Burn and Co., Calcutta vs Their Employees (And Connected Appeal)

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 325 of 1955 and 174 of 1956

Decision Date: 11 October 1956

Coram: Natwarlal H. Bhagwati, S.K. Das, P. Govinda Menon, T.L. Venkatramana Ayyar

The Supreme Court recorded that the matter titled Burn & Co., Calcutta versus Their Employees, together with a connected appeal, had been decided on 11 October 1956. The judgment was authored by a bench comprising Justice Natwarlal H. Bhagwati, Justice S. K. Das and Justice P. Govinda Menon. The petitioner was Burn & Co., Calcutta and the respondents were their employees. The citation of the decision appeared as 1957 AIR 38 and 1956 SCR 781. The issues involved the operation of an award made by an Industrial Tribunal, the circumstances under which such an award could be reopened in a subsequent dispute, the applicability of the principle of res judicata, the maintainability of a claim for bonus, the order passed by the Appellate Tribunal, the appealability of that order, and the power of the Supreme Court to entertain an appeal under Article 136 of the Constitution. The statutory provisions discussed included Section 19(6) of the Industrial Disputes Act (XIV of 1947), Section 7(1)(a) of the Industrial Disputes (Appellate Tribunal) Act (XLVIII of 1950), and Article 136 of the Constitution of India. The Court’s headnote explained that an award of an Industrial Tribunal is intended to have a long‑term operation and may be reopened under Section 19(6) of the Industrial Disputes Act only when a material change has occurred in the circumstances upon which the award was based. The Court observed that to allow reopening without such a change would defeat the two fundamental purposes of industrial legislation, namely, to secure a fair return for workmen’s labour and to prevent industrial disputes that could disrupt production and harm societal interests. Although the rule of res judicata contained in Section 11 of the Code of Civil Procedure does not directly apply to such awards, the Court held that its underlying principle, founded on sound public policy and of universal application, must nevertheless be applied. The Court referred to the decisions in Army & Navy Stores Ltd., Bombay v. Their Workmen ([1951] 2 L.L.J. 31) and Ford Motor Co. of India Ltd. v. Their Workmen ([1951] 2 L.L.J. 231), which had approved and applied this principle, and also cited Sheoparson Singh v. Bamnandan Prasad Singh ([1916] L.R. 43 I.A. 91). In the present case, the Union of the employees of a particular section of the appellant company had served a notice under Section 19(6) terminating a previous award that had fixed the scales of pay and dearness allowance for its members, as determined by the Bengal Chamber of Commerce with slight modifications. The Union demanded that the more favourable scale of pay adopted by the Mercantile Tribunal in its award be applied to them. The Tribunal appointed to adjudicate the dispute found that there had been no change in the circumstances underlying the earlier award, and therefore held that the earlier award remained binding on the parties and could not be altered. However, the Appellate Tribunal, on appeal, set aside the earlier award, holding that the order of the Appellate Tribunal was erroneous in law and therefore liable to be set aside. The Court further held that the rationale for granting a bonus was that workers should be permitted to share in the prosperity to which they had contributed, and that without sufficient profits for a particular year, no legal or equitable claim for bonus could arise.

The Court explained that a bonus could be granted only when the workers had contributed to the prosperity of the enterprise and the profits of a particular year were sufficient to allow a bonus payment to all employees in every section of the company. If the profits were not adequate, no claim for bonus could arise either in law or in equity. The Court referred to the decision in Karam Chand Thappar and Bros.’ Workmen v. The Company, [1953] L.A.C. 152, for this principle. The Court further noted that an order of the Tribunal refusing reinstatement was appealable under section 7(1)(a) of the Industrial Disputes (Appellate Tribunal) Act, 1960, when it involved a substantial question of law. The Court held that it was unnecessary to determine in the present proceeding whether the Appellate Tribunal’s view that an appeal lay to it under that provision was final and could not be questioned in a civil court, because the correctness of that view was being challenged not in a collateral or independent proceeding but in an appeal filed under article 136 of the Constitution. Consequently, the Supreme Court, in such an appeal, could examine the legality of the orders issued by either the Tribunal or the Appellate Tribunal. The Court distinguished the authorities in Pankaj Kumar Ganguli v. The Bank of India, [1966] 60 C.W.N. 602, and Upper Ganges Valley Electric Employees Union v. Upper Ganges Valley Electricity Supply Co. Ltd. and another, A.I.R. 1956 All. 491, from the present case. Finally, the Court observed that the failure to prepare a formal charge‑sheet against a workman did not invalidate a dismissal order if the workman was aware of the charge and had been given an opportunity to state his explanation.

