# Great Indian Motor Works Ltd., and A ·not her v. Their E1nployees and Others

- **Citation:** [1960] 1 S.C.R. 24
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Civil Appeals Nos. 473 & 474 of 1957
- **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/great-indian-motor-works-ltd-and-a-not-her-v-their-e1nployees-and-others-1753
- **Pages:** 8

## Headnote

.
Industrial Dispute-Puja Bonus-Implied agreement-Tes/-
Benefits arising out of service with employer's predecessors-Worlmten
if entitled to.
The workmen were originally employed by M/s. M.M. Ispahani
Ltd., which shortly before the partition of India transferred its
registered office from CO:Icutta to Chittagong. The appellant
company was incorporated on September 15, 1947 and took over
the good-will and trading rights of M/s. M. M. Ispahani Ltd. and
also purchased its stock-in-trade, properties and assets.
Most of
the shares of the appellant were held by M/s. M. M. Ispahani Ltd.
and the business of the appellant was of the same nature carried
on in the same premises with the san1e workmen on the same
remuneration. On the transfer of M/s. M. M. Ispahani Ltd. to
Chittagong the question arose of retrenching those workmen who
were not willing to go to Chittagong and when the appellant
company came into existence it agreed to employ those workmen.
The workmen apparently agreed to the termination of their
services with M/s. M. M. Ispahani Ltd., and after receiving their
provident funds and arrears of salaries they were appointed by
the appellant. M/s. M. M. Ispahani Ltd. used to pay puja bonus
to the workmen at the rate of one month's wages and the appellant
also paid the same from 1948 up to 1952, even in the years in
which the appellant suffered losses. As the appellant did not
pay puja bonus for 1953, a dispute arose and was referred for
•
•
•
~
S.C.R.
SUPREME COURT REPORTS
25
•
adjudication. The workmen also claimed benefits from the
appellant for the period of service rendered by them under
M/s. M. M. Ispahani Ltd.
Held, that the workmen were entitled to the puja bonus
equal to one month's wages as it was an implied term of the
employment of the workmen. Puja was a special festival in Bengal
and it had become usual with many firms there to give bonus
before Puja to their workmen. A claim for puja bonus was based
either on implied agreement or on customary payment.
An
implied agreement could be inferred if the following circumstances
were established:-
(i) that the payment was unbroken ;
(ii) that the payment had been made for a sufficiently long
period ; anci
(iii) that it was not paid out of bounty.
The payment need not necessarily be at a uniform rate
throughout, and it was for the Tribunal to decide the quantum in
a particular year taking into account the various payments made
in previous years. '.
In the present1case the payment was unbroken and was not
made out of bounty as it was made even in years of loss.
The
sufficiency of the length of the period depended on the circumstances of each case and in the present case the appellant had
paid the bonus since its birth.
Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton
Mills Workers' Union, 1953 L.A.C. 370 approved.
Held further, that the workmen were not entitled to any
benefits arising out of their employment with M/s. M. M. Ispahani
Ltd.
The workmen had agreed :o the termination of their service
with that company, and there was no express or implied undertaking given by the appellant regarding continuity of service
when employing the workmen.
CIVIL
APPELLATE
JURISDICTION: Civil Appeals
Nos. 473 & 474 of 1957.
Appeals by special leave from the judgment and
order dated the 27th July 1955 of the Labour Appellate Tribunal of India at Calcutta in Appeal No.
Cal. 257 of 1954.
M.
C. • Setalva<1,
Attorney-General
for
India
(M/s. J. B. Dadachanji, S. N. Andley and Rameshwar
Nath, Advocate of Mfs. Rajinder Narain & Co., with
him) for the appella~ts.
S. K. Mukherjee and P. K. Ghosh for the respon.
dents.
4
I959
I spahani Ltd.,
Calcutta
v.
l<pahani
Employees' Union
Wanchoo .f.
I959
I spahani Ltd,.
Calcutta
v.
Ispahani
E1nployees' Union
Wanchoo j.
