# CO., LTD v. HERCULES INSURANCE CO., LTD., CALCUTTA

- **Citation:** [1961] 2 S.C.R. 995
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal No. Hercules 531 of 1959
- **Bench:** P. B. Gajendragadxar, K. N. Wanchoo, K. C. Das Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/co-ltd-v-hercules-insurance-co-ltd-calcutta-1933
- **Pages:** 8

## Headnote

Industrial Dispute-Claim of bonus-General Insurance business-Validity of reference-Industrial Disputes Act, z947 (r4 of
r947), s. IO(I)-Insurance Act, z938 (IV of z938), s. 3rA(I)(c),proviso (vii).
In view of the unqualified and absolute prohibition contain~
ed ins. 31A(1)(c) of the Insurance Act, 1938, against payment
of bonus to the employees in general insurance business, the
exception made by proviso (vii) to that section must be strictly
confined to the limits prescribed by the said proviso.·
The policy underlying the proviso clearly is to exclude the
intervention of Industrial Tribunals·and leave the question of
payment of such bonu!! entirely to the discretion of the Central
Government.
Consequently, where the w.orkmen in general insurance
business claimed bonus and the Central Government referred
the dispute for adjudication to the Industrial Tribunal under
s. 10(1) of the Industrial Disputes Act, i947, and the Tribunal,
on a preliminary ·objection under s. 31A(1}(c) of the Insurance
Act, 1938, read with proviso (vii) thereof, held that· the reference was invalid,
_
-
·- · >f'
t•J [t96•l 2 s.c.R. 978.
z960
De&ember 7.
Workmen of the
Hercules
996
SUPREME COURT REPORTS
[1961]
Held, the decision of the Tribunal was correct and must be ;.
upheld.
Insurance Co., Ltd.
The Central Bank of India v. Their Workmen, [r960] r S.C.R.
200, relied on.
v.

## Text

2 S.C.R. SUPREME COURT REPORTS
995
-<
s. 23A for other purposes. This contention has no
I960
force.
Sliree Changd•o
The appeal is allowed, and the case is remitted to sugar Mills, Ltd.
the High Court for deciding the question in ~he light
v,
of the observations in our decision in the Rag'//,uvanski Commissioner of
Mills case (1).
As the case is remanded, the cost~ of
Income-ta"·
this appeal shall be paid by the respondent, but the
Bo.,,bay
costs in the High Court will abide the result.
HSJayatullali J .
.Appeal allowad .
. WORKMEN OF THE HERCULES INSURANCE
CO., LTD.
v.
HERCULES INSURANCE CO., LTD., CALCUTTA
(P. B. GAJENDRAGADXAR, K. N. WANCHOO
and K. C. DAS GUPTA, JJ.)
Industrial Dispute-Claim of bonus-General Insurance business-Validity of reference-Industrial Disputes Act, z947 (r4 of
r947), s. IO(I)-Insurance Act, z938 (IV of z938), s. 3rA(I)(c),proviso (vii).
In view of the unqualified and absolute prohibition contain~
ed ins. 31A(1)(c) of the Insurance Act, 1938, against payment
of bonus to the employees in general insurance business, the
exception made by proviso (vii) to that section must be strictly
confined to the limits prescribed by the said proviso.·
The policy underlying the proviso clearly is to exclude the
intervention of Industrial Tribunals·and leave the question of
payment of such bonu!! entirely to the discretion of the Central
Government.
Consequently, where the w.orkmen in general insurance
business claimed bonus and the Central Government referred
the dispute for adjudication to the Industrial Tribunal under
s. 10(1) of the Industrial Disputes Act, i947, and the Tribunal,
on a preliminary ·objection under s. 31A(1}(c) of the Insurance
Act, 1938, read with proviso (vii) thereof, held that· the reference was invalid,
_
-
·- · >f'
t•J [t96•l 2 s.c.R. 978.
z960
De&ember 7.
Workmen of the
Hercules
996
SUPREME COURT REPORTS
[1961]
Held, the decision of the Tribunal was correct and must be ;.
upheld.
Insurance Co., Ltd.
The Central Bank of India v. Their Workmen, [r960] r S.C.R.
200, relied on.
v.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
Hercules
531 of 1959.
