' The petitioner, Pakistan Tobacco Company Limited seeks to challenge the order dated 5.4-1976 of the III Sind Labour Court, Karachi, by which the petition of the petitioner under section 34 of the Industrial Relations Ordinance, 1969, was dismissed and it was held that the petitioner was liable to pay the statutory bonus under Standing Order 10-C (1) of the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1969 to the workers of the Union in addition to the annual bonus payable under the terms of the settlement concluded between the parties on 26th January 1972.
2. The facts forming the background of the case are largely undisputed and may be briefly stated.
The petitioner-Company was incorporated in 1947 and has its registered office at Karachi. It is engaged in the manufacture of cigarettes and has one factory at Karachi and one at Jhelum, besides having establishments in various places in Pakistan in connection with processing and purchase of raw materials and sales.
3. 'The workmen in these factories and establishments (except some of the sales offices) are represented by registered Trade Unions. The Pakistan Cigarette Labor Union, respondent No, 1 herein, was formed on 31.7-1961 and was registered as the Collective Bargaining Agent of the workmen at the Karachi Factory on 10-9-1963.
4. It appears from the record that the company has been paying in the past to its workmen annual bonus which continued to be paid under the terms of settlements from time to time until the controversy in regard to its nature and incidents arose, on the introduction of compulsory statutory profit bonus by amendment of West Pakistan (Standing Orders) Ordinance, 1968, through amending Ordinance IX of 1972.
5. The case of the company is that annual bonus paid by it was always related to profits made during the financial year and was therefore clearly a profit bonus, included in the various settlements with the workmen as such, with a view to meet the demand for payment of profit bonus. On 26-1-1972 the company executed a similar settlement with the Union. On 13-4-1972, however, as stated earlier, the amending law came into force, whereby under Standing Order 10-C the workmen became entitled to the payment of profit bonus equivalent to the aggregate of one month's wages of the workmen employed, if the amount of profit earned was more than such aggregate in any year. The Union therefore, demanded payment of bonus under Standing Order 10-C, which demand was resisted on the ground that the workmen were not entitled to receive an additional profit bonus in addition to the profit bonus payable to them in terms of the settlement dated 26-1-72 hut only one of the two whichever was higher. The parties entered into a dialogue which having failed a strike notice under section 28 of the Industrial Relations Ordinance, 1969, was served on the company in June 1973. There followed then the conciliation proceedings, during which, the respondent-Union maintained its claim to payment of both, the settlement as well as the statutory bonus.
6. According to the company, apprehending a strike by the workmen on the failure of conciliation proceedings and in order to maintain industrial peace, the company entered into a fresh settlement with the respondent-Union on 13-6-1973 agreeing to pay an amount equivalent to the additional bonus under Standing Order 10-C (1) but subject to its "right to approach the competent Courts of law to seek enforcement of its right and other reliefs in the above respect or to enforce any decision which may be pronounced by competent Courts of law or Government in this regard in general in due course of time".
7. Pursuant to the aforesaid clauses stipulated in the last mentioned settlement the Company filed a petition under section 34 of the Industrial Relations Ordinance, on 11-7-1973 before the III Sind Labor Court, Karachi, wherein the payment of the additional bonus under Standing Order 10-C was challenged on the plea that on payment of alleged profit bonus in accordance with the settlement dated 26-1-1972 the company had discharged its liability under Standing Order 10-C. The Labour Court after hearing the evidence of the parties, ultimately dismissed the petition of the company by the impugned order dated 5-4-1976, upon a finding that the bonuses as so far paid to the workmen under the settlements were contractual bonuses, irrespective of the fact whether the company earned profits or not and therefore clause (4) of Standing Order 10-C guaranteed the payment thereof b addition to the profit bonus made compulsorily payable under clause (1) of Standing Order 10-C.
8. The petitioner-Company has placed on record a number of documents which include the relevant settlements and the pleadings of the parties and their respective claims in the Labor Court as well as in the antecedent proceedings. Perhaps for this reason the respondent-Union has not filed a counter-affidavit but their learned counsel has resisted this petition on the basis of materials brought on record by the petitioner.
