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BEFORE THE HON’BLE INDUSTRIAL TRIBUBAL

RANCHI
IN THE MATTER OF:

WORKER’S UNION ..................................................... PETITIONER

VS
HMT PUBLIC COMPANY ......................................... RESPONDENT

PETITION NOS. /2017

ON THE SUBMISSION TO THE HON’BLE INDUSTRIALTRIBUNAL

PETITION UNDER SECTION 7(4) OF THE INDUSTRIALDISPUTES
ACT,1947

WRITTEN SUBMISSION ON BEHALF OF THE PETITIONER

COUNSEL APPEARING ON BEHALF OF THE PETITIONER
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TABLE OF CONTENTS
S.N CONTENTS PAGE NO.
O
1
3
LIST OF ABBREVATIONS

2
INDEX OF AUTHORITIES 4

3
CASE LAWS 6
4
STATEMENT OF JUSRISDICTION 7

5
STATEMENTOF FACTS 8

6
ISSUES INVOLVED 10

7
SUMMARY OF ARGUMENTS 11

8 12
ARGUMENTS ADVANCED

9 19
PRAYER AND CONCLUSION

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LIST OF ABBREVIATIONS

S.NO ABBREVIATIONS
.
1 & And
2 AC Appeal Cases
3 AIR All India Reporter
4 A.P Andhra Pradesh
5 All ER All England reporter
6 Anr Another
7 Art Article
8 AWC Allahabad weekly cases
9 CB Constitutional bench
10 Cr.P.C Criminal procedure code
11 Cal Calcutta
12 CB Constitutional bench
13 Ch Chapter
14 Civ Civil
15 Cl Clause
16 Co. Company
17 Comr Commissioner
18 Corpn Corporation
19 Edn. Edition
20 GLR Gujarat law reporter
21 HP Himachal Pradesh
22 http Hyper text transfer protocol
23 ILR Indian law reports
24 Ltd. Limited
25 No. Number
26 ILR Indian law reports
27 SCC Supreme court cases

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28 SCR Supreme court reporter

29 Vol. volumne
INDEX OF AUTHORITIES

STATUTES

THE INDUSTRIAL DISPUTES ACT 1947

PAYMENT OF BONUS ACT 1965
CONSTITUTION OF INDIAN 1950

BOOKS, ARTICLES & JOURNALS

Central Law Publications,(2005)

Kishor Prasad Advocate, Problems and solutions on Industrial
dispute,Universal law publications, (2011)
Ratanlal Dhirajlal, dispute resolution in a company, 3rd edition (2002)
R.K. Kelkar, Payment of bonus act , Eastern Book Company (2014)
JUSTICE B L HANSARIA'S, Payment of bonus act 1965 (3 ed. 2015)
M.P. JAIN, INDIANCONSTITUTIONAL LAW 1002 (2003)
NS BINDRA'S Payment of bonus act 1965 (1st Ed. 2011)
Durga Das Basu, Commentary on the Constitution of India (8th ed.
2007).
H.M. Seervai, Constitutional law of India (4th ed. 2008).
Dr. L.M. Singhvi. THE INDUSTRIAL DISPUTES ACT (1st ed. 2007)
Dr. L.M. Singvi, Jagadish Swarup Constitution of India (3d ed. 2013)
Arvind P. Datar, Commentary on the Constitution of India (2d ed. 2007)
M.P. Singh, THE INDUSTRIAL DISPUTES ACT (11th ed. 2009).
• M. Hidyatullah, Constitutional Law of India (1st ed. 1984).

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• M.V. Pylee, Constitutions of the World (4th ed. 2012).

WEBSITES

Manupatra Online Resources, http://www.manupatra.com.

Lexis Nexis Academica, http://www.lexisnexis.com/academica.
Lexis Nexis Legal, http://www.lexisnexis.com/in/legal.
SCC Online, http://www.scconline.co.in.
Oxford Dictionary, http://www.oxforddictionaries.com.
https://www.lawctopus.com
https://indiankanoon.org

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CASE LAWS

S.NO CASE CITATION

.
1 Associated Cement Companies v. 1960 AIR 777, 1960
TheirWorkmen SCR (3) 157
2 Jalan Trading Co v. Mills Mazdoor Sabha 1967 AIR 691, 1967
SCR (1) 15
3 Sanghvi Jeevraj Ghewar Chand and 1969 AIR 530, 1969
Ors. v.Secretary, Madras Chillies, SCR (1) 366
Grains and Kirana Merchants Workers
Union and Anr1
4 Hindustan Antibiotics v. Workmen 1967 AIR 948, 1967
SCR (1) 652
5 Express News Paper Pvt. Ltd. v. 1963 AIR 1141, 1963
TheirWorkmen, 1962 SCR Supl. (3) 405

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STATEMENT OF JURISDICTION

THE PETITIONER HUMBLY SUBMITS THIS MEMORANDUM FOR THE PETITION

FILED BEFORE THIS HONORABLE TRIBUNAL.THE PETITION INVOKES SECTION 7
(4) OF THE INDUSTRIAL DISPUTE ACT, 1947.

