' A settlement was arrived at between the Larkana Sugar Mills, the appellants herein, and the Larkana Sugar Mills Employees' Union, the respondent herein, on 1st December, 1975. The said agreement was to remain in force for a period of 2 years. Clause (3) of the said agreement which related to demand of bonus by the workmen, is to the following effect :- "Demand No, 3.-Three bonuses with Allowances.
Agreement-In full and final settlement of this demand it has been agreed that Production Bonus will be paid on the following formula :-
(i) 30 days basic pay as bonus on production of 1 lac bags of sugar,
(ii) 10 days additional basic pay as bonus for Production of every 25,000 bags of sugar above 1 lac bags."
2. It appears that for the year 1977-78, the Production Bonus payable under the aforesaid agreement was paid by the Management on the basic wages, including the cost of living allowance. This was purported to have been done in compliance with the memorandum, dated 9th October, 1978, for the P. I. D. C. To the Managing Directors/ General Managers of the establishments under its control including the P.
1. D. C. Project of Larkana Sugar Mills. The said memorandum reads as follows :- MEMORANDUM "Subject : Discontinuance of Payment of Cost of Living Allowance as part of bonus other than statutory profit bonus as for Standing Order 10-C ' Reproduced below is an extract from the judgment, dated 30th July, 1978, of the Punjab Labour Appellate Tribunal regarding treatment of Cost of Living allowance as part of wages for the purpose of bonuses other than statutory profit bonus under Standing Order 10-C :- 'The only appropriate interpretation that can be placed on the word 'bonus' used in section 7 of Employees Cost of Living (Relief) Act, 1973, would be that only. In other words, it would be obligatory to treat the cost of living allowances as part of wages for the purposes of statutory bonus only.'
' Accordingly in future C L A will be treated as part of pay wages for the purpose of Statutory profit Bonus under Standing Order 10-C only. Other bonuses as per Agreements will be paid excluding Cost of Living Allowance. This may kindly be noted by all concerned. M. Maujood, General Manager (A & P)."
3. For the year 1978-79, however, no bonus was paid by the appellant-Mills to its employees on the ground that the required production bonus payable under the settlement of 1975, was calculated only on the basic wages of the employees excluding the cost of living allowance, The respondent-Union claimed that the workmen were entitled to production bonus calculated on the basic wages including the statutory cost of living allowance. As this claim was not acceded to by the appellant-Mills, the respondent Union brought its claim before the learned VlIth Labour Court by means of an application under section 34, I. R.
0. The learned Labour Court has allowed, the application of the respondent Union on 3 grounds, i,e,, that the appellant-Mills had themselves paid production bonus for the year 1977-78 on basic wages plus cost of living allowance that according to clause 48 of the agreement arrived at between the Management and the workmen, the cost of living allowance was payable as per Government rules, and that lastly, the letter, dated 9th October, 1978 from the P. I. D. C. Provides that cost of living allowance will be treated as part of pay wages for the purposes of statutory bonus.
Aggrieved by this decision, the appellant-Mills have come up in appeal to this Tribunal.
4. I have heard Mr. Sardar Ikramullah for the appellant-Mills and Mr. Nizamuddin Baluch, who appeared for the respondent,-Union. The main contention of Sardar Ikramullah was that under the agreement of 1975, bonus was payable to the workmen only on the basic wages and basic wages do not include cost of living allowance. The learned representative further submited that the letter of P. I. D. C.. Dated 9th October, 1978, which itself was based on the decision, dated 30th July, 1978 of the Punjab Labour Appellate Tribunal, merely provided that the cost of living allowance will be treated as part of pay wages for the purposes of statutory profit bonus but does not direct that it will form part of the basic wages upon which alone the production bonus was payable under the agreement of 1975.
5. The Punjab Labour Appellate Tribunal, in the case of Employees Union Pak-American Fertilizers Ltd. v. Managements Pak-American Fertilizers Ltd., decided on 30th July, 1978, draw a distinction between statutory bonus and negotiable bonus and observed as follows :- "From the above it is clear that prior to the amendment Cost of Living Allowance was not to form part of wage but after the amendment it is to form part of wages. Now the point for deter-initiation is as to what is the effect of the proviso to section 7 of the Act. Under the law there are two kinds of bonuses, firstly profit bonus under Standing Order 10-C, which I fixed by law and, secondly negotiable bonus, which may be payable under a settlement arrived at between the parties under the Industrial Relations Ordinance, 1969. I am fortified in this view by the judgment in the case Pakistan Tobacco Company Ltd. V. Pak Cigarette Labour Union and another PLD 1977 Kar.