The judgment was rendered under the civil appellate jurisdiction in Civil Appeals Nos. 325 of 1955 and 174 of 1956, filed by special leave against the decision and order dated 29 April 1955 of the Labour Appellate Tribunal of India at Calcutta in Appeal No. Calcutta‑110 of 1953, which arose from the award dated 24 June 1953 of the Industrial Tribunal, Calcutta. The Government of India was represented by the Attorney‑General, while counsel for Burn and Co. and counsel for the workmen appeared for the respective parties. The judgment was delivered on 11 October 1956 by Justice Venkatarama Ayyar. The Court recounted that disputes had arisen between Messrs Burn and Company, Calcutta (referred to as “the Company”) and a section of its employees at Howrah Iron Works (referred to as “the Union”). The Government of West Bengal had issued a notification on 16 December 1952 referring the dispute to the First Industrial Tribunal for adjudication. Although the reference comprised thirteen items, the Court clarified that the present appeals concerned only four matters: the revision of pay for clerical and subordinate staff, the grades of sarkars and checkers, the award of bonus, and the reinstatement of four employees—S. N. Chatterjee, Ashimananda Banerjee, Panchanan Rana, and Joydeb Banerjee—or payment of compensation to them. By his award dated 24 June 1953, the Industrial Tribunal, presided over by Shri Banerji, had held that there were no grounds for revising the scale of pay of the clerical and subordinate staff.

The Tribunal of Shri Banerji delivered an award in which he determined four matters. First, he concluded that there were no grounds for revising the scale of pay for the clerical and sub‑staff. Second, he ordered that the pay of checkers should be increased and that they should receive remuneration according to the scale specified in his award. Third, he held that the Company’s profits did not justify the grant of any bonus beyond what had already been paid by the Company. Fourth, with respect to the four employees named in the dispute, he directed that Shambunath Chatterjee be re‑employed as a checker on his former salary, that Ashimananda Banerjee and Panchanan Rana be “re‑employed in posts equivalent to their own posts as new incumbents,” and that Joydeb Banerjee was entitled to neither reinstatement nor compensation. The Union challenged this award before the Labour Appellate Tribunal. In its decision dated 29 April 1955, the Appellate Tribunal substantially altered Shri Banerji’s conclusions in favour of the Union. It held that the minimum pay of the clerical and sub‑staff should be raised, and that corresponding adjustments should be made to the ceiling level, the increments and the scales of pay for other grades of staff. It also determined that the scale of pay for the sarkars and checkers should be increased and that increments should be given as laid down in the award. Further, the Tribunal ordered that the employees be paid a month’s bonus in addition to what they had already received. Regarding the individual employees, the Tribunal directed that Shambunath Chatterjee, Ashimananda Banerjee and Panchanan Rana not merely be re‑employed but be reinstated with continuity of service, and it awarded Shambunath Chatterjee compensation equal to six months’ basic wages together with dearness allowance. Although the Tribunal found that reinstatement of Joydeb Banerjee was not desirable, it awarded him compensation equivalent to one year’s basic wages with dearness allowance. Following this decision, the Company filed Civil Appeal No. 325 of 1955 by special leave, and the Union filed Civil Appeal No. 174 of 1956, the latter being limited to the four points raised by the Company in its appeal.

The first question before the Court concerned the increase in the minimum wages of the clerical and sub‑staff. To understand the true position, the Court referred to the factual background of the dispute. In 1946, the Bengal Chamber of Commerce examined the need to fix wages and other service conditions for employees in industrial enterprises, taking into account the changed circumstances resulting from the Second World War. The Chamber prepared a scheme that classified employees into various categories and fixed corresponding scales of pay and dearness allowance for each category. This scheme was implemented by the Company on 1 October 1946. Under the scheme, the basic monthly pay ranges for the lower categories of employees, which are the focus of the present appeals, were set as follows: Junior clerks were to receive a basic pay ranging from Rs. 60 to Rs. 2‑90; Tracers were to receive Rs. 60 to Rs. 2‑80; Clerks were to receive Rs. 60 to Rs. 4‑124 (with an earnings‑bonus of 105); Typists were to receive Rs. 60 to Rs. 4‑90; Steno‑typists operating a Comptometer were to receive Rs. 80 to Rs. 4‑124 (with an earnings‑bonus of 105); and Junior Operators were also classified within this structure. These figures formed the basis for the discussion on whether the minimum wages for the clerical and sub‑staff should be increased.

