# IQ6I February 16. Prakash Cotton Mills (Private) Ltd v. State of Bombay 106

- **Citation:** [1962] 1 S.C.R. 105
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Civil Appeal No. 759 of 1957
- **Bench:** P.R. Gajitindragadkar, A. K. Sarkar, K. Subba Rao, K. N. w· ANCIIOO, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/iq6i-february-16-prakash-cotton-mills-private-ltd-v-state-of-bombay-106-1964
- **Pages:** 24

## Headnote

Bonus-Textile Mills in local area-Agreement for bonus with
specified mills-Award thereon-Extension of award to other mills
in the area-Notification by Government-Validity-Constitu.tional
validity of mactment -
Bombay Industrial Relations Act, r946
(Rom. II of r947), ss. 95A, n4(2).
The disputes regarding bonus to be paid to the workmen of
the appellant mill and other cotton textile mills in Greater Bombay for the year 1952 and 1953 were referred to the Industrial
Court under the provisions of the Bombay Industrial Relations
Act, 1946, and while the references were pending, an agreement
was arrived at between the Mill~owners' Association, Bombay,
and the Rashtriya Mills Mazdoor Sangh, a Representative Union
of workmen in the cotton textile indnstry with respect to payment of bonus for the years 1952 to 1957. providing inter alia
for payment of bonus even where a mill made aotual loss, the
minimum bonus being 4·8 per cent., of the ba§ic wages earned
during the year, subject to such mill being entitled to adjust
the amount thus paid by it as the minimum bonus against any
available surplus in any subsequent year or years. 1'his agreement was registered and was made enforceable as an award
(r) I.L.R. [r94BJ Nag. 950.
(2) A.I.R. 1937 Mad. 763.
14
Kapur J.
IQ6I
February 16.
Prakash Cotton
Mills (Private)
Ltd.
v.
State of Bombay
106 .
SUPREME COURT REPORTS
[1962]
against those mills which were parties thereto. The appellant,
however, did not sign the agreement, and its case before the
Industrial Court was that it had been continuously making losses from 1950 to 1955· On July 31, 1956, the Government of
Bombay issued a notification under s. rr4(2) of the Act directing that the award made by the Industrial Court aforesaid, for
payment of bonus for the years 1952 and 1953 and also for the
years 1954 to 1957 be enforced against the appellant. The
appellant challenged the validity of s. rr4 on the grounds (1)
that it offended Art. 14 of the Constitution inasmuch as it gave
an unguided and arbitrary power to the State Government to
discriminate between various sets of employers and employees
and make an order on any one set at its pleasure leaving out
others, (2) that it offended Art. l9(1)(g) in that it put an unreasonable restriction on a person's right to carry on business, and
(3) that it prevented a party from having an industrial dispute
decided by an Industrial Court under the Act. In any event,
the appellant contended that the notification was bad, because
(a) it was made while a reference was pending in an Industrial
Court and, therefore, took away the jurisdiction of that Court to
decide the pending reference, and (b) the notification went
beyond the powers conferred on the State Government bys. n4
since under that section the Government was bound by the
decisions of the Full Bench in view of s. 95A, but in the present
case it ignored a decision of the Full Bench which provided that
no bonus would be payable by an employer where it had made
no profits.
Held (Sarkar, J., dissenting), that the notification dated July
31, 1956, was beyond the powers conferred on the State Government under s. u4(2) of the Bombay Industrial Relations Act,
1946, and must, therefore, be struck down.
There are three limitations on the power of the State
Government when acting under s. u4(2): (1) that it is limited
by the subject-matter of the agreement, or settlement, submission or award sought to be extended, (2) that it has to be in
conformity with the industrial law laid down by the Full Bench
of the Industrial Court and also by any decision of the Supreme
Court, and (3) that the State Government's power to make a
direction under that section is co-terminus with the power of
an adjudicator and the State cannot do what an adjudicator
cannot do under the Act.
Action taken by the State Government under s. n4(2) is
a proceeding under the Act within the meaning of s. 95A of the
Act.
The New Maneckchowk Spinning Co. Ltd. and others v. The
Textile Labo11r As

## Text

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l S.C.R. SUPREME COURT REPORTS
105
r96r
., _, Paiku v. Gaya (') and in Chunduri Panakala Rao v.
Penugonda Kiimaraswami (') and in our opinion as
Govc;mnent of
soon as the Collector determined the duty he became
uttar Pradesh
•
functus officio and he could not impound the instru-
&· ors.
ment under s. 33 and consequential proceedings could
v.
not, therefore, be taken.
Raja Mohammad
r
d
· h
Ainir Ahniad I<han
The appeal is there1ore dismisse wit costs.
Appeal dismissed.
THE PRAKASH COTTON MILLS (PRIVATE)
LTD. AND OTHERS
v.
