judgement:
Appeal No. 153 of 1954.
Appeal by special leave from the judgment and order dated January 15, 1952, of the Bombay High Court in Income Tax Application No. 54 of 1951.
R. J. Kolah, J. B. Dadachanji, section N. Andley and Rameshwar Nath, for the appellant.
C. K. Daphtary, Solicitor General of India, G. N. Joshi and R. H. Dhebar, for the respondent.
May 22.
The Judgment of the Court was delivered by KAPUR J.
This is an appeal by the assessee by special leave and the question for decision is whether questions of law, if any, arise out of the order of the Appellate Tribunal.
The facts giving rise to the appeal are that the petitioner company was incorporated on July 29,1924, as an investment company, the objects of which are set out in el.
III of the memorandum of association and more particularly in sub cls.
1, 2, 15 and 16 of that clause.
The assessment years under review.
are 1943 44 to 1948 49, excepting the year 1947 48.
According to its petition made in the High Court of Bombay, the petitioner company dealt with its assets as follows: "The Petitioner Company purchased during the period 1st July 1925 to 30th June 1928 shares of the value of Rs. 1,86,47,789/ major portion of which was comprised of shares in the Sassoon Group of Mills.
During the year ended 30th June 1929 the Petitioner Company promoted two companies known as Loyal Mills Ltd. and Hamilton Studios Ltd. and took over all their shares of the value of Rs. 10 1/2 lacs.
In the year 1930, the Petitioner Company purchased shares of Rs. 1,33,930.
During the period of 9 years from 1st July 1930 to 30th July 1939 no purchases were made with the exception of a few shares of Loyal Mills Ltd., 51 taken over from the staff of E. D. Sassoon & Co. Ltd., who retired from service.
In the year ended 30th June 1940 reconstruction scheme of the Appollo Mills Ltd., took place under which debentures held by the Petitioner Company in the Appollo Mills Ltd., were redeemed and the proceeds were reinvested in the new issue of shares made by the Appollo Mills Ltd. Out of the purchases of the value of Rs. 2,794 made by the Petitioner Company during the year ended 30th June 1941 Rs. 2,000/ was the value of shares of the Loyal Mills Ltd., taken over from the retiring staff.
In the year ended 30th June 1943 the Petitioner Company took over from the David Mills Co. Ltd., shares of The Associated Building Co., of the value of Rs. 56,700/ .
After this there were no purchases at all to this date excepting purchases of the value of Rs. 34,954 during the year ended 30th June, 1946.
" The sales are contained in para 3 (b) which may be quoted: " In relation to the purchases made by the Petitioner Company as stated above no appreciable sales of shares were made during the period 29th July 1924 to 30th June 1942, the sales made in the year ended 30th June 1929 of the value of Rs. 1,29,333 included shares of the value of 'Rs. 45,000 in the Loyal Mills Ltd., sold to the members of the staff and shares of the value of Rs. 83,833 representing sterling investments handed over to the creditors of the Petitioner Company in part repayment of the loan taken from them in the year ended 30th June 1931, shares of the value of Rs. 7,48,356 were handed over to the creditors in payment of the loan granted by them.
From the year ended 30th June 1943 E. D. Sassoon & Co. Ltd., started relinquishing the managing agencies of the various Mills under their agency and the shares held by the Petitioner Company in the Sassoon Group of Mills were handed over to the respective purchasers of the Mills agencies.
" This gives the history of the acquisition and disposal of shares and also how the various transactions were entered into and why.
Prior to 1940 the assessee company made a claim every year for being treated as 52 a dealer in investments and properties but this contention was consistently repelled and upto the assessment year 1939 40 the assessee company was assessed on the basis of being an investor but it appears that for the assessment year 1940 41 and the two following years 1941 42 and 1942 43 the Department accepting the plea of the assessee company treated it as a dealer in shares, securities and immovable properties and assessed it on that basis.
For these years and for the assessment year 1943 44 the company made its Return on that basis.
But after the Return had been filed for the year 1943 44 the assessee company withdrew its Return and filed a revised Return on March 7, 1944, contending that it was not a dealer but merely an investor.
Along with the Return it filed a letter dated March 6, 1944, in which inter alia it stated: "The Return of Total Income which was submitted with the Company 's letter of 25th May 1943 was prepared in conformity with the ruling of the Income.
tax Officer in the 1940 41 assessment that the company was to be assessed as a dealer in investments.
Since that Return was submitted the Central Board of Revenue has decided that the Company is an Invest ment Holding Company and accordingly an amended Return of Total Income under Section 22 (1) of the Indian Income tax Act is submitted herewith on which the assessment for 1943 44 may be based, as on this particular question the company obviously cannot have one status for Excess Profits Tax and another for Income tax.
" It was also contended that it never carried on any business in the purchase or sale of shares, securities or properties and therefore prayed that in view of the order of the Central Board of Revenue made on its application under section 26(1) of the Excess Profits Tax Act it should be assessed for income tax purpose as an investor and not as a dealer.
The Income tax Officer rejected this plea and " held the investments as the stock in trade of its business therein which it carried on during the 'previous year ' also ".
The company took an appeal to the Appellate Assistant Commissioner which was dismissed and the 53 order of the Income tax Officer upheld.
It then appealed to the Income tax Appellate Tribunal, Bombay, where the same contentions were raised but were, repelled.
The Tribunal said: " The company having itself raised the point in all the prior years that it was a dealer in investments and properties, it would appear to be difficult to understand why the company now seeks to get the position changed and desires the Income tax Officer to treat it as if it was not dealing in shares, securities and immoveable properties." The Tribunal after holding that the company was under no misapprehension when it claimed to be a dealer in investments in the earlier years because it was then always incurring losses and that the present contention was raised because it made "substantial profits" said: "but we have no doubt that, according to the company 's memorandum of association and its own assertions made all along in the past, the assessee company is a 'dealer in investments and properties and the income arising to it on the sale thereof has been rightly held by the Income tax Officer to be business profits liable to tax under the ordinary provisions of the Income tax Act." Thus the grounds on which the case was decided against the assessee were (1) that the assessee claimed to be a dealer or an investor according as it incurred losses or made profits and (2) that because of the objects contained in the memorandum of association and because of its assertion made in the past as being a dealer the assessee could not be held to be an investor.
The company then applied to the Appellate Tribunal under section 66(1) of the Indian Income tax Act for a reference of the following questions for the opinion of the High Court: "(1) Whether on the facts and in the circumstances of the case the assessee company can rightly be treated as a dealer in investments and properties; and 54 (2)Whether the profits and losses arising from the sale of shares, securities and immoveable properties of the assessee company can be taxed as business profits.
" This prayer was rejected because in the opinion of the Tribunal no question of law arose out of its order.
It said : " The Tribunal did not decide this point merely because the company 's memorandum of association gave power to the company to deal in investments and properties, but it was actually found that the company had dealt in investments and properties throughout and had also all along in the past asserted that it was a dealer in investments and properties.
" This was more than it had said in its appellate order.
The assessee company then made an application under section 66(2) of the Indian Income tax Act for requiring the Appellate Tribunal to state the case and refer it to the High Court but this application was dismissed, and then the company obtained special leave to appeal to this Court.
Counsel for the assessee company contends that the questions of law arise out of the order of the Tribunal because the Tribunal has ignored the documentary evidence produced before it, has based it decision on irrelevant matters, has failed to consider crucial facts and has misdirected itself by assuming that the petitioner was a dealer from the very beginning which was contrary to the documents produced before it.
Section 66 (1) of the Income tax Act (hereinafter termed the Act) provides that any assessee may require the Appellate Tribunal to refer to the High Court any question of law arising out of its appellate order and it is the statutory duty of the Appellate Tribunal to draft the statement of the case and refer the question of law arising out of such order to the High Court but the primary requirement is that there must be a question of law arising out of the order.
Should the Tribunal refuse to state the case as required under section 66(1) of the Act on the ground that no question of law arises, the assessee has the right to apply to the High 55 Court requiring the Appellate Tribunal to state a case and refer it to the High Court but again the essential consideration is the existence of a question of law.
arising out of the order.