The dispute arose after the Government of West Bengal, by a notification dated 31‑10‑1947, referred disagreements concerning grades, wages and dearness allowance between engineering firms in the State and their employees to the First Engineering Tribunal. The appellant Company and its workmen were parties to those proceedings, but the Union representing the clerical and sub‑staff was not a party. On 30‑6‑1948 the Engineering Tribunal issued an award whose terms were, in general, less favourable to the employees than the scales that the Bengal Chamber of Commerce had recommended and that the Company had adopted on 1‑10‑1946. While the Engineering Tribunal case was still pending, separate disputes emerged between various mercantile firms in Calcutta and their employees over wages, dearness allowance and other service conditions. By a notification dated 17‑1‑1948 the Government of West Bengal referred those mercantile disputes to a different adjudicatory body known as the Mercantile Tribunal. That Tribunal rendered its award on 26‑8‑1949, establishing a scale of pay for the lower categories of employees as follows: Grade D – Rs 70‑3‑130 and Grade C – Rs 70‑4‑134. The Union appeared as party number 192 in those proceedings, but for technical reasons the Tribunal declined to decide the Union’s specific claims, so the award did not bind the parties any more than the earlier Engineering Tribunal award.

The scale fixed by the Mercantile Tribunal was noticeably more favourable to the employees than either the Bengal Chamber of Commerce recommendation adopted by the Company or the Engineering Tribunal’s award. Consequently, the Union based its demand for wages and dearness allowance on the more generous mercantile scales. The Company refused to accept that demand, leading to an industrial dispute. By a notification dated 18‑1‑1950 the Government of West Bengal referred the dispute to Shri Palit, a District Judge, for adjudication. Before Shri Palit, the Company argued that, because the Union members were employed in an engineering concern, the appropriate scale of pay was the one set by the Engineering Tribunal, and further that the actual scale in force was already more favourable than that award, leaving no justification for revision. The Union, however, contended that it had not been a party to the Engineering Tribunal proceedings and therefore was not bound by that award, and asserted that its members, being clerical staff rather than workers, should be governed by the mercantile scales. In his award dated 12‑6‑1950, Shri Palit held that the nature of work and the qualifications of clerical staff varied across business establishments; clerks in mercantile concerns were better qualified and performed more onerous tasks than the Union’s clerical members, and therefore the two groups could not be placed on the same pay scale. He concluded that the scheme adopted by the Company from the Bengal Chamber of Commerce was fair and required no revision, although he made minor adjustments to incremental scales and maximum limits for the relevant grades.

The Union argued that its clerical members could not be placed in the same position as the engineering workers, and that the scale of pay provided in the Bengal Chamber of Commerce scheme, which the Company had adopted, was fair and did not require any revision. The adjudicating officer, however, introduced minor adjustments to the incremental scales and the maximum limits of the grades. In the award, the scheme was fixed according to the categories that were in dispute, and the pay rates were set as follows: for Grade “D” Junior Clerks the rate was 60‑3‑96; for Tracers the rate was 60‑3‑90; for Clerks the rate was 60‑4‑140 with an earnings‑basis at one hundred; for Typists the rate was 60‑4‑100; for Stenotypists and Comptometer Operators the rate was 80‑4‑124 with an earnings‑basis at one hundred‑twenty; for Grade “C” Junior staff in Drawing and Estimating the rate was 60‑4‑120; for Junior Draftsmen and Junior Estimators the rate was 92‑4‑140. The Union filed an appeal against this award, but the appeal was dismissed as being barred by limitation. Section 19(3) of the Industrial Disputes Act, 1947 required that an award operate for a period of one year, and section 19(6) provided that the award continued to bind the parties thereafter until either party terminated it by giving two months’ notice. Relying on this statutory provision, the Union served a notice to the Company on 12‑July‑1951, exactly one year after the publication of Shri Palit’s award dated 12‑June‑1950, declaring its intention not to be bound by that award. In November the Union presented a series of demands, one of which sought to raise the scale of pay to the level adopted in the award of the Mercantile Tribunal. These demands gave rise to an industrial dispute, which forms the subject of the present reference.

Shri Banerji, who heard the reference, held that the question of the appropriate scale of pay had been directly adjudicated by Shri Palit, and that, as a general principle, a tribunal’s decision on a matter referred to it should not be disturbed unless there had been a change of circumstances since the date of the award. He observed that no such change of circumstances had been shown, and therefore the wage structure fixed by Shri Palit should remain in force. The Appellate Tribunal, however, disagreed with this conclusion. It found that the award of Shri Palit, although accepted by Shri Banerji, was defective because it had not examined “the question as to whether the minimum salary fixed by the Managing Agents was adequate to cover the cost of a balanced diet and provide frugal comforts which a workman of the clerical staff must have to maintain the efficiency of his work.” The Tribunal referred to the opinion of Dr Akroyd, which held that an intake of 2,600 calories of food was necessary for work efficiency, and it cited several decisions of the Labour Tribunal where the minimum pay for clerical staff had been fixed at Rs 70 or higher. Consequently, the Tribunal decided that the minimum wage for the clerical and sub‑staff of the Company should be fixed at Rs 65 per mensem, and it raised the floor level of the wage structure accordingly.