~
26
SUPREME COURT REPORTS
[1960(1)]
1959. May 6.
The Judgment of the Court was
delivered by.
WANCHOO J.-These are two connected appeals by
special leave against the decision of the Labour
Appellate Tribunal in an industrial matter.

## Text

1959
Great Indian
Motor Works Ltd.,
and A ·not her
v.
Their E1nployees
and Others
Sinha].
1959
Jt,[ay6.
''\.
24
SUPREME COURT REPORTS (1960(1)]
\
In our opinion, therefore, the Labour Appellate
Tribunal was not in error in dismissing the appeal by
-1111
the Company and by the auction-purchaser, as incompetent. It follows, therefore, that we are not concerned with the merits of the appeal. In view of the
fact that we have not expressed any opinion on the
merits of the controversy raised in the abortive appeal,
this dismissal shall be without prejudice to the appellants' rights, if any. The appeal is, accordingly, dismissed, but the parties here are directed to bear their
own costs, in view of the fact that we have not gone
into the merits of the controversy.
Appeal clismi8ser.l.
MESSRS. ISPAHANI LTD. CALCUTTA
v.
ISP AHANI EMPLOYEES' UNION
(B. P. SINHA, P. B. GAJENDRAGADKAR and
K. N. WANCHOO, JJ.)
.
Industrial Dispute-Puja Bonus-Implied agreement-Tes/-
Benefits arising out of service with employer's predecessors-Worlmten
if entitled to.
The workmen were originally employed by M/s. M.M. Ispahani
Ltd., which shortly before the partition of India transferred its
registered office from CO:Icutta to Chittagong. The appellant
company was incorporated on September 15, 1947 and took over
the good-will and trading rights of M/s. M. M. Ispahani Ltd. and
also purchased its stock-in-trade, properties and assets.
Most of
the shares of the appellant were held by M/s. M. M. Ispahani Ltd.
and the business of the appellant was of the same nature carried
on in the same premises with the san1e workmen on the same
remuneration. On the transfer of M/s. M. M. Ispahani Ltd. to
Chittagong the question arose of retrenching those workmen who
were not willing to go to Chittagong and when the appellant
company came into existence it agreed to employ those workmen.
The workmen apparently agreed to the termination of their
services with M/s. M. M. Ispahani Ltd., and after receiving their
provident funds and arrears of salaries they were appointed by
the appellant. M/s. M. M. Ispahani Ltd. used to pay puja bonus
to the workmen at the rate of one month's wages and the appellant
also paid the same from 1948 up to 1952, even in the years in
which the appellant suffered losses. As the appellant did not
pay puja bonus for 1953, a dispute arose and was referred for
•
•
•
~
S.C.R.
SUPREME COURT REPORTS
25
•
adjudication. The workmen also claimed benefits from the
appellant for the period of service rendered by them under
M/s. M. M. Ispahani Ltd.
Held, that the workmen were entitled to the puja bonus
equal to one month's wages as it was an implied term of the
employment of the workmen. Puja was a special festival in Bengal
and it had become usual with many firms there to give bonus
before Puja to their workmen. A claim for puja bonus was based
either on implied agreement or on customary payment.
An
implied agreement could be inferred if the following circumstances
were established:-
(i) that the payment was unbroken ;
(ii) that the payment had been made for a sufficiently long
period ; anci
(iii) that it was not paid out of bounty.
The payment need not necessarily be at a uniform rate
throughout, and it was for the Tribunal to decide the quantum in
a particular year taking into account the various payments made
in previous years. '.
In the present1case the payment was unbroken and was not
made out of bounty as it was made even in years of loss.
The
sufficiency of the length of the period depended on the circumstances of each case and in the present case the appellant had
paid the bonus since its birth.
Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton
Mills Workers' Union, 1953 L.A.C. 370 approved.
Held further, that the workmen were not entitled to any
benefits arising out of their employment with M/s. M. M. Ispahani
Ltd.
The workmen had agreed :o the termination of their service
with that company, and there was no express or implied undertaking given by the appellant regarding continuity of service
when employing the workmen.