To draw a line between what is a question of law and what is a question of fact is not always easy.
It is difficult to define this distinction which has given rise to a number of decisions, which it will be useful to discuss at this stage.
In Stanley vs Gramophone and Typewriter, Limited(1) the Master of the Rolls discussed this question as follows : " It is undoubtedly true that, if the Commissioners find a fact, it is not open to this court to question that finding unless there is no evidence to support it.
If, however, the Commissioners state the evidence which was before them, and add that upon such evidence they hold that certain results follow, I think it is open, and was intended by the Commissioners that it should be open, to the court to say whether the evidence justified what the Commissioners held.
" These observations were explained by Hamilton J. in The American Thread Co. vs Joyce (2) as implying that by giving the material on which their finding was based the Commissioners were inviting the court to determine whether on that material they could reason.
ably arrive at the conclusion on which they did arrive.
The House of Lords on appeal categorically confirmed that the Courts had no jurisdiction over conclusions of fact except to see whether there was evidence to justify them and that proper legal principles had been applied.
Lord Clerk in Californian Copper Syndicate vs Harris (3) has laid down the test in the following words: " the question to be determined being Is the sum of gain that has been made a mere enhancement of value by realising a security, or is it a gain made in an (1) , 374.
(2) (3) , 166.
56 operation of business in carrying out a scheme for profit making.
" In that case the objects set out in the memorandum of association pointed distinctly to a highly speculative business and the mode of actual procedure of the company was also directed in the same direction.
Taking into consideration the course of dealing of the shares by the company and also that the turning of investment to account was not merely incidental but was an essential feature of the business, speculation being among the appointed means of the company 's business the court came to the conclusion that the company was carrying on a business.
The Lord President in a Scottish case Cayzer, Irvine & Co., Ltd. vs Commissioners of Inland Revenue (1) stated the grounds on which the court can interfere with the finding of the Commissioner as follows: " I think we have jurisdiction to entertain the question at law, which is whether the majority of the Commissioners were warranted on the evidence in determining as they did.
At the narrowest it is always open to this Court in a Stated Case to review a finding in fact on the ground that there is no evidence to support it." Lord Parker in Farmer vs Trustees of the Late William Cotton (2) after referring to the difficulty of distinguishing between a question of fact and a question of law observed: " Where all the material facts are fully found, and the only question is whether the facts are such as to bring the case within the provisions properly construed of some statutory enactment, the question is one of law only.
" But this statement of the law was considerably modified in Inland Revenue Commissioners vs Lysaght (3) where it was held that if the issue before the court could be described as a "question of degree" the conclusion must be a question of fact.
(1) , 501.
(2) [19I5] A.C. 922,932.
(3) 57 The Commissioners of Inland Revenue vs The Korean Syndicate, Ltd. (1) was a case where a syndicate was registered for the purpose of acquiring and working concessions and turning them to account, and of investing and dealing with monies not immediately required.
The syndicate acquired part of a right to a concession in Korea and then under an agreement described as a "lease", in consideration of receiving sums of money termed "royalties" but which were really percentages of profits made by assignee company, assigned the lease to a development company.
Some moneys which were received from sale of certain shares obtained by the syndicate in exchange for shares originally acquired in the mining company were deposited in a bank.
The activities of the company were during the relevant period confined to receiving the bank interest and royalties, distributing the amount amongst its shareholders as dividend.
The question for decision was whether the syndicate was carrying on a business and was therefore liable to excess profits duty.
From these facts it was concluded that they were carrying on a business.
Atkinson L.J. pointed out at p. 204 that merely because a company is incorporated it does not necessarily follow that it is carrying on business.
Its memorandum only shows that the company was incorporated for a particular purpose but taking into consideration the surrounding circumstances and facts of the case it was concluded that the company was carrying on a business.
In Great Western Railway Company vs Bater (2) the question for decision was whether a clerk held a public office to fall within Sch.
It was held that the determination by the Commissioners of questions of pure fact are not to be disturbed unless it should appear that there was no evidence before them upon which they, as reasonable men, could arrive at the conclusion which they came to.
Lord Atkinson said: " What I have many times in this House protested against is the attempt to secure for a finding on a mixed question of law and fact the unassailability (1) (2) , 244. 8 58 which belongs only to a finding on questions of pure fact.
This is sought to be affected by styling the finding on a mixed question of law and fact a finding of fact.
" According to the dictum of Lord Wrenbury the question for the Court was whether on the facts found and stated by the Commissioners the clerk held the office within the meaning of the Act which was a question of law.
In Lysaght vs The Commissioners of Inland Revenue (1) the question for decision was whether the assessee was a resident and ordinarily resident in United Kingdom in the year of assessment.
Lord Buckmaster said:. " The distinction between questions of fact and questions of law is difficult to It is, of course, true that if the circumstances found by the Commissioners in the Special Case are incapable of constituting residence their conclusion cannot be protected by saying that it is a conclusion of fact since there are no materials upon which that conclusion could depend.
But if the incidents relating to visits in this country are of such a nature that they might constitute residence, and their prolonged or repeated repetition would certainly produce that result, then the matter must be a matter of degree; and the determination of whether or not the degree extends so far as to make a man resident or ordinarily resident here is for the Commissioners and it is not for the Courts to say whether they would have reached the same conclusion.
" Jones vs Leeming(2) was a case where the respondent with three other persons obtained an option to purchase a rubber estate in the Malay Peninsula.
That estate along with another was sold at a profit.
The Commissioners found that the respondent had acquired the property with the sole object of turning it over again at a profit and at no time had he the intention of holding it.
This transaction was held not to be in the nature of trade nor the profits arising therefrom in the nature of income but they were accretions to (1) , 533, 534.
(2) 59 capital and therefore not subject to tax under Case VI of Sch.
In Cameron vs Prendergast (1) the following test was laid down by Viscount Maugham: " Inferences from facts stated by the Commissioners are matters of law, and can be questioned on appeal.
The same remark is true as to the construction of documents.
If the Commissioners state the evidence. . . . . . . . it is open to the court to differ from such holding.
" In Bomford vs Osborne (2) a farm was working as a mixed farm but as a single unit.
The question for decision was whether the assessment could be apportioned one part being assessed as a farm and the other as a nursery.
Viscount Simon laid down the test in the following words: " No doubt there are many cases in which Commissioners, having had proved or admitted before them a series of facts, may deduce therefrom further conclusions which are themselves conclusions of pure fact.
In such cases, however, the determination in point of law is that the facts proved or admitted provide evidence to support the Commissioner 's conclusions.
" It was also held that this question was a mixed question of law and fact.
Du Parcq J. in J. H. Bean vs Doncaster Amalgamated Collieries Ltd.(3) held the following to be the test for determining whether the question is one of fact or law: " Unless the Commissioners, having found the relevant facts and put to themselves the proper question, have proceeded to give the right answer, they may be said, on this view, to have erred in point of law.
If an inference from facts does not logically accord with and follow from them, then one must say that there is no evidence to support it.
To come to a conclusion which there is no evidence to support is to make an error in law." (1) , 40. (3) , 284.
(2) , 430.
60 In Edward vs Bairstow (1) the respondent embarked upon a joint venture to purchase a spinning plant with the object of holding it for quick resale and at a profit.
The General Commissioners found that there was no venture in the nature of trade but the court held that the facts found led inevitably to the conclusion that the transaction was a venture in the nature of trade and that the Commissioners ' inference to the contrary was erroneous.
Lord Simonds observed at p. 54 that: " To say that a transaction is, or is not, an adventure in the nature of trade is to say that it has, or has not, the characteristics which distinguish such an adventure.
But it is a question of law, not of fact, what are those characteristics. .
At p. 55 Lord Radcliffe pointed out: " I think that it is a question of law what meaning is to be given to the words of the Income Tax Act "trade, manufacture, adventure or concern in the nature of trade" and for that matter what constitutes "profits or gains" arising from it.
