M/S. Burn and Co. Ltd. and Others vs Their Employees

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 195 and 196 of 1959

Decision Date: 30/03/1960

Coram: K.N. Wanchoo, P.B. Gajendragadkar, K.C. Das Gupta

In this case the Supreme Court of India delivered a judgment on 30 March 1960 in the matter styled M S Burn & Co Ltd and Others versus Their Employees. The judgment was authored by Justice K N Wanchoo and was decided by a bench consisting of Justice K N Wanchoo, Justice P B Gajendragadkar and Justice K C Das Gupta. The parties were listed as petitioner M S Burn & Co Ltd and others and respondent Their Employees. The citation of the decision appears in the 1960 AIR 896 and the 1960 S C R (3) 423 reports. Subsequent citator references include F 1963 S C 325 (paragraphs 20, 21, 22), F 1964 S C 472 (paragraph 3), R F 1972 S C 2148 (paragraph 22) and R F 1975 S C 1114 (paragraph 3). The case concerned the Industrial Disputes Act, specifically the question of whether an incentive‑bonus scheme could lawfully exclude clerical and subordinate staff and what power the Industrial Tribunal possessed to decide such a matter. The headnote recorded that, from an economic perspective, clerical and subordinate workers contribute to production in the same manner as manual workers and therefore there was no justification for excluding them entirely from an incentive‑bonus scheme. The headnote further observed that the fact that clerical staff received a higher dearness allowance could not be a ground for their exclusion. It cited earlier authority stating that where a company had already introduced an incentive‑bonus scheme for most of its workmen, there was no reason why a Tribunal could not extend the same scheme to clerical and subordinate staff, referring also to the decision of M S Titaghur Paper Mills Co Ltd v Their Workmen ([1959] Supp. 2 S C R 1012).

The judgment was recorded under the heading Civil Appellate Jurisdiction and concerned Civil Appeals Nos 195 and 196 of 1959. Both appeals were taken by special leave from an award dated 15 April 1957 issued by the Third Industrial Tribunal, West Bengal, in Case No VIII‑7 of 1956. Counsel appearing for the parties included B Sen, P K Chakravarty and B N Ghosh on behalf of the appellants in Appeal 195 and the respondents in Appeal 196, and N C Chatterjee, D L Sen Gupta and B P Maheshwari on behalf of the respondents in Appeal 195 and the appellants in Appeal 196. Justice Wanchoo delivered the judgment, noting that the two appeals arose from the same tribunal award and would be disposed of together. Appeal 195 was filed by Messrs Burn & Co Limited, hereinafter referred to as “the company,” while Appeal 196 was filed by the workmen of the same company, hereinafter referred to as “the workmen.” The record showed that the company and the workmen had been involved in several disputes that were referred to the tribunal for resolution; however, only two of those disputes remained in the two appeals before the Supreme Court. The company’s appeal challenged the portion of the tribunal’s award that dealt with the denial of an incentive bonus to the clerical and subordinate staff. The workmen’s appeal, on the other hand, contested the portion of the award that provided a cash benefit of eight annas per head per working day for the period during which the canteen was not in operation.

The Court first examined the appeal filed by the company concerning the incentive bonus scheme that had been introduced for certain categories of employees. The company had already instituted an incentive bonus for manual workers, including persons employed as Sarkars and Checkers, but it had made no provision for providing a similar bonus to clerical and subordinate staff. The workmen argued that the clerical and subordinate categories should also be entitled to the incentive bonus, pointing out that comparable industrial concerns had extended such benefits to similar staff. The company opposed this claim by relying upon two principal grounds that it deemed sufficient to justify the exclusion. First, it submitted that the clerical personnel received the Bengal Chamber of Commerce dearness allowance, which was higher than the dearness allowance paid to manual workers, and therefore they already enjoyed a superior financial benefit. Second, the company contended that clerical and subordinate staff did not directly produce any output, so granting them an incentive bonus would amount to rewarding them for the production of others, namely the manual workers. The tribunal, however, held that the receipt of the Bengal Chamber of Commerce dearness allowance by clerks did not justify their complete exclusion from the incentive‑bonus scheme. It further observed that subordinate staff did not receive the Bengal Chamber of Commerce dearness allowance and that there was no disparity between their dearness allowance and that of the manual workers. The tribunal also noted that, although clerical and subordinate employees do not directly manufacture goods, this fact alone did not constitute a sufficient reason to deny them the incentive bonus. The tribunal further observed that other enterprises, Indian Iron and Steel Co. Ltd. at Burnpur, Bridge and Roof Co. (India) Limited, Howrah, and the Tata concerns, were providing such bonuses to similar categories of staff. Consequently, the tribunal ordered that the company should extend the incentive‑bonus scheme to include clerical and subordinate staff and should specify the appropriate rates and conditions applicable to those categories.