THE STATE OF BOMBAY (NOW
MAHARASHTRA)
(P.R. GAJITINDRAGADKAR, A. K. SARKAR,
K. SUBBA RAO, K. N. w· ANCIIOO and
J. R. MUDHOLKAR, JJ.)
Bonus-Textile Mills in local area-Agreement for bonus with
specified mills-Award thereon-Extension of award to other mills
in the area-Notification by Government-Validity-Constitu.tional
validity of mactment -
Bombay Industrial Relations Act, r946
(Rom. II of r947), ss. 95A, n4(2).
The disputes regarding bonus to be paid to the workmen of
the appellant mill and other cotton textile mills in Greater Bombay for the year 1952 and 1953 were referred to the Industrial
Court under the provisions of the Bombay Industrial Relations
Act, 1946, and while the references were pending, an agreement
was arrived at between the Mill~owners' Association, Bombay,
and the Rashtriya Mills Mazdoor Sangh, a Representative Union
of workmen in the cotton textile indnstry with respect to payment of bonus for the years 1952 to 1957. providing inter alia
for payment of bonus even where a mill made aotual loss, the
minimum bonus being 4·8 per cent., of the ba§ic wages earned
during the year, subject to such mill being entitled to adjust
the amount thus paid by it as the minimum bonus against any
available surplus in any subsequent year or years. 1'his agreement was registered and was made enforceable as an award
(r) I.L.R. [r94BJ Nag. 950.
(2) A.I.R. 1937 Mad. 763.
14
Kapur J.
IQ6I
February 16.
Prakash Cotton
Mills (Private)
Ltd.
v.
State of Bombay
106 .
SUPREME COURT REPORTS
[1962]
against those mills which were parties thereto. The appellant,
however, did not sign the agreement, and its case before the
Industrial Court was that it had been continuously making losses from 1950 to 1955· On July 31, 1956, the Government of
Bombay issued a notification under s. rr4(2) of the Act directing that the award made by the Industrial Court aforesaid, for
payment of bonus for the years 1952 and 1953 and also for the
years 1954 to 1957 be enforced against the appellant. The
appellant challenged the validity of s. rr4 on the grounds (1)
that it offended Art. 14 of the Constitution inasmuch as it gave
an unguided and arbitrary power to the State Government to
discriminate between various sets of employers and employees
and make an order on any one set at its pleasure leaving out
others, (2) that it offended Art. l9(1)(g) in that it put an unreasonable restriction on a person's right to carry on business, and
(3) that it prevented a party from having an industrial dispute
decided by an Industrial Court under the Act. In any event,
the appellant contended that the notification was bad, because
(a) it was made while a reference was pending in an Industrial
Court and, therefore, took away the jurisdiction of that Court to
decide the pending reference, and (b) the notification went
beyond the powers conferred on the State Government bys. n4
since under that section the Government was bound by the
decisions of the Full Bench in view of s. 95A, but in the present
case it ignored a decision of the Full Bench which provided that
no bonus would be payable by an employer where it had made
no profits.
Held (Sarkar, J., dissenting), that the notification dated July
31, 1956, was beyond the powers conferred on the State Government under s. u4(2) of the Bombay Industrial Relations Act,
1946, and must, therefore, be struck down.
There are three limitations on the power of the State
Government when acting under s. u4(2): (1) that it is limited
by the subject-matter of the agreement, or settlement, submission or award sought to be extended, (2) that it has to be in
conformity with the industrial law laid down by the Full Bench
of the Industrial Court and also by any decision of the Supreme
Court, and (3) that the State Government's power to make a
direction under that section is co-terminus with the power of
an adjudicator and the State cannot do what an adjudicator
cannot do under the Act.
Action taken by the State Government under s. n4(2) is
a proceeding under the Act within the meaning of s. 95A of the
Act.
The New Maneckchowk Spinning Co. Ltd. and others v. The
Textile Labo11r Association, [1961] 3 S.C.R. l, relied on.
Per Sarkar, J.-(1) Section u4 of the Bombay Industrial
Relations Act, 1946, does not offend Art. 14 of the Constitution.
The object of the Act is the settlement of industrial disputes and
..
r
•
•
•
l S.C.R. SUPREME COURT REPORTS
107
attainment of industrial peace and the section does not confer
absolute and arbitrary power.
(2) The restrictions imposed by s. rr4(2) are reasonable
and have been put in the interest of the general public. Consequently, the section does not contravene Art. r9(1)(g).
Bijay Cotton Mills Ltd. v. The State of Ajmer, (r955] l S.C.R.
752, referred to.
(3) The provisions of the Act must be read together and
in cases in which power under s. 114(2) has been exercised, the
right to ask for an adjudication by an Industrial Court must be
considered either as taken away or unavailing.
(4) The issue of a notification under s. rr4(2) is not a
proceeding as contemplated by s. 95A and, therefore, any
question of complying with any Full Bench decision does not
arise.