Here we have a statutory phrase involving a charge of tax, and it is for the courts to interpret its meaning, having regard to the context in which it occurs, and to the principles which they bring to bear on the meaning of income.
" and then at p. 57 laid down the test in the following words: " When the case comes before the court, it is its duty to examine the determination having regard to its knowledge of the relevant law.
If the case contains anything ex facie which is bad law and which bears on the determination, it is, obviously, erroneous in point of law.
But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal.
" The dicta of Warrington L.J. in Cooper vs Stubbs (2) that intervention by a court is proper only: (1) ; (2) , 768, 772.
61 missioners have come to their conclusion without evidence which should support it, that is to say, have come to a conclusion which on the evidence no reason ' able person could arrive at, or have misdirected themselves in point of law." and of Atkin L.J. that: to one conclusion of law. " were quoted with approval by Lord Radcliffe at pp.
56 and 57.
A review of these authorities shows that though the English decisions began with a broad definition of what are questions of law, ultimately the House of Lords decided that a "matter of degree" is a question of fact and it has also been decided that a finding by the Commissioners of a fact under a misapprehension of law or want of evidence to support a finding are both questions of law.
The Privy Council in Commissioner of Income tax vs Laxminarain Badridas (1) said: " No question of law was involved; nor is it possible to turn a mere question of fact into a question of law by asking whether as a matter of law the officer came to a correct conclusion upon a matter of fact. " Bose J. in Seth Suwallal Chhogalal vs Commissioner of Income tax(2) stated the test as follows: " A fact is a fact irrespective of the evidence by which it is proved.
The only time a question of law can arise in such a case is when it is alleged that there is no material on which the conclusion can be based or no sufficient material.
" Sufficiency of evidence was explained to mean whether the Income tax authority considered its existence so probable that a prudent man ought under the circumstances of the case to act upon the supposition that it exists.
The question for decision in Dhirajlal Girdharilal vs Commissioner of Income tax, Bombay(3) was whether a Hindu undivided family was carrying on business in (1) , 179.
(3) (2) , 277.
62 shares and it was held that this was a question of fact but if the Appellate Tribunal decided the question by taking into consideration materials which are irrelevant to the enquiry or partly relevant and partly irrelevant or based its decision partly on conjectures then in such a situation an issue of law arises, which would be subject to review by the court and the finding given by the Tribunal would be vitiated.
The result of the authorities is that inference from facts would be a question of fact or of law according as the point for determination is one of pure fact or a mixed question of law and fact and that a finding of fact without evidence to support it or if based on relevant and irrelevant matters is not unassailable.
The limits of the boundary dividing questions of fact and questions of law were laid down by this court in Meenakshi Mills, Madurai vs Commissioner of Income tax, Madras (1) where the question for decision was whether certain profits made and shown in the name of certain intermediaries were in fact profits actually earned by the assessee or the intermediaries.
Taking the course of dealings and the extent of the transaction and the position of the intermediaries and all the evidence into consideration the Tribunal came to the conclusion that the intermediaries were dummies brought into existence by the appellant for concealing the true amount of profits and that the sales in their name were sham and fictitious and profits were actually earned by the assessee.
The test laid down by this Court is to be found in the various passages in that judgment.
At p. 701 Venkatarama Ayyar J. pointed out that questions of fact are not open to review by the court unless they are unsupported by any evidence or are perverse.
At p. 706 it was observed : " In between the domains occupied respectively by questions of fact and of law, there is a large area in which both these questions run into each other, forming so to say, enclaves within each other.
The questions that arise for determination in that area are known as mixed questions of law and fact.
These questions involve first the ascertainment of facts on the evidence adduced and then a determination of the (1) ; 63 rights of the parties on an application of the appropriate principles of law to the facts ascertained.
The law was thus summed up at p. 720: (1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66 (1).
(2) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final its decision as to the legal effect of that finding is a question of law which can be reviewed by the court.
(3) A finding on a question of fact is open to attack under section 66 (1) as erroneous in law if there is no evidence to support it or if it is perverse.
(4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.
In the instant case the Appellate Tribunal in its appellate order has set out the amount of profits made by the assessee company in the years of assessment 1943 44 to 1948 49.
It has also mentioned the inconsistent positions taken up by the assessee in first claiming to be a dealer and then to be an investor which according to the Tribunal was due to the fact that it was incurring losses in the earlier years and had begun making profits when the claim of being an investor was put forward.
But the two basic facts on which the Tribunal has based its findings are: (1) the objects set out in the memorandum of association of the assessee company; (2) the previous assertion by the assessee company that it was a dealer in investments and not merely an investor.
Counsel for the assessee relies on the decision of Kishan Prasad & Co., Ltd. vs Commissioner of Incometax, Punjab (1) where this Court held that the circumstance whether a transaction is or is not within the powers of the company has no bearing on the nature of the transaction or on the question whether the profits arising therefrom are capital or revenue income and, therefore, it is contended that the Tribunal has (1) 64 relied upon an irrelevant circumstance.
Counsel for Revenue on the other hand refer to the judgment in Lakshminarayan Ram Gopal vs Government of Hyderabad (1) where the objects of an incorporated company were held not to be conclusive but relevant for the purpose of determining the nature and scope of its activities.
Merely because the company has within its objects the dealing in investment in shares does not give to it the characteristics of a dealer in shares.
But if other circumstances are proved it may be a relevant consideration for the purpose of determining the nature of activities of an assessee.
Whether in the instant case it will have any relevance because of other materials on which the assessee company was relying in support of its case that it was merely an investor and not a dealer will have to be considered when the suggested questions of law are answered.
As to what are the characteristics of the business of dealing in shares or that of an investor is a mixed question of fact and law.
What is the legal effect of the facts found by the Tribunal and whether as a result the assessee can be termed a dealer or an investor is itself a question of law.
The questions of law that arise out of the order of the Tribunal are: (1)Whether there are any materials on the record to support the finding of the Income tax Officer that the assessee company was a dealer in shares, securities and immoveable property during the assessment year in question ? (2)Whether the profits and losses arising from the sale of shares, securities and immoveable properties of the assessee company can be taxed as business profits ? We would therefore allow this appeal, set aside the order of the High Court and remit the case to the High Court for directing the Tribunal to state a case on the aforesaid two questions.
The appellant will have its costs in this Court and in the High Court for the proceedings so far taken.
Further costs will be in the discretion of the High Court.
Appeal allowed.
Case remitted.

summary:
The appellant company was incorporated as an investment company which by its memorandum of association enabled it, inter alia, to deal in investments and properties.
For the purposes of assessment to income tax the appellant claimed, for the assessment year in question, to be treated as an investor and not as a ,dealer on the ground that it did not carry on any business in the purchase or sale of shares, securities or properties.
The Incometax Appellate Tribunal held that according to the company 's memorandum of association and its own assertions made all along in the past, it should be treated as a dealer in investments and properties and that its income arising from the sales of shares and properties should be taxed as business profits.
The appellant 's applications for a reference to the High Court were rejected on the ground that no question of law arose out of the order of the Tribunal.
Held, that the question whether the appellant 's business amounted to dealing in shares and properties or to investment, is a mixed question of law and fact and that the legal effect of the facts found by the Tribunal as a result of which the appellant could be treated as a dealer or an investor, is a question of law.
Accordingly, the order of the High Court was set aside and the case remitted to the High Court for directing the Tribunal to state a case.
(1) 50 Meenakshi Mills, Madurai vs Commissioner of Income Tax, Madras, ; , applied.
Case law reviewed.


judgement:
Civil Appeal No. 1416 of 1981.
From the Judgment and Order dated 28.12.1975 of the Central Govt.
Labour Court at Calcutta in Application No L.C. 28 of 1976.
M.K Ramamurthi and Amlan Ghosh for the Appellants.
G.B. Pai, V.S. Desai, D.N. Mukherjee, N.R. Chaudhary and R. Mukherjee for the Respondent.
