# UNION AND OTHERS v. B. N. ELIAS & CO., LTD., AND OTHERS

- **Citation:** [1960] 3 S.C.R. 382
- **Court:** Supreme Court of India
- **Decided:** 1957-06-03
- **Case number:** Civil Appeal z96o No. 121 of 1959
- **Bench:** P. B. Gajendragadkar, K. N. w ANOHOO, K. C. Das Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-and-others-v-b-n-elias-co-ltd-and-others-1624
- **Pages:** 6

## Headnote

Industrial Dispute-Bonus-Implied term of agreement or
condition of service-Ex gratia payments-Cttstomary bonus- -Pnja
bonus.
Since 1942 the respondents had been making ex gratia payments to their employees (appellants) in addition to wages and
salaries, bnt these were not regular and in 1956, no ex gratia
payments were made at all. The appellants claimed that their
right to be paid bonus had become an implied term of agreement
or a condition of service and, at any rate, it should be paid as
customary bonus, and relied on the case of The Graham Trading
Co. (India) Ltd. v. Its Workmen, [1960] l S.C.R. 107. The evidence showed that though the payments were made from 1942
to 1952 it was made clear every time that the payments were
made as ex gratia:
Held, (1) Where payments are made to workers ex gratia
and are accepted as such, it is not possible to imply a term of
service on the basis of an implied agreement to pay bonus.
(2) that there cannot be a customary payment of bonus
between employer and employee where terms of service are
governed by contract, express or implied, except where the bonus
may be connected with a festival, whether Puja in Bengal or
some other equally important festival in any other part of the
country.
The Graham Trading Co. (India) Ltd. v. Its Workmen, [1960] l
S.C.R. 107, explained.
(3) that for the year 1956 one month's basic wage should be
paid as Puja bonus to the subordinate staff as it has become
customary and traditional in the respondents' concerns.
• -
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y
•
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3 S.C.R. SUPREME COURT REPORTS
383