The Tribunal had increased the ceiling level of wages together with the increment scales, and to preserve the differences among the various categories it also raised the minimum pay in every scale that previously stood at sixty‑five rupees or above, making “consequential changes in their incremental scales and the maximum grades.” The appellant Company contended that the Tribunal erred in discarding Shri Palit’s award and in treating the matter as if it were being considered for the first time, arguing that once a dispute had been referred to a Tribunal and an adjudication rendered, that decision should bind the parties unless a material change of circumstances had occurred, which the appellant claimed was neither alleged nor proved. To support this position the Company relied on the decisions in The Army & Navy Stores Ltd., Bombay v. Their Workmen and Ford Motor Co. of India, Ltd. v. Their Workmen. The Labour Appellate Tribunal rejected the contention, describing it as “a rule of prudence and not of law.” The Tribunal’s observation suggested that the statute did not expressly require that an award could be reopened only on the ground of a change of circumstances, a statement the Court found correct but not determinative because the statute provided no specific provision prescribing the circumstances for reopening an award. Section 19(4) authorised the Government to move the Tribunal for shortening the period during which the award operated if “there has been a material change in the circumstances on which it was based,” a provision linked to the one‑year period fixed under Section 19(3). The Court noted that this clause indicated the proper ground for reopening an award under Section 19(6), as the learned Attorney‑General had argued. However, the Court proposed to consider the broader question on the basis that the statute contained no explicit ground for reopening. It then examined whether an award issued after a full hearing could lose its effect merely because one party repudiated it under Section 19(6), leaving the Tribunal no option but to rehear the case de novo. The Court held that such an approach would contradict the well‑recognised principle that a competent authority’s decision on a contested issue after a complete enquiry should not be re‑agitated. This principle, derived from the doctrine of res judicata, underpinned the Court’s reasoning.

The Court noted that the rule of res judicata, which is enacted in section II of the Civil Procedure Code, is founded upon a principle that, although the specific provision may not be directly applicable to the present controversy, embodies a universal maxim: “interest rei publicae ut sit finis litium.” This maxim, as explained in Broom’s Legal Maxims, Tenth Edition, page 218, reflects sound public policy and enjoys universal application. In support of this view, the Court quoted Sir Lawrence Jenkins, C.J., who observed in Sheoparsan Singh v. Ramnandan Prasad Singh (1) that “the rule of res judicata is dictated … by a wisdom which is for all time.” The Court further explained that there are compelling reasons for extending this principle to decisions rendered by Industrial Tribunals.

Legislation governing the relationship between capital and labour pursues two principal objectives. First, it aims to secure fair returns for workmen who lack the capacity to negotiate with capital on equal terms. Second, it seeks to prevent disputes between employers and employees so that production is not unduly disrupted and the broader interests of society are protected. Accordingly, if an adjudication were deemed to lose its force simply because it is repudiated under section 19(6), thereby reopening the entire controversy, the practical result would be that neither party would feel compelled to accept the award and resume work. Instead, each side would treat the award as merely a temporary stage in a prolonged struggle. The Court cited authority (1) [1916] L.R. 43 I.A. 91; [1916] I.L.R. 43 Cal. 694, observing that such a situation would convert awards into fleeting truces that grant the parties breathing space before they resume hostile action with renewed vigor, rather than fostering industrial peace.

Conversely, the Court held that if awards are regarded as intended to have long‑term effect, while still being subject to modification when the underlying circumstances change, both legislative purposes are served. This approach aligns with the view expressed by the Tribunals themselves in The Army and Navy Stores Ltd., Bombay v. Their Workmen (1) and Ford Motor Co. of India Ltd. v. Their Workmen (2). The Court agreed that these decisions correctly articulated the principle and that there were no valid grounds for the Appellate Tribunal to depart from it.

The Court also observed that the Appellate Tribunal erred in concluding that Shri Palit had failed to refer to the principle governing the fixation of basic wages and had omitted reference to Dr. Akroyd’s doctrine concerning a balanced diet of 2,600 calories. While Shri Palit’s award does not expressly mention these matters, the Court pointed out that both the Engineering Tribunal and the Mercantile Tribunal had discussed them in their respective awards. The central dispute between the parties concerned which of those awards should serve as the basis for fixing the scale of pay. Shri Palit resolved that issue by deciding that the Engineering Tribunal’s award, rather than the other, should be applied.

