The Director of Industrial and Commerce vs K. Vellaichami and Others

Alagiriswami, J.—This writ petition is filed to quash the order of the Labour Court, Madurdi, directing the payment of bonus to the employees employed in the Textile Mills Parts Unit of the Government of Madras located in the Industrial Estate at Madurai.

Objection was taken before the Labour Court that u/s 32(iv) of the Act, the Act does not apply to employees employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or a State Government or a local authority and therefore no bonus was payable. But the Labour Court was impressed by the argument on behalf of the employees based on Section 20 of the Act which lays down that if in any accounting year an establish neat in public sector sells any goods produced or manufactured by it or renders any service in competition with an establishment in private sector and the income from such sale or services or both is not less than twenty percent of the gross income of the establishment in public sector for that year, then, the provisions of ibis Act shall apply in relation to such establishment in public sector as they apply in relation to a like establishment in private sector.

But unfortunately there was no material before the lower court to show whether this condition was satisfied except the fact that the profits were Rs. 56,000/- and Rs. 75,000/- respectively during the years 1963-1964 and 1964-1965 respectively. What was more, the Labour Court failed to consider the definition of "establishment in public sector" found in Section 2(xvi) of the Act which is as follows: "Establishment in public sector means an establishment owned, controlled or managed by (a) a Government company as defined in Section 6(1) of the Companies Act, 1956; (b) a Corporation in which not less than 40% of its capital is held (whether singly or taken together) by (i) the Government (ii) the Reserve Bank of India or (iii) a Corporation owned by the Government or Reserve Bank of India." thus an establishment in public sector is an establishment owned by a Government company in which the Government or the Reserve Bank have substantial proportion of shares. This should be put in contra distinction to ad establishment engaged in any industry carried on by or under the authority of any Department of the Central Government or a State Government or a local authority, In the latter case the industry is run directly by the Government and in such a case the Act does not apply. In the former case the industry is run by a company or Corporation owned by the Government or in which the Government or the Reserve Bank of India hold not less than 40% of the shares. This distinction the Labour Court failed to keep in mind and thus misdirected itself and this has been responsible for the wrong award. The error is apparent on the face of the record.

The writ petition is allowed and the award of the Labour Court is quashed. There will be no order as to costs.