Section 7 of the Industrial Dispute Act 1947

7. Labour Courts.-
(1) The appropriate Government may, by notification in the Official Gazette,
constitute one or more Labour Courts for the adjudication of industrial disputes
relating to any matter specified in the Second Schedule and for performing such
other functions as may be assignedto them under this Act.
(2) A Labour Court shall consist of one person only to be appointed by the
appropriate Government.
(3) A person shall not be qualified for appointment as the presiding officer of a
Labour Court, unless--
(a) he is, or has been, a Judge of a High Court; or
(b) he has, for a period of not less than three years, been a District Judge or an
Additional District Judge; or 3
(d) he has held any judicial office in India for not less than seven years; or
(e) he has been the presiding officer of a Labour Court constituted under any
Provincial Act or State Act for not less than five years.

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STATEMENT OF FACTS

The HMT is a public Company having its registered office in the district of Ranchi. It
maintains some branch offices at Calcutta and Patna. It carried on the business
primarily of manufacturing and selling iron pipes and poles and has been employing a
large number of workmen, their number being 1000 on the relevant date. According to
balance sheet of the company, which have not been questioned it is a prosperous
company and between the years 2007 and 2012 the appellant paid its employees
bonus equivalent to four months' wages every year except in 2010-
11. For the subsequent three years bonus was paid at the rate of four per cent under
the Payment of Bonus Act, 1965 (Act XXI of 1965). The workmen were not satisfied
with the payment at the rate of four per cent and raised a dispute. On August 22, 2013,
they made a demand for bonus at the rate of 20 per cent of their annual salary or
wages for the accounting year 2014-15.

II

Certain correspondence started between the Assistant Labour Commissioner, the

Management and the General Secretary of the Union (Dhurba Tubes Mazdoor
Sangh). On September 21,2015, the Manager (Administration) notified that bonus at
the rate of 4 per cent for the year 2014-15 had been sanctioned by the Management.
The General Secretary of the Union asked the Manager to review the above notice and
to send a copy of the balance sheet for the accounting year in question. On
September 25, 2015, the District Labour Officer informed the Manager that he had
fixed October 2, 2015, (11 A. M.) for discussion in the matter of the payment of bonus.

III

The Manager sent a copy of the balance sheet to the General Secretary of the Union
on October 1, 2015. On that day the General Secretary asked the Assistant Labour
Commissioner to examine the profit and loss account for the year 2014-15 and to
apply the requisite formula under the Payment of Bonus Act. On October 1, 2015
about 150 workmen assembled after 2 P. M. at the gates of the Administrative
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Building in which about 40-47 members of the staff were present. They were not
allowed to leave the Building till 5 A. M. next day.

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IV

Meanwhile the Officer-in-charge Ranchi Police Station and the Assistant Labour
Commissioner went to the place where all this was happening. The factory remained
closed on October 2, 2015 on account of Gandhi Jayanti. On the morning of October
3, 2015 the Management issued a notice declaring a closure of the factory. It is
common ground that up till now the factory has remained closed. The Management
offered to pay wages for one month in lieu of notice and reduced compensation
under the proviso to sub-section (1) of Section 25-FFF of the Industrial Disputes Act,
1947. It has not been disputed that out of 1000 workers, 113 workers accepted
compensation under the aforesaid provision. The remaining workmen, however,
neither agreed to nor accepted any compensation. The reference under the Act was
made on October 29, 2015 by the Government of Orissa primarily for adjudicating
whether the appellant had declared a lock out by means of the notice dated October 3,
2015 or whether it was a closure.