## Text

Bharat Barrel &
Drum Mfg. Co.
(P) Ltd.
..
Govind Gopal
Waghmare
Wanchoo ].
r960
382
SUPREME COURT REPORTS
[1960]
tax authorities assess as actual income-tax in a particular year; it is concerned with working out the Full
Bench formula in accordance with its notional calculations and this is what has been done in this case.
There is no ground therefore for interference with the
award of bonus for this reason either.
We therefore dismiss the appeal, but in the circumstances pass no order as to costs.
Appeal dismissed.
B. N. ELIAS AND CO., LTD., EMPLOYEES'
UNION AND OTHERS
v.
B. N. ELIAS & CO., LTD., AND OTHERS.
(P. B. GAJENDRAGADKAR, K. N. w ANOHOO
and K. C. DAS GUPTA, JJ.)
Industrial Dispute-Bonus-Implied term of agreement or
condition of service-Ex gratia payments-Cttstomary bonus- -Pnja
bonus.
Since 1942 the respondents had been making ex gratia payments to their employees (appellants) in addition to wages and
salaries, bnt these were not regular and in 1956, no ex gratia
payments were made at all. The appellants claimed that their
right to be paid bonus had become an implied term of agreement
or a condition of service and, at any rate, it should be paid as
customary bonus, and relied on the case of The Graham Trading
Co. (India) Ltd. v. Its Workmen, [1960] l S.C.R. 107. The evidence showed that though the payments were made from 1942
to 1952 it was made clear every time that the payments were
made as ex gratia:
Held, (1) Where payments are made to workers ex gratia
and are accepted as such, it is not possible to imply a term of
service on the basis of an implied agreement to pay bonus.
(2) that there cannot be a customary payment of bonus
between employer and employee where terms of service are
governed by contract, express or implied, except where the bonus
may be connected with a festival, whether Puja in Bengal or
some other equally important festival in any other part of the
country.
The Graham Trading Co. (India) Ltd. v. Its Workmen, [1960] l
S.C.R. 107, explained.
(3) that for the year 1956 one month's basic wage should be
paid as Puja bonus to the subordinate staff as it has become
customary and traditional in the respondents' concerns.
• -
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y
•
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3 S.C.R. SUPREME COURT REPORTS
383
CIVIL APPELLATE JURISDICTION:
Civil Appeal
z96o
No. 121 of 1959.
.
B. N. Elias & Co.
Appeal by spemal leave from the A ward dated Ltd. Employees'
June 3, 1957, of the Second Iudustrial Tribunal, West
Union.
Bengal.
v.
N. C. Chatterjee, D. L. Sen Gupta and Dipak Datta B. N. Elias & Co.
Choudhri, for the appellants.
l.td.
C. K. Daphtary, Solicitor-General of India, H. N.
Sanyal, Additional SoUcitor-General of India and
S. N. Mukherjee, for the respondents.
1960. March 24.
The Judgment of the Court was
delivered by
"VANCHOO, J.-This appeal by special leave raises
Wanclwo J.
the question of bonus. There was a dispute between
the workmen of B. N. Elias & Co. Ltd. (hereinafter
called the appellants) and their employers, B. N. Elias
. and Co. Ltd. and others (hereinafter called the respondents) with respect to bonus for the years 1954,
1955 and 1956. The case of the appellants was that
they were entitled to bonus as a condition of service
irrespective of profit or loss on the following scale :-
I-Clerical staff.
1 month's basic pay as bonus in April,
1 month's basic pay as bonus in August,
1 month's basic pay as bonus in December.
II-Subordinate staff.
1 month's basic wages as bonus in April,
1 month's basic wages as bonus in August,
1 month's basic wages as bonus at Puja time,
1 month's basic wages as bonus in December.
According to the appellants this bonus was always
paid from 1942 to 1952. Later as there were some
disputes between the appellants and the respondents,
the respondents wanted to stop the payment of bonus
from 1953, though something less was paid that year.
In 1954 the amount of bonus was further reduced.
Consequently, a dispute was raised which was referred
by the Government of West Bengal in May 1956.
Subsequently another dispute was raised with respect
to the bonus for the years 1955 and 1956 and this
time it was claimed as a customary bonus or as· a condition of service payable at regular intervals of four
•
384
SUPREME COURT REPORTS
[1960]
months and at a uniform rate. Thereupon a consolidated reference was made by the Government of West
Bi.~: i~;;0~~~· Bengal in September 1956 with respect to all the
Union
three years, i. e., 1954, 1955 and 1956, to the same
v.
tribunal.
·
B. N. Elias<>- Co.
When the matter came up before the tribunal, the
Ltd.
respondents contended that they were not in a pro·
Wanchoo j.
sperous condition and were unable to pay any further
bonus besides what had already been paid for the
years in dispute. It was admitted that since about
1942 the respondents had been making ex gratia payments to their employees in addition to wages and
salaries. These payments were made at the , rate of
one month's basic wage each time but their number
in the course of one year used to vary. At one time
four ex gratia payments were made to clerical and
subordinate staff but later the number of ex gratia payments was reduced for the clerical staff to three per
year but it remained at four for the subordinate staff
until the year 1952.
As, however, the trading result
in 1952 deteriorated as compared with the previous
years, the respondents made only two ex gratia payments to clerical staff and three to subordinate staff
for the year 1953. A dispute was then raised by the
workmen with regard to that year but the Government refused to make a reference to the tribunal. In
1954 and 1955 two ex gratia payments were made to
clerical staff and two to the subordinate staff. In
1956, no ex gratia payments were made at all.
The
respondents denied that these payments were made as
a condition of service or as an implied term of agreement irrespective of profit or loss. They also denied
that these were customary payments irrespective of
profit and loss. It was alleged that they were truly
and strictly ex gratia payments made by the respondents voluntarily out of goodwill in circumstances in
which no tribunal would award a bonus. The respondents .therefore resisted the claim for any further
payment as bonus for these three years.