9. It will be noticed from the resume of facts stated above that the substance of the controversy between the parties is as to the nature and content of the settlement bonus stipulated to be payable under the settlement dated 2e-1-1972. In order to appreciate the contentions raised by counsel appearing for the parties, it will be advantageous to reproduce the provisions of Standing Order 10-C, which reads as follows:- "10-C. Payment of bonus.-(1) Every employer making profit in any year shall pay for that year within three months of the closing of that year to the workmen who have been in his employment in that year for a continuous period of not less than ninety days a bonus in addition to the wages payable to such workmen.
(2) The amount of the bonus payable shall- (a)If the amount of the profit is not less than the aggregate of one month% wages of the workmen employed, be not less than the amount cf such aggregate, subject to the maximum of thirty per cent. Of such profit; ' iliastration 1.-If the profit is Rs, 1,20,000, and the aggregate of one month's wages of the workmen is Rs, 30,000, the amount of bonus payable shall be not less than the aggregate of one month's wages, that is to say, Rs, 30,000.
' Illustration 2.-If the profit is Rs, 30,000 and the aggregate of one month's wages of the workmen is also Rs, 30,000 the amount of bonus payable shall be not less than thirty per cent. Of the profit that is tc say, Rs, 9,000.
(b)if the amount of the profit is less than the aggregate referred to in paragraph (a), be not less than fifteen per cent. Of such profit.
(3) The bonus payable to a workman entitled thereto under clause (1) shall bear to his monthly wages the same proportion as the total bonus payable by the employer bears to the aggregate of the wages referred to in paragraph (a) of clause (2) and shall be paid either in cash or in N. I. T.
Units of equivalent value at the option of such workman.
(4) Nothing in this section shall he deemed to affect the right of any workman to receive any bonus other than that payable under clause (1) to which he may be entitled in accordance with the terms of his employment or any usage or any settlement or an award of a Labour Court established under the Industrial Relations Ordinance, 969 (XXIII of 1969).
Explanation.-For the purpose of this section- (a)"N. I. T. Units" mean the Units referred to in the National Investment (Unit) Trust Ordinance, 1965 (VII of 1965)
(b)"Profit" means the "net profits" as defined in section 87-C of the Companies Act, i913 (VII of 1913); and
(c) "Wages" does not, for the purpose of calculating the bonus payable to a person under clause (1), include the bonus referred to in clause (vi) of section 2 of the Payment of Wages Act (IV of 1936).
10. In support of the petition Mr. Irshad Hussain Khan, learned counsel for the petitioner urged the following points:
(1) that the Labor Court has failed to determine the real nature of the bonus under the settlement and has merely relied upon the solitary ex gratia payment in 1971 to hold that the bonus was a part of wages;
(ii) that the evidence adduced by the petitioner before the Labour Court unquestionably shows that the bonus in question in the past was linked with profits and prosperity earned by the Company;
(iii) that no contrary evidence was produced by the respondent that bonus was linked with profit.
11. Mr. Obaidur Rehman, learned counsel appearing for the respondent-Union, on the other hand, highlighting the differences between the profit bonus payable under Standing Order 10-C (1) and contractual bonus under the settlement of the parties, urged as under:
(i) Contractual Bonus is a part of the wages and operates as a part of the terms and conditions of service.
(ii) Bonus under Standing Order 10-C is a profit sharing bonus and is other than wages.
(iii) In case of Settlement Bonus, prosperity of the concern, trading results, and profitability, all are important considerations but the sole consideration in case of Bonus under Standing Order 10-C (1) is profit making.
(iv) Finally the Settlement Bonus is paid out of 'available surplus' whereas the statutory Bonus under Standing Order 10-C is payable out of rent profits.
12. It is beyond question that the bonus made compulsorily payable under Standing Order 10-C is a profit bonus and therefore the controversy between the parties was confined to the nature of the bonus agreed to be paid under the terms of the settlement. In final analysis the question resolved itself to this: if the nature of the settlement bonus was different from the profit bonus payable under 10-C (1) or if the same was shown to have become an implied term of employment then the bonus payable under the settlement was to be paid in addition to the statutory bonus, Conversely if the settlement bonus was a profit bonus, then the workmen had no right to claim profit bonus twice over, under the settlement as well as under Standing Order 10-C. The decision of the question as to the nature of the bonus under the settlement, in my opinion does not conclusively determine the true construction of clause (4) of Standing Order 10-C upon which the fate of this petition ultimately hinges. However, as I shall discuss later the determination of the former question would in any case be relevant. The first question that falls for consideration, therefore, is as to what is the nature of the bonus granted under the terms of the settlement in question.
