Bombay High Court
Navbharat Potteries Pvt. Ltd. vs State Of Maharashtra And Ors. on 25 June, 1986
Equivalent citations: (1994)IIILLJ1144BOM
JUDGMENT Pendse, J.
1. The petitioner is a private limited company incorporated under the Companies Act, and is engaged in manufacture and sale of ceramic crockeries. The registered office and factory of the petitioner is situate at Sewree and the petitioner had employed about 200 workmen. On August 27, 1970 the service conditions of the employees were adjudicated by an award passed by the Industrial Tribunal presided over by Shri R.D. Tulpulet. A year after the date of the award, the workmen joined the union of Bombay Mazdoor Sabha and from the year 1972 onwards resorted to unfair labour practices, like indiscipline, go slow, assaults, etc. The Sabha submitted demand for revision of pay scales, dearness allowance, etc., and the demand was referred for adjudication to the Industrial Tribunal. The Tribunal did not give relief as the financial position of the petitioner was extremely precarious and it was not possible for the petitioner to bear the additional burden. As the workers failed to secure any benefits under the award, the workers left the Sabha and joined Bombay General Kamgar Union. The petitioner thereupon entered into a settlement on Nov. 3, 1980 with the Union, whereby a consolidated ad hoc increase of Rs. 2/- in the daily total emoluments was given to the workers with retrospective effect from August 1, 1980. After signing the settlement, the workers left Bombay General Kamgar Sabha and joined Maharashtra General Karngar Union led by Dr. Datta Samant. Thereafter again the workmen indulged in indiscipline and go slow tactics and refused to give the requisite production. The conduct of the workers right from the year 1972 onwards led to serious losses and put the petitioner in extremely hopeless financial position. The petitioner was required to borrow heavy loans from the financial institutions and Canara Bank, to whom the petitioner owed Rs. 30 lakhs, suggested to the Government of Maharashtra to treat the petitioner as a sick unit. The accumulated losses as on December 31, 1979 were to the tune of Rs. 58 lakhs.
2. On Nov. 27, 1979 the petitioner applied to the State Government under Section 36 of the Bonus Act for granting exemption for payment of bonus for the year 1978. Another application dated July 25, 1980 was filed for the identical purpose for the year 1979. The petitioner set out in detail the behaviour of the workers all along and the losses suffered by the petitioner and its inability to pay even the minimum bonus. The applications for the years 1978 and 1979 were rejected by the State Government and the decision was communicated to the petitioner by letter dated Oct. 1, 1981, a copy of which is annexed at Exhibit 'Q'. The petitioner thereafter filed a review application before the Minister for Industries, Energy and Labour, but the decision to reject the exemption applications was upheld and the decision was communicated to the petitioner by letter, dated Feb. 10, 1982, copy of which is annexed as Exhibit 'T' to the petition.
In the meanwhile the Union had made demand for payment of 20% bonus and on failure of the conciliation proceedings, the State Government decided to refer the dispute for payment of bonus for the years 1978 and 1979 for adjudication to the Industrial Tribunal presided over by Shri Talathi. The reference order was made on Nov. 5, 1981. The petitioner, feeling aggrieved by refusal to grant exemption from payment of bonus for the years 1978 and 1979 and the action of making reference for adjudication of dispute to the Industrial Tribunal, filed the present petition under Article 226 of the Constitution of India in this Court on March 29, 1982.
The learned single Judge by order dated April 22, 1982 granted rule only in respect of the prayer for setting aside the order of the Government refusing to grant exemption. The learned Judge also granted interim relief in respect of the order passed by the Government refusing to grant exemption. The learned Judge did not entertain the petition in respect of the challenge to the order of reference, but gave directions to the Tribunal to dispose of the reference by end of October 1982.
3. Shri Ramaswami, learned counsel appearing on behalf of the petitioner, challenged the action of the State Government in declining to grant exemption under Section 36 of the Bonus Act by submitting that the reasons given for rejecting the application clearly demonstrate non-application of mind. The Learned counsel also urged that the State Government has ignored the relevant factors and proceeded on totally unsustainable grounds. The learned counsel urged that the State Government completely ignored that exemption was granted to the petitioner for the years 1976 and 1977 and it was not in dispute that the financial condition of the petitioner has gone from bad to worse subsequent to the year 1977, There is considerable merit in the submission of Shri Ramaswami. The order communicated to the petitioner recites that in the opinion of the State Government it will not be in the public interest to grant exemption from payment of bonus and three reasons are set out in reaching that conclusion-
(i) The right of bonus should not be taken away unless there are overwhelming considerations, and the Supreme Court has held that granting exemption to the employer on the basis that loss has been sustained would not be be in the public interest.