The Court observed that the award issued by Shri Palit was based on the award of the Engineering Tribunal and not on the award of the Mercantile Tribunal, which was arguably more suitable for the class of employees that formed the Union. By relying on the Engineering Tribunal’s award, Shri Palit is considered to have taken into account every factor that the Tribunal used to determine the wage scales; therefore, the criticism that his award fails to mention those factors is a matter of form rather than of substance. Consequently, the Court held that the decision of the Appellate Tribunal could not be sustained even on its own reasoning. The Court then set out the factual position. The issue of wage scales had been resolved by Shri Palit in his award dated 12‑06‑1950, as reported in [1951] 2 L.L.J. 31 and [1951] 2 L.L.J. 231, and the Union was a party to that award. No allegation was made that any circumstances had changed between that date and 16‑12‑1952, when the present reference was made to Shri Banerji. Applying the principles previously articulated, the Court concluded that Shri Palit’s award should remain undisturbed. Although this conclusion would have required overturning the Appellate Tribunal’s order and reinstating Shri Banerji’s award, the Court expressed a different view regarding the specific scale fixed by the Appellate Tribunal in its order dated 29‑04‑1955. The Court stated that the scale fixing the minimum pay of clerical and sub‑staff at Rs. 65 per mensem should not be interfered with. It was agreed by all parties that a dearness allowance is payable under the Company’s rules only when the cost‑of‑living index exceeds 180 points, and therefore basic wages should be fixed using a cost‑of‑living index of 180. When the Court examined the Engineering Tribunal’s award, it found that the Tribunal had fixed basic wages based on a cost‑of‑living index of 160 points. Prior to Shri Palit’s award, the Company had argued that the scale set by the Engineering Tribunal should serve as the basis for determining the Union’s pay scale. Although the Tribunal held that its award was not binding on the Union, it concurred with the Company that the Engineering Tribunal’s scale, rather than that of the Mercantile Tribunal, was more appropriate for the clerical staff of an engineering concern, and it adopted the Company’s scale dated 31‑10‑1946 as being “slightly in advance of the terms contained in the Engineering Tribunal’s award.” The Court noted that Shri Palit did not appear to be aware that the Engineering Tribunal had fixed basic wages using a 160‑point cost‑of‑living index. His comment that the Company’s scale represented an advance over the Engineering Tribunal’s scale implies that he assumed both the Company and the Engineering Tribunal had used a 180‑point cost‑of‑living index for basic wages. The Court then proceeded to consider the implications of this assumption.

In this case, if the Court were to accept the wage scale that had been fixed in the award of Shri Palit, as Shri Banerji had done, the result would be that the cost‑of‑living index applicable to basic wages would be 160, while the index applicable to dearness allowance would be 180. The Court observed that such a dual application would create a great injustice to the workers. The Court understood that this realization prompted counsel for the Company, Mr. Bose, to raise, at a late stage of the appeal hearing, the argument that the cost‑of‑living index used by the Bengal Chamber of Commerce and adopted by the Company differed from the index used by the Government. That argument conflicted with an earlier admission made by counsel for the Company, Mr. Sen, and the Appellate Tribunal correctly rejected it; the argument was then abandoned before the present Court. Consequently, on the face of the record there appeared to be an error of a fundamental character. The appellant argued that the point could not be considered at this stage because the Union had never raised it, and that the matter ought to be remanded for further enquiry. The Court considered whether, given the material on the record, the special appeal warranted interference. It held that the minimum wage fixed by the Appellate Tribunal would be appropriate if the cost‑of‑living index for basic wages were taken as 180 rather than 160, and saw no reason to reject that approach. The Court further concluded that a remand was unnecessary in the interests of justice, as the undisputed facts would only prolong the proceedings and damage the relationship between the parties. Accordingly, the Court declined to disturb the minimum pay of Rs. 65 per mensem fixed by the Appellate Tribunal, but found no justification for raising either the ceiling levels or the starting pay of other employee categories whose initial pay was Rs. 65 per mensem or more. The Court therefore set aside the wage scale fixed by the Appellate Tribunal and restored the scale of Shri Banerji, with the following modifications: Grade D Junior clerks Rs. 65‑3‑98; Tracers Rs. 65‑3‑92; Grade C Clerks Rs. 65‑4‑141 (E.B. at 105); Typists Rs. 65‑4‑101; Junior (Drawing and Estimating) Rs. 65‑4‑121.