KHALID, J.
This appeal, by special leave, by two employees of the United Bank of India at Calcutta, is directed against a decision given by the Central Government Industrial Tribunal 1059 cum Labour Court, Calcutta, on 28th December, 1979, in an application made under Section 31 C (2) of the .
The claim made by them related to the bonus paid on the eve of Pooja every year which according to them was customary in nature, irrespective of profit or loss.
The Labour Court after considering the evidence placed before it held that the bonus claimed could not be characterised as customary since it did not answer to the requirements of law to be customary bonus and that in the absence of an existing right to customary bonus or bonus founded on an implied agreement as a condition of service, the application made under section 33 C(2) was not maintainable and accordingly dismissed the same 3.
The petitioners ' claim was attempted to be Supported by the fact that they were given one month 's pay as bonus for the years 1959 to 1963, one and half months ' for the year 1964 and two months ' pay for the years 1965 to 1974.
Their further case was that this bonus was paid every year on the eve of Pooja at the rate of pay as on 1st September of the respective year and was unrelated to any profit made by the company.
The payment of such bonus consecutively for 16 years without any break and unrelated to profit or loss, without its sanction either in law or any award or any written settlement, payable on the eve of the Pooja developed into a condition of service giving rise to a right and an expectancy which in law assumed the characteristics of customary bonus.
This claim was resisted by the Bank on the ground that the application itself was not maintainable since the alleged right pleaded by the workmen was not a condition of service and that such a right did not exist in fact also.
The conditions of service of the employees of the Bank are governed by various awards and settlements.
Though there were agreements entered into between the bank and its employees on several matters there was no agreement at any time on the question of payment of bonus.
Bonus was paid to its employees every year as a result of demand raised separately by them and in respect of every year there was a separate agreement with regard to bonus.
It was further stated that the bonus paid was related to profit and not based on any custom 4.
The Labour Court considered the correspondence that passed between the BANK and its employees and came to the con 1060 clusion that a right to customary bonus in favour of the employees of the Bank did not exist.
The application was dismissed holding that on the basis of the material on record, there was no existing right to customary bonus and that the Labour Court could not either create or declare a right which was not in existence to stretch its jurisdiction under Section 33 C(2) of the .
It is the correctness of this finding that we are called upon to decide in this appeal.
The Counsel on both sides took us through the various letters that passed between the employees of the Bank and the Bank and brought to our notice the past history relating to the payment of bonus for a considerably long time.
It is seen that the Bank had been paying bonus at the rate of one month 's salary from 1959 to 1963.
This is period prior to the Bonus Act which came into force in 1965.
The payment continued even after coming into force of the Bonus Act.
We find from the materials on record that the above payments were not made by the bank unilaterally without any demand, unrelated to profit or loss as a customary bonus.
It is true that payments were made on the eve of the Pooja.
The bonus so paid was not called Pooja bonus except in 1972 when the words 'Pooja ' was mentioned at the time when the payment was made.
The bonus in question was paid for the years 1958 and 1959 as a result of protracted negotiations.
Bonus for the year 1962 was paid at the rate of one month 's pay on the basis of Desai award.
This rate continued for the year 1.963 also.
In 1964, it was at the rate of 45 days ' pay.
This rate was further increased for the year 1965 to two months ' pay and this we find was as a result of the discussions held on the subject between the management and the union from time to time.
The two months ' rate continued till the year 1969.
In 1969, the Bank was nationalised and till 1971 bonus at the rate of two months ' basic salary was sanctioned by the Ministry of Finance and was accordingly paid to the employees.
In 1972, the General Secretary of the Union claimed by a letter that the employees were getting bonus at the rate of two months ' pay at the time of Pooja, irrespective of profits and asked for an enhancement of rate of bonus.
Discussions were initiated and ultimately the Bank agreed to pay an additional bonus for the year 1972 of an additional four days pay and for the year 1973 two months and 12 days and for 1974 two months and 271/2 days.
We have ourselves gone through the letters which are on 1061 record that passed between the parties.
The correspondence shows .
that the bonus was paid from year to year pursuant to negotiations that took place between the Union of the employees and the Bank and that the rates of bonus were not uniform, but were fluctuating.
The Bank had a definite case that bonus was paid out of the profits made or in anticipation of profits.
The claim of the Union that it was customary and unrelated to the profits of the Bank was attempted to be made at a belated stage of the case.
Before deciding the case on the above materials, it would be useful to refer to the decision of this Court in Vegetable Products Ltd. vs Their Workmen(l) where this Court has laid down the test to determine what exactly is customary or festival bonus.
The tests laid down by this Court are: (I) that the payment has been made over an unbroken series of years; (2) that it has been for a sufficiently long period the period has to be longer than in the case of an implied term of employment; (3) that it has been paid even in years of loss and did not depend on the earning of profits; and (4) that the payment has been made at a uniform rate throughout.
From the materials disclosed in the records, reference to which was made by us earlier, it will be evident that the bonus paid in this case does not satisfy the requirements laid down by this Court detailed above.
It may be true that the payments were made in the month of September or thereabout every year, but that by itself will not make the bonus paid a customary Pooja bonus.
The rate has not been uniform.
The management has at all times taken the definite stand that the payment was related to profits and that it was in anticipation of making profit.
The payments were made at all times pursuant to demands made by the employees.
We would like to refer to only two or three letters to fortify our conclusion that the payment was pursuant to the demands of the employees.
In the letter dated 20th September, 1958, addressed to the General Secretary, United Bank of India 's employees Association, the opening sentence reads as follows: "With reference to the several demands as stated in your letter dated we have agreed as follows: (1) 1062 (1) Annual bonus for the year 1958.
In the letter dated September 3, 1968, written to the President of the Association and marked as confidential, it is stated that "the Bank tried to impress upon the President through a number of discussions to persuade him to revise the present system of paying bonus in September to a system after the year 's results are available and to pay the minimum as provided for in the Bonus Act then and the balance if any after the year 's profit figures are known and since the Bank did not propose to strain its relationship with the employees and as the request made was not acceptable to the employees, it was decided to pay the bonus at the rate of two months ' basic salary, as existing on 1.9.1968.
" In the letter dated December 29, 1972, addressed to the General Secretary of the Association it is stated that in case of this Bank, bonus is paid on the basis of the agreement arrived at between your association and the management equivalent to two months ' basic pay. " Reference may also be made to a letter dated 17th April, 1973, by the Association to the Chairman and Managing Director of the Bank which reads as follows: ".
As you know, bonus is being paid at the present rate of two months basic pay as on September 1st each year since 1964, when after a continuous struggle the original pre amalgamation rate.
was restored gradually, beginning with 15 days basic pay in 1958. " In the letter addressed to the General Secretary (dated 26th August, 1973) reference is again made to the demands made by the association for additional bonus for 1972 and to the subsequent discussions and agreement for payment of bonus at the rate of two months and 12 days pay as on 1.9.1973.
From the above letters it is evident that bonus was paid as a result of long discussion at every stage No bonus was paid for the years 1950 to 1958.
From 1959 onwards, the rate has not been uniform.
There is no evidence to show that this payment was unrelated to the profits.
The letters sent by the management clearly indicated that bonus payment was related to the profits and the Bank always wanted its employees to wait for the financial position for computation of the bonus payable.
The 1063 evidence in this case does not also justify inference of an implied agreement on the part of the Bank to pay bonus of a customary nature at the time of Pooja, without any relation to profits as a condition of service.
The Labour Court has noted the fact that it was nobody 's case that bonus was ever paid in any year of loss or that there was any year of loss and that the bank had consistently taken the position that bonus was paid out of the year 's profit in anticipation.
There is one other aspect of the claim now put forward which cannot be lost sight of, which affords an additional reason to reject the contention of the appellants.
The respondent is a nationalised bank.
Roughly in all there are 25 nationalised banks.
The concept of any customary bonus is unknown to nationalised banks.