(ii) The quantum of wages and liability arising out of the settlement cannot set-off the right to receive the benefit of bonus; and
(iii) The petitioner did not conclusively prove that the loses were only because of a direct action of all the workers.
Each of these reasons furnished for declining to grant exemption is totally erroneous and unsustainable. It was wrong on the part of the State Government t,6 assume that the Supreme Court has held that in spite of a loss sustained by the employer exemption should not be granted because that would be against the public interest. The reference was made by the State Government to the decision of the Supreme Court reported in : (1979) 1 LLJ 162, Jalan Trading Co. (P). Ltd. v. DM. Aney and Anr. The short order passed by the Supreme Court nowhere propounds such an observation, but on the other hand the Supreme Court merely observed that the provisions of the Act requiring the employer to pay minimum bonus even in the years where there has been a loss is reasonable as contemplated under Article 19(6) of the Constitution. The Supreme Court observed that what is reasonable depends on the variety of circumstances and from these observations it is clear that the Supreme Court did not wish to lay down that the State Government can refuse exemption even if the employer establishes that the financial condition of the concern was hopeless for over several years and the losses were suferred continuously and the entire capital and the assets were wiped out.
The second reason furnished by the State Government is equally erroneous. The petitioner has pointed out in the application for exemption that in spite of the stringent financial condition and losses being sustained over several years, by way of settlement the petitioner agreed to give a consolidated ad hoc increase of Rs. 2/- to each of the workmen, and to meet this additional liability the petitioner leased out a part of the factory premises. The petitioner pointed out to the State Government that the conduct of the petitioner in reaching the settlement should also be borne in mind while considering the application for exemption. The State Government failed to understand the importance of this aspect and merely observed that the quantum of wages and liability arising out of the settlement cannot set-off the right to receive bonus. The factor of payment of additional amount was mentioned not with a view to set-off right of bonus, but only to fortify the claim that even though the financial situation was hopeless the petitioner was not adopting attitude of confrontation.
The third reason furnished by the State Government is difficult to comprehend. The Government suggested that it was not proved conclusively that losses were only because of direct action of all the workmen. The record produced by the petitioner before the State Government unmistakably indicates that the workers were adopting go-slow tactics and were indulging in indiscipline right from the year 1972 onwards. The workmen changed their union on more than one occasion and whenever a particular union was unable to secure the demands of the workmen. The Government did not choose to reject any of this material but speciously observed that the workmen were not responsible for the losses. The State Government overlooked that the workers had gone on a strike which was subsequently declared illegal by the concerned authorities. The Government also overlooked that from the year 1980 onwards there was no production whatsoever. It is not in dispute that the concern is completely closed from the year 1983. In my judgment, each and every reason furnished by the State Government is erroneous.
4. The grievance of Shri Ramaswami that the State Government failed to take into consideration the relevant circumstances is also correct. The material produced on record clearly indicates that the Company wiped out not on its reserved capital by the end of 1978, but also its assets. The cumulative losses suffered by the petitioner till the year 1978 were to the tune of Rs. 58 lakhs and out of that the liability of the Canara Bank was in the vicinity of Rs. 42 lakhs. The Bank was insisting that the petitioner should be declared as a sick unit and the Government was willing to do so provided the Bank prepared a scheme for reviving the sick unit. There is no challenge on behalf of the workmen to the claim of the petitioner that the losses were suffered right from the year 1972 onwards save and except a profit of Rs. 10,000/- in one year. The financial condition of the petitioner could not have been ignored by the State Government while exercising powers under Section 36 of the Bonus Act. The second crucial factor which was overlooked by the State Government was the inability of the petitioner to secure steam coal which was necessarily required for running the unit. The inability or the petitioner to secure coal was because of shortage of coal available with the Central Government. The losses were suffered by the petitioner not only because of short supply of quality coal but in addition thereto the irresponsible, unco-operative attitude adopted by the workmen. It was necessary for the State Government to bear this aspect in mind before rejecting the applications of exemption by a cursory order. The State Government also overlooked the third important aspect and that is that the exemption was granted in respect of payment of bonus for the years 1976 and 1977. Admittedly the financial condition of the petitioner went from bad to worse subsequent to year 1976-77 and it is difficult to appreciate how the State Government could overlook this important aspect and decline the exemption. The order granting exemption for the years 1976 and 1977 indicates that the State Government was impressed by the fact that the petitioner was financially so weak that it was impossible to pay even the minimum bonus. In case the Government had borne this fact in mind, then the exemption for the years 1978 and 1979 would not have been refused. The review application was rejected without assigning any reasons. In my judgment, the action of the State Government in refusing exemption for the relevant years is entirely unwarranted and contrary to the provisions of law.