Before thE! tribunal, the appellants abandoned their
claim for bonus on the basis of the Full Bench formula. They however pressed t.heir claim on the
' • .. -
3 S.C.R. SUPREME COURT REPORTS
385
·-'"' ..,.
ground that bonus was payable all an implied condiz96o
-
tion of service and had also acquired the status of B N ;;:- & c
customary bonus. The tribunal, however, negatived Ltd.' E~;~oyees?·
the contention that the payment of bonus as claimed
Union
had become an implied condition of service. It also
v
held that the case of the employees based on custom B. N. Elias & Co.
was not tenable. In consequence it refused to grant
Ltd.
any further bonus for the years 1954 and 1955 beyond
wanchoo J.
~ what the appellants had been already paid and rejectis
ed the claim for 1956 altogether.
Shri N. C. Chatterjee for the appellants has mainly
pressed the claim for bonus on the ground that it is a
customary bonus and relies on The Graham Trading
Co. (India) Ltd.v.Its Workmen( 1).
Before we deal
~
i
with this aspect of the matter we may shortly dispose
-
of the claim based on an implied agreement or condition of service. The evidence shows that though
payment was made uninterruptedly from 1942to 1952
three times a year to the clerical staff and four times
a year to the subordinate staff, it was made clear
every time the payment was made that it was an ex
gratia payment. Further the receipts given by the
employees, a sample of which was produced, show
~ that the bonus was accepted as ex gratia bonus.
As is
~
pointed in The Graham Trading Co. (1) it would not be
possible to imply a term of service on the basis of an
implied agreement when the payment was clearly
made ex gratia and had even been accepted as such, as
in this case. Therefore, the contention of the appel-
· 1ants that the bonus.claimed by them has become an
implied term of agreement or a condition of service
'"
must fail.
' Our attention in this connection was drawn to a
letter of appointment -issued to one 0. V. Thomas in
which under the head "other allowance", the following appears-
" Equivalent to a month's salary every 4th
month will be allowed after your confirmation in
employment."
" ....,.. x
That is, however, an express term in the contract
between the National Tobacco Company of India
Limited (which is one of the respondents before us)
(I) [1960] I S.C.R. 107.
386
SUPREME COURT REPORTS
[1960]
.,.
I960
and Thomas and cannot be a basis for a finding of an
-
implied term of agreement to give bonus three times a
B. N. Elias & Co.
Th
h
J •
th b
·
f th·
Ltd. Employees' year. f
omas mayb ave a ch~1m ond eh as1s o
1s
Unio,,.
term o agreement etween
1m an
t e company,
v.
about which we say nothing. Another letter of appointB. N. Elias & Co. ment also of National Tobacco Co. of India Limited
Ltd.
with respect to one Ram Shankar Misra was referred
to. In that letter, however, among the terms we find a
Wanchoo ].
term relating to bonus at the rate of Rs. 15 per month
>
after confirmation. That is again an express term
~
between that employee and the National Tobacco Co.
of India Limited and cannot support the case of an
implied term of agreement by which a month's bonus
is paid thrice a year in April, August and December.
The tribunal was therefore right in rejecting the
"
contention based on the implied term of agreement or
condition of service.
Turning now to the case of customary bonus which
has been pressed before us on the authority of The
Graham Trading Co. (1 ) we may point out that that
was a case of a customary and traditional bonus
payable at Puja which was a special festival of particular importance in Bengal. That case cannot be
-.
held to have laid down that there can be customary
bonus as such unconnected with some festival. It is
difficult to introduce a customary payment of bonus
between employer and employee where terms of
service are governed by contract, express or implied,
except where the bonus may be connected with a
festival whether Puja in Bengal or some other equally
important festival in any other part of the country. -.,
The principles laid down in that case for governing
customary and traditional bonus connected with a
festival cannot in our opinion'be extended to what
may be called a customary bonus unconnected with
any festival.
We are therefore of opinion that the
appellants having failed to prove (except in one matter
with which we shall .deal presently) that there was an
implied agreement or condition of service for payment
of bonus, they cannot ask for payment of any bonus _,"'
on the basis of any customary payment unconnected
with any festival.
( !) [1960] I S.C.R. 107
-
-
3 S.C.R.
SUPREME COURT REPORTS
387
This brings us to one of the payments to subz96o
ordinate staff which was" one month's basic wages as B N El-:- & c
bonus at Puja time ". It will be noticed that this Ltd: E~;:oyees?·
payment to the subordinate staff at Puja time is in
Union.
addition to the other payments which are common
v.
between the clerical and the subordinate staff. This B. N. Elias & Co.
payment of one month's basic wage as bonus at Puja
Ltd.
appears to have continued uninterrupted from the
wanchoo J.
time it started in 1942 or thereabout upto the time
the dispute arose in 1954. The payment was invariably of one month's basic wage and it appears that it
was paid even in a year of loss, vide Ex. E. We are
therefore of opinion that the principles laid down in
The Graham Trading Co. (1) apply to one month's Puja
bonus payable to the subordinate staff and it should
be held that this payment has become customary and
traditional in the respondents' concerns when the
dispute was raised for the first time in 1954. We'
have no doubt that if the judgment in The Graham
Trading Co. (1) was available to the tribunal it would
have held that one month's basic wage as bonus at
Puja time ~o subordinate staff had become customary
and traditional in the respondents' concerns. We
therefore partly allow the appeal and hold that one
month's basic wage as Puja bonus to the subordinate
staff has become customary and traditional in the
respondents' concerns and we order the respondents
to pay that for the year 1956 for which no bonus
whatsoever has been paid.' The rest of the appeal
fails and is hereby dismissed. In the circumstances
we order the parties to bear their own costs. ·
Appeal allowed in part.
(1) [196oJ 1 s.c.R. 107,