(5) Section rr4 directly permits and contemplates a
notification which would produce a result in variance with a
decision of the Supreme Court and, therefore, a notification
duly issued under that section cannot be said to have been
issued mala fide.
Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur,
[1955] I S.C.R. 991, referred to.
(6) The Act is not invalid and the notification of July
3r, r956, is unobjectionable and cannot be set aside.
CIVIL
APPELLATE
JURISDICTION:
Civil Appeal
No. 759 of 1957.
Appeal from the judgment and order dated June
26, 1957, of the Bombay High Court in Appeal No. 92
of 1956.
J. 0. Hhatt, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants.
R. Ganapathy Iyer and D. Gupta, for respondent .
1961. February 16.
The Judgment of Gajendragadkar, Subba Rao, Wanchoo and Mudholkar, JJ.,
was delivered by Wanchoo, J. Sarkar, J., delivered a
separate Judgment.
Prakalh Cotton
Milts (Private)
Ltd.
v.
State oj Bombay
WANCHOO, J.-This appeal by certificate granted
Wanchoo ].
by the High Court of Bombay raises the constitutionality of s. 114(2) of the Bombay Industrial Relations
Act, No. XI of 1947, (hereinafter called the Act). The
brief facts necessary for present purposes are these.
I96I
p,.akash Cotton
Mills (Private)
Ltd.
v.
Slate of Bombay
JVanchoo ].
108
SUPREME COURT REPORTS
[1962]
The appellant is a cotton textile mill situate in Bombay. It is said that tho appellant had been continuously making losses from 1950 to 1955. References were
however made under s. 73-A of the Act by the Rashtriya Mill Mazdoor Sangh, Bombay, in respect of disputes relating to bonus for the years 1952 and 1953,
which are said to be pending before the Industrial
Court, Bombay. The case of the appellant before the
Industrial Court was that as it had made losses there
was no question of its paying any bonus for the years
in dispute. It seems that at the same time there were
cases relating to bonus of other mills pending before
the Industrial Court and the appellant applied that its
case should be dealt with separately, and this prayer
was acceded to. It seems that while the references
were pending, an agreement was arrived at between
the Mill-owners' Association, Bombay and the Rashtriya Mill Mazdoor Sangh, Bombay, with respect to
payment of bonus for the years 1952 to 1957 and the
agreement was to come into force with respect to each
mill when it was signed by each _member mill of the
Mill-owners' Association.
Clause (6) of that agreement provided for payment of bonus even where the
profit made by a mill was not adequate to provide
for all prior charges as per the Full Bench formula
evolved by the Labour Appellate Tribunal in The
.Mill-owners' Association, Bombay v. The Rashtriya
1liill .Mazdoor Sangh (1) or even where a mill made
actual loss, the minimum bonus being in either of these
two cases 4·8 per cent. of the basic wages earned during the year, subject to such mill being entitled to
adjust the amount thus paid by it as the minimum
bonus against any available surplus in any subsequent
year or yearn under the provisi?ns of the agreement.
This agreement was registered and was made enforceable as an award against those mills which were parties
thereto. The appellant however did not sign the
agreement and therefore it was not enforced as an
award by the Industrial Court against the appellant.
Thereafter the Rashtriyn, Mill Mazdoor Sangh wrote
to the Government of Bombay requesting that the
(1) [1950] 2 L.L.J. 1247.
•
•
.,
1 S.C.R. SUPREME COURT REPORTS
109
said award should be enforced against the appeJlant
in exercise of the powers vested in· the Government by
s. 114(2) of the Act. After necessary action under
s. 114(2), the Government of Bombay issued a notification dated July 31, 1956, directing that th.e award
made by the Industrial Court on March 13, 1956, for
payment of bonus for the years 1952 and 1953 and
also for the years 1954 to 1957 be enforced against
the appellant.
This was followed by a writ petition by the appellant in the High Court challenging the constitutionality of s. 114(2) and also challenging the power of the
State Government to issue such a notification under
that provision. The petition was however dismissed
on October 9, 1956.
There was then an appeal to a
Division Bench of the High Court in which also the
appellant failed. The appellant then applied for a
certificate to enable it to file an appeal to this Court,
which was granted and that is how the matter has
come up before us.
Two main points have been urged on behalf of the
appellant before us. In the first place, it is urged that
s.
114(2) is unconstitutional as it violates the fundamental rights guaranteed under Art. 19(1)(f) and (g) of
the Constitution. In the second place, it is urged that
even ifs. 114(2) is constitutional, the notification has
gone beyond the powers conferred on the State Government by that section and therefore the notification
is bad.
We do not think it necessary for purposes of the
present appeal to consider the constitutionality of
s. 114(2), for we have come to the conclusion that the
notification is bad because it goes beyond the powers
conferred on the State Government by that section.
