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Petitioner: EMPLOYEES' UNION VS Respondent: MESSRS FOUJI SUGAR MILLS LTD.
Court Name: Labour Appellate Tribunal Judge(s): Z. A. Channa Title: EMPLOYEES' UNION vs MESSRS FOUJI SUGAR MILLS LTD. Case No.: Application No, KAR-274 of 1980 Date of Judgment:1981-02-11 Reported As: 1982 PLC 947 Result: Order accordingly
Judgment ORDER ' This is a reference under section 50, I. R. 0., for the interpretation of the provisions of a settlement relating to bonus, arrived at between the Fouji Sugar Mills, Tando Muhammad Khan, and the Fouji Sugar Mills Employees' Union (the 2 parties to the reference), on 9th February, 1972. The reference arises under the following circumstances. 2. On 9th February, 1972 a settlement was arrived at between the parties to the present reference which covered a number of items. Clause (1)(b) of the settlement, which has given rise to a dispute between the parties, reads as follows :- "(b) The management agreed to pay the bonus on pro rata basis and according to the duration of season on the formula of one bonus on one lac bags production of sugar during the current season and onward to the maximum of four bonus. Every one place of decimal equal to 3 days bonus will be minimum unit payable. (Bag to be calculated at weights of two maunds and 30 seers of each)." 3. Subsequent to the execution or the above settlement between the paires, on 13th April, 1972, Ordinance IX of 1972 was promulgated by the President of Pakistan by which Standing Order 10-C was added to the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968. The said Standing Order made it compulsory for every employer making profit in any year to pay profit bonus to his workmen. The said Standing Order also saved the right of the workmen to receive additional bonus payable in accordance with the terms of his employment or any usage, or a settlement or an award. On the promulgation of the above Ordinance, the workmen of the Fouji Sugar Mills claimed profit bonus under the Ordinance in addition to the bonus payable under the settlement. As the management rejected the claim of the workmen, the Fouji
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Sugar Mills Employees' Union approached the learned VIth Labour Court at Hyderabad, under section 34, 1. R. 0. To direct the management to pay profit bonus under Standing Order 10.6(1) to the workmen. The learned Labour Court rejected the claim of the workmen and dismissed the application under section 34, 1. R. 0., on the ground that the bonus paid to the workmen under the settlement, dated 9th February, 1972, was a profit bonus the workmen were not entitled to any further profit bonus under Standing Order 10-C(I). The Union challenged the decision of the learned Labour Court by way of a Constitutional Petition before the High Court. The learned Single Judge of the High Court, who heard the petition, considered that the matter involved interpretation of a settlement, which was the exclusive function of this Tribunal and accordingly, referred the matter to this Tribunal for the interpretation of the settlement, dated 9th February, 1972, with the following observations :- "Now the pertinent question in this case is that of interpretation of the settlement dated 9th February, 1972. The employers stand is that the bonus granted by the settlement was a bonus of the nature of profit bonus, which is payable under clause (1) of Standing Order 10-C, therefore, it would not be admissible as protection given by clause (4) thereof would not extend to it. On the other hand, the workmen's stand is that this is a bonus purely based on production and is not relatable to any profits. The learned counsel for the petitioners contends that even if the establishment does not make any profits in a given year. Still it would not be absolved of its liability to pay a bonus, in terms of the settlement. Whatever be the respective stand of the parties the fact remains that dispute is now mainly based on the interpretation of the settlement itself. The learned counsel for the respondent contends that the Labour Court had no jurisdiction to interpret the settlement in view of the provisions of S. 50 of the Industrial Relations Ordinance and that an objection to the competence of application under section 34, I. R. 0. Was raised at the beginning but was not entertained. Whatever be the position in this regard the provisions of section 50 of the I. R. 0. Are very clear which state that in case a difficulty or a doubt arises as to the interpretation of any provisions of an award or settlement it shall be referred to the tribunal constituted under the Ordinance whose decision shall be final and binding on the parties. There was no alternative left for the learned Presiding Officer of the Labour Court but to refer the matter to the tribunal or interpretation of the settlement regarding the grant of bonus. The provisions of section 50 are exclusive and, therefore, I would refer the matter to the tribunal for interpretation of the settlement dated 9th February, 1972. In case the learned Tribunal comes to the conclusion that the bonus granted under the settlement dated 9th February, 1972 was based purely on profits the workmen would not be entitled to bonus allowed under the settlement with effect from the date of coming into force of Ordinance IX of 1972. Otherwise they would be entitled to that bonus in addition to the one granted by Standing Order 10-C(1), which in any case is payable to them. 4. The Fouji Sugar Mills Employees' Union went up in appeal against the above decision of the learned Single Judge but the appeal was dismissed in limine by a Division Bench of the High Court, by its order passed on 12th August, 1976, with the following observations - "The reason that has prevailed with the learned Single Judge in disposing of the Constitution Petition with the direction given by him or not open to any just exception and this appeal has therefore no force and is accordingly dismissed in limine. 5. A copy of the decision of the Division Bench was obtained by the Fouji Sugar Mills Employees' Union on 8th April, 1980, and thereafter, on 20th April, 1980, a formal application was made by the Union under section 50. I. R. 0., for interpretation of the provision of the settlement, dated 9th February, 1972, relating to payment of bonus. It may be pointed out at this stage that despite the fact that the learned Single Judge of