13. Before the aforesaid question can be examined I would deal with a subsidiary point urged by Mr. Obaidur Rehman, learned counsel for the respondent-Union. It was urged by the counsel that for determining the nature and the character of the bonus payable under the settlement, no evidence except the clauses of the settlement or the contents of the settlement deed can be looked into. For this proposition, learned counsel relied upon Shafiq Textile Mills Limited v. Mazdoor Union (1) which was also
(1) 1975 PLC 559 ' a case relating to an industrial dispute for payment of the bonus under the terms of the settlement which provided for payment of bonus at the rate of 51 days' basic wages and 2 calendar months' basic salary to daily-rated and monthly-paid workers on fulfillment of certain conditions and/or bonus prescribed under the provisions of the (Standing Orders) Ordinance, 1968, whichever of the two is higher. In resisting the claim the company took up a stand that the first of the aforesaid two bonuses was also a profit bonus, and therefore, in the year in question, since the company had suffered loss, none of the two bonuses was payable. The Appellate Tribunal on a comparison of the relevant clauses of the settlement and Standing Order 10-C arrived at the conclusion that there were marked distinguishing features between the two and held that the claim for bonus under the first clause of the settlement was payable at the rate shown therein irrespective of gain or loss. After analyzing the concept of bonus and noticing the different categories thereof, at page 562 of the report, the learned Tribunal observed as under :- "Apart from this, Bonus can be specifically granted under the terms of contract of service or settlement as in the present case. When such is the case, the intention of the parties is to be collected from the document itself unless it is not possible to discover the intention without the aid of extrinsic evidence or judicial precedents."
In the first place, the decision does not lay down the wide proposition canvassed by the learned counsel, in so far as the cases in which the intention of the parties cannot be clearly spelled out from the instrument, resort can be had to the extrinsic evidence bearing on the question outside the instrument. In the present case, the clause in the settlement in question dated 26-1-1972 (Annexure "A") reads as follows: "Annual Bonus.-The Company agrees to pay annual bonus to all workers calculated at the rate of 15% of their earnings of scale pay during the currency of this settlement."
' There is nothing in the rest of the clauses of the settlement to indicate any thing as to the nature of the bonus, whether the bonus was agreed to be paid on considerations of profit earned or otherwise. It is quite apparent that the settlement does not incorporate the premises or the respective contentions of the parties on the basis of which during the negotiations between the parties, the company finally agreed to pay the bonus. The settlement only contains the operative part of the agreement without mentioning anything in the recitals beyond that. Thus the present case is clearly one in which the intention of the parties cannot be gathered from the bare reading of the clauses of the settlement. It will be noticed that the facts of the reported case were in this regard distinguishable. In that case the settlement was concluded after the promulgation of the amending Ordinance noticing the Standing Order 10-C in the statute whereas in the present case the settlement was executed before 10-C was inserted in the Standing Orders. In the reported case the company had undertaken to pay bonus at a prescribed rate in first clause and in the alternative clause had undertaken to pay the statutory bonus if the same was higher. So the question was whether in case the contractual bonus, in a particular financial year worked out to be lower than the statutory bonus, it was intended to pay bonus at the stipulated rate in the first clause. The question of intention of the parties was the only question for adjudication in that case.
So far as the present case is concerned, there are no alternative clauses in the settlement which required to be construed. The question here is entirely different, namely as to the nature of the bonus agreed to be paid under the terms of the settlement.
' I am therefore, clearly of the opinion that there is no bar in law, in taking into consideration all the available evidence including that which is extraneous to settlement deed for decision of the question as to the nature of the bonus granted thereunder.
14. Before proceeding to examine the material placed on record relevant to the aforesaid question, I would briefly examine the grounds which prevailed with the Labour Court in arriving at the conclusion that the bonus in question was not a profit bonus of the nature envisaged in Standing Order 10-C (1). The Labour Court strongly relied upon a decision of the Peshawar High Court in the case of Khyber Tobacco Company Limited (1) wherein a dictum was laid down that if in a given case a worker had been able to make his employer agree to pay him bonus, it would be deemed to have become a part of his wages to which he would be entitled as a matter of right under the contract/settlement. The Labour Court had relying upon this dictum held that the contractual bonus had become a part of the wages of the workers who were therefore, entitled to receive additional profit bonus under the statute, The Court further supported its conclusion with the fact that the petitioner-Company in the year 1971 in spite of sustaining loss had agreed to pay bonus in accordance with the settlement.
