# MUMBAI KAMGAR SABHA, BOMBAY v. ) M/S ABDULBHAI F AIZULLABHAI & ORS - **Citation:** [1976] 3 S.C.R. 591 - **Court:** Supreme Court of India - **Decided:** 1976-03-10 - **Case number:** Civil Appeal No. 61 of 1971 - **Bench:** V. R. Krishna !Yer, N. L. Untwalia - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mumbai-kamgar-sabha-bombay-v-m-s-abdulbhai-f-aizullabhai-ors-6808 - **Pages:** 23 ## Headnote B ' Payn1ent of Bonus Act, 1965-Workers' Union-Not being a party to dispute if had locus standi-Bonus Act-If a complete code-Bonus based on custom, usage or a condition of service-If excluded by the Act. • • Res judicata-if applicable to industrial disputes. A considerable number of workmen were employed by a large number of small businessmen in a locality in the city. Prior to 1965, the employe1s C made cx-rtratia payment to the workers by way of bonus which they stopped from that year. A Board of Arbitrators appointed under s. lOA of the Industrial Disputes Act, to which the bonus dispute was referred, rejected the workers• demand for bonus. The dispute was eventually 'referred to an Industrial Tribunal which in limine dismissed the workers' demand as being barred by res judicata,1 in view of the decision of the Arbitration Board. The Tribunal' in addition. held that bonus so far paid having been_ founded on tradition and custom, did not fall within the four-corners of the Bonus Act which is a complete code and came to the conclusion that the workers were not D entitled to bonus. On appeal to this Court it was contended that (i) the appellant-Union not being a party to the dispute had no locus standi, (ii) the claim of the workmen not being profit-based bonus, which is what the Bonus Act deals with, the Act has no application to this case; and (iii) since no case of customary or contract bonus was urged before the Arbitration Board such a_ ground was barred by the general principles of res judicata. E Dismissing the appeal. HELD: 1 (a) In an industrial dispute the process of conflict resolution is informal, rough and ready and invites a liberal approach. Technically the union cannot be the appellant, the workmen being the real parties. 1bere is a terminological lapse in the cause title, but a reading of the petition, the description of the parties, the grounds urged and grievances aired, show that the battl~ was between the workers and the employers and the Union represented the workers. The substance of the matter being obvious, formal def6cts fade away. [596H] (b) Procedural prescriptions are handmaids, not mistresses of justtce and failure of fair play is the spirit in which Courts must view processual deviances. Public interest is promoted by a spacious construction of locus .standi in our socio-econornic circumstances, conceptual latitudinarianisn1 permits taking liberties with individualisation of the right to invoke the higher courts where the remedy is shared by a considerable number, particularly when they are weaker. [597B; DJ Dhabolkar [1976] I S.C.R. 306 and Nawabgani Sugar Mills [1976] I S.C.C . 120 held inapplicable. (e) In industrial law collective bargaining, union representation at conciliations, arbitrations, adjudications and appellate and other proceedings is a welcome development and an enlightened advance in industrial life. [597GJ In the instant case the union is an abbreviation for the totality of workmen involved in the dispute. The appeal is, therefore, an appeal by the workmen compendiously projected and impleaded through the union. [598Dl F G H 592 SUPREME COURT REPORTS (1976] 3 S.C.R. A 2(a) The demands referred by the State Govt. under s. lO(l)(d) of the In~ustrial Disputes Act, specifically speak of payment of bonus by the employers which had become custom or usar:e or a condition of service in the establish~ ments. The subject matter of the dispute referred by the Govt. dealt with bonus based on custom or condition of service. The Tribunal was bound to \ investigate this question. The workers in their statements urged that the demand was not based on profits or financial results of the employer but was based on y' custom. [599 D-E] B (b) The pleadings, the terms of reference and the surrounding circumstances c D support the only conclusion_that the core of the cause of action is custom and/or term of service, not sounding in or conditioned by profits. The omission to • mention the name of ~ f ## Text _Characters 0–39,886 of 73,065. This is a partial read: ask again with offset=39886 for what follows._ 591 MUMBAI KAMGAR SABHA, BOMBAY A v. ) M/S ABDULBHAI F AIZULLABHAI & ORS. March 10, 1976 [V. R. KRISHNA !YER