Insurance Co.,
Ltd., Calcutta
Appeal by special leave from the Awa.rd dated
October 21, 1957 of the Central Government Industrial
Tribunal, Dhanba.d, iu Reference No. 6 of 1957.
N. Dutt,a Mazurndar, G. N. Bhattacharjee and B. P.
Maheshwari, for the appellants.
M. 0. Setalvad, Attorney-Genera}, of India and R.
Gopalakrishnan, for the respondent.
1960. December 7. The Judgment of the Court
was delivered by
Gajlffl4ragaakor J.
GAJENDRAGADKAR, J.-The short question of law
which falls to be decided in the present appeal is
whether a dispute raised by the employees of a
General Insuro.nce Company against their employer '
for payment of bonus in any particular year can be
referred for adjudication by an Industrial Tribunal
under s. 10(1) of the Industrial Disputes Act, 1947
(XIV of 1947). This question arises in this way. The
workmen of the Hercules Insurance Co. ·Ltd. are the
appellants and the Insurance Company is the respondent before us. On April 11,-1957, the Central Government referred the appellants' claim for bonus for the
years 1954 and 1955 for adjudication to the Industrial
Tribunal, Dhanbad, constituted under s. 7A of the
Industrial Disputes. Act, and this reference has been
made under s. lO(l)(d) of the Act. Before the Tribunal the respondent urged a preliminary objection
against the validity of the reference itself. Its case
was that the payment of bonus by an Insurance Company is conditioned entirely by the relevant provisions
of the Insurance Act, 1938 (IV of 1938), and that the
said provisions did not justify the reference of a
dispute in that behalf for adjudication by any Industrial Tribunal. This preliminary objection was based ,'>- . _
on the provisions of s. 31A(l) and proviso (vii) of the
2 S.C.R. SUPREME COURT REPORTS
997
Insurance Act. It was also urged by the respondent
i96o
that having regard to the limitations imposed on the w k
th
General Insurance Companies by s: 400 of the Insu0
~:::1~ •
ranee Act the claim for bonus made by the appellants Insurance Co., Ltd.
could not be sustained. The Tribunal has upheld the
v.
preliminary objection thus raised by the respondent
Herc.ules
and held that the reference is invalid. Incidentally it
lnsurnnce Co.,
h
1
.d
d th
1
. d
d
400
d
Ltd. Calcutta
as a so cons1 ere
e p ea raise
un er s.
an
· _
has observed that the said plea. is also well founded. Gajendragadkar J.
In the result the Tribunal refused to entertain the
reference and dismissed it accordingly. It is agairist
this order of the Tribunal that the appellants have
come to this Court by special leave.
It is common ground that the respondent has paid
the appellants bonus equivalent to two months' basic
wages for each of the two years 1954 and 19fi5. The
appellants claim two months' basic wages as additional
bonus for each of the two years under reference. It
is their case that if the trading profits made by the
respondent are ascertained from the respondent's
balance sheet and the Full Bench formula is applied,
it would appear that the respondent has in its hands
a substantial amount of available surplus from which
the additional bonus claimed by them can be awarded. Since the reference has been rejected on the preliminary ground the Tribunal has naturally not considered this aspect of the problem.
The preliminary objection raised by the respondent
is founded on the relevant provisions of s. 31A of the
Insurance Act (hereafter called the Act) and so we
must now turn to the said provisions. Section 31A(l)(c)
of the Act provides, inter alia., that notwithstanding
anything to the contrary contained in the Indian Companies Act, 1913, or in the articles of association of
the insurer, if a company, or in any contract or agreement, no insurer shall after the expiry of one year
from the commencement of the Insurance (Amendment) Act, 1950, be directed .or managed by, or
employ as manager or officer or in any capacity, any
person whose remuneration or a.ny pa.rt thereof takes
the form of commission or bonus in respect of the
1:26
/
998
SUPREME COURT REPORTS
[1961]
i96o
general insurance business of the insurer. Thus looking s. at 31A(l )( c) by itself without the proviso the posiwo,kmen of the
b l
b
Hercules
tion is a so utely at clear. The respondent cannot e
rn.mrance co .• Ltd. directed to employ the appellants in any capacity so
v.
as to include in their remuneration a liability to pay
Hmules
bonus in respect of the general insurance business of
lnSHrance Co.. the respondent. Bonus under the Industrial Disputes
Ltd., Cofoutla A t .
t
t
f
b t h
• h t
] •
_
c is no a par o
wages,
u t e rig t o c aim
Gajendragadkar J. bonus which has been universally recognised by industrial adjudication in cases of employment falling
under the said Act has now attained the status of a
legal right. Bonus can be claimed as a matter of right
provided of course by the application of the :Full
Bench formula it is shown that for the relevant year
the employer has sufficient available surplus in hand.