15. Learned counsel for the petitioner strongly contended that the proposition holding that the contractual bonus invariably forms part of the wages is too wide a proposition to be sustained in law. In order to appreciate this submission it is necessary to notice the nature and incidents of the right to the payment of bonus in the industrial jurisprudence. It is needless for me to trace the history and the development of the concept of bonus. Suffice to say that bonus as the meaning of the term suggest originated as a purely ex gratia payment or gift or donation by the employee to the workers but in course of social and industrial transformation of society in the modern age the bonus has come to acquire an entirely different connotation and is regarded as a right enforceable at law.
16. It is now well-recognized that there can be various kinds of bonus like attendance bonus, dependent upon the regular attendance of the workers, production bonus as an incentive to increase in production, customary bonus, based on usage or festival bonus which is also based on usage connected with some festival and lastly profit bonus which is entirely based upon the earning of profits by the employer. The nature and incidents of the various types of bonuses show that not all bonuses are related to profit earning. For instance, production bonus or incentive bonus or festival bonus is paid irrespective of whether the employer earns profit or not. Whether a bonus in a given case forms part of the terms of employment was considered in India in Mahalaxmi Cotton Mille case (2) where certain tests were laid down which would justify the inference that there was an implied term of employment for payment of bonus. In this case the Puja Bonus was held to be an implied term as distinct from customary bonus usually paid in Bengal. It was held by the Tribunal as under :- "That there could be a right in the workers to claim Puja bonus different from the bonus payable where there are profits, if there was an agreement, express or implied to that effect; that the agreement could be inferred if the payment has been made over a number of years, especially in years when the company incurred loss; that the agreement will not be unenforceable as in civil Courts for vagueness If the
(1) PLD 1976 Pesh. 8 (2) 1952 L A C 370 ' quantum was not fixed but was left to be fixed according to circumstance in each year whether by agreement or by award of Tribunal."
17. The tests laid down in the above case were followed in a number of cases by Industrial Tribunals and Labor Appellate Tribunal. The Supreme Court of India in Ispahard Employees' Union v. Messrs Ispahani Limited (1) approved these tests and summarized them as the tests for inferring an implied agreement as under (1)The payment must be unbroken ; (2)It must be for a sufficiently long period ; and (3)The circumstances in which payment was made should be such as to exclude that it was paid out of bounty.
' It was further laid down that the fact of payment in a year of loss would be an important factor in excluding the hypothesis that the payment was out of bounty and in coming to the conclusion that it was a matter of obligation based on implied agreement The Supreme Court in this case clearly held that the claim for Puja Bonus in Bengal was based on either of the two grounds. It may either be a matter of implied agreement between the employers and employees creating a term of employment for payment of Puja Bonus, or even though no implied agreement can be inferred it may be payable as a customary bonus. On the facts their Lordships came to the conclusion that the bonus claimed by the workers as an implied term of contract was proved in view of the fact that the same was paid without any break and even in the years in which the company suffered loss.
18. In this context reference may also be made to Messrs.' Lipton Limited v. Their Employees (2) where the learned Judges of the Indian Supreme Court pointed out the distinction between bonus and wages. It was observed "Bonus comes out of profits and can claim no priority over dividend or other prior charges; bonus is paid if after meeting the prior charges there is an available surplus. Wages stand on somewhat different footing; wages primarily rest on contract and are determined on a long term basis and are not necessarily dependent on profits made in number of years."