AND N. L. UNTWALIA, JJ.] B ' Payn1ent of Bonus Act, 1965-Workers' Union-Not being a party to dispute if had locus standi-Bonus Act-If a complete code-Bonus based on custom, usage or a condition of service-If excluded by the Act. • • Res judicata-if applicable to industrial disputes. A considerable number of workmen were employed by a large number of small businessmen in a locality in the city. Prior to 1965, the employe1s C made cx-rtratia payment to the workers by way of bonus which they stopped from that year. A Board of Arbitrators appointed under s. lOA of the Industrial Disputes Act, to which the bonus dispute was referred, rejected the workers• demand for bonus. The dispute was eventually 'referred to an Industrial Tribunal which in limine dismissed the workers' demand as being barred by res judicata,1 in view of the decision of the Arbitration Board. The Tribunal' in addition. held that bonus so far paid having been_ founded on tradition and custom, did not fall within the four-corners of the Bonus Act which is a complete code and came to the conclusion that the workers were not D entitled to bonus. On appeal to this Court it was contended that (i) the appellant-Union not being a party to the dispute had no locus standi, (ii) the claim of the workmen not being profit-based bonus, which is what the Bonus Act deals with, the Act has no application to this case; and (iii) since no case of customary or contract bonus was urged before the Arbitration Board such a_ ground was barred by the general principles of res judicata. E Dismissing the appeal. HELD: 1 (a) In an industrial dispute the process of conflict resolution is informal, rough and ready and invites a liberal approach. Technically the union cannot be the appellant, the workmen being the real parties. 1bere is a terminological lapse in the cause title, but a reading of the petition, the description of the parties, the grounds urged and grievances aired, show that the battl~ was between the workers and the employers and the Union represented the workers. The substance of the matter being obvious, formal def6cts fade away. [596H] (b) Procedural prescriptions are handmaids, not mistresses of justtce and failure of fair play is the spirit in which Courts must view processual deviances. Public interest is promoted by a spacious construction of locus .standi in our socio-econornic circumstances, conceptual latitudinarianisn1 permits taking liberties with individualisation of the right to invoke the higher courts where the remedy is shared by a considerable number, particularly when they are weaker. [597B; DJ Dhabolkar [1976] I S.C.R. 306 and Nawabgani Sugar Mills [1976] I S.C.C . 120 held inapplicable. (e) In industrial law collective bargaining, union representation at conciliations, arbitrations, adjudications and appellate and other proceedings is a welcome development and an enlightened advance in industrial life. [597GJ In the instant case the union is an abbreviation for the totality of workmen involved in the dispute. The appeal is, therefore, an appeal by the workmen compendiously projected and impleaded through the union. [598Dl F G H 592 SUPREME COURT REPORTS (1976] 3 S.C.R. A 2(a) The demands referred by the State Govt. under s. lO(l)(d) of the In~ustrial Disputes Act, specifically speak of payment of bonus by the employers which had become custom or usar:e or a condition of service in the establish~ ments. The subject matter of the dispute referred by the Govt. dealt with bonus based on custom or condition of service. The Tribunal was bound to \ investigate this question. The workers in their statements urged that the demand was not based on profits or financial results of the employer but was based on y' custom. [599 D-E] B (b) The pleadings, the terms of reference and the surrounding circumstances c D support the only conclusion_that the core of the cause of action is custom and/or term of service, not sounding in or conditioned by profits. The omission to • mention the name of ~ festival as a matter of pleading did not detract from the clain1 of customary bonus. An examination of the totality of materials leads to the inevitable result that what had been claimed by the workmen \vas bonus based on custom and service condition, not one based on profit. [600E; 601B] Messrs. lsvahani Ltd. v. lspahani Etnployees' Union (19601 1 S.C.R. 24, Bombay Co. [19641 7 S.C.R. 477, Jardine Henderson [1962] Supp. 3 S.C.R. 382, Howrah-Am/a Light Rly. [1966] II LLJ 294, 302, Tulsidas Khimji [1962] I LLJ 435 and Ti/ak Co. A.LR. 1959 Cal. 797 referred to. (c) \Vhen industrial jurisprudence speaks