879. From the perusal of section 7 of the Act, it is clear that cost of living allowance has made a part of wages only for the purchases of calculating statutory benefits i,e, benefits, which are conferred by law. This is so because of the words "for the purposes of any other law" used In section 7 of the Act. The bonus paid under the W.P. Industrial and Commercial Employment (Standing Orders)
Ordinance, 1968 is a statutory bonus and the wages for this purpose may include the cost of living allowance, provided no part transaction or vested rights and obligations are impaired because the cost of Living (Relief) (Amendment) Act, 1977, is only perspective end not retros- pective. The bonus paid under a settlement is, however, negotiable as provided under section 26 of Industrial Relations Ordinance, 1969."
6. In the instant case, admittedly the bonus payable to the workmen was negotiated bonus and not statutory bonus. Further more the bonus A was payable on the basic wages and not on gross or total wages or even wages as such. In the case Pak. Gum Industries Ltd. v. Pak. Gum) Industries leeway Labour Union, decided on 1st October, 1980, this Tribunal had occasion to examine the distinction between wages and basic wages for the purposes of computation of bonus and observed as follows :-- "Under the settlement, each workman was entitled to bonus equivalent to for months for three months basic wages depending upon the profits made by the appellant-Company. The expression "basic wages" is well understood, in wage circles and means basic salary excluding all allowances.
The settlement thus clearly contemplated computation of bonus on the basis of the basic salary excluding allowances. It was, however, contended by Mr. Sultan Ansari, the learned Representative of the respondent-Union, that since the Cost of Living Allowance forms part of wages, therefore, it should also form a part of the basic wages for the purposes of payment of bonus under the settlement in question. The contention of Mr. Ansari, however, is included by 2 serious objections.
The first is, as already pointed out, that there is a clear distinction between basic wages and wages. This distinction was not disputed by Mr. Ansari who conceded that wages may include something more than basic wages. The Cost of Living Allowance does not form paint of wages of the worker for the purposes of the I. R.
0. 1969. In other words, where a benefit is obtained under a settlement arrived at under the I. R.
0., the Cost of Living Allowance will not be added thereto. The object of the said Act, as I see it, is to statutorily raise the wages of a workman so as to compensate him on account of the abnormal increase in the Cost of Living. However, where by a settlement or contract the benefits to or allowance of workmen have been increased, keeping in view the increased cost of living, no justification would exist for adding the Cost of Living Allowance to the wages with such increased allowance and benefits. What the respondent-Union is claiming through these proceedings is the enforcement under the provisions of the I. R.
0., of a settlement made under the said law. However, since the Cost of Living Allowance does not form part of wages for the purposes of the I. R.
0., neither the respondent-Union can be permitted under the provisions of the I. R.
0. To make such a claim on behalf of workmen nor can an individual workman be entitled to make such a claim, since it is based on a settlement made under the I. R.
0. No doubt, under Standing Order 10-C, the minimum profit bonus admissible to a workman is an amount equivalent to one month's wages, including the Cost of Living Allowance."
7. On the basis of the above decision, I am of the view that the, workmen of the appellant mills are not entitled to be paid bonus calculated on the basis of wages or even basic wages plus cost of living allowance, since the cost of living allowance does not form part of basic wages for the purposes of computing production bonus, which is different from statutory bonus.
8. Mr. Nizamuddin Baloch, however, sought to rely on the fact that in the year 1977-78, the appellant-Mills themselves had paid bonus to its workmen calculated on basic wages plus cost of living allowance. Possibly this was done under some misapprehension which was introduced by misreading of P. I. D. C. Letter, dated 9th October, 1978. Even if the said letter is construed as directing that the cost of living allowance be included in wages for the purpose of computing statutory production bonus, it cannot be construed as directing that for the purposes of computing negotiated production bonus, the cost of living allowance is to be included in basic wages. The parties having agreed that the bonus payable under the settlement of 1975 was to be calculated on the basis of basic wages only, they would not be entitled to claim that cost of living allowance be included in the basic wages for the purposes of Calculating bonus payable to them. As has been explained by this Tribunal in the case of Pak. Gum Industries Ltd., the Law does not provide that such allowance should be included in the wages or basic wages for the purposes of computing negotiable bonus.
9. For the reasons discussed by me above, I would set aside the impugned order and allow the appeal. The security furnished by the appellant mills at the time of admission of the appeal should be returned to them.