Therefore a claim for bonus made by the appellants
in the present proceedings is a claim in respect of the
general insurance business of the respondent, and if
allowed it would add to the remuneration payable to
them. In other words, bonus claimed by the appellants, if awarded, would, for the purpose of s. 31A
(l)(c}, be a part of their remuneration, and that is
precisely what is prohibited by the said provision.
There are, however, certain exceptions to this
general prohibition, and it is to one of these exceptions that we must now turn. Proviso (vii) to s. 31A
(l)(c) lays down that nothing in this sub-section shall
be deemed to prohibit-
"the payment of bonus in any year on a uniform
basis to all salaried employees or any class of them by
way of additional remuneration, such bonus, in the
case of any employee, not exceeding in amount the
equivalent of his salary for a period which, in the
opinion of the Central Government, is reasonable ha v -
ing regard to the circumstances of the case."
This provision which constitutes an exception to the
rule prescribed by s. 3IA(I)(c) allows the payment of
bonus to the empfoyees of Insurance Companies
subject to the condition specified by it. Bonus intended to be paid to such employees must not exceed in
amount the equivalent of their salary for a period
which the Central Government regards as reasonable.
2 S.C.R. SUPREME COURT REPORTS
999
The result of this provision appears to be that the
1960
Central Government has to consider the circumstances
d
d
h h
b
Workmen of Iha,
of each insurer and then eci e w et er any
onus
Hercules
should be paid by the insurer to its employees. If the Insurance Co., Ltd.
financial position of the insurer is sufficiently satisfacv.
tory, the Central Government may decide to allow the
. Hercules
insurer to pay bonus to its employees, and in that
f;;ur~n~e ~~··
context the Central Government would prescribe the
·· _"_
0
"
a
maximum within which the payment should be made. Gajondragadkar J
In no case can payment exceed the maximum prescribed by the Central Government, and in all cases the
matter has to be considered by the Central Government and no other authority. Having regard to the
scheme of the Act which purports to supervise and
regulate the working of Insurance Companies the legislature thought that the payment of bonus by the Insurance Companies to their employees should normally
be prohibited and its payment should be permitted
subject to the over-riding control of the Central Government to prescribe the maximum in that behalf. If the
Central Government decides that no bonus should be
paid, no bonus ca.n be paid by the insm·er. If the
Central Government decides that bonus should be paid
but not beyond specified limit the insurer cannot
exceed that limit. · That; in our opinion, is the effect
of proviso {vii) to s. 31A{l).
·
It is, however, urged that proviso (vii) merely enables the Central Government to prescribe the maximum. It does not take away the Central Government's authority to refer an industrial dispute in
respect of bonus for adjudication under s. 10 of the
Industrial Disputes Act. In this connection it is
urged by Mr. Mazumdar that in some cases the Central Government may take the view that the financial
position of the insurer justified the payment of bonus,
but the quantum may be better left to the Industrial
Tribunal. In such a case the Central Government
should have authority to make the reference. Similarly it is urged that the Central Government may
decide tha.t within the maximum prescribed by it,
bonus should be paid by an insurer, but the insurer
1000
SUPREME COURT REPORTS
[1961]
1960
may not comply with the Central Government's deciWorkmen of the sion
1
aGnd in thatt~asedt~e.only ::ayt· to 1?-ake thfe CehnHer•ul"
tra
overnmen s
ec1s10n e11ec ive IS to re er t e
Ins111anceCo., ua. matter to adjudication and enable the employees to
v.
obtain an award which can be executed. That is why
Hmul"
the appellants contend that the enabling provision
~':a~,'·;;;.,~~; conta.ined in proviso !vii) should not be construed ~o
_
constitute a bar agamst the Central Government·s
Gajendragadkar J. power to act under s. 10(1) of the Industrial Disputes
Act.