This brings us immediately to the second point that
has been urged before us and in that connection we
have to consider the ambit of the power of the State
Government under s. 114(2). Section 114(2) reads as
follows:-
" In cases in which a Representative Union is a
party to a registered agreement, or a settlement,
submission or award, the State Government may,
Prakash Cotton
Mills (Private)
Ltd.
v.
State of B01nbay
lVanchoo ].
Prakash Cotton
Mills (Private)
Ltd.
v.
State of Bonibay
Wanchoo ].
110
SUPREME COURT REPORTS
[1962]
after giving the parties affected an opportunity of
being heard, by notification in the Official Gazette,
direct that such agreement, settlement, submission
or award s.hall be binding upon such other employers and employees in such industry or occupation in that local area as may be specified in the
notification:
Provided that before giving a direction under
this section the State Government may, in such
cases as it deems fit, make a reference to the Industrial Court for its opinion."
The words ofs. 114(2) are very general and may
at first blush be open to the interpretation that any
agreement, settlement, submission or award may be
extended thereunder provided it fulfils its terms. But
further consideration shows that there are two obvious
limitations on the power of the State Government in
that behalf. The first limitation arises out of the subject-matter of the agreement etc., to be extended.
Suppose the agreement etc. deal with (let us say) the
wages of a certain type of workmen in a certain mill.
Suppose that the agreement etc., are extended to ano.
ther mill where that type of workmen does not exist.
Obviously the agreement cannot be extended in these
circumstances and the power of the State Government
is thus limited by the subject matter of the agreement
etc.
The second limitation which again is obvious arises
from the provisions of law. The proviso to s. 114(2)
shows that before exercising its power under the said
section the Government can refer the matter to an
Industrial Court and there can be no doubt that an
Industrial Court cannot and will not advise anything
against the law. Section 95-A makes the determination of any question of law in any order, decision,
award or declaration passed or made, by the Full
Bench of the Industrial Court under the regulations
made under s. 92 binding in all proceedings under the
Act. What is done under s. 114(2) is also a proceeding
under the Act after notice to the parties affected. The
State Government is thus bound by any decision on a
question of law while proceeding under s. 114(2). The
•
1 S.C.R. SUPREME COURT REPORTS
111
policy of the Act underlying s. 95-A therefore leads to
z96z
the conclusion that the exercise of power conferred by Praltash Cotton
s. 114(2) has to be in conformity with the industrial Mills (Priuat•)
law laid down by the Full Bench of the Industrial
Ltd.
Court and also by any decision of this Court. The
v.
State Government therefore when it passes an order State of Bombay
under s. 114(2) must have full regard to the law as laid
down by the legislature and by the decisions of this
Wanchoo J.
Court and cannot pass an order under s. 114(2) which
is against such law.
Besides, s. 114(2) places a registered agreement, a settlement, a submission and an
award on the same footing and so if an award has to
conform to s. 95-A as it must so must the other three
mentioned therein. Therefore, when the State Government acts under s. 114(2) it can only do as between the
parties before it what a labour court, an Industrial
Court or a wage board can in law do under the Act.
We do not think that s. 114(2) authorises the State
Government to act against the law as laid down by
the legislature or by this Court. Section 114(2) therefore appears to be speedy remedy (dispensing with all
appeals provided under the Act) by which the State
Government may direct that the terms and conditions
of employment in the matter of wages, hours of work
and so on may be the same in a particular industry or
occupation in a particular area as may have been settled between a representative union and other employers in that area and as could if necessary be enforced
through an award in a case to which the representative union was a party. There can be no doubt however that the State Government cannot do under
s. 114(2) what an adjudicator has no power to award
under the provisions of the Act. Therefore, as we read
s. 114(2) we cannot escape the conclusion that the
State Government's power to make a direction under
that section is co-terminus with the power of an
adjudicator (be it a labour court, an Industrial Court
or a wage board under the Act) to make an award
thereunder, and the State Government cannot under
s. 114(2) do what an adjudicator cannot do under the
Act. This being the ambit of the State Government's
power in respect of giving a direction under s. ll4(2),
196I
Prakash Cotto?}
Atills (Private)
Ltd.
v.
State of Bon1bay
ivanchoo ].
112
SUPREME COURT REPORTS
[1962]
let us now proceed to see whether the impugned
notification is within the ambit of these powers.
