# THE GRAHAM TRADING CO. (INDIA) LTD v. ITS WORKMEN

- **Citation:** [1960] 1 S.C.R. 107
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Civil Appeal No. 161of1959
- **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-graham-trading-co-india-ltd-v-its-workmen-1720
- **Pages:** 7

## Headnote

Industrial, Dispute-Puja Bonus-Customary and traditional
payment of-Test.
The appellant had been paying puja bonus to its workmen
continuously from 1940 to 1952 at the rate of one month's wages.
From 1948 to 1952, the appellant whenever it paid this bonus,
made it clear that it was ex gratia payment and would not constitute any precedent in future years. The dispute arose regarding
the payment of bonus in 1953· The workmen claimed that the
sole object of bonus which had been grantecf to them upto that year
was to meet puja expenses and that the payment of this bonus
had become customary and a term of employment. The appellant contended that payments in the past years had been entirely
ex gratia and as there was loss in 1953 no ex gratia payment could
be made in that year.
Held, that the workmen were not entitled to puja bonus as
an implied term of employment for an implied agreement could
not be inferred when the appellant had made it clear that the
payments from 1948 to 1952 were ex gratia ; but they were
entitled to puja bonus on the basis that it was a customary and
traditional payment. In determining whether the payment was
customary and traditional the following circumstances have to be
established :
(i) that the payment has been made over an unbroken series
of years;
,
(ii) that it has been for a sufficiently long period, the
period has to be longer than in the case of an implied term of
employment;
(iii) that it has been paid even in years of loss and did not
depend on the earning of profits ; and
(iv) that the payment has been made at a uniform rate
throughout.
The fact that the employer made the payment ex gratia
made no difference ; nor did unilateral declarations of one party
inconsistent with the course of conduct adopted by it matter.