19. Now, as stated earlier, the first contention of the learned counsel for the respondent-Union was that the settlement bonus in question formed part of the wages and is to be regarded as implied term of the contract of service. Since the learned counsel supports this submission with two decisions of the superior Courts in Pakistan namely, the case of Attock Oil Company (3) and Khyber Tobacco Company I shall examine these cases in detail. The Lahore case arose out of a petition under section 10 of the Industrial Disputes Ordinance, 1959 wherein Attack Oil Company Limited sought a declaration that the dispute raised by the workers regarding payment cf higher bonus for the year ending December, 1965 was frivolous and vexatious. Simultaneously the workers had also filed an application under section 5 of the Industrial Disputes Ordinance for payment of bonus as demanded by them. The dispute had arisen on the declaration of bonus for the year by the company at the rate of 2 months' pay which was considered inadequate by the workers who demanded bonus at the rate of 3 months' pay Conciliation proceedings having failed the matter was (9 AIR 1959 SC 1147 (2) AIR 1959 SC 676
(3) PLD 1970 Lab. 122 'brought before the Industrial Court. It was inter alia contended on behalf of the company that the dispute regarding the bonus did not constitute an industrial dispute entertain able under the Industrial Disputes Ordinance, 1959. Having failed to obtain favorable decision from the Industrial Court, the matter was brought before the High Court in appeal; It was in relation to the aforesaid contention whether the demand pertaining to the payment of bonus constituted an industrial dispute, that the relevant observations were made by the Court in the reported decision on which reliance is being placed. It was observed in para. 11 at page 132 of the report as under t "So far as the nature of bonus is concerned, we would like to observe that the employees always regard bonus as an item of remuneration to which they are entitled out of the profits of the company after they have put in a year's labor. They consider it as an essential condition for the continuance of work by them in the future in a particular industrial concern and by convention of industries it has come to be regarded as part of their terms and conditions of employment and has been enforced as such by the Courts of law." (Underlining is mine).
' The learned Judges then proceeded to notice some of the decisions from the Indian Jurisdiction relating to Durga Puja Bonus paid in Bengal. It was finally observed at page 133 of the report as follows t "The object of the industrial Disputes Ordinance is to bring about industrial peace by settling disputes between the workers and the Management which, if not settled, may result in dislocation of the peace essential to the life of the community. The grant of bonus to the employees is calculated to make labor more contented and it has always been considered as part of the remuneration of the workers for their service. In fact bonus has been regarded as a recognition of the right of the workers to share in some measure in the profits of the company which encourages its workmen to work hard in the hope and with the knowledge that they will secure more gain to themselves."
' On the basis of the aforesaid reasoning their Lordships came to the conclusion that the dispute arising out of a demand for payment of bonus was covered by the words "industrial dispute" as defined under the Industrial Disputes Ordinance, 1959.
20. In the first place the facts of the case clearly show that the bonus in the reported case was a profit bonus. This is further clear from the first passage cited above where the underlined* words clearly indicate that the learned Judges had in mind a profit bonus while making the observations.
As pointed out earlier, the Indian Supreme Court has taken the view that in order to qualify as an implied term of contract of service the payment of bonus should exclude any connection with the earning of profit as that would amount to a payment out of bounty. Those were the cases which were referred in the cited judgment pertaining to the festival bonus of Durga Puja. In India also such bonus was held to be claimable either Rs an implied term of employment or as a customary bonus. Consequently, with utmost respect those decisions did not support the wide proposition that the right to the payment of the bonus is always to be regarded as an implied term of the contract of service or as part of the wages. In Muir Mills Company Ltd. v. Suti Mills Mazdoor Union, Kanpur (1) it was observed "Bonus is not a deferred wage. Because if it were so it will necessarily rank for precedence before dividends. The dividends can only be paid out of profits and unless and until profits are made no occasion or question can also arise for distribution of any sum as bonus amongst the employees. If the industrial concern has resulted in a trading loss there would be no profits of the particular year available for distribution of dividends, much less could the employees claim the distribution of bonus during the year."
' Similarly, in Messrs Lipton Limited v. Their Employees which has been referred to above pointed out the distinction between the wages and the bonus. I am therefore, of the opinion that the dictum laid down in the Lahore case cannot be taken as an authority for the present purposes as I am quite clear in my mind that it is conceivable that the payment of bonus may be claimed as of right otherwise than as a term of employment. Conversely the agreement to pay a bonus does not in all cases form part of the terms of contract or the wages. Each case has to be decided in the light of the facts and circumstances and the nature of the bonus.