By this notification the State Government has directed that the award dated March 13, 1956, made by
the Industrial Court shall be binding on the appellant
and its employees in the matter of payment of bonus
for the years 1952 to 1957 (both inclusive). It is not
in dispute that the said award was based on an agree- .
ment between the Mill-owners' Association, Bombay
and the Rashtriya Mill Mazdoor Sangh, Bombay. The
said agreement provided that it would have to be
signed by each member mill of the Mill-owners'
Association before it would be binding on it and again
it is not in dispute that the appellant-mill though it is
a member of the Mill-owners' Association never signed
it. Further, cl. (6) of the agreement provided for
payment of minimum bonus even in cases where tliere
was no adequate profit to provide for all prior charges
as per the Full-Bench formula and also in cases where
a mill had made actual loss on the year's working,
subject to a proviso as to adjustment. Thus by the
direction given in the impugned notification the
appellant is subjected to payment of bonus even where
it has not made adequate profit to provide for all
prior charges or has in fact made a loss. The contention on behalf of the appellant is that it would not be
open to an Industrial Court to grant bonus when profit
was not adequate to meet all prior charges or where
there was an actual loss and therefore when the impugned notification made it possible for grant of bonus
even in these cases (for prima Jacie the appellant had
made losses upto 1955), it directed something which
even an Industrial Court could not do. In consequence,
it is urged that the notification inasmuch as it makes
this possible is beyond the powers conferred on the
State Government under s. 114(2) because it allows
something to be done which even an Industrial Court
could not allow. Reliance in this connection is placed
on the decision of this Court in The New M anekchowk
Spinning. Co. Ltd. and Others v. The Textile Labour
Association (1 ). In that case this Court was considering
(I) [r96r] 3 S.C.R. I.
...
..
..
•
..
---:
>.
'
•
•
1 s.c.R. SUPREME COURT REPORTS
113
a similar agreement relating to Ahmedabad. The
Industrial Court had imposed that agreement after its
expiry for one year on the mills in spite of their
contention that they were not bound to pay any
bonus for the years in dispute in view of the law laid
down by this Court in The Associated Cement Companies, Limited v. The Workmen('). After examining the
terms of the agreement then in dispute this Court
came to the conclusion that in view of the law laid
down in The Associated Cement Companies' case, the
Industrial Court had no jurisdiction to impose that
agreement on the mills. It further held that an agree-
:iμent of that kind could only continue by consent of
pa:rties and could not be enforced by industrial
adjudication against the will of any of the parties. The
agreement in the present case directed to be enforced
by the impugned notification is similar in terms and
as held in The New JJ1anekchowk's case(') it could not
be enforced by industrial adjudication against the will
of any of the parties. The power of the State Government under s. 114(2) being co-terminus with the power
of an adjudicator under the Act, such an agreement
cannot therefore be directed to be enforced against
the will of the appellant even under s. 114(2) inasmuch
as by doing so the State Government would be going
beyond the powers conferred on it by that section.
The impugned notification therefore must be held to
be bad inasmuch as it goes beyond the powers
conferred on the State Government under s. 114(2)
and must therefore be struck down.
We therefore allow the appeal with costs and
setting aside the order of the High Court hold that
the notification dated July 31, 1956, is beyond the
powers of the State Government under s. 114(2) and
direct that it will.not be enforced.
We should however like to make it clear that this
decision will not prejudice the trial of any references
with respect to bonus which may be pending or which
may hereafter be made between the appellant and its
employees with respect to years 1952 to 1957 (both
(1) [1959] S.C.R. 925.
15
(i) [1961] 3 S.C.R. l.
l 1rakash Cotton
1\Jills (Private)
Lid.
v.
State of Bombay
Wanchoo ].
zg6r
Prakash Cotton
AI1/ls (P1ivute)
Ltd.
v.
State of Bombay
Sa1kar j.
114
SUPREME COURT REPORTS
[1962]
inclusive).
If such references are pending or are
hereafter made they will be decided in accordance
with the decision of this Court in The Associated
Cement Companies' Case (1).
SARKAR, J.-This appeal arises out of an application
made by the appellants to the High Court at Bombay
under Art. 226 of the Constitution for a writ directing
the respondent, the State of Bombay, to forbear from
acting upon or enforcing a certain notification issued
by it under s. 114(2) of the Bombay Industrial Relations Act, 1946. This order was sought on two grounds.
The first ground was that s. 114(2) was ultra vires,
illegal and void. The second ground was that if it was
not so, the notification had been issued in improper
exercise of the powers conferred by that provision.
The appellants are a cotton textile mill in Greater
Bombay, a local area under the Act, and its directors
and shareholders. Their application was dismissed by
the High Court and hence the present appeal.
It appears that certain references were pending
since 1953 and 1954 under the Act in the Industrial
Court between various cotton textile mills in Greater
Bombay and their employees, in respect of disputes
concerning bonus for the years 1952 and 1953.
In
these references tho employees were represented by
the Rashtriya Mill Mazdoor Sangh, a Representative
Union of workmen in the cotton textile industry as
defined in the Act and a union registered under it.
The appellant mill was a party to these references.
On March 1, 1956, while these references were pending,
the Rashtriya Mill Mazdoor Sangh entered into an
agreement with the Mill Owners Association, Bombay,
of which fortyseven cotton textile mills including the
appellant mill, were members, regarding the bonus to
be paid to the employees of these·mills for the years
1952 to 1957. This agreement was subsequently accepted individually by about fortytwo of the mills
who were members of the Association and parties to
the references, and became binding on these mills.