## Text

S.C.R.
SUPREME COURT REPORTS
107
THE GRAHAM TRADING CO. (INDIA) LTD.
v.
ITS WORKMEN
(B. P. SINHA, P. B. GAJENDRAGADKAR and
K. N. WANCHOO, JJ.)
Industrial, Dispute-Puja Bonus-Customary and traditional
payment of-Test.
The appellant had been paying puja bonus to its workmen
continuously from 1940 to 1952 at the rate of one month's wages.
From 1948 to 1952, the appellant whenever it paid this bonus,
made it clear that it was ex gratia payment and would not constitute any precedent in future years. The dispute arose regarding
the payment of bonus in 1953· The workmen claimed that the
sole object of bonus which had been grantecf to them upto that year
was to meet puja expenses and that the payment of this bonus
had become customary and a term of employment. The appellant contended that payments in the past years had been entirely
ex gratia and as there was loss in 1953 no ex gratia payment could
be made in that year.
Held, that the workmen were not entitled to puja bonus as
an implied term of employment for an implied agreement could
not be inferred when the appellant had made it clear that the
payments from 1948 to 1952 were ex gratia ; but they were
entitled to puja bonus on the basis that it was a customary and
traditional payment. In determining whether the payment was
customary and traditional the following circumstances have to be
established :
(i) that the payment has been made over an unbroken series
of years;
,
(ii) that it has been for a sufficiently long period, the
period has to be longer than in the case of an implied term of
employment;
(iii) that it has been paid even in years of loss and did not
depend on the earning of profits ; and
(iv) that the payment has been made at a uniform rate
throughout.
The fact that the employer made the payment ex gratia
made no difference ; nor did unilateral declarations of one party
inconsistent with the course of conduct adopted by it matter.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
161of1959.
Appeal by special leave from the judgment and
order. dated the 31st January 1956 of the Labour
Appellate Tribunal at Calcutta in Appeal No. Cal. 301
I959
May7
I9S9
Th~ Graham
Tf'ading Co.
(India) Lid.
v.
JU Workmen
Wanehoo ].
108
SUPREME COURT REPORTS [1960(1)}
of 1954, a.rising out of the Awa.rd dated the 20th October
1954, of the Second Industrial Tribunal, West Bengal.
B. Sen and 8. N. Mukherjee, for the appellants.
D. N. Mukherjee, for the respondents.
1959. May 7.
The Judgment of the Court was
delivered by
WANCHoO J.-This is an appeal by special leave in
an industrial matter. The appellant is the Graham
Trading Co. (India) Ltd. (hereinafter called the
company). There was a dispute between the company
and its workmen about bonus, which was referred by
the Government of West Bengal by its order of
December 17, 195:J: to the Second lndust.rial Tribunal.
Though the order of reference did not specify the year
for which the bonus was in dispute, it is common
ground between the •parties that the dispute was for
bonus for the ·year 1953. The case of the workmen,
who a.re respondents before us, was that the company
ha:d been paying one month's bonus invariably from
1940 to 1950. In 1951, one month's bonus was paid
in October and half a month's further bonus was paid
in December. In 1952 one month's bonus was paid.
The demand that the workmen made in their letter of
August 27, 1953, was for three month's bonus. The
· company replied that payments in past years had been
entirely ex gratia and as there was loss in 1953 it was
not possible to make any ex gratia payment that year.
The workmen then contended in their letter of September 21, 1953 that the sole object of bonus which had, been
granted upto that year was to meet puja expenses and
that the payment of this bonus had become customary
and a term of employment. The matter could not be
settled between the parties and that is how the dispute
was referred for adjudication.
The company's case was that payment of bonus had
all along been ex gratia depending upon profits except
in a few years. But in those years it was also made
clear that the payment was ex gratia and without
creating any precedent for future.
Therefore, there
was neither a term of employment nor any custom,
S.C.R.
SUPREME COURT REPORTS
109
which put any. obligation on the company to pay any
bonus.in a year of loss.
The quest.ion was considered by, the Industrial
Tribunal from three aspects. Firstly, it considered
whether any bonus was payable for this year as profit
bonus, on the basis of the :Full Bench formula evolved
in The Mill.Owners' Association, Bombay, v. The
Rashtriya Mill Mazdoor Sangh, Bombay (1) and it
came to the conclusion that there was no available
surplus of profit to justify such bQnus. It then con.
sidered the remaining two aspects, namely, whether
puja bonus could be awarded either as an implied
term of employment according to the decision in
M ahalakshmi Cotton Mills Ltd., Calcutta v. M ahalakshmi
Cotton Mills Workers' Union (g) or on the basis of
custom. It seems to have mixed up the discussion on
these aspects and having come to the conclusion that
puja bonus could not be awarded in this case on the
basis of an implied term of employment it proceQded
to dismiss the claim on the basis of custom also.
The workmen then went up in appeal to the Labour
Appellate Tribunal, which allowed the appeal. The
decision of the Appellate Tribunal has also mixed the
two aspects of puja bonus, namely, whether it is based
on an implied term of employment or on custom; but
it came to the conclusion that there was sufficient
evidence to establish custom and therefore ordered
payment of one month's basic wages as puja bonus. It
was also inclined to the view that the company's
accounts showing loss were not reliable and there might
even be a case for profit bonus; but eventually it
granted one month's basic wages as customary puja
bonus. Thereupon the company filed an application
for special leave to appeal to this Court, which was
allowed; and that is how the matter has come up
before us.
Puja is a special festival of particular importance in
Bengal ; and it has become usual with many firms there
to pay their employees bonus to meet special puja
expenses. Disputes have arisen with respect to this bonus
which were adjudicated npon by various tribunals. As
(1) 1950 L.L.J. 1247.
( 2) 1952 L. A. C. 370.
I9S9
The Graham
Trading Co,
(India) Ltdi
v.
Its Workmen
Wanchoo ].
I959
The Graham
Trading Co.
(India) U4.
v.
Its Workmen
Wanehoo ].
110
SUPREME COURT REPORTS [1960(1)]
for back as 1949, in a dispute betwe~ The Bengdl
Chamber of Commerce, Calcutta and Its Employees('),
the Industrial Tribunal, which adjudicated upon the
dispute, observed that Durga Puja was a national
festival in Bengal and it was customary to make
presents to near and dear ones and to relatives at that
time.
As it was difficult for poorly paid employees
to make savings out of the monthly income for this
purpose, it, therefore, had become traditional and
customary in 'Bengal for employers to make a monetary
grant at the time of the pujas. The Bengal Chamber of
Commerce had not been slow in appreciating this and
had been granting bonus equivalent to one month's
pay, and the tribunal had been assured that there was
no intention to discontinue it. Later the matter was
considered in Mahalaxmi Cottan Mills case('), where
certain tests were laid down which would justify the
inference that there was an implied term of employment for payment of bonus at the time of the annual
Durga Puja. That case, however, was concerned with
puja bonus as an implied term of employment and not
as a matter of tradition or custom in Bengal. It is,
however, clear that puja bonus which is usually paid