21. The Peshawar case on which reliance was placed had in the main followed the decision in the aforesaid Attock Oil Company case. In this case there was a settlement concluded between the company and the Union providing for payment of annual bonus at the rate of 2 months' basic pay in lieu of bonus prescribed in the Standing Order 10-C. Subsequently, the Union repudiated the settlement and claimed the payment of the statutory bonus in addition to the bonus paid to the workers as usual. The company resisted the claim on the plea that the bonus already paid to the workers also covered its obligation under Standing Order 10-C. This led to an industrial dispute which eventually went before the Labor Court which allowed the claim of the Union. The matter was then taken to the High Court by the company in Writ Jurisdiction. The contention on behalf of the company inter alia was that the bonus already paid to the workers was also meant to liquidate the liability of the company for payment of the statutory bonus. In reply the Union contended that long before the coming into force of the Standing Order 10-C the Union had been receiving from the company annual bonuses which were of linked with the profits of the company and therefore, had become a part of the wages of the workers. Repelling the contention of the company the Court came to the conclusion that if in a given case a worker bad been able to make his employer agree to pay him bound s it would be deemed to have become a part of his wages to which he would be entitled as a matter of right under the contract/ settlement. On the facts after reviewing the evidence on record the Court found that in the past the bonus was paid under the various settlements which did not depend on the making of profits. The Court therefore, concluded that the workers had been receiving contractual bonus entirely free from consideration of the company making profits or incurring losses. While therefore, laying down the wide proposition that where the workers had succeeded in obtaining an agreement by the employer to pay bonus it would be deemed to be a part of his wages, the Court in fact went into the question whether the bonus in question was in any way related to the earning of profits and was influenced in its conclusion by the consideration that the bonus in the past was paid irrespective of the question of profit or loss. In the circumstances and for the reasons already assigned, this
(1) AIR 1955 SC 170 ' decision also does not support the contention advanced on behalf of the respondent-Union.
22. In the light of the above discussion, I have come to the conclusion that the first two points urged by Mr. Obaidur Rahman, learned counsel for the respondent-Union to the effect that the contractual bonus is invariably Ba part of the wages and operates as an implied term of service have no substance. The question has to be decided in the light of the tests laid down in the case of Ispahani Employees' Union referred to above.
23. This brings me now to the consideration of the question as to whether, as contended on behalf of the company the bonus has in the past been linked with profits. The Labour Court found that in the year 1971 the company paid bonus in accordance with the settlement despite the fact that it sustained loss in that year. Mr. Irshad Hassan, learned counsel for the petitioner forcefully contended that the payment in this year was made expressly ex gratia. In this connection the company has placed, on record notice dated 1-1-1972 (Annexure 'Z') which specifically mentions that the payment was being made in spite of company's unsatisfactory trading results "purely as a gesture of goodwill "and" in spite of the fact that the company is under no obligation to pay bonus for the year 1971". In para. 4 of this letter it was stated as follows : "4. The company does not guarantee the payment of annual bonus in future which will be dependent on the company's future trading results and/or collective bargaining agreement with the Union of the employees."
' Thus it is clear that payment was made without admitting liability to pay, as an ex gratia payment.
In Messrs Grahams Trading Company v. Their Workmen (1) the contention that festival bonus was paid by the company from year to year and had therefore become an implied term of employment, was repelled on the basis that whenever the company paid the bonus, it made it clear that it was an ex gratia payment and would not constitute any precedent for future years. By parity of reasoning therefore, the pay ment of bonus in one year expressly made ex gratia in spite of loss would not furnish a ground for holding that the bonus was usually paid irrespective or consideration of profit.
