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TMI Blog1994 (7) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... d at its 4 pumping stations and two treatment plants, were not justified in demanding Bonus. In arriving at the said conclusion the Tribunal found that the Pumping Stations and the treatment plants, having been registered as Factories under the Factories Act, Employees working at the said Stations and Plants were entitled to Bonus and the remaining Employees of the Board were not so entitled, not only because the Board was a non-profit making organisation but also because it was a local authority within the meaning of Section 32(iv) of the payment of Bonus Act, 1965 (hereinafter referred to as the Act). 3. Both the Board as also its employees are aggrieved of the aforesaid Award, and have filed separate Petitions challenging the validity of the same. While Writ Petition No. 19528/84 has been filed by the Board, its employees have filed Writ Petition No. 4550/1985 W.P. No. 16210/1984. In the Writ Petition filed by the Board it has challenged that part of the award by which employees working on its Pumping Stations and Plants have been held entitled to the payment of bonus. The Board contends that the said finding is legally unsustainable, keeping in view the fact that it is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority within the meaning of Section 32(iv) of the Act and therefore exempt from the Payment of Bonus to its employees. He contended that while the finding returned by the Tribunal holding the Board to be a local authority was perfectly justified, it committed an error in over-looking the fact that employees engaged by a local authority in any establishment even if registered as a factory would be exempt from the rigors of the Act keeping in view the provisions of Section 1(iii) of the Act. He urged that Section 1 sub-section (iii) applied the provisions of the Act to every factory except as otherwise provided in the Act and that Section 32 was a provision to the contrary which made the Act inapplicable to any establishment even if registered under the factories Act, provided the same was being run by or under the authority of a local authority. The Tribunal according to the learned counsel was in error in holding that the Pumping Stations and the treatment plant of the Board having been registered as Factories under the Factories Act, would ipso facto to governed by the Bonus Act entitling the employees working in the said Stations to payment of bonus. 9. Shri Narasimhan, lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trict Urban, including such other areas adjacent thereto as the State Government may be notification from time to time specify. Section 16 of the Act provides for General Principles for Board's finance, whereas Section 2 vests authority in the Board to make Regulations not inconsistent with the Act for all or any of the matters set out in the said Section. A reference is greater detail to these provisions shall be made in the later part of this Judgment. 11. Now the term 'Local Authority' has not been defined either by the Payment of Bonus Act or by the Bangalore Water Supply Sewerage Act, 1964. The fact that Section 9 sub-section (2) of the 1964 Act makes the Board a local authority for purposes of the Bangalore Water Supply Sewerage Act and the Land Acquisition Act, does not also lead us anywhere for it does not necessarily mean that the Board shall be deemed to be local authority even for the purposes of Payment of Bonus Act, merely because it is so for purposes of the Land Acquisition Act or the 1964 Act. 12. The General Clauses Act 1899 however defines a local authority as under :- Local Authority shall mean a municipal committee, district boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Next, they must be entrusted by Statute with such Government functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc., etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governmental duties and functions. Finally, they must have the power to raise funds for the furtherance of their activities and the fulfilment of their projects by levying taxes, rates, charges or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority. 16. Applying the aforesaid test Their Lordships came to the conclusion that the Delhi Development Authority fulfilled all the tests to be treated a local authority for the purposes of Section 32(iv) of the Payment of Bonus Act. 17. Mr. Prabhakar, learned counsel appearing for the Board placed heavy reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rests as the State Government thinks fit that is to say the Municipal corporation of the City of Bangalore, the Bangalore City Improvement Trust Board and consumers of water. The Committee so constituted is required to advice the Board on major questions of policy and schemes and to review the programmes and the working of the Board from time to time. The Board is required to place before the consultative Committee an Annual Financial Statement before submitting any such statement to the State Government under Section 17 of the Act. 21. It is thus apparent that while the Board is nominated by the Government, its functions are closely coordinated and reviewed by the Consultative Committee which has a representative character. Consultation with the representatives of bodies like the Municipal Corporation, City Improvement Trust and the Consumers of water does give to the Consultative Committee which is in the nature of an Apex Advisory body, a representative character. It is therefore incorrect to suggest that the Board in the present case is devoid of any representative character as suggested by Mr. Narasimhan so as to make the same only a Satellite or an extended arm of the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first place when it is said that one of the attributes of a local authority is the power to raise funds by the method of taxation, taxation is to be understood not in any fine and narrow sense as to include only those compulsory exactions of money imposed for public purpose and requiring no consideration to sustain it, but in a broad generic sense as to also include fees levied essentially for services rendered. It is now well recognised that there is no generic difference between a tax and a fee; both are compulsory exactions of money by public authority. 24. The distinction sought to be made between the R. C. Jain's case and the case at hand is therefore in my opinion without any difference. 