This agreement was later registered under the Act
and filed in the pending references and an award was
(1) [1959] S.C.R, 925.
•
•
I S.C.R. SUPREME COURT REPORTS
115
made by the Industrial Court on March 13, 1956, in
terms of it, as between the mills who had individually
accepted the agreement and their employees. The
appellant mill did not accept the agreement and no
award was made in the references concerning it and
so far as it was concerned, the references remained
pending.
On July 31, 1956, the respondent made the order
which is challenged in these proceedings. That order
was in these terms:
"vVhereas the Rashtriya Mill Mazdoor Sangh,
Bombay, ........... .is a party to an award dated the
13th March 1956 ........... .
And whereas the Government of Bombay, considers that the award should be made binding upon
the employers specified in column 1 of the schedule
hereto annexed and their employees ........ .
And whereas the said employers and the Rashtriya Mill Mazdoor Sangh, Bombay, representing
the said employees being the parties affected were
heard .............. .
Now, therefore, in exercise of the powers conferred by sub-section (2) of section 114 of the said Act,
the Government of Bombay hereby directs that the
said award shall be binding on the employers specified in column 1 of the schedule hereto annexed
and their employees in the matter of payment of
bonus for the years specified against the employers
in column 2 of the said schedule."
The appellant mill was one of the employers mentioned in the schedule to the notification and the
schedule further provided that the award would be
binding on the appellant mill and its employees for
the years 1952 to 1957, both inclusive.
As a result of
this notification the appellant mill became liable to
pay bonus to its employees for the years mentioned, in
terms of the award based on the agreement, to neither
of which it was a party. The appellants contend that
the appellant mill is not liable to pay bonus in law
as laid down by this Court in Muir Mills Co. Ltd. v.
Suti Mills Mazdoor Union (1) and by the Full Bench
(1) [1955] I S.C.R. 991.
Prakash Cotton
Mills (Private)
Lid.
v.
State o.f Bombay
Sarkar ].
I96I
p,,akash Cotton
Mills (P1ivate)
Ltd.
v.
State of noml1ay
Sarkt1r J.
116
SUPREME COURT REPORTS
[1962]
of the Labour Appellate Tribunal in Mill Owners'
Association, Bombay v. Rashtreeya Mills Mazdoor
Sangh (1) as it has not made any profit for the period
commencing from June 30, 1950, and ending on June
30, 1955.
The agreement on which the award was based,
adopted a formula for ascertaining the available
surplus of the profits of an employer and provided for
payment of certain bonus out of it. This bonus, I
gather, would have been of a smaller amount than
that payable under the formula laid down in the cases
mentioned earlier. The appellants have no complaint
against this part of the agreement for, presumably,
under it, they would not be liable to pay any bonus at
all. 'Vhat they object to is cl. 6 of the agreement. This
clause in substance provided that when no available surplus was found to exist according to the formula or even when a mill had incurred loss in a particular year, it would have to pay its employees "a
minimum bonus equivalent to 4·8 per cent of the basic
wages earned by them during the year'', with a right
to recoup the bonus so paid, out of the bonus that
would be payable under the agreement in subsequent
years and out of the residue of the surplus profits then
remaining, it would have to pay bonus in terms of the
agreement. The substance of the appellants' grievance against the notification is that under it the
appellant mill has to pay bonus in terms of cl. 6 of
the agreement even though it has been working at a
loss.
The first question is whether s. 114(2) is invalid and
illegal. That section so far as is material is in these
terms:
"S. 114 (1). A registered agreement or a sett.lement,
submission or award shall be binding upon all persons who are parties thereto:
(2) In cases in which a Representative Union is a
party to a registered agreement, or a settlement,
submission or award, the State Government may,
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after giving the parties affected an opportunity of
,.
(•) (1950] 2 L.L.J. 1247.
..
1 S.C.R. SUPREME COURT REPORTS
117
being heard, by notification in the Official Gazette,
direct that such agreement, settlement, submission
or award shall be binding on such other employers
or employees in such industry or occupation in that
local area as may be specified in the notification."
The appellants first challenge the validity of the
section on the ground that it offends Art. 14 of the
Constitution. It is said that it gives an unguided and
arbitrary power to the State Government to discriminate between various sets of employers and employees
and make an order on any one set at its pleasure leaving out others. It seems to me that this contention is
not well-founded. The power given by the provision
is not, in my view, uncontrolled. The object of the
Act clearly is the settlement of industrial disputes
and attainment of industrial peace. Furthermore,
under the section the order can be made on employers and employees in a local area which again is a
limitation of the power.
Now, a local area is an area notified as such for the
purposes of the Act: see s. 2(23). The object of this provision as to local areas is to divide the State into several areas for better maintenance of industrial peace and
to group together for that purpose, the industries in a
region. If conditions of labour in any area where a
large number of workmen is collected, are uniform,
then there is less likely to be disaffection among them
whereas if such conditions are not the same, the workmen are likely to become restive. It is well-known
that regional considerations are closely connected with
industrial disputes and are of importance for their
settlement .