24. The history of the payment of bonus in this case is that initially it was paid prior to 1968 as "annual gift" but subsequently it was described as "annual bonus" as adjudicated by the Industrial Tribunal. The respondent-Union continued to raise industrial disputes from time to time which resulted in settlements concluded between the parties according to which bonus was paid by the company at varying rates from year to year. It seems that except in 1954, 1956 and 1962, the quantum of bonus was fixed by mutual agreement as a result of Collective Bargaining. In 1954 the dispute was referred to the Central Labour Commissioner, who awarded bonus equivalent to 2 months' wages for the years 1953, 1954 and 195e. In 1956 again a dispute was raised whereby the workers demanded quarterly work bonus equal to one month wages. The dispute was referred for adjudication to the Industrial Tribunal. The petitioner in its pleadings before the Tribunal referred to the demand made by the workers on the basis of huge profits made by the company. Mr. Mansoor Alam the Industrial Tribunal in his award published on 16-3-1957 (Annexure 'S') set out the respective contentions of the parties. The contention on behalf of the Union was stated to be one for payment of bonus in advance on a fixed base regardless of
(1) AIR 1959 SC 1151 ' the profit earned. But the Tribunal held that the payment of bonus was correlated to the earning of fairly large profits and dependent on Profit & Loss Account of the company each year. Upon this view the demand of the Union was rejected. In 1962 again a dispute arose for enhancement of bonus which eventually went before the Industrial Court. In their statement and counter-statement (Annexures T U' &V ) the claim for the payment of enhanced bonus was made and resisted with reference to the earning of huge profit. The Tribunal in its award published on 6-8-1963 (Annexure W') rejected the claim of the Union upon arriving at the finding that the Union had brought nothing on the record to show that the financial position of the company in these years was such as to entitle the workers to higher rate of bonus. However, the company offered to the Union that should production which in turn affects earning be kept at a higher level the company would consider higher bonus in coming years. It was accordingly decided by the award that the offer of the company to pay bonus for the years 1962-63 equal to 3 months' basic wages in all on a uniform basis be alloyed subject to the workers restoring and maintaining normal production and discipline. In 1965 the workers once again demanded higher rate of bonus equivalent to 1/3 of each worker's total earning. By a mutually concluded settlement the company agreed to pay bonus equal to 1/4 of basic pay earned during the year. By subsequent settlement in the year 1970 the rate of bonus was enhanced to the 15% of actual earnings. On 26-1-1972, also a fresh settlement was entered into between parties whereby the company once again agree. To pay annual bonus to all workers calculated at the rate of 15% of their earnings of scale pay during the currency of the settlement (Annexure 'A'). As regards the operation of' the settlement it was stipulated that it will be operative for the period from 1-9-1971 to 30.6-1973 and thereafter, continue to bind the parties until expiry of 2 months from to date on which notice in writing of intention to terminate the settlement was given by either party. As stated earlier, after the incorporation of Standing Order 10-C. In May, 1973 the present dispute was raised which eventually resulted in a fresh settlement dated 13-1-1973 whereby the company agreed to pay the contractual bonus as well as statutory bonus under Standing Order 10-C subject to their right to seek adjudication of their contention that the payment of contractual bonus discharged their liability for the payment of statutory bonus. Before the Labour Court Mr. Saghir Ahmed, President of the Union appeared as a witness and in the cross- examination (Annexure (Q) stated that settlements have been executed between the parties after a long and hard collective bargaining on the increased prosperity of the company and increased cost of living. Having regard to all this evidence, the conclusion is inescapable that in the past the company was made to pay the bonus on the basis of profit. It has rightly been contended on behalf of the company that the respondent-Union has failed to show that the bonus was related to any other consideration. The Union has failed to establish circumstances excluding the possibility that the bonus was paid irrespective of the earning of profit. In this view of the matter it is clear that the bonus hitherto paid was a profit bonus and therefore, did not constitute an implied term of employment.
25. But this does not conclude the matter, The submission on behalf of the company was that the effect of clause (4) of Standing Order 10-C was to preserve the right of the workmen to receive bonuses other than profit bonus payable under clause (1) thereof. Therefore, since the bonus payable under the settlement was higher than the statutory bonus, the company was under no liability to pay the same in addition to the settlement bonus. In this connection, learned counsel contended that the words "other than that payable under clause (1)" in clause (4) of Standing Order 10-C cannot be construed to mean "in addition to that payable under clause (1)". Proceeding from these premises, the counsel argued that clause (4) preserved the rigtet of workers to bonus of the nature different from the bonus payable under the statute which was obviously a profit bonus.
For this proposition, learned counsel placed reliance on an unreported decision of this Court in Constitutional Petition No, 487/1974 Fauji Sugar Mills Employees' Union v. Fauji Sugar Mills and another.
26. Now Standing Order 10-C is the first legislative measure whereby the compulsory profit bonus was made payable by statute at the prescribed minimum rate to the workmen by the employer.