CIVIL
APPELLATE
JURISDICTION: Civil Appeals
Nos. 473 & 474 of 1957.
Appeals by special leave from the judgment and
order dated the 27th July 1955 of the Labour Appellate Tribunal of India at Calcutta in Appeal No.
Cal. 257 of 1954.
M.
C. • Setalva<1,
Attorney-General
for
India
(M/s. J. B. Dadachanji, S. N. Andley and Rameshwar
Nath, Advocate of Mfs. Rajinder Narain & Co., with
him) for the appella~ts.
S. K. Mukherjee and P. K. Ghosh for the respon.
dents.
4
I959
I spahani Ltd.,
Calcutta
v.
l<pahani
Employees' Union
Wanchoo .f.
I959
I spahani Ltd,.
Calcutta
v.
Ispahani
E1nployees' Union
Wanchoo j.
~
26
SUPREME COURT REPORTS
[1960(1)]
1959. May 6.
The Judgment of the Court was
delivered by.
WANCHOO J.-These are two connected appeals by
special leave against the decision of the Labour
Appellate Tribunal in an industrial matter. Appeal
No. 473 is by Messrs. Ispahani Ltd. (hereinafter called
the company) and appeal No. 4'.74 is by the employees
of the company represented by Ispahani Employees'
Union (hereinafter called the workmen). They will
be disposed of by one judgment.
There was a dispute between the company and its
workmen on a number of matters, which was referred
by the Government of West Bengal to the adjudication of the Second Industrial Tribunal, by an order of
December 17, 1953.
There were a number of matters
which had to be adjudicated upon ; but of these only
two now survive, namely-
(!) whether the workmen are entitled to puja
bonus for 1953, and
(2) whether the workmen are entit.led to receive
from the company any benefits for the period of
service rendered by them under Messrs. llf. M.
Ispahani Ltd.
A few facts may be set out here to give the background of this dispute. Originally, there was another
company called Messrs. M. M. Ispahani Ltd. which was
carrying on business in Calcutta since December 1934
before the partition of India. Shortly before the partition took place, Messrs. M. M. Ispahani Ltd. transferred their registered head office from Calcutta to
Chittagong, now in Pakistan. That company thus
became a Pakistani company after August 1947. It,
however, continued to own properties in India and
carried on some business in Calcutta on a small scale.
The company was incorporated on September 15, 1947
and took over the good-will and trading rights of
Messrs. M. M. Ispahani Ltd. and also purchased the
stock-in-trade, properties and assets of that company.
Most of the shares of the company were, however, held
by Messrs. M. M. Ispahani Ltd. and the business of the
company was of the same nature and was carried on
in the same premises with the same telegraphic address
•
•
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S.C.R.
SUPREME COURT REPORTS
27
and with the same workmen on thll same remuneration. Further, the company continued to pay puja
bonus at the rate of one month's wages from 1948 up
to 1952.
As no bonus was paid in 1953, a dispute
arose between the company and the workmen, which
was referred for adjudication along with other matters.
The Industrial Tribunal held that it had not been
established that puja bonus had been paid at the
uniform rate of one month's wages for a sufficiently
long time and for unbroken period, and therefore
rejected the claim for puja bouns for 1953. On the
other question relating to whether the workmen were
entitled to receive from the company any benefits for
the period of service rendered by them under Messrs.
M. 1\1. Ispahani Ltd., it held that the workmen were
entitled to take into account the service rendered by
them under Messrs. M. M. Ispahani Ltd. in the matter
of benefits due under the law during their service under
the company.
This award led to two appeals, one by the company
on the question of benefits arising from the service
rendered under Messrs. M. M. Ispahani Ltd., and the
other by the workmen with respect to puja bonus for
the year 1953. The Labour Appellate Tribunal allowed
both the appeals. It held on the question of bonus
that it had been proved that puja bonus had become a
term of employment and the workmen were therefore
entitled to bonus at the rate of one month's wages for
the year 1953. As to the benefits arising out of the
service rendered by the workmen under Messrs. M. M.
Ispahani Ltd., it held that there was termination of
employment of the workmen when Messrs. M. M.