The company now submits that because clerical and subordinate employees do not take part in the manufacturing process, they should be excluded from incentive‑bonus entitlement, especially since their workload does not rise with increased production. The Court is reluctant to accept this position, as it finds implausible that a rise in output would leave the tasks of clerical and subordinate staff completely unchanged. Even though the magnitude of any additional duties may be less than the increase in factory production, the Court believes some impact on their workload is inevitable. The Court also recognizes that clerical and subordinate personnel do not directly create the manufactured goods, a circumstance that may justify a differentiated approach to the incentive‑bonus scheme. Nevertheless, the tribunal’s directive was limited to extending the bonus scheme to these categories and to fixing appropriate rates and conditions. The tribunal did not prescribe that the exact rates applicable to manual workers must be imposed on clerical and subordinate staff. Accordingly, the Court must examine whether the tribunal’s order, which merely required the company to devise suitable rates and conditions for the clerical and subordinate groups, satisfies the principles of equity and industrial harmony. The Court therefore considered the need to balance the company’s management prerogative with the legitimate expectation of the clerical and subordinate staff to share in the benefits arising from increased productivity.

In this case, the Court observed that although the clerical and subordinate staff do not directly manufacture goods, they nevertheless participate in the production process and therefore should not be totally excluded from the incentive‑bonus scheme. The Court noted that the tribunal had already pointed out that in other comparable enterprises, clerical and subordinate employees receive such bonuses, and that the fact that these employees receive a higher dearness allowance does not justify denying them the bonus altogether. The Company argued that the introduction of an incentive bonus is a managerial function and that a tribunal should not impose it, citing the decision in Messrs. Titaghur Paper Mills Co. Ltd. v. Their Workmen. However, the Court distinguished the present situation because the Company had already introduced the incentive‑bonus scheme for the majority of its workmen; the present request was merely for the extension of the existing scheme to the remaining clerical and subordinate staff. The Court explained that this request is fundamentally different from asking a tribunal to impose a new bonus scheme for the first time. Consequently, the Court found no reason to interfere with the tribunal’s order directing the Company to extend the incentive‑bonus benefits to the clerical and subordinate employees, and it declined to disturb that portion of the tribunal’s judgment.

Turning to the appeal concerning the eight‑anna tiffin allowance for the period when the canteen was operational, the Court stated that the tribunal had examined the matter exhaustively, reviewing the historical background of the allowance and considering every argument presented on behalf of the workmen. No new material was brought before the Court that would warrant overturning the tribunal’s considered decision. The tribunal had concluded, after weighing all circumstances, that the workmen were not entitled to the eight‑anna per‑head per‑day tiffin allowance. The Court also referred to the correspondence between the workmen and the Company, which indicated that the workmen had initially demanded a canteen before the allowance was granted by the award dated 24 July 1953, but their enthusiasm waned after the award. The Company appears to have taken steps to establish a canteen even before the award and pursued the matter vigorously thereafter, while the workmen later raised objections—some of which the Court described as fanciful. The Court therefore affirmed the tribunal’s findings on the tiffin allowance and found no ground for interference.

In this case the Court observed that after the workmen had received the tiffin allowance they seemed to prefer retaining that monetary benefit rather than making use of the canteen that had been proposed. The Court therefore concluded that, on the facts before it, the tribunal’s finding that the workmen were not entitled to the canteen and that the allowance of eight annas per head per day should remain in force was correct. The Court examined the record and found that the workmen had not produced any argument showing that the canteen service was now preferable or that the allowance ought to be withdrawn, and it noted that the tribunal had already considered the objections raised by the workmen and had determined that those objections were without merit. On this basis the Court was satisfied that the tribunal’s decision was grounded on a proper appraisal of the circumstances and that there was no ground on which it could interfere with the considered decision of the tribunal. Accordingly the Court dismissed the appeals that had been filed against the tribunal’s order. In addition the Court indicated that, given the circumstances, it would not make any order directing either party to pay costs, because the parties had been fully represented and there was no indication of frivolous or vexatious conduct. The dismissal of the appeals therefore stood as the final order and no costs were awarded to either side.