The notice which was issued by the Management on the morning of October 3, 2015
is as follows: "The Management hereby notified that as a direct consequence of the
continued and sustained illegal activities of the workmen and their pre concerted and
pre-meditated acts since 1st October 2015 by illegally keeping confined and forcibly
resisting the exit of the staff and some of the officers of the Company in the
Administrative Office building. from about 2 P. M. ofthe 1st October 2015 till they were
forcibly rescued by the Police authorities at about 5 A. M. on the morning of 2nd
October 2015 and thereafter continuing with their illegal trespass into the premises of
the Company in the aforesaid Administrative Office, and refusal to allow entry ofany
of the staff and officers of the Company into the said building; and the consequent
refusal by the officers and supervisory staff of the Company to carry on their normal
work and discharge their functions being reasonably apprehensive of their safety, it
has become impossible to continue to run the factory and its subsidiary Sections and
Departments any further. The Company hereby notifies that there will be a complete
closure of the Factory on and with effect from 6 A. M. of the 3rd October 2015."

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ISSUES INVOLVED

1. Whether the payment of bonus at the rate of 4% is legal under the payment of
bonus act1965?
2. Whether the act of the company comes under the purview of closure?

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SUMMARY OF ARGUMENTS

1. Whether payment of bonus at the rate of 4% is legal under the payment of

bonusact 1965

According to this act every employer is bound to pay to every employee in respect of
accountingyear, a minimum bonus which is to be 8.33 per cent of the salary or wage
earned by the employee during the accounting year or one hundred rupees,
whichever is higher, whether or notthe employer has any allocable surplus in the
accounting year.

2. Whether the act of the company comes under the purview of closure?

According to Section 2(l) of the Industrial Dispute Act 1947, “lockout means the
temporary closing of a place of employment, of the suspension of work, or the refusal
by an employer to continue to employ any number of persons employed by him.
Lock out indicates the temporary closure of the place of business or place of
employment and nota closure of the Business itself. Lockout is a weapon of coercion
in the hands of employer. A Lockout is caused by the existence or apprehension of an
Industrial Dispute.
According to Section 2 (cc) of the Industrial Dispute Act, 1947 Closure means the
permanent closing down of a place of employment or part thereof. The closure of a
business indicates the final and irrevocable termination of the business itself. Closure
is generally for trade reason. A closure need not to be in consequence of an Industrial
dispute.

In closure there is severance of employment relationship whereas in lockout there is

no severance but only suspension of such relationship.

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ARGUMENTS ADVANCED

1. Whether payment of bonus at the rate of 4% is legal under the payment of

bonusact 1965

Bonus is a reward that is paid to an employee for his good work towards the
organisation 2. The basic objective to give bonus is to share the profit earned by the
organisation amongst the employees and staff members. In India there is a principal
law relating to this procedure of payment of bonus to the employee and that principal
law is named as Payment of Bonus Act, 1965. The object of the Act, as its preamble
discloses, is to provide for the payment of bonus to persons employed in certain
establishments. The expression bonus is not defined in the Act nor that expression is
found defined in any other enactment.

In Corpus Juris Secundum, Volume II under the caption, "As compensation for
services", the following passage occurs:

The word 'bonus' is commonly used to denote an increase in salary or wages in

contracts of employment. The offer of a bonus is the means frequently adopted to
secure continuous service from an employee, to enhance his efficiency and to
augment his loyalty to his employer and the employee's acceptance of the offer by
performing the things called for by the offer binds the employer to pay the bonus so
called.

The Textile Labour Inquiry Committee defined 'bonus' as follows :

The term 'bonus' is applied to a cash payment made in addition to wages. It generally
represents the cash incentive given conditionally on certain standards of attendance
and efficiency being attained.

So far as the judicial dicta is concerned, we find the Supreme Court, speaking through
Gajendragadkar, J. in the case of Associated Cement Companies v. Their
Workmen3observingthus:

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3

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...the formula for awarding bonus to workmen is based on two considerations: first
that labor is entitled to claim a share in the trading profits of the industry because it has
partially contributed to the same; and second that labor is entitled to claim that the gap
between his actual wage and the living wage should within reasonable limits be filled
up.

Therefore in dealing with the claim for bonus made by workmen two fold basis of the
formula must be kept in mind.

It was also observed Shah, J., in delivering judgment of the Supreme Court in
the caseof Jalan Trading Co v. Mills Mazdoor Sabha4 ,"being to maintain peace
and harmony between labour and capital by allowing the employees to share the
prosperity of the establishment reflected by the profits earned by the contributions
made by capital, management and labour, Parliament has provided that bonus in a
given year shall not exceed 1/5th and shall not be less than 1/25th of the total
earning of each individual employee, and has directed that the excess share shall
be carried forward to the next year, and that the amount paid by way of minimum
bonus not absorbed by the available profits shall be carriedto the next year and be
set off against the profits of the succeeding years. This scheme of prescribing
maximum and minimum rates of bonus together with the scheme of "set off" and
"set on" not only secures the right of labour to share in the prosperity of the
establishmentbut also ensures a reasonable degree of uniformity."