All the nationalised banks are wholly owned undertakings of the Government of India in the matter of bonus, the employees of the nationalised banks must be dealt with on a common denominator.
If therefore the contention of the appellant were to prevai the employees of the respondent, which is only one amongst many nationalised bank, would enjoy an undeserved advantage compared to their counterparts in other nationalised banks and even in the Other branches of the respondent bank and may become a cause of disharmony and inequality.
Therefore in larger public interest also, the demand for customary bonus otherwise found to be untenable, must be negatived.
On a careful consideration of the facts and circumstances of the case disclosed, we find that the appellants have not succeeded in persuading us to disagree with the findings of the Labour Court or to satisfy us that the bonus that they received had the characteristic of customary bonus as known to law and that therefore they were entitled to the quantification of that amount under Section 33 C (2) of the , on the basis of the existence of a legal right in them.
The appeal has, therefore, to fail and is dismissed with out any order as to costs S.R. Appeal dismissed.

dataset_name: IN-Abs

summary:
Two employees of the respondent Bank preferred a claim on the basis of the existence of legal light in them to the payment of a customary bonus on the eve of pooja.
Their case was that the bonus paid to them every year on the eve of pooja at the rate of pay as on 1st September of the respective year was unrelated to any profit or loss made by the company and that the consecutive payment for more than 16 years without any break of such bonus has developed into a condition of service giving rise to a right and an expectancy which in law assumed the characteristics of customary bonus.
The claim was resisted by the bank on the grounds, namely, (a) the application itself was not maintainable since the alleged right pleaded by the workmen was not a condition of service and that such a right did not exist in fact also; (b) the conditions of service of the employees of the Bank are governed by various awards and settlements; (c) though there were agreements entered into between the bank and its employees on several matters there was no agreement at any time on the question of payment of bonus; and (d) though the bonus was paid, as a result of the employees demand every year as per separate agreement for the payment thereof the bonus paid was related to profit and not based on any custom.
After considering correspondence that passed between the Bank and its employees, the Labour Court dismissed the application holding that on the basis of the material on record, there was no existing right to customary bonus and that the Labour Court could not either create or declare a right which was not in existence to stretch its jurisdiction under section 330(2) of the .
Hence the appeal by special leave.
^ HELD: 1.
In the facts and circumstances of the case the bonus received by the appellants did not have the characteristic of customary bonus as known to law and therefore they were not entitled to the quantification of that amount under section 33 c(2) of the , on the basis of tho existence of a legal right in them.
In Vegetable Products Ltd. vs Their Workmen, , the Supreme Court has laid down the tests to determine what exactly is customary or festival bonus.
The tests laid down are; (I) that the payment has been made over an unbroken series of years; (2) that it has been for a sufficiently long period the period has to be longer than in the case of an implied term of employment; (3) that it has been paid even in years of loss and did not depend on the earning of profits; and (4) that the payment has been at a uniform rate throughout.
In the instant case, the record shows that the bonus paid does not satisfy the requirements laid down by the Court.
The mere fact the payments were made in the month of September or thereabout every year, by itself will not make the bonus paid a customary pooja bonus.
The rate has not been uniform.
The management has at all times taken the definite stand that the payment was related to profits and that it was in anticipation of making profit.
Further the payments were made at all time pursuant to demands made by the employees.
11061 C F Vegetable Products Ltd vs Their Workmen, applied.
The concept of any customary bonus is unknown to nationalised banks.
All the nationalised banks are wholly owned undertakings of the Government of India.
In the matter of bonus, the employees of the nationalised banks must be dealt with on a common denominator.
If therefore, the contention of the appellants were to prevail the employees of the respondent.
which is only one amongst many Nationalised banks, would enjoy an undeserved advantage compared to their counterpart in other nationalised banks and even in the other branches of the respondent bank and may become a cause of disharmony and inequality.
Therefore, in larger public interest also, the demand for customary bonus otherwise found to be untenable, must be negatived.
[1063 C E]


judgement:
Civil Appeal No. 3121 of 1981.
From the Judgment and Order dated 28 9 1979 of the Madhya Pradesh High Court in Misc.
Petition No. 408 of 1978.
M.K. Ramamurthi and H.S. Parihar for the Appellants.
Maheshwari T. V.S.N. Chari and R.N. Poddar for the Respondents.
The Judgment of the Court was delivered by KHALID, J.
The question involved in this appeal brings to fore how the equality doctrine embodied in the Constitution of India is attempted to be flouted by some authorities under cover of artificial divisions, dividing persons doing the same work into two 103 groups without any justification and denying to one group by way of pay and emoluments what the other group gets.
We do not propose to examine the width of the quality provisions contained in article 39(d) in all its manifold aspects but would like to restrict it in its application to the facts of this case, in our attempt to see whether the High Court was justified or not, in declining relief to the petitioners.
Now the facts: This appeal by special leave is directed against the Judgment of a Division Bench of the High Court of Madhya Pradesh at Jabalpur in Miscellaneous Petition No. 408 of 1978, dismissing the petition challenging the Order of the Government of India accepting the recommendations of the Third Pay Commission dividing Senior Draughtsmen into two groups with different pay scales, which according to the appellants violated Articles 14 and 16 of the Constitution.
The Appellants Nos.
1 to 8 are Senior Draughtsmen in the Ordnance Factories under the Ministry of Defence, Department of Defence Production and the Director General of Ordnance Factories.
Appellants Nos.
1 to 5 were promoted on different dates to the post of senior Draughtsman when they were working as Draughtsmen.
Appellants Nos.
6, 7 & 8 were directly recruited as Senior Draughtsmen in the Vehicle Factory, Jabalpur on different dates.
Appellant No. 9 is a registered Association of the Employees working in the Design/Drawing Office of the Defence Establishments under the Ministry of Defence, etc.
There are 33 establishments under the Ministry of Defence Production and Director General of ordnance Factories, Calcutta.
In these establishments, there are two categories of Drawing Office Staff; (1) Senior Draughtsman and (2) Draughtsman.
Senior Draughtsmen are either directly recruited or promoted from the post of Draughtsmen.
At all relevant times, all the Senior Draughtsmen throughout the above establishments, were drawing the same pay scale.
The first and the second Pay Commission set up by the Government of India, recommended same scales of pay for all the Senior Draughtsmen.
A Third Pay Commission was set up by the Government of India under the Chairmanship of Shri Raghubar Dayal, a retired Judge of the Supreme Court of India and consisting of three other members.
One of the recommendations of this Pay Commission, related to the scales of pay of Draughtsmen and Senior Draughtsmen, 104 Draughtsmen were to be in the scale of Rs. 330 560 while the Senior Draughtsmen were divided into two groups with two scales of pay, Rs. 330 560 and Rs. 425 700.
It is this division of Senior Draughtsmen that was under challenge before the High Court.
Representations were made by the Petitioner against this grouping by the Third Pay Commission, and they pleaded that there should not be any discrimination in the pay scales of Senior Draughtsmen as was recommended by the Third Pay Commission.
Similar representations were made by others also like Senior Rate Estimator, Senior Rate Fixer, Senior Planner and Supervisor etc.
Some representations were accepted by the Government but not the representations made by the appellants ' Association.
Aggrieved by this unhelpful attitude of the Government in not accepting their representation, the appellants moved the High Court under Article 226 of the Constitution, Their case before the High Court was that Senior Draughtsmen discharged identical duties and performed similar work.
That being so there was little or no justification in putting 50% of them in a higher scale of pay and 50% others in a lower scale of pay.
This grouping was without any intelligible differentia.
The High Court referred to a decision of this Court in Kishori Mohanlal Bakshi vs Union of India(1) and sought support from it to deny relief to the petitioners.
That was a case where the grouping of Income tax Officers as Class I and class II with different scales of pay and different channel of Promotion was questioned.
This Court observed in that Judgment as follows: "It might very well be that "matters relating to employment or appointment to any office" in article 16(1) are wide enough to include the matter of promotion.
Inequality of opportunity for promotion as between citizens holding different posts in the same grade may, therefore, be an infringement of article 16.