Ispahani migrated to Pakistan and the employment of
the workmen by the company was fresh employment
and they therefore were not entitled to any benefits
arising out of their employment under Messrs. M. M.
Ispahani Ltd. Both the company and workmen applied
for special leave to appeal to this Court against the
decision of the Appellate Tribunal insofar as it was
against them. The applications were granted; and that
is how the matter has come up before us.
I959
Jspahani Lid.,
Calcutla
v.
lspahani
Employees' Union
Wanchoo ].
28
SUPREME COURT REPORTS [1960(1)~
'959
We shall first take up the appeal of the company
relating to pui·a bonus for the year 1953.
Two points
Ispahani Ltd .•
Calcutta
have been urged in this behalf, namelyv.
(1) the Appellate Tribunal had no jurisdiction to
1.>pah~ni .
interfere with the finding of the Industrial Tribunal as
Employm Umon it was a finding of fact ; and
wanchoo J.
(2) even ifthe Appellate Tribunal had jurisdiction,
its decision is incorrect in law.
Puja is a special festival in Bengal and it has become
usual with many firms there to give bonus before puja
to their workmen.
This matter came up before the
Appellate Tribunal in Jtlahalaxmi Cotton Mills Ltd.,
Cafoutta v. Mahalaxmi Cotton Mills Worlcers' Union.(1 )
In that case puja bonus was claimed as a matter of
right payable by the employer at a special season of
the year, namely, at the time of the annual Durga
Puja. '!'his right was not based on the general principle that labour and capital should share the surplus
profits available after meeting prior charges. It was
held in that case that this right rested on an agreement
between the employer and the employees, and that the
agreement might be either express or implied. Where
the agreement was not express, circumstances might
lead the tribunal to an inference of implied agreement.
The following cireumstances were laid down in that
case as material for inferring an implied agreement:-
(1) The payment must be unbroken:
(2) lt must be for a sufficiently loug period; and
(3) The circumstances in which payment was
made should be such as tu oxdude that it was paid out
of bounty.
The Appellate Tribunal further pointed out that it was
not possible to lay clown in tcrnrn wlmt should be the
length of period to justify the inference of implie<l
agreement and that that would depend upon the circumstances of each case. It also pointed out that the
fact of payment in a year of loss would he an important factor in excluding the hypothesis that the
payment was out of bounty and in coming to the
conclusion that it was as a matter of obligation based
(1) 1952 L.A. C. 370.
•
/
"
'•
I
I
S.C.R.
SUPREME COURT REPORTS
29
on implied agreement. As to the quantum of bonus it
r959
was laid down that even if payment was not at a
Ispahani Ltd.,
uniform rate throughout the period, the implied agreeCalcutta
ment to pay something could be inferred and it would
v.
be for the tribunal to decide what was the reasonable
Ispahani
amount to be paid as puja bonus. The tests laid down Employees' Union
in that case have since been followed in a number of
-
Wanchoo ].
cases by the Industrial Tribunals and the Labour
Appellate Tribunal. \Ve do not think it necessary to
refer to all those cases. It may now be taken as well
settled that puja bonus in Bengal stands on a different
footing from the profit bonus based on the Full Bench
formula evolved in The M illowners' Association, Bombay
v. The Rashtriya .Mill Mazdoor Sangh, Bombay (1). The
claim for puja bonus in Bengal is based on either of
two grounds. It may either be a matter of implied
agreement between employers and employees creating
a term of employment for payment of puja bonus, or
(secondly) even though no implied agreement can be
inferred it may be payable as a customary bonus. In
the present case we are concerned with the first category, (namely, that based on an implied agreement
creating a term of employment between the employer
and the employees), and so we shall confine ourselves
to that category. It was this kind of bonus which was
considered by the Appellate Tribunal in Mahalaxmi
Cotton Mills case (2).
We are of opinion that the tests
laid down in that case for inferring that there was an
.implied agreement for grant of such a bonus are
correct and it is necessary that they should all be
satisfied before bonus of this type can be granted.