of bonus it enters the area of right and clain1 to what is due beyond strict wages. Viewed from this augle prima facil' one is led to the conclusion that if the Bonus Act deals wholly and solely with profit bonus it cannot operate as a bar to a different species of claim merely because the word 'bonus' is common to both. [604G] (d) The welfare of the working classes is not only a human problem but a case where the success of the nation's economic adventures depends on the cooperation of the working classes to make a better India. Against such a perspective of developmental jurisprudence there is not much difficulty in recognising c-u~tomary bonus and contractual bonus as permissible in indnstrial law. [605BJ gh, to some extent, its quantum is adjustable towards statutory boruus. Section 34 does not mean that there cannot be contractual bonus or other species of bonus. This provision only emphasises the importance of the obligation of the employer, in every case, to pay the statutory bonus. The other sub-sections of s. 34 also do not destroy the survival of other types of bonus than provided by the Bonus Act. The heart of the statute, pJainly read, from its object and provisions, reveals that the Act has no sweep wider than profit bonus. [607E-G; 608 B-Dl · (d) The fact that certain types of bonus which are attended with pecularities deserving aH special treatment have been expressly saved from the bonus Act did not mean that whatever had- not been expressly saved was by necessary implication included in the Bonus Act. [608D] ( e) The long title of the Bonus Act seeks to provide for bonus to p\!rsons employed "in certain establislunents" not in all establishments. Moreover, A B customary bonus does not require calculation of profits, available surplus, C because it is a payment founded on long usage and the Act gives no guidance to ·fix the quantum of festival bonus. It is, therefore, clear that the Bonus Act deals with only profit bonus and matters connected therewith and does not govern customary, traditional or contractual bonus. [608G--H] (f) The Bonus Act speaks and speaks as a whole code on the sole subject of profit-based bonus but is silent on and cannot therefore annihilate by implication. other distinct and different kinds of bonus such as the one oriented D on custom. [609D] -. G'hewar Chand's case [1969) 1 S.C.R. 366 distinguished and hcl·foul play is absent, and fairness is not faulted, latitude is a grace of processual justice. Test litigations, representative actions, . pro bona publico and like broadened forms of legal proceedings are in keeping with the current accent on justice to the common man and C a necessary disincentive to those who wish to bypass the real issues on the merits by suspect reliance on·peripheral procedural short-comings. Even Art. 226, viewed in wider perspective, may be amenable to ventilation of collective or common · grievances, as disti.[Iguished from assertion of individual rights, although the traditional view, backed by precedents, has opted for the narrower alternative. Public interest is promoted by a spacious construction of locus standi in our D- . socio-economic circumstances and conceptual latitudinarianis.m permits taking liberties with individualisation of the right to invoke the higher courts where the remedy is shared by a considerable number, particularly when they are weaker. Less litigation, consistent with fair process, is the aim of adjectival law. Therefore, the decisions cited before us founded on the jurisdiction under Art. 226 are inept and themselves somewhat out of tune ·with the modem requirements of E jurisprudence calculated to benefit the community. Two rulings of this Court more or less endorse this general approach : Dhabolkar(1 ) and Newabganj Sugar Mills('). All. this apart, we are dealing with an industrial dispute which, in some respects, lends itself to more informality especially in the matter of Union representation. Technically, the Union cannot be the appellant, the workmen being the real parties. But the infelicity of drafting notwithstanding, the Union's role as merely representing the workers is made clear in the description of the parties. Learned counsel took F us through s. 36(1) and (4) of the Act, rr. 29 and 36 of the Central Rules under that Act, s. 15 (2) of the Payment of Wages Act and some rulings throwing dim light on . the rule regarding representation in · G industrial litigation. We deem it needless to go deeper into this ·question, for in industrial law, collective bargaining. union representation at conciliations, arbitrations, adjudications and appellate and otber proceedings is a welcome development and an enlightened advance in industrial life . Organised labour, inevitably involves unionisation.