Thus, if of the Income tax Officers of the same grade, some are eligible for promotion to a superior grade, and others are not, the question of contravention of article 16(1) may well arise.
But no such question can arise at all when the rules make Income tax Officers of Class I, eligible for appointment as Assistant Commissioner, but make 105 Income tax Officers of Class II eligible for promotion as Income tax Officers of Class I but not for promotion to the post of Assistant Commissioners.
There is no denial in such a case of equality of opportunity as among citizens holding posts of the same grade.
As between citizens holding posts in different grades in Government service there can be no question of equality of opportunity.
article 16 does not forbid the creation of different grades in the Government service.
The abstract doctrine of equal pay for equal work has nothing to do with article 14.
article 14, therefore, cannot be said to be violated whose the pay scales of Class I and Class II Income tax Officers are different though they do the same kind of work.
Incremental scales of pay can be validly fixed dependent on the duration of an officers service.
" The High Court also referred to the decisions of this Court in State of Punjab vs Joginder Singh(1), Unikat Saakunni Menon vs State of Rajasthan(2) and State of Mysore & Anr.
vs P. Narsingh Rao(3) in which cases also certain grouping of employees were challenged as violative of article 14 & 16, which challenge was repelled by the Supreme Court.
The High Court relied upon these decisions and held that "It is therefore evident that it was open to the Government to fix two different pay scales for Senior Draughtsmen," and that "It was for the Government to decide what pay scale should be provided to the different.
classes of employees and simply because they have been provided different pay scales that would not amount to discriminations.
" The High Court was told that all the Senior Draughtsmen did the same kind of work and discharged same or similar duties and that therefore there was no justification for a distinction being made between the two classes of Senior Draughtsmen, providing two different pay scales on the basis of seniority, Denial of the higher scale of pay to one class of Senior Draughtsmen, only on the ground of length of service was, according to the appellants, wrong.
The Government brought in this classification, by its Order dated 1 7 1978, directing that only Senior Draughtsmen, holding that post on 31 12 1972, would be given the Senior scale and not 106 those who did not hold that post on 31 12 1972.
This basis, the appellants, contended was unsupportable.
These contentions did not appeal to the High Court.
While repelling the arguments of the Petitioners, the High Court observed that "The petitioners are unable to show a single authority in support of their contention that all the persons doing the same work are entitled to same scale of pay.
" It is the correctness of this decision that falls to be decided in this appeal.
Before discussing the factual matrix of the case, we will refer to the Order passed by the Government of India on 27th January, 1978, which brought into effect this difference in the pay scale.
The said Order reads as follows: "The undersigned is directed to refer to Sl.
No. 32 of Part D, Section I, in the First Schedule to the Civilians in Defence Services (Revised Pay) Rules, 1973 and to say that the President is pleased to decide that, as recommended by the Third Pay Commission in para 81, Chapter 14, of their report, half the number of posts of Draughtsman in the DGOF Organisation on the present pay scale of Rs. 205 7 240 8 280 will be placed in the revised scale of Rs. 425 15 500 EB 15 560 20 700 and the remaining half in the revised scale of Rs. 330 10 380 EB 12 500 EB 15 560. . . . .
On their allocation to the revised scale of Rs. 425 700 and Rs. 350 560, the existing Draughtsman in the present pay scale of Rs. 205 280 who are brought on to the revised scale of Rs 330 560 would continue to retain their present designation as a personal to them.
The placement of the existing Draughtsman in the higher revised pay scale of Rs. 425 700 will be on the basis of seniority, subject to the rejection of the unfit.
Any administrative instruction that may be considered necessary may be issued by you.
These orders will take effect from 1 1 73.
" It is pursuant to this Order that the change in the emoluments of the petitioners ' group of Draughtsmen was effected.
107 It has to be borne in mind that this differentiation is not based on any intelligible ground.
The group of Draughtsmen entitled to the higher scale of pay, is not selected by any process nor is it based on any merit cum seniority basis, but is based only on seniority cum fitness.
There is no denial anywhere that both these types of Draughtsmen do the same work and discharge the same functions and duties.
According to the recommendations of the Third Pay Commission, a Draughtsman has to get Rs. 330 10 380 EB 12 500 EB 15 560, while Senior Draughtsman, like the appellants, who have become so on promotion, will continue to get the same scale of pay and not the higher scale of pay.
In other words, the promoted persons like the appellants, are without any monetary benefit to them.
The pay that they would get as Senior Draughtsman, would be the same as a Draughtsman would get under the Third Pay Commission.
That is, for the same work and same functions, the appellants would get less pay than the other group of Senior Draughtsmen.
The explanation is that this division is based on seniority.
This cannot be accepted as sufficient to meet the requirements of law.
By seniority, a Senior Draughtsman will get higher pay with the increments that he earns proportionate to the number of years he is in service.
Here that is not the case.
It is the classification of the Senior Draughtsmen into two groups, that is responsible for the higher pay.
For this classification, the Government must be able to satisfy the Court of certain other tests which are non existent, in this case, since it is not in dispute that Senior Draughtsmen, belonging to the two Divisions, do equal and same work.
In view of the total absence of any plea on the side of the respondents, that the Senior Draughtsmen who are placed in the advantageous group, do not perform work and duties more onerous or different from the work performed by the appellants group, it will have to be held that this grouping violates Article 14 of the Constitution.
The High Court did not have the advantage of a decision of this Court in Randhir Singh vs Union of India & Ors.(1), to which one of us was a party, which evolved the equality doctrine embodied in Article 39(d) and read Article 14 into it; while considering the complaint of a driver who was originally in the Army but later employed as a driver constable in Delhi Police Force under the Delhi Administration and who was denied the same pay as was available to the other drivers in the service of the Delhi Administration.
This Court 108 allowed the Writ Petition and directed the concerned authorities to pay the petitioners in that case, salary at least equal to the Drivers of the Railway Protection Force.
Disagreeing with the plea, put forward by the Union of India this Court observed as follows: "The Counter Affidavit does not explain how the case of the drivers in the police force is different from that of the drivers in other departments and what special factors weighed in fixing a lower scale of pay for them.
Apparently in the view of the respondents, the circumstance that persons belong to different departments of the Government is itself a sufficient circumstance to justify different scales of pay irrespective of their identity of their powers, duties and responsibilities.
We cannot accept this view.
If this view is to be stretched to its logical conclusion, the scales of pay of officers of the same rank in the Government of India may vary from department to department notwithstanding that their powers duties and responsibilities are identical.
We concede that equation of posts and equation of pay are matters, primarily for the Executive Government and expert bodies like the Pay Commission and not for Courts but we must hasten to say that where all things are equal, that is where all relevant considerations are the same, persons holding identical posts may not be treated differentially in the matter of their pay merely because they belong to different departments.
Of course, if officers of the same rank perform dissimilar functions and the powers, duties and responsibilities of the posts held by them vary, such officers may not be heard to complain of dissimilar pay merely because the posts are of the same rank and the nomenclature is the same.
" This Court however observed that a differential treatment in appropriate cases can be justified, when there are two grades based on reasonable grounds, and stated as follows: "It is well known that there can be and there are different grades in a service, with varying qualification for entry into a particular grade, the higher grade often being a promotional avenue for officers of the lower grade.
The higher qualifications for the higher grade, which may be 109 either academic qualifications or experience based on length of service reasonably sustain the classification of the officers into two grades with different scales of pay.
The principle of equal pay for equal work would be an abstract doctrine not attracting article 14 if sought to be applied to them." With respect we agree with the conclusion arrived at in the above Judgment, that where all relevant considerations are the same, persons holding identical posts and discharging similar duties should not be treated differently.
The case on hand is much stronger than the facts of the Randhir Singh 's case.
In that case, the drivers belonged to two different departments.
In this case, the Senior Draughtsmen, divided into two groups are in the same department doing identical and same work.
It is not a case of different grades created on the ground of higher qualification either academic or otherwise or an entitlement by any other criteria laid down.