The local area contemplated by s. 114(2) is obviously
the area in respect of which the Representative Union
mentioned in it has been registered.
No reference
can be found in the section to any other local area.
Under s. 2(33) a Representative Union means a union
registered as such under the Act and under s. 13(1) a
Representative Union is a union which has a membership of not less than fifteen per cent. of the employees
in any industry in any local area and registered for
that industry in the area.
I96I
Prakash Cotton
Mills (Private)
Ltd.
v.
State of Bombay
Sarkar ].
l)rakash Cotton
Mills (Private)
Ltd.
v.
State of Bontbay
Sarkar ].
ll8
SUPREME COURT REPORTS
[1962]
The agreement, settlement, submission or award
mentioned in the section has to be one to which a
Representative Union is a party. It follows from
this that a substantial body of workmen in an area
has come to a decision or become bound by an award
as to a question or questions affecting them. Therefore, the power under the section can be exercised
only for achieving industrial peace in that area. It is
not unlikely when a substantial section of workmen
congregated in an area have secured certain rights
that the other employees in that area may claim similar rights and this may disturb industrial peace in
that area. The power can be exercised only for meeting such disturbance and only in the local area where
it occurs.
There are therefore two guiding principles. First,
the power can be exercised only to prevent breach of
industrial peace. Secondly, it can be exercised only
in a specified area if there is a threat to industrial
peace there. An exercise of the power outside the
area and for purposes other than maintenance of
industrial peace, would be beyond the scope of the
section.
Again, once there is occasion for legitimate
exercise of the power and it is exercised, it must be
exercised in all units of t.he industrv in that local area
in which units the threat to the ind;JStrial peace exists
if that would restore the peace. It would be open to
the Courts to correct a discriminatory use of the
power or its use outside the scope of the section.
Therefore it does not seem to me that the section confers unguided and arbitrary power.
It is of some interest to state that in the present
case there has been no such discriminatory use of
the power or any use outside the section. The respondent has made the award binding on all the
remaining mills who had not accepted the agreement
and there is evidence that there was threat of breach
of industrial peace in these mills.
Then also, I find that the section has conferred the
power on the highest authority, namely, the Government itself. That would be some guarantee that it
would be duly exercised. This is a further reason for
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•
I S.C.R. SUPREME COURT REPORTS
119
holding that the section does not confer absolute and
arbitrary power.
The next objection to the section is that it offends
Art. 19(l)(g) in that it puts an unreasonable restriction on a person's right to carry on business.
This contention also is unacceptable to me.
There is
no doubt that the section puts certain restrictions on
a person's right to carry 0n an occupation or business.
The real question is whether the restrictions have been
put in the interest of the general public and are reasonable. That the restrictions have been put in the
interest of the general public seems to me to be unquestionable. The reason why the restrictions have
been put is that otherwise, industrial peace would be
disturbed. The entire country is interested in industries and, therefore, in industrial peace. This point
requires no elaboration .
Then, are the restrictions put, reasonable? It seems
to me that they are. The restrictions are that an
agreement, settlement, award or submission-all of
which of course must be concerning industrial disputes
-to which a person is not a party is made binding
on him.
By an "agreement", the parties to an industrial dispute settle it themselves. A "settlement"
means a settlement of an industrial dispute arrived at
with the assistance of a conciliator in the course of
conciliation proceedings under the provisions of the
Act.
A "submission" is a reference of an industrial
dispute to arbitration. An "award" is an adjudication on an industrial dispute by the court constituted
under the Act .
An agreement, a settlement or a submission is the
result of the free consent of the parties to the dispute.
As earlier stated, the section only applies to an agreement, settlement or submission to which a Representative Union, which is a union representing a substantial number of workmen, is a party. Therefore,
the section can apply to an agreement, settlement or
submission which a substantial number of workmen
and an employer has, of their free choice, accepted.
It would follow that such an agreement, settlement or
submission has been considered reasonable by parties
Prakash Cotton
Mills (Private}
Ltd.
v.
State of Bombay
Sarkar J.
120
SUPREME COURT REPORTS
[1962]
z96z
interested and in the case of a settlement by the conPrakash Cotton cilia tor appointed under the Act also. The restrictions
Mills (Private) imposed by any of these must therefore be reasonable.
Ltd.
An award, on the other hand, is a decision of a
v.
court and can, therefore, always be expected to be
State of Bombay reasonable.
Sarkar J.
If certain restrictions are reasonable for an employer and his employees, I suppose it would follow
that those restrictions would be equally reasonable for
other employers and employees and more so, when
they are all in the same neighbourhood where the
conditions are likely to be more or less the same.
Therefore, it seems to me that the restrictions imposed
by s. 114(2) cannot be said to be unreasonable.