· Welfare of. H workers being a primary .concern of our Coustitution (Part IV), we (1) [1976] l S.C.R; 306. (2) (1976) 1 S.C.C. 120. A B c D E F .G H 598 SUPREME COURT REPORTS [1976] 3 S.C.R. have to understand and interpret the new norms of procedure at the pre-litigative and litigative stages, conceptually recognising the representative capacity of labour unions. Of course, complications may arise where inter-union rivalries and kilkenny cat competitions impair the peace and solidarity of the working class. It is admitted, in this case, that there is only one, union and .so we are not cqlled upon to visualize the difficult situations counsel for the respondents invited us to do, where a plurality of unions pollute workers' unity and create situations calling for investigation mto the representative credentials of the party appearing before the Tribunal or court. It is enough, on the facts of this case, for us to take the Union as an abbreviation for the totality of workmen involved in the dispute, a convenient label which, for· reasons of expediency, converts a lengthy party array into a short and meaningful one, group representation through unions being · familiar in collective bargaining and later litigation. We do not expect the rigid insistence on each workman having to be a party eo nomine. The whole body of workers, without their names being set out, is, in any case, sufficient, according to the counsel for the respondents, although strictly speaking, even there an amount of vagueness exists. For these reasons, we decline to frustrate this appeal by acceptance of a subversive technicality. We regard this appeal as one by the workmen compendiously projected and impleaded through the Union. Next we come upon the plea of.res judicata, as a roadblock in the way of the appellant. But we will deal with it last, as was done by counsel, and so straight to the piece de resistance of this !is. Points (b) and (c) bearing on bonus therefore claim our first attention and, in a sense, are integrated and amenable to common discussion. Shri G. B. Pai, appearing for the respondents, contended that the claim put forward by the appellant before the Tribunal was, on the face of it, unsustainable on the short ground that what . was pleaded was profit-based bonus only and, therefore, fell squarely within the Bonus Act. That Act being a complete Code, it expressly excluded by s. 1 (3) all establishments employing less than 20 workmen and all but four of the respondents were admittedly such small undertakings, with the result that the death knell to the plea of bonus was tolled by the Act itself. T):ierefore, the conclusion . was irresistible, - argued counsel for the respondents, that the plea for a profit-based bonus, being negatived by the-statute, stands self-condemned. This argument drives us into an enquiry as to whether the claim before the Tribunal was for profit-based bonus. "Yes'', was his holding and so he said 'no' to the workmen. The ·answer is the same, if the claim is founded on a similar b~s.is. Shri Tarkunde, for the appellant, countered this seemingly fatal submission by urging that whatever might have been the - species of · bonus demanded in 1965, the present dispute referred by the State Government related to a totally different type of bonus, namely, customary bonus or one which was a term of the employment itself. Even • • MUMBAI KAMGAR SABHA v. ABDULBHAI (Krishna Iyer, !.) 599 if this be true, Shri G. B. Pai has his case that the Bonus Act is allcomprehensive and no kind of bonus can gain legal recognition if it falls outside the sweep and scope of the Bonus Act itself. No brand of bonus has life left if it does not find a place in the oxygen tent of the complete Code called the Bonus Act. What thus first falls for our examination is the reference by the A State Government to the Tribunal, the pleading of the workmen before B the Tribunal and the counter statement by the employers before the Tribunal with a view to ascertain the character of the bonus demanded by the workers and covered by the dispute. It must be remembered that the award has rejected the claim not substantively but on the ground of two legal bars and care must be taken not to mix up maintainability with merits. A short cut is a wrong cut often times and the Tribunal's easy recourse to dismissal on preliminary grounds may well C lead-and it has, as will be presently perceived-to a re-opening of the case many years