The justification for this classification is by the mere accident of an earlier entry into service.
This cannot be justified.
The above decision of this Court has enlarged the doctrine of equal pay for equal work, envisaged in Article 39(d) of the Constitution of India and has exalted it to the position of a fundamental right by reading it alongwith Article 14.
This exposition of law had given rise to some whispering dissent in that the doctrine had been extended beyond permissible limits.
The observations that the abstract doctrine of equal pay for equal work has nothing to do with article 14, in the Judgment in Kishori Mohanlal Bakshi vs Union of India (supra), rendered by a Constitution Bench of this Court it is contended, may perhaps run counter to the observations in the decision referred above.
We do not think it necessary on the facts of this case to dwelve at length upon the effect of this observation on a wider campus of service jurisprudence in the context of equal pay for equal work which will have to be attempted in an appropriate case.
For the purposes of the case on hand, it is sufficient to note that the classification between two groups of Senior Draughtsmen is 110 without any basis.
They do the same work, they perform the same duties, and as such the ratio of the decision in Randhir Singh 's case applies to this case with greater force.
The Order passed by the Government of India on 27th January, 1978, implementing this classification violates article 14 of the Constitution and has to be struck down and we do so.
In our opinion, it would be a great injustice to continue the appellants on the scales of pay of Draughtsmen even after promotion as Senior Draughtsmen, which is destructive of all incentive and initiative in the service.
In our Judgment, the High Court was in error in declining relief to the appellants.
We accordingly, set aside the Judgment of the High Court and allow this appeal and direct the Union of India to fix the scale of pay of appellants at Rs. 425 15 50 EB 15 560 20 640 EB 20 700.
The appellants will be entitled to costs from the respondent No. 1.
M.L.A. Appeal allowed.

summary:
Senior Draughtsmen in the Ordnance Factories under the Ministry of Defence are either directly recruited or promoted from the post Draughtsmen.
At all relevant times all the Senior Draughtsmen throughout the above establishments were drawing the same pay scale of Rs. 205 280.
While revising the pay scale of various categories of employees, the Third Pay Commission recommended that the Draughtsmen should be placed in the scale of Rs. 330 560.
The Pay Commission also recommended that the Senior Draughtsmen should be divided into two groups and half the number of posts of Draughtsmen in the above organisations on the present pay scale of Rs. 205 280 be placed in the revised scale of Rs. 425 700 on the basis of seniority and the remaining half in the revised scale of Rs. 330 560.
Pursuant to the aforesaid recommendation, the Government of India by its Order dated 1st July, 1978 directed that only those senior Draughtsmen who were holding that post on 31st December, 1972 would be given the senior scale of pay i.e. Rs. 425 700.
The appellants who are senior Draughtsmen made representation to the Government of India against this grouping by the Third Pay Commission.
As the representations were not accepted, the appellants challenged the Order of the Government before the High Court in a Writ Petition contending that all the Senior Draughtsmen did the same kind of work and discharged same or similar duties and therefore there was no justification for distinction being made amongst the Senior Draughtsmen, providing two different pay scales on the basis of seniority.
The High Court dismissed the petition holding that it was open to the Government to fix two different pay scales for Senior Draughtsmen and that it was for the Government to decide what pay scale should be provided to the different classes of employees.
102 Allowing the appeal, ^ HELD: (1) Where all relevant considerations are the same, persons holding identical posts and discharging similar duties should not be treated differently.
Therefore the Order passed by the Government of India implementing the impugned recommendation of the Third Pay Commission dividing the Senior Draughtsmen into two categories with two different pay scales on the basis of seniority violates Article 14 of the Constitution and is struck down.
Randhir Singh vs Union of India and Ors.
; , followed.
In the instant case the group of Draughtsmen entitled to the higher scale of pay is not selected by any process nor is it based on any merit cum seniority basis, but is based only on seniority cum fitness.
Moreover, the Senior Draughtsmen divided into two groups are in the same Department doing identical and same work.
It is not a case of different grades created on the ground of higher qualification either academic or otherwise or an entitlement by any other criteria.
Thus the classification between the two groups of Senior Draughtsmen is without any basis.
In view of the total absence of any plea on the side of the respondents that the Senior Draughtsmen who are placed in the advantageous group, do not perform work and duties more onerous or different from the works performed by the appellants group, it will have to be held that this grouping violates Article 14 of the Constitution.
[107 E F] Kishori Mohanlal Bakshi vs Union of India, A.I.R. 1962 S.C. 1139; State of Punjab vs Joginder Singh, ; ; Unikat Sankunni Menon vs State of Rajasthan A.I.R. ; State of Mysore and Anr.
vs P. Narsingh Rao ; , distinguished.


judgement:
rit Petitions Nos.
5870 93/81, Under Article 32 of the constitution of India WITH Civil Appeal NO.
2226/85 From the Judgment and Order dated 14.
2. 1984 of the Bombay High Court in Writ Petition No. 4215 of 1983 Yogesbwar Prasad, H. Salve, P. H. Parckh, Mrs., Rani Chhabra, Ms. Data Krishnamurthy, Ms. A. Subhashini, A. section Pundir, J.S. Bali, section Balakrishnan, Pramod Sarup and R. section Sodhi, for the petitioners.
V. B. Joshi for the Appellant.
The following Judgment of the Court was delivered by DESAI, J. Promise of socio economic justice depicted in rosy language in articles 38, 39 and 41 is being translated into a real action oriented programme by the stand taken by the Union of India and the Ministry of Finance in this group of petitions and application for special leave which deserves approbation and commendation.
Amongst the neglected sections of the society women form a bulk.
In that bigger class widows are possibly the worst sufferers both socially and economically.
To them, a helping hand is extended, for providing succour sorely needed, by the two statements made in the Court by Mr. B. Dutta, learned counsel appearing for the Union of India and the Ministry of Finance.
Throughout the course of hearing, Mr. B. Dutta adopted a positive, constructive and helpful attitude and he is equally entitled to our appreciation.
As a sequel to the decision of the Constitution Bench of this Court in D.S. Nakara and Of hers vs Union of India(l) a number of petitions came to be filed by persons claiming to be entitled to the socially beneficent approach of the Court.
One such group comprised (1) ; 1044 widows of erstwhile Government servants who are not in receipt of family pension.
Family pension came to be conceptualised in the year 1950.
When a Government servant die in harness or soon after retirement, in the traditional Indian family on the death of the only earning member, the widow or the minor children were not only rendered orphans but faced more often destitution and starvation.
Traditionally speaking the widow was hardly in a position to obtain gainful employment.
She suffered the most in as much as she was deprived of the companionship of the husband and also became economically orphaned.
As a measure of socioeconomic justice family pension scheme was devise to help the widows tie over the crisis and till the minor children attain majority to extend them some succour.
This appeared to be the underlying motivation in devising the family pension scheme.
It was liberalised from time to time.
The liberalisation was however subject to the condition that the Government Servant had in his life time agreed that he shall make a contribution of an amount equal to two months ' emoluments or Rs. 5,000 whichever is less out of the death cum retirement gratuity.
Those Government servants who did not accept this condition were denied the benefit of family pension scheme.
Focussing on the liberalisation that was introduced in 1964 it transpires that the widow and the minor children of those Government servants who died prior to 1964 were not eligible for the benefit of liberalised scheme.
The other class which was left out of the liberalisation scheme was those Government servants who specifically opted out of the family pension scheme, 1964.
The resultant situation was that since January 1,1964 there were in force two parallel schemes in operation namely a) a pre liberalisation scheme which continued to be in force those who retired prior to 1.1.1964 or those who did not contribute out of the death cum retirement gratuity, roughly styled as non contributory scheme.
The other was the contributory scheme.
Both these schemes are incorporated in Rule 54 and 55 respectively of the Civil Services Pension Rules 1972.
The Union of India in its onward march for ushering in socioeconomic justice in the form of social security further took a bold and imaginative step on September 22, 1977 by which the pre condition of two months ' emolument out of death cum retirement gratuity was done away with.