This brings us to the two questions raised on behalf
of the company, as set out above.
The first question,
(namely, that the Appellate 'rribunal had no jurisdiction to interfere with the finding of the Industrial
Tribunal that begin a question of fact) can be easily
disposed of.
We are of opinion that the decision
whether there is an implied term of employment is a
mixed question of fact and law and not a pure question of fact.
This is similar to the decision, for
example, on a question whether a custom has been
(1) i950 L.L.J. 1247
(2) 1952 L.A.C. 370
30
SUPREME COURT REPORTS
[1960(1))
z959
established or whether adverse possession has been
Proved, or whether a Hindu family has ceased to be
Ispahani Led.,
Calcutta
joint as a matter of law accepting the facts proved.
v.
The Appellate Tribunal will therefore have jurisdiction
Ispahani
to consider whether on the facts proved before the
Employees' Union Industrial Tribunal an inference in law can be drawn
that an implied term of employment for grant of
Wanchoo ].
puja bonus has been established. The Appellate
Tribunal therefore had jurisdiction to consider this
matter.
The next question is whether in law the decision of
the Appellate Tribunal drawing the inference of an
implied term of employment in this case is correct.
The undisputed facts here are these : The workmen
when they were in the employ ofMessIB. M.M. Ispahani
Ltd. always used to get puja bonus at the rate of one
month's wages. This was asserted by the workmen in
their written statement and the company did not deny
it in its reply. All that it said was that the practice or
custom prevalent at the time of Messrs. M.M. Ispahani
Ltd. and the payment of bonus by that company were
immaterial and did not bind the company. This averment impliedly admitted that Messrs. M. M. Ispahani
Ltd. used to pay puja bonus as alleged by the respondents. The company practically took over the business
from Messrs. M.M. lspahani Ltd. and it was found that
it had been paying bonus ever since it came into existence from 1948 right up to 1952 without any break
attherate of one month's wages and that this bonus was
paid even in the years in which the company suffered
loss. In the circumstances, it was established in this
case that (1) the payment was unbroken and (2) it was
not paid out of bounty due to profits having arisen,
for it was paid in some years of loss also. The only
other question that remains is whether it had been paid
for a sufficiently long period in order to justify the
inference that it was an implied term of employment.
The length of the period depends on the circumstances
of each case and what may be a short period not
justifying an inference of an implied term of employment in one case may be long enough in another. In
the present case, sin<:e the appellant has paid the bonus
•'
..
..
S.C.R.
SUPREME COURT REPORTS
31
continuously since its birth, we agree with the Appellate Tribunal that the circumstances justify the
inference of an implied term of employment for payment of puja bonus at the rate of one month's wages
every year. The appeal of the company must therefore fail.
Turning now to the appeal of the workmen on the
question of benefits, we are of opinion that the decision
of the Appellate Tribunal on this question also is
correct. It is true that the company practically took
over the business of Messrs. M. M. Ispahani Ltd. But,
as pointed out by the Appellate Tribunal, when
Messrs. M. M. Ispahani Ltd. transferred their headoffice from Calcutta to Chittagong, the question arose
of retrenching those employees who were not willing
to go to Chittagong in view of the expected partition
of India. In these circumstances, the company, when
it came into existence in September 1947, agreed to
employ those employees of Messrs. M. M. Ispahani Ltd.,
whose services were likely to be terminated. These
employees apparently agreed to the termination of
their services with Messrs. M. M. Ispahani Ltd., and
therefore obtained settlement of their claims for
provident fund, and also received all arrears of salary
from them. They were thereafter appointed, after
withdrawal of their provident fund, by the company.
There was no express or implied undertaking given by
the company regarding continuity of service and the
employees joined the provident fund of the company
afresh. In the circumstances the decision of the
Appellate Tribunal on this question is correct, and the
appeal of the workmen must also fail.
We therefore dismiss both the appeals and in consequence order the parties to bear their own costs of
this Court.
Appeals dismissed .
I959
I spahani Ltd.
Calcutta
v.
Ispahani
Employees' Unio11
Wanchoo]