25. It was next argued by Mr. Narasimhan that the nature of the fund which Bangalore Water Supply and Sewerage Board is required to manage was different from that of the fund which the Delhi Development Authority was managing. It was contended that whereas the Delhi Development was entitled to utilise the local fund for activities other than for the Development of Delhi Area, the Bangalore Water Supply and Sewerage Board is by reason of Section 16 of the Act under a statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct affecting the areas administered by it. It is charged with the discharge of governmental functions and duties such as providing essential amenities like water and sewerage facilities to the inhabitants of the area. And finally the power to levy rates, charges and fees and to manage the fund so created for the purpose mentioned under Section 169 leaves, no doubt that the Board is a Local Authority within the meaning of the definition given in the General Clauses Act as also within the meaning of Section 32(iv) of the Payment of Bonus Act. 28. Mr. Narasimhan, then argued that even if the Board is a Local Authority yet it will not be exempt from the Payment of Bonus to its employees because the said exemption is available only in a case where a local authority has an establishment which is (independent of other function of a sovereign nature) engaged in any industry. The submission was that the provisions of Section 32(iv) would not be applicable where the only activity which the local authority is engaged in is running of the industry. For the application of Section 32(iv) contended Mr. Narasimhan, it was necessary that the local authority must be discharged functions in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as appointed to manage an industrial undertaking, the affairs whereof were not being properly handled by its Management. The question that arose was whether on account of the appointment of an Authorised Controller in terms of Section 18(9) of the Industries (Development and Regulation) Act, 1951, the employees of such an undertaking were excluded from the application of the Payment of bonus Act for the reason that they are or to have become the employees of an establishment in an industry carried on by or under the Authority of a Department of the Central Government. The Supreme Court negatived the contention and held that the appointment of an Authorised Controller does not make the establishment of the Industrial unit, an establishment under the Authority of a Department of the Central Government. Interpreting the expression under the Authority of any Department of the Central Government , the Supreme Court observed thus :- The expression under the authority of any department of the Central Government would in ordinary parlance mean that the department is directly responsible for the management of the industrial undertaking. This responsibility may cover, amongst others, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferentiate and discriminate between employees of establishment engaged in the same industry. It, therefore, appears that the exception that is being carved out by Section 32(iv) is in respect of employees of an industrial undertaking engaged in an industry carried on by or under the authority of any department of the Central Government as a whole and not individual establishments. All establishments in that industry which is carried on by or under the authority of the department of the Central government would be excluded from the operation of the bonus Act. 33. The view taken by the Court does not lend support to the interpretation which Mr. Narasimhan sought to place upon the provisions of Section 32(iv) of the Act for two distinct reason. In the first place the Supreme Court was not dealing with a case where a local authority was engaged in any industrial activity as is the case before me, and in the second place the view taken by the Court does suggest that in case an industry is being carried on either by the Government or a local authority itself, any such establishment which is engaged in any such industrial activity would be exempt from the application of the Bonus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about by the Section 32(iv) of the Payment of Bonus Act, between employees employed in an industry established by or under the Authority of the Local Authority and those employed in any other establishment was unfair, irrational and discriminatory. Mr. Narasimhan, urged that there was no intelligible differentia between the employees of a 'Local Authority' engaged in an industry and those engaged by any other Industrial concern, nor was there any nexus between the classification brought about by Section 32(iv) and the object sought to be achieved by the Act. The need to bridge the gap between the actual wage and the living wage was the same, contended Mr. Narasimhan whether the employee was engaged by a 'Local Authority' for its industrial activity or by any other private or public sector establishment. Denial of the beneficial provisions of the Act to the employees of the 'Local Authority' even when the said employees were engaged in an industrial activity was, according to Mr. Narasimhan, a violation of the Fundamental Right guaranteed under Article 14 of the Constitution. The classification according to him being unsustainable, the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutional validity of a law in terms of Article 14 of the Constitution, thus :- When a law is challenged as violative of Article 14 it is necessary in the first place to ascertain the policy underlying the statue the object intended to be achieved by it. Having ascertained the policy and object of the Act the Court has to apply a dual test in examining its validity (i) whether the classification is rational and based upon an intelligible differentia which distinguished persons or things that are grouped together from others that are left out of the group and (ii) whether the basis of differentiation has any rational nexus or relation with its avowed policy and object. 40. What then is the object which the Payment of Bonus Act intends to achieve is the first question that would arise. The term 'Bonus' has not been defined by the payment of Bonus Act nor has the said term been defined by any other enactment. The Bonus Commission when asked to provide a definition to the concept of 'bonus' also found it difficult to do so, in rigid terms. It was suggested that it was possible only to urge that once profits exceed a certain based labour should legitimately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he anomalies that may result if exemption is taken away. The Committee found that the withdrawal of exemption would give an undue advantage to such of the employees as are working in the Departmentally run Industrial and Commercial undertakings over other government employees. This was so for the reason that while fixing wages of the Government employees based on the Pay Commission recommendations various aspects, such as cost of living, living wages etc., are taken into consideration together with the fact that such Government employees are not entitled to Bonus in view