The second issue concerned the grading of sarkars and checkers. The claim advanced on their behalf was that they should be placed in the clerk category. That claim had been rejected by Shri Palit in his award dated 12‑6‑1950 and again by Shri Banerji in the subsequent proceedings. The Appellate Tribunal, before which the claim was again raised, observed that the work performed by sarkars and checkers was not of the same nature as that performed by members of the clerical staff, yet it held that the pay scales fixed in the award of the Engineering Tribunal for clerks should be applied to them. Specifically, the Tribunal ordered that non‑matriculate sarkars and checkers be placed on the Rs. 55‑2 ½‑80 scale and matriculate sarkars and checkers on the Rs. 60‑2 ½‑90 scale. The Court was unable to uphold that order. Having concluded that the Appellate Tribunal had determined that sarkars and checkers could not be placed in the same category as clerks, the remaining question was whether any ground existed for interfering with the pay scales fixed by Shri Banerji. Regarding sarkars, their scale had been fixed by Shri Palit and subsequently adopted by Shri Banerji; no change in circumstances was alleged to justify a revision, so there was no ground for interference. Concerning checkers, who are hourly‑rated workers, Shri Banerji had revised their pay scale. Apart from a statement that “the ends of justice” required the revision, the Appellate Tribunal offered no reason for modifying Shri Banerji’s award. The Court therefore held that the order concerning sarkars and checkers should not be maintained.

The Appellate Tribunal had directed that the pay scales fixed in the award of the Engineering Tribunal for clerks should also be applied to sarkars and checkers. Accordingly it placed non‑matriculate sarkars and checkers on the Rs. 55‑2 1/2‑80 scale and matriculate sarkars and checkers on the Rs. 60‑2 1/2‑90 scale. The Court was unable to sustain this order. Once the Tribunal had concluded that sarkars and checkers could not be classified in the same category as clerks, the only remaining issue was whether any ground existed for disturbing the pay‑scale fixation made by Shri Banerji. Regarding the sarkars, their scale had originally been fixed by Shri Palit and subsequently adopted by Shri Banerji. No alteration in circumstances had been alleged to justify a revision, and therefore no basis existed for interfering with that scale. As for the checkers, they were hourly‑rated employees, and Shri Banerji had already revised their pay scale. Apart from a vague statement that “the ends of justice” required the modification, the Tribunal offered no substantive reason for altering his award. Consequently, the Court set aside the Tribunal’s order both with respect to sarkars and checkers and restored the award originally made by Shri Banerji.

On the question of bonus, the facts showed that the Company operated a detailed bonus scheme under which the employees had been paid. The Union claimed that, in view of the Company’s profits, the employees should receive a bonus equal to three months’ basic wages for the years 1950 and 1951. The profits available for distribution were Rs. 3.81 lakhs for 1950 and a smaller amount for 1951. The total monthly salary of clerks, sub‑staff, sarkars and checkers was Rs. 89,500 and the monthly wages of the workers amounted to Rs. 1,75,000, giving a combined monthly outlay of Rs. 2,64,500 for the Howrah Iron Works alone. The Company owned nine additional units, but no evidence was produced concerning the salaries payable in those establishments. The Rs. 3.81 lakhs surplus represented the total profit of the Company across all its units and was clearly insufficient to meet the cost of one month’s basic wages as bonus for employees in all ten units. Shri Banerji therefore held that the profit did not justify any bonus beyond what the Company had already granted, and he directed that the bonus, including what had already been paid, should be limited to one month’s basic pay. The Appellate Tribunal, in considering this issue, agreed that if every category of workmen were to receive a bonus, there was no scope for an additional bonus, and it affirmed the limitation imposed by Shri Banerji.