We are not impressed by this argument. In our
opinion the policy of the relevant clause of the proviso is absolutely clear. Payment of bonus by insurers
was intended by the legislature to be conditioned by
the provisions contained in the said clause, and we
feel 110 doubt or difficulty in reaching the conclusion
that the intervention of the Industrial Tribunals was
intended to be excluded and the matter was intended
to be kept within the discretion of the Central Government so far as the payment of bonus by the insurers
is concerned. Then, as to the argument that the
Government directive issued under proviso (vii) may
not be obeyed by any insurer, we do not think that
such an event is likely to happen; but theoretically it
is conceivable that an insurer may refuse to comply
with the decision of the Government. In that case all
we can say is that there is a lacuna left and the legislature may consider whether it is necessary to provide
adequate remedy for making the Government. decision binding and final. Having regard to the unquali-.
fied and absolute prohibition contained in s. 31A(l)(c)
it seems to us difficult to hold that the payment of
bonus to the employees of Insurance Companies is not
absolutely conditioned by proviso (vii). In the absence of the said provision no bonus could have been
claimed by Insurance employees, and so the effect of
the said provision must be to limit the said right to
the conditions prescribed by it. That is why we think
that the Tribunal was right in coming to the conclusion that the reference made by the Central Government is invalid. The fact that the Central Govern.
,\
ment took the view that it could make such a reference
2 S.C.R. SUPREME COURT REPORTS
1001
1960
-i is hardly relevant in determining the scope and
effect of the relevant provisions of the, Act.
This
.
b
'd
d
h
b
Workmen of th•
'>'
J_
quest10n must e cons1 ere
on w at we regard to e
Hercules
the fair constn10tion of the relevant stat;utory provi- l>isurance co , Ltd.
sion, and as we have just indicated the constructfon
v.
of the relevant provision clearly supports the view
Hercule<
taken by the Tribunal. Incidentally, it may be pointInrnrauce Co.,
ed out that in its 'award the Tribunal ha,s 'referred to
Ltd., Calcutta
several other decisions of Industrial Tribunals which Gnje"a,:~~dkar 1.
have taken the same view though there are one or
two decisiqns which have upheld the validity of the
reference without duly considering the effect of
s. 31A(l).
In this connection we may refer to the decision of
this court in The Central Bank of India v. Their
Workmen (1), where a similar question has been considered. In that case the Court had to consider the
effect of s. 10 of the Banking Companies Act, 1949,
prior to its amendment in 1956. The said section,
according to that decision, prohibited the grant of
industrial bonus to bank employees inasmuch as such
bonus is remuneration which takes the form of a
share in the profits of a banking compimy. In dealing
with the character of bonus in relation to remuneration specified by s. 10, S. K. Das, J., who spoke for
the Court, observed that "bonus in the industrial sense
as understood in our country does come out of the
available surplus of profits, and when paid it fills the
gap, wholly or in part, between the living wage and
the actual wage. It is an addition to the wage in that
sense, whether it be called contingent or supplementary. None the less, it is labour's share in the profits,
and as it is a remuneration which takes the form of
a share in profits, it comes within the mischief of
s. 10 of the Banking Companies Act", · Section 10 of
the Banking Companies Act is comparable to s. 31A
of the Insurance Act, and so this decision supports
the view that we have taken about the effect of
s. 31A(l)(c). We have already held that the payment
of bonus would be an additional remuneration to the
employees of Insurance Companies and it would be
(I) (1960] I S.C.R. 200.
1002
SUPREME COURT REPORTS
[1961)
'960
bonus in respect of the general insurance business of
>-
the insurer. In view of our conclusion that the Tribunal
Work1nen of the
Hercules
was right in upholding the preliminary objection, we
r.,,,ran" co .. Lid. do not propose to consider the other argument which
v.
had been urged by the respondent before the TribuHercules
nal under s. 400 of the Act, and which the Tribunal
~";"'"t; Co.. has incidentally considered and accepted.
1 "_':_'"
11•
The result is that the appeal fails and is dismissed.
Gajrndraga(lkar J. There will be no order as to costs.
Appeal dismissed.
,:.