SHELAT, J. - (1.) THIS appeal, by special leave, is by the employer company against the award dated November 18, 1965 of the Special Industrial Tribunal, Bangalore, by which the Tribunal awarded bonus at the rate of 6 months basic wages for the year 1962-63 to the staff members of the company. There were in the company's employment at the relevant time staff members, artisans and daily rated labourers, but as the reference to the Tribunal was confined only to the question of bonus payable to the staff members, we are not concerned in this appeal with the artisans or the labourers.
(2.) THE appellant-company has been paying bonus to the staff members for the last several year. The practice followed by the company was first to fix the amount of bonus which it was prepared to pay and then to negotiate with the employees as to differences, if any, between them. Bonus thus was so far not determined on the basis of the Full Bench Formula as approved by this Court in Associated Cement Companies v. Its Workmen (1959) S.C.R. 925. For the year 1960-61 the company paid bonus to staff members equal to 8 1/2 months basic wages. For 1961-62 the bonus paid was at the rate of 5 1/2 months basic wages. For the year in question, i.e., 1962 63, the company finalised its accounts on October 31, 1963. The accounts showed a net profit of Rs. 18.19 lacs. In its P & L account the company, showed Rs. 36.39 lacs as expenditure under the heading "salary, wages and bonus". This amount included the sum Rs. 1, 15, 000 for bonus. The union's case was that the company had agreed to pay bonus to the staff members at the rate of 7 months basic pay. In the alternative, it relied on three facts, viz., (1) the offer by the company to pay bonus at the rate of 6 months basic pay, (2) the fact of the company having provided Rs. 1, 15, 000 as bonus in the P & L account, and (3) the fact of the company having paid to one staff member and three artisans at the rate of 5 1/2 months basic pay. From these facts the union pleaded that the company had admitted its liability to pay bonus at the rate of 6 months basic pay and that therefore the only question for adjudication by the Tribunal was with regard to the excess claimed by the staff members. The union claimed that considering the profits of the year the company was bound to pay bonus at the rate of 8 months basic pay and because of the past practice it was not entitled to contend that bonus should be computed according to the law applicable to the year in question. The appellant company in its reply denied to have agreed to pay bonus at the rate of 7 months basic pay. The company conceded that bonus had been paid during earlier years at rates negotiated between and agreed to by the parties and, therefore, no question of its being calculated according to law arose. For the year in question, however, the parties could not settle the question as to the quantum of bonus with the result that the rate at which the bonus should be paid had to be decided according to law. The company offered the maximum, i.e., at the rate of 20% of the total salary and dearness allowance, as it believed that Payment of Bonus Ordinance or the Payment of Bonus Act, 1965 applied to this case. But S.33 of the Payment of Bonus Act having been declared invalid by this Court in Jalan Trading Co. (Private) Ltd. v. Mill Mazdoor Union (1967) S.C.R. 15, neither the Ordinance nor the Act could be applied, and, therefore, if the parties were not able to settle the question, it had to be decided on the basis of the Full Bench Formula. The company conceded that during negotiations between the parties an offer was made on its behalf to pay bonus equivalent to 6 months basic pay. The negotiations, however, failed and since the union went for conciliation proceedings the offer lapsed. Any offer, therefore, made by the Managing Director during the said negotiations, which was not accepted by the union, cannot be said to constitute an agreement. Regarding Rs. 1, 15, 000, included under the heading "Salary, Wages and Bonus", the company's case was that the entry was validly made as that amount had to be provided for in the P & L account as also in the balance sheet in order to arrive at the net profits of the year. Such an entry and the fact that the company's shareholders had passed the audited accounts would not mean that the amount was treated by the company as bonus actually due by it nor could it mean an agreement or an admission binding on the company. The company pleaded that it was prepared to have the bonus quantified in accordance with law, in this case, according to the principles laid down in the Full Bench Formula.
(3.) THE evidence of the Managing Director was that there were discussions between the union and the company in December 1963. The union demanded bonus at the rate of 9 1/5 months basic pay but came down to 7 months basic pay. The company, on the other hand, offered first bonus at the rate of 5 1/2 months basic pay, but went upto 6 months basic pay. The union did not agree to the offer with the result that negotiations between the parties broke down. His evidence further was that the company had given to the Managing Director the mandate to offer bonus upto 6 months basic pay in full settlement of the dispute. But that also was not acceptable to the union. Three artisans and one staff member accepted bonus at the rate of 5 1/2 months' basic pay and since they accepted that amount unconditionally the company paid them at that rate. According to the Managing Director the offer to pay bonus at the rate of 5 1/2 months' basic pay was kept open but as the union did not accept it and approached the conciliation officer, the offer lapsed and was not longer open.;