Obviously the Legislature was aware of the fact that bonuses of all types were being received by the workmen in some of the establishments at the time of new legislation or may in future be made payable to the workmen, These bonuses were either being paid or could be paid to the workman in accordance with the terms of their employment or by usage or under settlement or under award by a Labor Court. The clear intention of the Legislature envisaged in clause (4) was therefore, to save the validity of such bonuses from being affected by the payment of compulsory statutory bonus. In my opinion no other meaning can be read into the language of the sub-clause For if the construction placed by the learned counsel for the petitioner upon the language of the sub-clause is accepted it e ill obviously produce inconsistent and irrational consequences. The bonuses to which, workmen are entitled as terms G of their employment or usage are of a permanent nature and would continue to be payable as long as the relationship of the employer and employee continues to exist. As is explained above these types of bonuses are not related to the earning of profit, As such they could have been otherwise made payable in addition to the profit bonus under clause (I) 10-C. But the bonus payable by virtue of any settlement or an award could be a profit bonus. If therefore, the reference was to the nature of the bonus and the intention was to only preserve the validity of the bonuses other than profit bonus, then any settlement or award by which a profit bonus in excess of the statutory bonus was required to be paid would also cease to be payable. But this does not seem to be the intention, as the learned counsel himself conceded that it is legally permissible for the employer to agree to pay profit bonus at a rate higher than the one prescribed under 10-C. It is quite obvious from clause (2) of 10-C that the statute prescribed for minimum rates and no maximum was stimulated therein. Accordingly an employer would be guilty of violation of the provisions of Standing Order 10-C in case he fails to pay profit bonus at the minimum rate prescribed and any agreement to that effect would be void as being unlawful. This leads to the conclusion that it is open to the workmen despite the mandatory payment of profit bonus under 10-C to demand for the payment of profit bonus at a higher rate if they can justify the same and in case of such a dispute the employer may enter into a settlement or a labor Court may award a profit bonus at a higher rate. This interpretation does not offend in any way against the language of the enactment or operate harshly to any party. Apparently clause (4) would be attracted to bonuses payable under existing terms of employment, usage or settlement or award in force at the time Standing Order 10-C became operative. Likewise, it will be attracted to cases arising in future. As the question of profit bonus only arises in case of settlement or award as explained above the question is as to what is the remedy for the employer who is affected adversely under an existing settlement or award as a result of burden created by the statute on account of the compulsory payment of bonus under 10-C. Section 39 of the Industrial Relations Ordinance, 1969 provides for the binding effect of a settlement or an award. But section 40 of the said Ordinance provides that a settlement shall remain effective and binding for such period as is agreed upon and in absence of such period, for a period of one year from the date of the settlement subject to the right of termination after the expiry of that period by notice at the instance of any party. Likewise an award can remain effective for a maximum period of 2 years subject to the right of any party bound by the award to apply to the Labour Court for reduction of the period on the ground of material change in the circumstances. As is usual settlements in case of profit bonus are rarely for a fixed period extending over several years and in any case provision is usually made to leave scope for either party in case of change in circumstances to repudiate the settlement. Thus if the employer feels that the burden of payment under the settlement has increased on account of the compulsory statutory bonus, the employer can always relieve himself by repudiating the settlement or seeking appropriate remedy for termination of the period of an award under section 40 of the Industrial Relations Ordinance.
27. Looking at the provisions of clause (4) in the above prospective, it would appear that the intention of the Legislature was to clarify that if the bonus is payable otherwise then under the statute by virtue of terms of employment, usage, settlement or award, it shall continue to be payable. To me the meaning of the words "other than" appears to be "apart from" and if the former words are substituted with the latter the meaning would be plain and clear.
28. In this view of the matter, I have come to the conclusion that if a bonus is payable under an existing settlement in force, the same irrespective of its nature is payable by virtue of clause (4) of Standing Order 10-C read with sections 39 and 40 of the Industrial Relations Ordinance, 1969 until the settlement remains in force. The liability of the employer to pay the I statutory bonus at the minimum rate arises independently by operation of law under clauses (1) and (2) of Standing Order 10-C and therefore, I there is a subsisting settlement side by side, that would itself create a right for the payment of bonus independently of statutory bonus. It is for the employee in such a case to relieve himself of such a situation in the manner discussed above.
29. Now the prayer in this petition is confined to the effect of Standing Order 10-C on to e settlement dated 26-1-1972 between the parties. The result of my conclusions as aforementioned is that the petitioner was liable to pay bonus in terms of this settlement apart from the statutory bonus payable under Standing Order 10-C as long as this settlement remained in operation and force.
The petition is therefore dismissed but as complicated questions of law were involved in the decision of this case, the parties are left to bear their own costs.