5. Shri Naik, learned counsel appearing on behalf of respondent No. 2 Union, submitted that the Court should not exercise powers under Article 226 of the Constitution of India and grant relief to the petitioner in respect of the claim for exemption in view of the subsequent developments. The learned counsel urged that at the stage of admission this Court declined to entertain the grievance of the petitioner in respect of the order referring the dispute for adjudication to the Industrial Tribunal. The dispute between the parties was in respect of the claim made by the Union for 20% bonus for the years 1978 and 1979. Shri Naik submitted that this Court did not entertain the challenge against the order of reference, but on the other hand gave directions to the Tribunal to dispose of the reference expeditiously and the Tribunal in fact declared the award on July 18, 1983 and directed that the petitioner should pay minimum bonus to the workmen for the relevant years. Shri Naik urged that in view of the award passed by the Industrial Tribunal the reliefs sought in the petition no longer survive. It is not possible to accept the submission of the learned counsel.
In the first instance the award given by the Industrial Tribunal would have no effect if the petitioner is given exemption from payment of bonus for the years 1976 and 1977. The reference was sought by the Union for the demand of payment of bonus of 20%, but before the Industrial Court the Union did not bother to press the claim or to lead evidence in support thereof, with the result that the Tribunal declared the award for payment of minimum bonus. The passing or the award was always subject to the decision of this petition, and the learned single Judge, who gave directions for expeditious disposal of the reference, desired that during the pendency of this petition the claim of the workmen should be adjudicated by the Tribunal, so as not to postpone adjudication till after disposal of petition. The direction of the learned Judge to proceed with the reference was obviously subject to the result of the petition. In my judgment, the mere fact that award has been passed would not make the present petition infructuous.
6. Shri Naik then submitted that the decision taken by the Government is based on subjective satisfaction and this Court should not disturb such decision in exercise of writ jurisdiction. It is not possible to accept the submission of the learned counsel. The State Government is required to take an objective decision while exercising powers under Section 36 of the Act and it is futile to claim that the decision could be taken on irrelevant or extraneous considerations. As pointed out hereinabove the decision of the Government suffers from serious infirmity and cannot be sustained and certainly not for the reasons furnished by the Government. Shri Naik was unable to point out any other valid reason for sustaining the order.
7. Shri Naik then submitted that even if the decision taken by the Government is found to be erroneous and unsustainable, still this Court should not in exercise of powers under Article 226 of the Constitution grant exemption to the petitioner but should ' remit the matter back to the State Government for reconsideration. I am not inclined to adopt the course suggested by the learned counsel for more than one reason- In the first instance several years have elapsed after the commencement of the proceedings seeking exemption and it would not be appropriate to keep the proceedings pending for some more years. Secondly, the facts brought on record are not in dispute and in my judgment on these sets of facts no rational man can arrive at a conclusion that the petitioner is not entitled to exemption. A Division Bench of this Court in Appeal No. 214 of 1977 from Miscellaneous Petition No. 1560 of 1977 has laid down the test to be applied for granting exemption by Judgment dated Dec. 2, 1977. Following those tests, it is clear that the petitioner is entitled to exemption on the facts and circumstances of the case. In my judgment no useful purpose would be served by remitting the matter back to the State Government for a fresh consideration.
8. Accordingly, petition succeeds and the orders passed by the Government on October 1, 1981 and Feb. 15, 1982, copies of which are annexed as Exhibits 'Q and 'T' to the petition are set aside and the applications filed by the petitioner for exemption from payment of bonus for the years 1978 and 1979 are granted. In view of the grant of this exemption, the award passed by the Industrial Tribunal in pursuance of the reference made on Nov. 5, 1981 shall not be executed. In the circumstances of the case, there will be no order as to costs.