After drawing court’s attention towards the concept of bonus. The present case
calls on to focus on the bonus paid to the workers of the HMT Company.
According to the balance sheetof the company, it is a prosperous company having
primary business of manufacturing and selling iron pipes and has been employing
1000 workmen at the relevant date. The company paid it’s workmen bonus which
was equivalent to four month wages in year 2007-2012 except 2010-2011. The
company reduced the bonus of the workmen for next three accounting years to
4% of their annual salary. The bonus decided was disputed by the workmen for
20% of their annual salary.

The provision under Payment of Bonus act 1965 says,

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4

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8. Eligibility for bonus.—Every employee shall be entitled to be paid by his employer

in an accounting year, bonus, in accordance with the provisions of this Act, provided
he has worked inthe establishment for not less than thirty working days in that year.

1 [10. Payment of minimum bonus.—Subject to the other provisions of this Act, every
employer shall be bound to pay to every employee in respect of the accounting year
commencing on any day in the year 1979 and in respect of every subsequent
accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage
earned by the employee during the accounting year or one hundred rupees,
whichever is higher, whether or not the employer has any allocable surplus in the
accounting year: Provided that where an employee has not completed fifteen years of
age at the beginning of the accounting year, the provisions of this section shall have
effecting relation to such employee as if for the words “one hundred rupees”, the
words “sixty rupees” were substituted.] 2

[11. Payment of maximum bonus.—(1) Where in respect of any accounting year

referred to in section 10, the allocable surplus exceeds the amount of minimum bonus
payable to the employees under that section, the employer shall, in lieu of such
minimum bonus, be bound to pay to every employee in respect of that accounting;
year bonus which shall be an amount in proportion to the salary or wage earned by the
employee during the accounting year subject to a maximum of twenty per cent, of
such salary or wage. (2) In computing the allocable surplus under this section, the
amount set on or the amount set off under the provisions of section 15 shall be
taken into account in accordance with the provisions of that section.]

It has been clearly mentioned in section 10 of the mentioned act regarding the
minimum bonus to be paid must be 8.33 per cent of the annual salary. Whereas the
employer of the HMT company is being unfair to the workmen of the company and
confutes the principle of equity and fairness. As observed by Shelat, J.,while
rendering the decision of the Supreme Court in Sanghvi Jeevraj Ghewar Chand
and Ors. v. Secretary, Madras Chillies, Grains and Kirana Merchants Workers
Union and Anr5

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5

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The right to the payment of bonus and the obligation to pay it arose on principles of
equity and fairness in settling such disputes under the machinery provided by
the Industrial Actsand not as a statutory right and liability as provided for the first
time by the present Act. In providing such statutory liability, Parliament has laid
down a statutory formula on which bonus would be calculated irrespective of
whether the establishment in question has during a particular accounting year
made profit or not.

The Text can never be understood without the context and the object of the Act can
better be understood in this case in its constitutional context. The principles laid
down in Part IV of the Constitution, dealing with the subject-matter of "directive
principles of State policy" are fundamental in the governance of the country and it
is the duty of the Parliament to apply those principles in making laws (Article 37).
The Parliament shall have to strive to usher in a welfare State by securing and
protecting as effectively as it may, a social order in which social justice, among
other things, shall have to inform all the institutions of national life (Article 38). In.
particular, it has to direct its policy towards securing equal pay for equal work for
both men and women (Article 39). It has to make provision for securing just and
humane conditions of work (Article 42). Article 43 enjoins on the State including
Parliament to endeavor to secure, by suitable legislation or economic organization

or in any other way, to all workers, agricultural, industrial or otherwise, work, a

living wage,conditions of work ensuring a decent standard of life.

It is only with a view to securing the implementation of the principles embodied in

Part IV of the Constitution, the Parliament made laws contained in the Act in
question. It is a piece ofwelfare legislation. Welfare of labour is one of the matters
with respect to which the Parliament has been given power to make laws under
Articles 245 and 246 read with the relevant entries, particularly, Entry 24 in the
concurrent list in the 7th Schedule appended to the Constitution. The law contained
in the present Act is one such.