of Section 32(iv) of the Act. 43. In M/s. Jalan Trading Co. Pvt. Ltd. v. Mill Mazdoor Sabha Constitutional validity of the Payment of Bonus Act, was challenged on the ground that the same was a fraud on the Constitution and a colourable exercise of legislative power. While examining the merits of the challenge the Supreme Court noticed that the Scheme of the Payment of bonus Act was four dimensional namely : 1) to impose statutory liability upon the employer of every establishment covered by the Act to pay bonus to employees in the establishment; 2) to define the principle of payment of bonus according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Equal treatment of unequal objects or persons is not liable to be struck down as discriminatory unless there is simultaneous absence of an intelligible differentia and a rational nexus with the object intended to be achieved by the law. 45. It is therefore apparent that while the term 'Bonus' is not capable of any precise definition nor has any such definition been safely attempted so far, yet the object behind payment of Bonus is to share the prosperity of an establishment with the Labour who has participated in producing such prosperity and to maintain industrial peace. The submission of Mr. Narasimhan, that the entire object behind the Act was to bridge the gap between the actual wage and living wage is not supported by any judicial pronouncement or any other rational or acceptable hypothesis. 46. Having thus identified the policy and the object of the Act, the Court has to apply the dual test for examining the validity of the impugned provision namely :- 1) Whether the classification is based upon an intelligible differential between those grouped together for the grant of benefit under the Act and others taken out of the group and 2) Whether the basis of diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a deliberate object, viz., not to subject establishments to the burden of bonus which are conducted without any profit motive and are run for public benefit. The exemption in Section 32(x) is, however, a limited one, for under Section 20 if a public sector establishment were in any accounting year to sell goods produced or manufactured by it in competition with an establishment in private sector and the income from such sale is not less than the 20 per cent of its gross income. It would be liable to pay bonus under the Act. Once again it is clear that in exempting public sector establishments Parliament had a definite policy in mind. This policy becomes all the more discernible when the various categories of establishments exempted from the Act by Section 32 are examined. An insurer carrying on general insurance business is exempted under clause (i) in view of certain provisions of the Insurance Act, 1936 and the Insurance (Amendment) Act, 1950. In view of these provisions the Full Bench, formula could not be and was not in fact applied at any time to such insurance establishments. The Life Insurance Corporation of India is exempted under clause (i) because of its being a publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est namely the classification is based on an intelligible differentia and the same has a reasonable nexus to the object sought to be achieved by the Act. 50. There is yet another aspect of the matter which cannot be over-looked. Equality, it is well settled, means equality in similar circumstances between the same class of persons for same purpose and objects. The rule of equality does not operate amongst unequals. Only likes can be treated alike. Though even among likes also the Legislature or Executive may classify on the basis of the distinctions which are real. As held by their Lordships of the Supreme Court in State of West Bengal and Anr. v. Rash Behari Sarkar and Anr. even likes can be treated differently for good and valid reasons. 51. In order therefore that the Rule of equality is attracted, it must first be demonstrated by the petitioners that they are situated similarly as others who are entitled to the benefit of the payment of Bonus in identical circumstances. For this the petitioners must provide the requisite information and particulars to show the similarity of their situation with others who have been treated differently by the Act. No such material has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom this Court with the provision called in question. 54. Mr. Prabhakar, learned Counsel appearing for the Board, however, urged that there are certain distinctive features about the employees of the Respondent-Board which clearly distinguish them from employees engaged in other establishments receiving bonus. He submitted that the employees of the Board are holding pensionable jobs and are entitled to receive death-cum-retirement benefits in the same fashion as other government employees. Mr. Narasimhan, learned counsel for petitioner did not dispute this fact. It was also note disputed that while the salaries of the Government employees are fixed on the basis of the report of the Pay Commission appointed for that purpose, the salaries of the employees of the Respondent-Board are fixed on the basis of agreements between the Board and its employees in which settlements the pay scales admissible to the Government employees are given due weight and consideration. Mr. Prabhakar in fact suggested that the employees of the Board are placed in pay scales which are comparable to those that are admissible to government employees working on similar posts. Be that as it may, the fact re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he object sought to be achieved by the statute. 57. The Court then proceeded to uphold the classification made by the provisions of the Act and held that poverty and economic backwardness of the agriculturists debtors and their miserable conditions in which they live justify their being treated as a separate category or class for a differential treatment in public interest. It was also pointed out that while making a classification, the Legislature cannot be expected to provide an abstract symmetry but the classes have to be set apart according to the necessities and exigencies of the Society as directed by experience and surrounding circumstances. All that is necessary is that the classification should not be arbitrary, artificial or illusory. 58. In State of West Bengal and Another v. Rash Behari Sarkar and Anr. (supra) the question that fell for consideration was : Whether a classification amongst groups performing shows for monetary gains and a similar group playing shows of similar type for cultural activities could be said to be arbitrary for purposes of granting exemption from payment of Entertainment Tax under Bengal Amusements Tax Act, 1922. The Supreme Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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