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the High Court had specifically referred the matter for the interpretation of the settlement of 9th February, 1972, to this Tribunal no copy of the said order or of the order of the Division Bench was sent to this Tribunal and it came to know of the passing of these orders only when the application under section 50, I. R. 0., was made by the Fouji Sugar Mills Employees' Union. 6. Before dealing with the issue referred to the Tribunal by the High Court, namely whether the bonus payable under the settlement, dated 9th February, 1972, is a profit bonus envisaged under Standing Order 10-C(1) or whether this bonus falls under the ambit of clause (4) of Standing Order 10-C, it will be appropriate to deal with the several objections raised by Mr. Nizam Ahmad, the learned counsel for the Fouji Sugar Mills, regarding the maintainability of the present reference. The first objection of Mr. Nizam Ahmad in this behalf is that the present reference is not covered by the scope of section 50. The precise contention of Mr. Nizam Ahmad in this behalf was that there was no dispute or ambiguity between the parties with regard to the terms of the settlement, which are quite clear and unambiguous, and hence the reference was not maintainable. In support of his contention, the learned counsel relied upon the decision of their Lordships of the Supreme Court in the case of Oil & Gas Development Corporation, Karachi v. Punjab Labour Court (1). That was a case in which a settlement had been arrived at between the management and its workmen providing for a revised scale in a manner so as to enable the workmen to derive monetary benefits to the tune of approximately 10% of their existing emoluments. However, when the increments according to the revised scale fell due, the employer denied the employees the benefits of the aforesaid 10% increase and took refuge behind the fundamental rules. The bargaining agent of the workmen {{FOOT NOTE}} (1) 1975 SCMR 485 {{FOOT NOTE}} ' there upon took the matter to the Labour Court under section 34, I. R. 0. The Labour Court held that there was a breach of the agreement by the employer and that the fundamental rules did not apply. It was contended before their Lordships of the Supreme Court that this was a case of difficulty or doubt in respect of the interpretation of an award and, therefore, under section 50, I. R. 0., only a Labour Tribunal had jurisdiction in the matter. This contention was repelled by the Supreme Court on the ground that there was neither an award in the case nor was there any difficulty or doubt about its interpretation. In the instant case, there is admittedly a settlement, dated 9th February, 1972, between the parties, which provides for the payment of bonus. A dispute has arisen between the parties whether the bonus payable under the settlement is a profit bonus falling under clause (1) of Standing Order 10-C or it is a, different kind of bonus falling under clause (4) of Standing Order 10.C.I As such the reference squarely falls within the scope of section 50, I. R. 0. Moreover, the reference has been made by the High Court, which order was upheld by a Division Bench of the High Court. The said order not having been further challenged has attained finality and cannot be questioned before this Tribunal. 7. It was next contended by Mr. Nizam Ahmad that a reference under section 50, I. R. O., can only be made by the Government. According to him the words "shall be referred to the Tribunal" in section 50, I. R. 0., shall be construed as "shall be referred by Government to the Tribunal." The precise argument of Mr. Nizam Ahmad in this behalf was that the word 'refer' or 'referred' as used in the I. R. O. Means 'referred' by the Government and in support of his contention he sought reliance upon the provisions of subsection (3) of section 32, I. R. O., which provides reference of a dispute to the N. I. R. C. Or the Labour, Court whenever the Federal Government or Provincial Government prohibits a
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strike or lock-out. The contention of Mr. Nizam Ahmad has no substance. Reference by the appropriate Government has been provided under subsection (3) of section 32, I. R. 0., on the primary consideration that it is that Government which has prohibited the strike or lock- out. No such consideration arises in the case of a reference under section 50, I. R. 0. The Government in fact is not involved or concerned with a dispute as to the interpretation of a settlement between the management and its workmen, which is an internal matter of an establishment. If the intention of the Legislature had been that such a reference should, be made by the Government, it would have specifically so provided as in the case of references under subsection (3) of section 32, I. R. 0. 