The Tribunal held that because the other categories of workmen had not claimed any bonus and because the amount due to the Union members was only Rs. 89,000, the remaining surplus was sufficient to justify awarding those Union members only an additional month’s basic wages as bonus. The Court examined this conclusion both from the standpoint of law and of equity and found it to be manifestly unsound. In legal terms, a bonus claim is admissible only when the business has, during the relevant year, generated enough profit to support such a payment. Moreover, the justification for granting a bonus is that workers should partake in the prosperity to which they have contributed; consequently every worker is entitled to share in that prosperity. Hence, profits may be deemed sufficient for a bonus only if they are adequate to make the payment to all workers. If the profits are insufficient for that purpose, the essential condition for declaring a bonus would be absent, and no question of granting any bonus could arise. It was accepted as common ground that the Company’s profits were not enough to justify a bonus payable to all workers across all its units; therefore, in law there was no basis for any bonus. The same conclusion could not be sustained in equity. All of the Company’s profits derived from the labour of all its workmen and employees in all units, so granting a bonus to a select group on the basis of total profits would allocate to them a share of profits to which they had not contributed. The Court could not accept the Appellate Tribunal’s observation that refusing an additional bonus to the Union employees would punish them “not for their own fault but for the laches of the co‑workers, who abandoned their claim.” The Tribunal overlooked its own finding that, had every workman made a claim, no bonus could have been declared; the issue was not that the others abandoned a claim but that they realized they had no claim at all. If the Tribunal’s order were given effect, some employees would receive a bonus while others would not, and, as noted in Karam Chand Thappar & Bros.’ Workmen v. The Company, such a situation would inevitably breed disaffection among the workforce and provoke further industrial disputes. Consequently, the Court held that the Tribunal’s award of an additional month’s basic wages as bonus was neither legal nor just, and it struck that award down, restoring the award of Shri Banerji with respect to bonus. The Court then turned to the remaining issue concerning the reinstatement and/or compensation of four employees—S. N. Chatterjee, Ashimananda Banerjee, Panchanan Rana and Joydeb Banerjee— noting that the order of Shri Banerji with respect to these individuals had already been discussed.

The Appellate Tribunal altered the reference to the four employees by granting S. N. Chatterjee compensation equivalent to six months’ basic wages, as reported in (1) [1953] L.A.C. 152,160, and by awarding Joydeb Banerjee one year’s basic wages together with dearness allowance. In addition, the Tribunal ordered that S. N. Chatterjee, Ashimananda Banerjee and Panchanan Rana should not merely be re‑employed but should be reinstated with continuity of service, thereby restoring the length of their prior employment.

The appellant contended that, under section 7 of the Industrial Disputes (Appellate Tribunal) Act XLVIII of 1950, the Tribunal’s order refusing reinstatement was not amenable to appeal because it did not fall within the categories listed in section 7(1)(b). Accordingly, the appellant argued that the Appellate Tribunal’s modification of the original Tribunal’s order concerning the four employees was beyond its jurisdiction and therefore void. To support this position, the appellant relied upon the decisions in Ranganathan v. Madras Electric Tramways (1) and Sudershan Steel Rolling Mills v. Their Workmen (2).

It is necessary to note that “retrenchment” is among the matters enumerated in section 7(1)(b), and an appeal would lie against orders dealing with retrenchment. However, an order characterised as a dismissal cannot automatically be treated as a retrenchment in the ordinary sense of the term, and thus would not be appealable under section 7(1)(b). In 1953 the legislature enacted the Industrial Disputes (Amendment) Act XLIII of 1953, which for the first time defined “retrenchment” to include, subject to certain exceptions, the termination of a workman’s service for any reason (see section 2(oo)). Under this statutory definition, an appeal would be permissible under section 7(1)(b)(vii) where service termination occurs, subject to the specified exceptions.

Nevertheless, the Amendment Act became operative on 24 December 1953, and it contains no provision granting it retrospective effect. Consequently, the rights of the parties to the present appeal were not altered by that later definition. Earlier, the same definition appeared in Ordinance No. V of 1953, which likewise became effective on 24 October 1953. The present appeal, however, was filed on 19 August 1953, before either the Ordinance or the Amendment Act came into force. On that date, the Tribunal’s order refusing reinstatement was not appealable, and therefore the Appellate Tribunal’s subsequent modification of that order would have been beyond its jurisdiction and consequently void.

The respondent argued in contrast that an award of the Tribunal refusing reinstatement could be appealed under section 7(1)(a) if it raised a substantial question of law. The respondent maintained that the employees claimed the dismissal orders were invalid because they were passed in violation of the rules of natural justice, and that such a violation constituted a question of law, rendering the appeal competent. The respondent further contended that when a question arises as to whether the Tribunal possesses jurisdiction over the subject‑matter, the Tribunal is competent to determine whether the preliminary conditions for jurisdiction exist, and that its decision on that preliminary question is not subject to attack in civil courts. Accordingly, the respondent relied on the decisions in Pankaj Kumar Ganguli v. Bank of India (3) and Upper Ganges Electric Employees Union v. Upper Ganges Valley Electricity Supply Co. Ltd. and another (4) to support the view that the Appellate Tribunal’s assumption of jurisdiction on the basis of a substantial question of law could not be questioned by a civil court.