in Bengal is of two kinds; namely, (1) where it is paid
as an implied term of employment as explained in
M ahalaxmi Cottan Mills case(') and (2) where it is paid
as a customary and traditional payment as stated in
the Industrial Tribunal's award referred to above.
We have considered the tests to be applied where it is
a case of payment on an implied term of employment
in Messrs. Ispahani Ltd. v. Ispahani Employees'
Union(') and we need not repeat what we have said
there. In the present case it has been pointed out by
the company that payments which had been made in
the past years from 1940 to 1952 could not be considered as based on an implied term 0£ employment in
the circumstances of this case. This contention, in
our opinion, is correct. An implied term of employment cannot be inferred in this case, for right from
(I) Publication of Government of West Bengal,
j Awards made by the
Tribunals for the quarter ending March 1949', p. 116.
(2) 1952 L.A.C. 370.
(3) [1960(1)] S.C.R. 24.
S.C.R
SUPREME COUR'f REPORTS
111
1948 to 1952, the company whenever it paid this
bonus, made it clear that it was an ex gratia payment
and would not constitute any precedent for future
years. In the face' of such notice year by year it
would not be possible to imply a term of employment
on the basis of an implied agreement, for agreement
postulates a meeting of minds regarding the subjectmatter of an agreement; and here one party was
always making it clear that the payment was ex gratia
and that it would not form a precedent for future
years. In dealing with the question of an implied
term of the condition of service, it would be difficult
to ignore the statement expressly made by the
employer while making the payment from year to year.
The question, however, whether the payment in this
case was customary and traditional, still remains to be
considered. In dealing with puja bonus based on an
'implied term of employment, it was pointed out by us
in Messrs. lspahani Ltd. v. lspahani Employees'
Union (1) that a term may be implied, even though the
payment may not have been at a uniform rate
throughout and the Industrial Tribunal would be
justified in deciding what should be the quantum of
payment in a particular year taking into account the
varying payments made in pr1;1vious years. But when
the question of customary and traditional bonus arises
for adjudication, the considerations may be somewhat
different. In such a case, the Tribunal will have to
consider: (i) whether the payment has been over an
unbroken series of years; (ii) whether it has been for a
sufficiently long period, though the length of the period
might depend on the circumstances of each case : even
so the period may normally have to be longer to
justify an inference of traditional and customary puja.
bonus than may be the case with puja bonus based on
an implied term of employment; (iii) the circumstance
that the payment depended upon the earning of profits
would have to be excluded and therefore it must be
shown that payment was made in years of loss. In
dealing with the question of custom, the fact that the
payment was called ex gratia by the employer when it
(1) [1960(1)] S.C.R. 24.
z959
The Gra/lam
Trading Co.
(India) Ltd.
v.
Its Workmen
Wanchoo j.
z959
Th~Graham
Trading Co.
(India) Ltd.
v.
Its Workmen
wan&hoo ].
112
SUPREME COURT REPORTS [1960(1))
was made, would, however, make no difference in this
regard because the proof of custom depends upon the
effect of the relevant factors enumerated by us; and it
would not be materially affected by unilateral declara.
tions of one party when the said declarations are
inconsistent with the course of conduct adopted by it ;
and (iv) the payment must have been at a uniform
rate throughout to justify an inference that the
payment at such and such rate had become customary
and traditional in the particular concern. It will be
seen that these tests are in substance more stringent
than the tests applied for proof of puja bonus as an
implied term of employment.
Let us now see whether these tests are satisfied in
the present case. The practice in the present case
began in 1940 and was unbroken upto 1950. In
between there was an adjudication in 1948 to which
the company was a party. At that time it was said
on behalf of the company before the industrial
tribunal that some bonus was being paid and that
there was no intention to discontinue it and consequently .the tribunal did not adjudicate upon the
matter, which shows that the company recognised the
traditional and customary nature of the payment and
it assured the tribunal that there was no intention
then to discontinue the payment. The payment was
continued from 1949 to 1951. In 1952, there was some
dispute and originally the company paid one month's
wages as advance of pay and not as bonus. Some of
the workmen, however, accepted the payment while
others did not, because they were not satisfied with
the amount being paid as advance of pay. The
chairman of the board of directors of the company
visited Calcutta in 1952 and then on the represehtation
of the workmen the advance was converted into one
month's bonus and even those workmen who had not
accepted the advance were allowed to draw the bonus.
It cannot therefore be said that there was any break
in the payment of bonus from 1940 to 1952, for if the
chairman had not converted what was advance of pay
into bonus in December 1952, the workmen might
ha. ve raised the dispute even in tha.t year a.nd then
S.C.R.
SUPREME COURT REPORTS
113
there would have been no break up to 1951. So there
has been unbroken payment and the period has been
sufficiently long to justify an inference of customary
and traditional bonus. It was pointed out that in
four years during this period the payment was made
in November and December and not about the time of
the pujas; and, therefore, it could not be said that
this was traditional and customary puja bonus. The
delay in payment is not in our opinion material in
this case, for one of the directors of the company, who
appeared as a witness, stated as to this one month's
bonus that it was paid by the company to help its
staff during pujas.
The condition that the payment should have been
made in years of loss also to exclude the hypothesis
that it was paid only because profits had been made,
has also been satisfied, for the evidence is that
payments were made in at least two years of loss.
Lastly, the condition that payment should have been
at a uniform rate has also been satisfied because one
month's basic wage is the quantum of bonus from 1940
right up to 1952 without any change. It is true that
in December 1951 further bonus for half a month was
paid; but that year was a year of profit in which
cloth-bonus for half a month was specially paid. Thus
the rate so far as the puja bonus is concerned has
always remained uniform at one month's basic wage.
It is true that the workmen pitched their demand too
high for three month's bonus in 1953. But that does
not in our opinion detract from the inference to be
drawn from the facts proved in this case. All the
conditions, therefore, of a customarv and traditional
bonus are satisfied in this case and there is no reason
to interfere with the order of the Appellate Tribunal,
though we should like to make it clear that we do not
agree with the observations of the Appellate Tribunal
in connection with the profit bonus aspect of the
matter. The appeal therefore fails and· is hereby
dismissed. As this question has arisen for tlie first
time in this Court as a distinct issue and was not
clearly considered before by the Appellate Tribunal,
we order the parties to bear their own costs.
15
Appeal dismissed.
I959
The Graham
Trading Co.
(India) Ltd.
v.
Its Workmen
wa.nchoo ].