8. The last objection made by Mr. Nizam Ahmad in respect of the maintainability of the present reference was that it suffers from its laches. The learned counsel submitted that the settlement, the interpretation of the provisions whereof was sought was executed on 9th February, 1972. The petition in the High Court in respect of the settlement was filed some, where in 1974, and the decision by the learned Single Judge was given on 13th April, 1976. The High Court appeal against the decision of the learned Single Judge was filed on 14th May, 1976, while the decision by the Division Bench an appeal was given on 12th August, 1976. The learned counsel contended that the reference should have been made within a reasonable time of the orders passed by the learned Single Judge on 13th April, 1976, or at least of the orders by the Division Bench, dated 12th August, 1976, dismissing the High Court appeal. According to the learned counsel, there was no excuse in delaying the making of the reference to this Tribunal for almost full 4 years after the rejection of the High Court appeal by the Division Bench. He accordingly contended that the reference suffers from laches and should, therefore, be rejected on that account. The contention of the learned counsel overlooks the fact that the reference has not been made by the Fouji Sugar Mills Employee's Union, though they have undoubtedly submitted an application under section 50, I. R. 0., on 20th April, 1980. The reference has been made by the learned Single Judge of the High Court, whose decision was upheld by the Division Bench. This Tribunal is bound to comply with the directions of the High Court and to decide the reference. It is unfortunate that no copy of the decision of the learned Single Judge or of the Division Bench was forwarded to or received by this Tribunal until the making of the application by the Employees' Union on 20th April, 1980. No question thus of laches, therefore, arises in the instant case. Moreover, it was explained by Mr. Ali Amjad, the learned counsel for the workmen's Union that the delay in the making of the application by the file of the case was misplaced and it was available only on 12th March, 1980. Some support to ships contention is provided by the fact that the application for copies was made by the Workers' Union on 8th April, 1980. It may also be painted out that the grievant of the Worker's Union is against the refusal on the part of the management to grant them monetary benefits to which they came to be entitled. The claim thus is in respect of a continuing wrong or breach of settlement. In the case of 011 and Gas Development Corporation, the Supreme Court repelled the contention based on the ground of laches with the following observations :- "The petitioner contended before the High Court, and has repeated the contention before us that the application under section 34 of the Industrial Relations Ordinance suffered from laches and estoppel. This was rightly repelled by the High Court on the ground that the breach was continuing wrong and that it was not the case of any party that the initial fixation made by the petitioner suffered from any defect or illegality." 9. This brings me to a consideration of the main issue in the case, namely, whether the bonus payable under the settlement, dated 9th February, 1972, falls within the purview of clause (1) of Standing Order 10-C or of clause (4) of the said Standing Order. It was contended by -Mr. Ali Amjad, the learned counsel for the employee's Union, that the bonus payable under the settlement is
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based entirely on production, being payable at the rate of one bonus for every one lac bags of sugar produced up to a maximum of 4 bonuses. The learned counsel submitted that the said bonus does not refer to profits at all and was payable irrespective of the facts whether there are profits, no profits or even losses. According to the learned counsel, the production bonus payable under the settlement is a totally different concept or scheme from profit bonus as greater production need not result in profit or increased profits. He contended that production was not directly relatable to profits as there are other factor also which together with production regulate the quantum of profits. The learned counsel contended that bonus payable under clause (1) of Standing Order 10 C was on known and realized profits, while bonus payable on production is at best on the conception of expected rather than realized and known profits. In support of his contentions, the learned counsel relied upon the decision of the Indian Supreme Court in the case of Messrs Titaghar Paper Mills v. Their Workmen (1). On the other band, Mr. Nizam Ahmed, the learned counsel for the Fouji Mills contended that the bonus payable under the settlement was directly relatable as also proportionate to the profit earned by the Fouji Sugar Mills. His first argument in support of his contention was that as both the price of the sugarcane as also the price of sugar were fixed by the Government for the whole season, and he produced notification of the Government fixing such prices, the profits of the mills, including the quantum and rates of the profits, were directly relatable to and dependent upon the production of the mills. Mr. Nizam Ahmad also sought support for his contention that the bonus falling under clause (I) of Standing Order 10- C from the conduct of the parties, the demands made by workmen and the settlements arrived at between the parties previous and subsequent to the settlement, dated 9th February, 1972. 10. In order to appreciate the respective contentions of the 2 learned counsels, it would be appropriate to reproduce Standing Order 10.0 in the entirety. The said Standing Order reads as follows :- "10-C. Payment of Bonus.-(l) 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 bonus payable' shall- (a) if the amount of the profit is not less than the aggregate of one month's wages of the workmen employed, be not less than the amount of such aggregate, subject to the maximum of thirty per cent of such profit : Illustration No, 1.-1f 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 No, 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 it to 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 workmen entitled thereto under clause (I) 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 be deemed to affect the right of any workmen to receive any bonus other than that payable under clause (1) to which he may be entitled in accordance with {{FOOT NOTE}} (I) A 1 R 1959 SC 1059