later if the higher Court reverses the legal findings. Be that as it may, let us test the validity of the plea that only a profitbased bonus has been claimed by the workers. The demands referred by the State Government under s. 10(1) (d) specifiaclly speak of payment of bonus by the employers which 'has D become custom or usage or a condition of service in the establishments'. The subsidiary or rather consequential point covered by the reference is 'if so, what shonld be the basis on which employers should make payment of bonus to their workmen for the years ... '. It is plain that the subject matter of the dispute, as referred by the Government, deals with bonus based on custom or condition of service. The Tribunal is therefore bound to investigate this question, the terms of E refereace being the operational basis of its jurisdiction. The workmen, in their statement, have asserted that bonus had been paid for several years and what transpired at the conciliation stages is clear from the letter of the Commissioner of Labour who adverts to the 'usual' custom and practice of payment of bonus'. The colour of the workers' claim has been clarified further in paragraphs F 10 to 12 of their statement before the Tribunal. While they do mention that the hardware merchants of Nag Devi have been making large profits during the years in question and, therefore, can afford to pay bonus according to the standards and criteria applicable to large and prosperous industrial establishments, the real foundation of their claim is set out in indubitable language as attributable to 'custom, usage and condition of service'. Snrely, they have no case of bonus dependent G upon the quantum of profits of the establishments nor uniformity region-wise. On the other han~, the amount of bonus, the time of payment, etc., vary from estabhshment to es~ab!1shm.ent. The c'.'nstant factor, however, is allegedly that there 1s consistency, predictability and uniformity', continuity and payment 'without reference t? the fluctuations in the financial performance and. profits of. eac)l firm . The Sabha does not mince words when, in praymg for relief, 1t sta~s H that the Tribunal 'be pleased to restore the custom, ~sage and conditions of service represented by the payment of bonus I~ these firms. In short, the bedrock of the bonus claim of the workers 1s custom and A B c D E F G H 600 SUPREME COURT REPORTS [1976) 3 S.C.R. usage and/or implied condition of service. Nor have the establishments, who are the respondents before the Tribunal and before us, made any mistake about the nature of the demand. In their statement before the Tribunal they have urged that a scrutiny of the accounts of the firms is unnecessary 'since the demand is not based on the profits or the financial results of the employers but is based on custom': "The contentions of the Sabha that the conditions oi service under all these employers should be governed by one standard and one criteria is, not tenable. Since all the shops are not owned by one person and since every shop is a different entity there is no question of uniformity of service conditions. Moreover, there is no law which lays down that the service conditions of the employees under all these employers should be uniform. It is submitted that the reference to the capital-turnover ratio in this paragraph is irrelevant. It is also submitted that the Sabha's demand that a sample scrutiny of the Accounts of the firms should be made by the Tribunal is irrelevant in this respect since the demand is not based on the profits or the financial results of the employers but is based on custom." More over the ex gratia payments for the pre-Bonus Act period are admitted by the respondents. They seek sanctuary on the counterplea that free acts of grace, even if repeated, can neither amount to a custom, usage or condition of service. In sum, a study of the pleadings, the terms of reference and the surrounding circumstances supports the only conclusion that, peripheral reference to the profits of the establishments notwithstanding, the core of the cause of action or the kernel of the claim for bonus is custom and/ or term of service, not sounding in or conditioned by profits. Shri G. B. Pai did urge that the precedents of this Court have linked custom-based bonus with some festival or other and that bonus founded on custom de hors some festival is virtually unknown to caselaw on the point. From this he argues that since the bonus has not been related by reference to any festival by the workmen in their pleadings (reference to Diwali as the relevant festival in the statement