Recognising the need for such a 1045 beneficial change, the memorandum introducing the 1977 liberalisation recorded the decision of the Union of India as under: "The staff side has suggested in the National Council of the JCN that this family pension is a social security measure and the employee should not be called upon to contribute towards the scheme.
The matter has been examined in the light of the recommendations of the National Council and the President is pleased to decide that no deduction should be made from the death cum retirement gratuity as a contribution towards the family pension." Accordingly since September 22, 1977 the contributory scheme ceased to exist.
A very analogous situation arose.
The widows of the Government Servants who had not agreed to make the contribution in accordance with the 1964 scheme were denied the benefit of pension scheme and this disability continued even after the changes introduced in 1977 when the scheme ceased to be contributory.
Such widows moved this Court in writ petitions.
Widows similarly situated had also filed Writ Petition No. 3749/84 in the High Court of Judicature at Bombay.
A Division Bench of the High Court rejected the writ petition for reasons, which, in our opinion, are wholly untenable but that is beside the point.
We accordingly granted leave to the petitioners whose petition were dismissed by the Bombay High Court.
Rule nisi was issued in writ petitions filed in this Court.
It is not necessary to examine the concept of pension.
As already held by this Court in numerous judgments that pension is a right not a bounty or gratuitous payment.
The payment of pension does not depend upon the discretion of the Government but is governed by the relevant rules and anyone entitled to the pension under the rules can claim it as a matter of right.
Deoki Nandan Prasad vs State of Bihar and Ors.(1) State of Punjab & Anr.
vs Iqbal Singh(2) and D.S. Vakara & Ors.
vs Union of India.
Where the Government Servant rendered service, to compensate which a family pension scheme is devised, the widow and the dependent minors would equally be entitled to family pension as a matter of right.
In fact we look upon pension not merely as a statutory right but as the fulfilment of a constitutional promise in as much as it partakes the character of public assistance in cases of unemployment, (1) [1971] Supp.
SCR 634 (2) [19761 3 SCR 360 1046 old age, disablement or similar other cases of underserved want.
Relevant rules merely make effective the constitutional mandate.
That is how pension has been looked upon in D.S. Nakara 's judgment.
At the hearing of group of matters we pointed out that since the family pension scheme has become non contributory effective from September 22, 1977 any attempt at denying its benefit to widows and dependents of Government servants who had not taken of the 1964 liberalisation scheme by making or agreeing to make necessary contribution would be denial of equality to persons similarly situated and hence violative of article 14.
If widows and dependents of deceased Government servants since after September 22, 1977 would be entitled to benefits of family pension without the obligation of making contribution, those widows who were denied the benefits on the ground that the Government servants having not agreed to make the contribution, could not be differently treated because that would be introducing an invidious classification: among those who would be entitled to similar treatment.
When this glaring dissimilar treatment emerged in the course of hearing in the Court, Mr. B. Dutta learned counsel appearing for the Union of India requested for a short adjournment to take further instructions.
On the next hearing Mr. B. Dutta made a statement on behalf of Union of India, the relevant portion of which may be extracted: "Government have examined the matter.
As the Family Pension Scheme, 1964 was made non contributory from 22.9.1977, Government would agree to extend the benefit of the Family Pension Scheme 1946 to all the living widows.
Payment to such widows may be made from 22.9.1977 or the date of death of the pensioner, whichever is later, till the date of death of the widow.
The benefit will also be available in cases where the death of the pensioner occurs hereafter.
Administrative procedures are being evolved to facilitate identification of widows of Government pensioners and to lay down the guidelines for the determination of family pensions.
The benefit of family pension mentioned above will not apply to the widows of Government servants who would not have been covered by the scheme even if the scheme had been given retrospective effect." 1047 While examining the statement it transpired that certain clarifications were necessary. 'Common Cause ' a Society which is a petitioner in one petition pointed out certain aspects of the statement which needed clarification.
The Court directed the the 'Common Cause ' society to send a letter to the Ministry of Finance indicating the points on which clarifications were required by Y them.
The issues raised by the Society may be summed up as under: "(i) whether the orders will apply to the widow/minor son/ unmarried daughter as defined in the relevant provisions of family pension scheme; (ii) whether the scheme of pension as prescribed with effect from 1.1.1973 will be made uniformly applicable to all the eligible persons in the family pension scheme; and (iii) whether the benefits of family pension scheme will be made available to all pensioners irrespective of the fact whether they had or had not contributed two months ' emoluments in terms of the original family pension scheme, which contribution was subsequently deleted with effect from 22 9. 1977.
" Today when the matter was taken up for final hearing another statement was submitted by Mr B. Dutta on behalf of the of India.
The Government of India submitted its clarifications on the afore mentioned three points which reads as under: "(i) Governments are prepared to grant to the dependents i.e. minor sons, etc of the pensioners governed unclear pre 1964 scheme the same pensioners benefits as are admissible to the dependents under current pension rules.
(ii) It is clarified that Government are agreeable to apply the increased pension rates introduced from 1.1 1973 to all the eligible persons, including dependents.
This will, however, be subject to the condition that the total amount admissible (excluding dearness relief) under the liberalised provision now being agreed to, will not be more than what is admissible to a person covered 1048 under the Rules.
(iii) Government have already agreed to the grant of ar rears of family pension with effect from 22.9.77 the date on which contribution of two months ' emoluments by pensioners was dispensed with.
Persons who are now to be granted the benefits of family pension will not be required to contribute two months emoluments.
Similarly, no demand for refund of contribution already made by pensioners will be entertained, ' The clarifications offered are clear, unambiguous and wholly satisfactory.
Learned counsel appearing for the petitioners stated that nothing more is required to be done and requested us to incorporate the clarifications submitted to the Court.
Accordingly these petitions and appeals are disposed of in terms as herein above indicated.
We order accordingly.
The appeal against the decision of the Division Bench of the Bombay High Court is also allowed in the same terms.
This is a happy ending to this extremely humane problem.

summary:
Since January 1, 1964, there were in force two parallel family pension schemes in operation, namely, (a) a pre liberalisation scheme which continued to be in force for those who retired prior to 1.1.1964 or those who did not contribute out of the death cum retirement gratuity, roughly styled as non contributory scheme.
The other was the contributory scheme.
Both these schemes are incorporated in Rule 51 and 55 respectively of the Civil Services Pension Rules 1972.
On September 22, 1977 the Government of India done away with the pre condition of contribution of two months emoluments out of death cum retirement gratuity.
But, the widows of the Government servants who had not agreed to make the contribution in accordance with the 1964 scheme were denied the benefit of pension scheme and this disability continued even after the changes introduced in 1977 when the scheme ceased to be contributory Such widows moved Supreme Court and Bombay High Court in writ petitions.
The High Court rejected the writ petition Disposing of the petitions and the appeal to this Court, ^ HELD: 1.
Since the family pension scheme has become non contributory effective from September 22,1977, any attempt at denying its benefit to widows and dependents of Government servants who had not taken advantage of the 1964 liberalisation scheme by making or agreeing to make necessary contribution would be denial of equality to persons similarly situated and hence violative of article 14.
If widows and dependents of deceased Government servants since after September 22, 1977 would be entitled to benefits of family pension scheme without the obligation of making contribution, those widows who were denied the benefits of the ground that the Government servants having not agreed to make the contribution, could not be differently treated because that would be introducing an invidious classification among those who would be entitled to similar treatment.
[1046 B D] 1043 2.
Where the Government servant rendered service, to compensate which a family pension scheme is devised the widow and the dependent minors would equally be entitled to family pension .19 a matter of right.
If fact the Court looks upon pension not merely as a statutory right but as the fulfilment of a constitutional promise inasmuch as it partakes the character of public assistance in cases of unemployment old age, disablement or similar other cases of undeserved want.
Relevant rules merely make effective the constitutional mandate.
That is how pension has been looked upon in D.S. Nakara 's case; , [1045; G H 1046 A]