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{{FOOT NOTE}} ' the terms of his employment or any usage or any settlement or an award of a Labour Court established under the Industrial Relations Ordinance, 1969 (XXIII of 1969). Explanation.-For the purpose of this section- (a) N. 1. 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, 1913 (VII of 1913) ; (c) "Wages" does not, for the purpose of calculating the bonus payable to a person under clause (I), include the bonus referred to in clause (vi) of section 2 of the Payment of Wages Act, 1936 (IV of 1936). 11. A bare perusal of the above Standing Order indicates that the essential ingredients of a profit bonus payable under clause (1) are : (1) that it is statutorily payable i. e., it is payable under law as against bonus payable under clause (4) to which a workman is entitled in accordance with the terms of his employment or any usage or any settlement or an awards (2) that the bonus under clause (1) is payable only when the employer makes profit during a particular year while bonus under clause (4) may be payable irrespective of profits being earned by the employer ; (3) that the bonus under clause (I) is an annual bonus, i. e., it is relatable to the year during which the employee has made a profit, while bonus under clause (4) may cover one or more years ; (4) that the maximum bonus payable under clause (1) is limited to the aggregate of one month's wages, while bonus under clause (4) contains no such limitation and may cover wages for more than one month ; and (5) that the total amount payable as bonus to workmen under clause (I) is further subject to the limit of 30% of the profit made by the employer in the year for which the bonus is payable, while the bonus payable under clause (4) is not subject to any such limit and in fact may be payable irrespective of the employer having made profit or even where he had incurred losses. 12. An examination of the bonus payable in the instant case under the settlement, dated 9th February, 1972, clearly indicates that it does not fulfil the above conditions of statutory bonus payable under clause (1) of Standing Order 10-C. Although the demand of the workers, as contained in their Charter of Demands, dated 2nd January, 1972, was that for the season 1971-72, a formula should be adopted for the payment of bonus, the settlement, dated 9th February, 1972, while laying down the formula of payment of one bonus for production of every one lac of bags of sugar up to a maximum of 4 bonus, clearly stipulates that the Union accepted this formula for the current season as well as more seasons of, 1972-73 and 1973-74. In other words, the bonus was payable under the aforesaid formula not only for the year 1971-72, but also for the subsequent years. The bonus payable under the settlement further was not subject to either of the 2 limitations prescribed in clause (1) of Standing Order 10-C, 1. e., the amount of bonus not to exceed the aggregates of one month's wages of workmen as also 30% of the profits earned by the employer. Most important, the bonus under the settlement is based' not on known or realized profits but on expected profits. Although ordinarily in an industry where there the prices of the raw material and the finished goods are controlled, the quantum of profits would depend upon the production, but there can be other factors which may reduce or even eliminate the profits together. For instance, if there is over production, there may not be also of the products resulting in the establishment having to keep unsold stocks on which interest and other charges may be payable. The possibility of breakdown in the machinery or damage to or destruction of the machinery and the stocks byfire, flood or other natural or human causes, which may seriously affect or eliminate profits altogether, cannot also be excluded. The production bonus thus, as contended by Mr. Ali Amjad, is an incentive bonus based on expected profits than known and realised profits. Production may be
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an important or even the most important factor in the earning of profits by an industry but it certainly is not the sole factor determining whether an establishment earns a profit or not. In any case a production bonus clearly is a wage incentive plan devised in the hope or expectation that profits will thereby accrue to the employer but it is not necessarily based on profits. In the Dictionary of Business and Economics by Christine Anther, wage incentive has been described as follows:-- "Incentive plans for production workers, individuals or groups, tend to be one of two types : (1) piece rate plans, which provide for wage payments based on the number of units produced ; (2) production bonus plans, with payments based oh unit production in excess of standard output in standard time (standards being set by time and motion studies or other industrial engineering techniques). Piece-rate plans ape the more common of the two. Among the many production bonus plans are the Beduax point system, in which an employee receives a premium of 75 per cent of the points in excess of 60 per hour, each point representing one minute of productive work at normal speed : the Emerson efficiency plan, whereby the employee receives a base rate for standard output puts an accelerating premium for any work in excess of two-thirds of standard output (the more output, the higher the .Premium) ; the Gantt premium plan, whereby an employee receives base pay for standard output and a standard piece rate puts a percentage premium on work in excess of standard outputs and variations on these plans known as the Barth plan. Halsey premium plan, Rowan premium plan, and Taylor differential piece rate. Still other incentive plans are sales-pay plans, with commissions or bonuses based on the dollar volume or number of items sold, and the measured day-rate plan, whereby employees are rated periodically on productivity, quality of output, reliability, etc., and are paid a premium according to their current rating." 13. I may also refer on the subject of production to certain passages from the book "Increasing Employees' '…
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