of the case in this Court is an ingenious innovation to fit into the judge-made law according to Shri Pai) the claim must fail. Legal life is breathed into customary bonus only by nexus with Puja or other festival. We are unable to agree with this rather meretricious submission. Surely, communal festivals are occasions of rejoicing and spending a.nd employers make bonus payments to employees to help them meet the extra expenses their families have to inc11r. Ours is a festival-ridden society with many religions contributing to their plurality. That is why our primitive practice of linking payment of bonus with some distinctive festival has sprouted. As we progress on the secular road, maybe the Republic Day or the Independence Day or the Founder's Day may well become the occasion for customary bonus. The crucial question is not whether there is a festival which buckles the bonus and the custom. What is legally telling is whether by an unbroken flow • , ,, I ' • • \ r • MUMBAI KAMGAR SABHA v. ABDUL BHAJ (Krishna Tyer, !.) 601 of annual payments a custom or usage has flowered, so that a right to A bonus based thereon can be predicated. The custom itself precipitates from and is proved by the periodic payments induced by the sentiment of the pleasing occasion, creating a mutual consciousness, after a ripening passage of time, of an obligation to pay and a legitimate expectation to receive. We are, therefore, satisfied that the omission to mention the name of a festival, as a matter of pleading, does not detract from the claim of customary bonus. The impact of B this omission on proof of such custom is a different matter with which we are not concerned at this stage since the Tribunal has not yet enquired. into the merits. Shri Pai urged that the custom, even if true, stood broken in 1965 and, therefore, during the post-1965 period, customary bonus stood extinguished. The effect of the arbitral board's negation of the c profit-based bonus claim in 1965 on custom-based bonus for the subsequent period is again relevant, if at all, as evidence, which falls outside our consideration at present. In the event of the Tribunal having to adjudicate upon the question, maybe this rather anaemic circumstance will be urged by the employer and explained by the employees. There is hardly any doubt that custom has been recognised in the past as. a source of the right to bonus as the several decisions cited before us by Shri Tarkunde make out ands. 17(a) of the Bonus Act, in a way, recognizes such a root of title. Jn Churakulam Tea Estate(') this Court surveyed the relevant case law at some length. lspahani( 2 ) implied as a term of the contract the payment of bonus from an unbroken, long spell. Vaidialingam J., in Churakulam(') referring to some of the precedents, observed : "In lspahani's case(') this Court had to consider a claim for Puja bonus, in Bengal, and the essential ingredients, for sustaining such a claim when it is based on an implied agreement. After stating that the claim, for Puja Bonus, can be b,ased either as a matter of implied agreement between the employers and employees, creating a term of employment for payment of Puja bonus, or that even where no implied agreement can be inferred, it may be payable as a customary bonus, this Court, in the said decision, specifically dealt with a claim for payment of bonus as an implied condition of services. This Court further accepted as correct the tests laid down by the Appellate Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton Mills Workers' Union (1952 L.A.C. 370) for inferring that there is an impl;cd agreement for grant of such bonus. The three circumstances, laid down by the Appellate Tribunal, were : (I) that the payment must be unbroken: (2) that it must be for a sufficiently long period; and (3) that the circumstances, in which payment was made should be such as to exclude that it was paid out of bounty ..... (!) [1969] 1 S.C.R. 931. (2) [1960] 1 S.C.R. 24 . 6-608 SCf/76 D E F G H A B c D E F G H 602 SUPREME COURT REPORTS (1976] 3 S.C.R. This Court, again, had to consider the essential ingredients to be establtshed when payment of bonus as customary or traditional, is claimed-again related t~ a festival-in The Graham Trading Co. (India) Ltd. v. Its Workmen (1960 1 SCR 107, 111) and dealt with the question as follows : "In dealing with puja bonus based on an implied term of employment, it was pointed out by us in Messrs. Ispahani Ltd. v. lspahani Employees' Union that a term may be implied, even though the payment may not have been at a uniform rate throughout and the Industrial Tribunal woul