A) ABSTRACT / HEADNOTE
The case concerns the entitlement of employees to Puja Bonus and the distinction between such payments being part of an implied term of employment versus being customary and traditional. The appellant company, The Graham Trading Co. (India) Ltd., had been paying its workmen one month’s wages as Puja Bonus from 1940 to 1952. From 1948 onwards, each payment was accompanied by a written clarification that it was an ex gratia payment not intended as a precedent. In 1953, the company declined to pay bonus due to losses, prompting a dispute referred to the Industrial Tribunal. The Tribunal rejected the claim on both implied term and custom grounds. The Labour Appellate Tribunal reversed the decision, finding sufficient evidence of customary payment. The Supreme Court examined the legal tests for customary and traditional bonus, which included: (i) unbroken payment over a long period, (ii) payment even in loss years, (iii) uniform quantum, and (iv) independence from profits. The Court held that though no implied contractual term existed, the payment had indeed become customary and traditional. The appeal was dismissed, affirming one month’s basic wages as Puja Bonus for 1953.
Keywords: Puja Bonus, Customary Payment, Implied Term of Employment, Industrial Dispute, Labour Law, Ex Gratia Payment, Supreme Court of India.
B) CASE DETAILS
i) Judgement Cause Title:
The Graham Trading Co. (India) Ltd. v. Its Workmen
ii) Case Number:
Civil Appeal No. 161 of 1959
iii) Judgement Date:
7th May 1959
iv) Court:
Supreme Court of India
v) Quorum:
B. P. Sinha, P. B. Gajendragadkar, and K. N. Wanchoo, JJ.
vi) Author:
Justice K. N. Wanchoo
vii) Citation:
1960 (1) SCR 107
viii) Legal Provisions Involved:
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Industrial Disputes Act, 1947 – provisions regarding reference of disputes and adjudication.
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Judicial principles laid down in:
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The Mill Owners’ Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay, 1950 LLJ 1247.
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Mahalakshmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton Mills Workers’ Union, 1952 LAC 370.
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Messrs. Ispahani Ltd. v. Ispahani Employees’ Union, [1960(1)] SCR 24.
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ix) Judgments Overruled by the Case (if any):
None explicitly overruled.
x) Case is Related to which Law Subjects:
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Labour Law
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Industrial Disputes
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Employment Law
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Contractual Obligations
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Customary Practices in Employment
C) INTRODUCTION AND BACKGROUND OF JUDGEMENT
The dispute arose in Bengal, where Puja Bonus has cultural and economic significance, particularly during the Durga Puja festival. The case presented a nuanced question — whether the long-standing payment of a festival bonus becomes legally enforceable as a term of employment or as a binding custom, despite repeated disclaimers by the employer labelling the payments as ex gratia. The company consistently paid the bonus from 1940 to 1952, barring no year, and even in years of financial loss. However, after recording losses in 1953, it refused payment. The workmen contended that the payment had become customary and integral to their employment conditions. The Supreme Court had to dissect and differentiate between the concepts of implied contractual term and customary payment while assessing the weight of unilateral employer declarations against the historical course of conduct.
D) FACTS OF THE CASE
The appellant company paid its workmen one month’s wages as Puja Bonus from 1940 to 1950 without break. In 1951, employees received one month’s bonus in October and an additional half-month in December. In 1952, the company initially paid an “advance of pay” equal to one month’s wages but later converted it into a bonus after negotiations. From 1948 onwards, all payments were issued with a written disclaimer stating they were ex gratia and not to be treated as precedent. In 1953, citing losses, the company refused to pay any bonus. The workmen demanded three months’ wages as bonus, arguing the payment was customary and part of employment terms. The Industrial Tribunal rejected the claim, but the Labour Appellate Tribunal awarded one month’s wages as customary Puja Bonus. The company appealed to the Supreme Court.
E) LEGAL ISSUES RAISED
i) Whether the payment of Puja Bonus in previous years had created an implied term of employment binding the employer to continue payment.
ii) Whether the payment had become a customary and traditional obligation, enforceable irrespective of profits or losses.
F) PETITIONER / APPELLANT’S ARGUMENTS
i) The counsel for the appellant contended that all payments from 1948 to 1952 were explicitly stated as ex gratia, without creating precedent. Therefore, there was no mutual intention to form a binding term of employment.
ii) The appellant argued that Puja Bonus was contingent on profits, and in a loss-making year, there was no obligation to pay.
iii) It was submitted that occasional payment in loss years did not alter the fundamentally voluntary nature of the payment, which remained discretionary.
iv) The appellant stressed that for a custom to be binding, it must be certain, reasonable, and consistently recognised as obligatory, which was not the case here given their explicit disclaimers.
G) RESPONDENT’S ARGUMENTS
i) The respondents argued that the company’s continuous payment of Puja Bonus for 13 years, including loss years, evidenced a binding custom independent of profits.
ii) They contended that the bonus was intended to meet festival expenses, an established practice in Bengal, making it a social and economic necessity rather than a profit-linked reward.
iii) They asserted that unilateral employer statements could not defeat a long-standing custom accepted in practice by both parties.
iv) The respondents argued that the uniformity in quantum (one month’s wages) and the unbroken nature of the payments satisfied the legal criteria for customary bonus.
H) RELATED LEGAL PROVISIONS
i) Industrial Disputes Act, 1947 – Sections dealing with the reference of disputes to Industrial Tribunals and powers of adjudication.
ii) Principles from judicial precedents:
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The Mill Owners’ Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay, 1950 LLJ 1247 – Full Bench formula for profit-based bonus.
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Mahalakshmi Cotton Mills Ltd. v. Mahalaxmi Cotton Mills Workers’ Union, 1952 LAC 370 – Tests for implied term of employment.
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Messrs. Ispahani Ltd. v. Ispahani Employees’ Union, [1960(1)] SCR 24 – Differentiation between implied terms and custom.
I) JUDGEMENT
a. Ratio Decidendi
The Court held that although an implied term of employment could not be established due to explicit disclaimers between 1948 and 1952, the payment was nonetheless enforceable as a customary and traditional bonus. The Court laid down four conditions for such recognition:
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Unbroken series of years of payment.
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Long period of payment beyond that needed for implied terms.
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Independence from profits, including payment in loss years.
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Uniform rate of payment.
All conditions were satisfied in the present case.
b. Obiter Dicta
The Court observed that Puja Bonus in Bengal is deeply rooted in cultural tradition and economic necessity. It also clarified that unilateral employer declarations labelling payments as ex gratia cannot override established customs if other criteria are met.
c. Guidelines
When adjudicating claims for customary festival bonuses, tribunals should:
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Examine continuity and duration of payments.
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Verify payments in loss years to exclude profit-dependence.
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Ensure quantum uniformity.
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Disregard unilateral employer statements inconsistent with long-standing practice.
J) CONCLUSION & COMMENTS
This judgment solidified the legal distinction between customary and contractual obligations in employment law. It underscored that a consistent course of conduct can crystallise into an enforceable custom despite repeated denials by one party, provided strict evidentiary conditions are met. It also recognised the socio-cultural context of labour benefits, particularly in regional traditions like Puja Bonus in Bengal.
K) REFERENCES
a. Important Cases Referred:
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The Mill Owners’ Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay, 1950 LLJ 1247.
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Mahalakshmi Cotton Mills Ltd. v. Mahalaxmi Cotton Mills Workers’ Union, 1952 LAC 370.
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Messrs. Ispahani Ltd. v. Ispahani Employees’ Union, [1960(1)] SCR 24.
b. Important Statutes Referred:
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Industrial Disputes Act, 1947.