I have earlier summarised the offending part of the
agreement. I do not think that there is anything
unreasonable there.
The employer pays only 4·8
per cent of the basic wage in the year when he makes
no profit with a right to recoup it in a subsequent and
more prosperous year. The maximum that he has to
pay as bonus in the best year is, I gather, !{')SS than
what he would have to pay under the formula regarding bonus laid down by this Court. The agreement
extends over 6 years and it would not be unreasonable
to suppose that during these years profits might be
made to wipe off the minimum bonus paid in a lean
year. The restrictions put by the present agreement
are, therefore, in my view quite reasonable.
·
It may be that in individual cases, which are not
likely to be many, the restrictions may work hardship.
But that would not justify a conclusion that s. 114(2)
itself imposes unreasonable restrictions on a man's
right to carry on his business or occupation. This
view was taken by this Court in Bijay Cotton Mills v.
The State of Ajmer (1), where it was said in respect of
the Minimum Wages Act, 1948;
"Individual employers might find it difficult to
carry on the business on the basis of the minimum
wages fixed under the Act but this must be due
entirely to the economic conditions of these particular employers. That cannot be a reason for the
striking down the law itself as unreasonable."
(1) [1955] I S.C.R. 752, 755-6.
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I '"(
1 S.C.R. SlJPREME COURT REPORTS
121
Another ground on which the validity of the section
was challenged was that it prevented a party from
having an industrial dispute decided by an Industrial
Court under the Act. But I do not see that there is
an inherent right in a party to an industrial dispute
to have it decided by an Industrial Court under the
Act.
The right to ask for an adjudication by an Industrial Court is itself created by the Act. What the
Act has given, it can clearly restrict or take away in
any manner it thinks fit.
The provisions of the Act
must be read together and in cases in which power
under s. 114(2) has been exercised, the right to ask for
an adjudication by an Industrial Court must be considered either as taken away or unavailing.
I thus come to the conclusion that the section is not
invalid for any of the reasons mentioned. I also feel
no doubt that the section was quite within the legislative competence of the legislature which passed it.
I did not understand the learned counsel for the
appellants to contend to the contrary. I have mentioned the legislative competence only to dispose of
another argument which also, I think, was aimed at
the validity of the section. It was said that there is
no power anywhere to provide for payment of bonus
where in law such bonus is not payable. This argument is founded on the decision of this Court in the
Muir Mills case (1) where it had been said that no
bonus is payable where no profit has been made.
Therefore it is said that the section authorises payment of bonus where none is payable in law. This
argument seems to me to be misconceived. If the
section is legislatively competent and otherwise valid,
as I think it is, then it cannot be invalid for the simple reason that it directs payment of bonus where, as
held by this Court, as a matter of adjudication, none
would be payable in law. The law laid down by this
Court is only for application when the question comes
up for adjudication by a court bound by that law. It
has no relevance in deciding the validity of an otherwise competent law.
The law laid down by any
Court cannot take away legislative competence.
The
(1) [1955] 1 S.C.R. 991.
16
r961
Prakash Cotton
Mills (Private)
Lid.
v.
State of Bombay
Sarkar ].
122
SUPREME COURT REPORTS
[1962)
r96r
enactment in question has left the law laid down by
this Court quite unaffected; it will still apply in all
Prakash Cotton
Mills (Private) cases where it is applicable.
Ltd.
Now I proceed to consider the validity of the notifiv.
cation. As I understood the learned counsel for the
State of Bombay appellants, he put his case on two grounds. He first
said that the notification was invalid as it was made
Sarkar J.
while a reference was pending in an Industrial Court.
The reasoning is that it is invalid as it takes away the
jurisdiction of that Court to decide the pending reference. I think what I have earlier said is a sufficient
answer to this contention. The right to have the
pending reference proceeded with was given by the
Act. There is nothing to prevent that Act or any
other, from providing that the pending reference shall
be discontinued or become infructuous. If a notification could be made under the section, as the present
argument assumes it could be, then as to when it could
be made, would certainly depend on the terms of the
statute. I find nothing in the Act to show that a
notification could not be made while a reference was
pending and so as to render it abortive. Therefore I
think that no exception can be taken to the notification in the present case for the reason that it was
issued while the reference was pending.
The other challenge to the notification does not appear to have been raised in the High Court. It was
based on s. 95A of the Act which is in these terms:
S. 95A.
The determination of any question of
law in any order, decision, award or declaration
passed or made, by the Full Bench of the Industrial
Court, constituted under the regulations made
under s. 92, shall be recognised as binding and shall
be followed in all proceedings under this Act.
It is said that the Government in issuing a notification
under s. 114(2) was, in view of s. 95A, bound by the
decisions of the Full Bench but in issuing the present
notification, it ignored a decision of the Full Bench
which provided that no bonus would be payable by
an employer where he had made no profits.