The Act, in question, is entitled the Payment of Bonus Act, 1965; it is enacted, as
we have already noticed, with a view to providing for the payment of bonus to
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persons employed in

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certain establishments. The Act is of all India application, excepting it be with

respect to the States of Jammu and Kashmir (Section 1(2)). It applies to every
establishment in which 20 or more persons arc employed on any day during an
accounting year (Section 1(3)). An establishment to which this Act applies is to be
continued to be governed by this Act, notwithstanding the fact that the number of
persons employed therein falls below twenty (Section 1(5)). The expression
"employee" is intended to comprehend within its ambit, industrial labour (Section
2(13)). Every employee is entitled to be pail by his employer in an accounting year
bonus, in accordance with the provisions of the Act (Section 8). Payment byevery
employer to every employee of minimum bonus at four per cent of the salary or
wage earned by the employee during the accounting year or forty rupees,
whichever is higher, whether there are profits in the accounting year or not, is
assured (Section 10).

The argument is concluded through above obsevations that the bonus given to
the workmenat the rate of 4% was illegal and also against the statutory provision
i.e Payment of BonusAct 1965 and Constitution of India. As it was being observed
by the Justice Subba Rao while delivering judgment of the supreme court in the
case of Hindustan Antibiotics v. Workmen6, that,

The object of the industrial law is twofold, namely, (i) to improve the service
conditions of industrial labour so as to provide for them the ordinary amenities of
life, and (ii) by that process, to bring about industrial peace which would in its turn
accelerate productive activity of the country resulting in its prosperity. The
prosperity of the country, in its turn, helps to improve the conditions of labour. By
this process, it is hoped that the standard of life of the labour can be progressively
raised from the stage of minimum wage, passing through need- found wage, fair
wage, to living wage.

2. Whether the act of the company comes under the purview of closure?

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6

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No, the company as mention under section 25 FF A an employer who intends to close
down an undertaking shall serve, at least sixty days before the date on which the
intended closure is to become e4ffective, a notice, in the prescribed manner, on the
appropriate Government stating clearly the reasons for they intended closure of the
undertaking.

The Act defines “Closure” as the permanent closing down of a place of

employment or partthereof. Here, the employer is constrained to close the
establishment permanently.

“Lock out” means the -

i. Temporary closing of a place of employment, or

ii. The suspension of work, or
iii. The refusal by an employer to continue to employ any number of persons
employed byhim

A closure and a lockout may be distinguish in following important respect:

Firstly, in closure there is severance of employment relationship while in lockout there

is no severance but there is only suspension .

Secondly, lock out is caused by the existence or apprehension of an industrial dispute.

A closure need not to be in consequence of an industrial dispute.

Thirdly, a lockout is intended for the purpose of compelling the employees directly
affected by the lockout, suspension or refusal or any other employees of his or aiding
any other employer in compelling person employed by him , to accept any terms or
condition of affecting employment .In other words, a lockout is a tactic in bargaining.
While a closure is shutting employment and thereby ending bargaining. It’s irrelevant
what the intension in closing is.

The Supreme Court has explained this distinction in the following words : “The
theoretical distinction between a closure and a lockout is well settled . In the case of a
closure the employer does not merely close down the place of business, but he closes
the business itself and so the closure indicates the final and irrevocable termination of
the business itself. Though the destination between the two concepts is the clear in
theory, in actual practice it is not always easy to decide whether the act of closure
really amounts to a closure properly so called, or whether itis a disguise for a lockout.
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In dealing with this question industrial adjudication has to take into

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account several relevant facts and these facts may be proved before the industrial
tribunal either by oral or by documentary evidence, and by evidence of conduct and
circumstances. [ Express News Paper Pvt. Ltd. v. Their Workmen, 1962]7

The Procedure mentioned under section 25 O OF industrial dispute act that is the
procedure for closing down of an undertaking is not followed by the HMT public
company so it is considered as the illegal closure of the undertaking.

The section 25 R that is penalty for closure “any employer who close down an
undertaking without complying the provision of subsection of 25 o shall be punishable
with imprisonment fora term which may extend to 6 months or with the fine which may
extend to 5000 or with both.

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PRAYER

Wherefore in the light of the issued raised, arguments advanced and authorities cited,
it ishumbly requested that this hon’ble court may be pleased to:

That payment of bonus at the rate 4%is illegal under the payment of bonus Act
1965.
The act of company comes under the preview of lockout.
AND/OR
Your lordship be pleased to grant appropriate judgement in the light of the
ground andcontentions raised in the present appeal.
Your lordships be pleased to grant such other and furthers reliefs as may be
deemed fit inthe interest of justice.

All of which is most humbly and respectfully submitted.

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