The Tribunal possessed jurisdiction over the matter before it and therefore had the authority to determine whether the preliminary conditions required for that jurisdiction were satisfied. Its determination on that preliminary question could not be challenged in civil courts, and consequently the Appellate Tribunal’s assumption of jurisdiction on the basis that a substantial question of law existed was likewise insulated from civil‑court scrutiny. The Tribunal’s position was supported by reference to the decisions in Pankaj Kumar Ganguli v. Bank of India (3) and Upper Ganges Electric Employees Union v. Upper Ganges Valley Electricity Supply Co. Ltd. and another (4). The Court concurred that an order refusing reinstatement became appealable under section 7(1)(a) when it raised a substantial question of law. However, the Court refrained from pronouncing on whether a determination by the Appellate Tribunal that an appeal from an award was permissible under section 7(1)(a) on the ground of a substantial question of law was final and barred from civil‑court review. In the present case the correctness of that determination was not contested through a collateral proceeding such as an article 226 petition, as in the two precedents cited by the respondent, but was instead raised by an appeal under article 136. Accordingly, the Court, acting as an appellate authority, was entitled to examine whether the Tribunal’s order was tainted by an error of law and whether the subsequent order of the Appellate Tribunal modifying that award was legally sound.

Having set out the principle, the Court then turned to the four employees individually. First, S.N. Chatterjee suffered an eye defect and, on the advice of the company’s medical officer, was dismissed on that ground. The Tribunal found him medically fit and directed his reinstatement. He subsequently sought compensation, alleging that he had produced a fitness certificate from a competent medical practitioner, yet the company dismissed him without conducting any enquiry. The Appellate Tribunal concluded that the company had acted in good faith but that the dismissal, being made without a proper enquiry, was invalid, and therefore awarded Chatterjee compensation equal to six months’ basic wages. The Court found no basis to hold that the Appellate Tribunal had acted without jurisdiction in interfering with the Tribunal’s award, nor that its order was unjust, and therefore saw no reason to interfere under article 136. The second employee, Ashimananda Banerjee, had been arrested under the West Bengal Security Act and detained from 25 January 1949 to 5 April 1951; the company terminated his service on 22 April 1949. The Tribunal ordered his reinstatement, a point that was not in dispute, but Banerjee further claimed entitlement to …

The employee Ashimananda Banerjee asserted that the Company should reinstate him after his dismissal. The Appellate Tribunal accepted this claim on the basis that the Company had dismissed him without first framing any formal charge or conducting an enquiry, thereby violating the rules of natural justice. The Court, however, could not concur with that conclusion. The factual basis for the dismissal was the employee’s continued absence and his inability to perform his duties, and the Court found it difficult to imagine any practical purpose that a formal charge would serve in such circumstances, nor any meaningful response the employee could give to such a charge. Consequently, the Court held that the Tribunal’s order was manifestly erroneous and ordered it to be set aside. The Court noted that the circumstances relating to another employee, Panchanan Rana, were substantially the same as those of Ashimananda Banerjee. For the same reasons previously explained, the Court concluded that the Appellate Tribunal’s decision in favour of Panchanan Rana should also be set aside.

The remaining issue concerned whether Joydeb Banerjee was entitled to compensation because he had been wrongly dismissed. The factual record showed that on 16‑11‑1950 a group of employees, including Joydeb Banerjee, participated in an assault on the Works Manager, Mr. Davison, and that the Company dismissed fourteen of those participants on that ground. The Appellate Tribunal ruled that because no formal charge was framed against Joydeb Banerjee and no enquiry was held, his dismissal contravened the rules of natural justice, and therefore ordered that he receive one year’s basic wages with dearness allowance as compensation. The Court observed that although no formal charge‑sheet was prepared, the dismissal would not be invalidated if Joydeb Banerjee had been aware of the charge and had been given an opportunity to explain himself. The Court further found that after the Company’s dismissal, conciliation proceedings and an enquiry by the Labour Minister were undertaken, resulting in the Minister’s recommendation that seven of the fourteen dismissed workers be reinstated, while the dismissal of the remaining seven, including Joydeb Banerjee, remained in effect. In light of these facts, the Court concluded that Joydeb Banerjee could not plausibly claim that he had been dismissed without a hearing or enquiry, and therefore set aside the Tribunal’s order awarding him compensation. In the final disposition, Civil Appeal No. 325 of 1955 was allowed, the order of the Appellate Tribunal was set aside and the order of Shri Banerji was restored, subject to two modifications: the minimum pay of clerical staff was fixed at Rs. 65 per mensem with the ceiling level and increments as previously specified, and S. N. Chatterjee was to be reinstated with compensation as directed by the Appellate Tribunal. The Union was ordered to bear half of the appellant’s costs throughout the proceedings. Civil Appeal No. 174 of 1956 was dismissed, and no costs were awarded in that matter.