HARYANA STATE COOPERATIVE LAND DEVELOPMENT BANK LTDversusHARYANA STATE COOPERATIVE LAND DEVELOPMENT BANKS EMPLOYEES UNION AND ANR.

            HARYANA STATE COOPERATIVE LAND                          A
                DEVELOPMENT BANK LTD.
                                v.
   HARYANA STATE COOPERATIVE LAND DEVELOPMENT
   . .... BANKS EMPLOYEES UNION AND ANR.

                       DECEMBER 18, 2003
                                                                    B

       [DORAISWAMY RAJU AND ARIJJT PASAYAT, JJ.]

    Service Law :
                                                                    c
     Haryana Cooperative Society Act, 1984-Sections 3 proviso thereto,
10, 34 third proviso thereto-Rules fiwned under the Act-Rule 21-
Bonus-Payment of-To the employees of Primary Bank at parity with
employees ofApex State Bank-Apex Bank transacted its business through
PrimaTJJ Banks-Primary Banks maintaining their separate accounts-At D
the relevant time concerned Primary Bank incurring a loss and had no
allocable surplus-Held: Employees ofPrimary Bank not entitled to bonus
at parity with employees ofApex Bank as Primary Banks have independent
c01porate existence-Payment of Bonus Act, 1965.

    Statutory Law :                                                 E
    Proviso to a Provision-Purpose of-Discussed.

      Apex State Bank, transacted its business though Primar:' Banks
which are its members. Staff of the Primary Banks except class IV
employees were drawn from Apex Bank. Primary Banks maintained F
their separate accounts and balance sheet. At the relevant time they
were incurring loss and had no allocable surplus. Respondent No. 1-
Union, which had members of the appellant-Primary Bank, filed writ
petition raising a demand that they were entitled to bonus at the rate
applicable to employees of the Apex Bank. The claim was resisted by G
Primary Bank on the ground that they were separate entities with
separate balance sheet and profit and loss accounts and have distinct
corporate identity under the Act. Single Judge of High Court, allowed
the petition holding that employees of Prim.try Banks were entitled to
bonus at the rate app•icable to employees of Apex Bank as Rule 21 has H
                               1039
    1040               SUPREME COURT REPORTS [2003) SUPP. 6 S.C.R.

A   overriding effect vis-a-vis Section 34 of Haryana Cooperative Society
    Act, 1984 in view of Section 34A of the Act. The view of Single Judge
    was confirmed by Division Bench in Letters Patent AppeaJ.

           In appeal to this Court appellant-Bank contended that according
B to third proviso to Section 34, minimum bonus was only 8.33% of the
    wages, if the employer has no allocable surplus; that Rule 21 does not
    have overriding effect vis-a-vis Section 34; and that merely because
    members 9fthe staff were drawn from the Apex Bank, it does not mean
    that they continued to be employees of the Apex Bank.

C        Respondent-Union, in order to support its case.relied on letter of
    previous years relating to payment of bonus.

           Allowing the appeal, the Court

           HELD : 1.1. The payment of minimum bonus is provided in
D Section 10 of Haryana Cooperative Society Act, 1984 and is fixed at
    8.33 percentage of the salary or wages earned by the employees. The
    entitlement of higher bonus comes in case the allocable surplus permits
    payment of higher ,bonus in terms of the applicable formula. The view
    of High Court that Rule 21 had overriding effect vis-a-vis Section 34,
E   by referring to Section 34-A of the Act, is untenable. Rule 2lwas
    interpreted to mean as if all other provisions of the Act had to give way
    to Rule 21. It is really not so. Sections 34 and 34-A make the position
    clear. The Primary Banks have independent corporate existence and
    were undisputedly maintaining separate Balance Sheet and Profit and
F   Loss account. Therefore proviso to Section 3 of the Act has full
    application. High Court did not take into account the effect of the
    proviso to Section 3, and third proviso to Section 34. (1048-B-E)

         1.2. Where in a company having number of undertakings sepa-
G   rate accounts 11re kept for each sep2rate undertaking though it is not
    a requirement of the Companies Act, 1956, they shall be treated as
    different undertakings for the purpose of the Act. These aspects do not
    appear to have been considered by the High Court which erroneously
    proceeded to hold about Rule 21 having overriding effect over Section
    34. Rules are framed under Section 32 of the Act. Therefore, question
H   of Rules have overriding effect does not arise. 11048-F-H]
HARYANA COOP., LAND DEVELOPMENT BANK LTD. v. HARYANA STATE COOP. LAND   } 041
DEVELOPMENT BANKS EMPLOYEES UNION

      Mis. Alloy Steel Projectv. The Workmen, (1971] 1sec536 and The A
K. C.P. Employees' Association, Madras v. The Management ofK. C.P. Ltd.
Madras and Others, (I 978) 2 SCC 42, relied on.

      2.1. The normal function of a proviso is to except something out
of the enactment or to qualify something enacted therein which but for B
the proviso would be within the purview of the enactment. When one
finds a proviso to a Section the natural presumption is that, but for
the proviso, the enacting part of the Section would have included the
subject matter of the proviso. The proper function of a proviso is to
except and to deal with a case which would otherwise fall within the
general language of the main enactment and its effect is confined to            c
that case. It is a qualification of the preceding enactment which is
expressed in terms too general to be quite accurate. As a general rule,
a proviso is added to an enactment to qualify or create an exception
to what is in the enactment and ordinarily, a proviso is not interpreted
as stating a general rule. Normally, a proviso does not travel beyond D
the provision to which it is a proviso. It carves out an exception to the
main provision to which it has been enacted as a proviso and to no
other. [1046-D-H; 1047-A]

     Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash              E
Chandra Yograj Sinha, AIR (1961) SC 1596 and Calcutta Tramways Co.
Ltd. v. Corporation of Calcutta, AIR (1965) SC 1728, relied on.

     A.N Sehgal and Ors. v. Raje Ram Sheoram and Ors., AIR (1991)
SC 1406; Tribhovm1das Haribhai Tamboli v. Gujarat Revenue Tribunal
and Ors., AIR (1991) SC 1538 and Kera/a State Housing Board and Ors.            F
v. Ramapriya Hotels (P) Ltd. and Ors., [1994J 5 SCC 672, referred to.

      Mullins v. Treasurer of Survey, (1880) 5 QBD 170; West Derby
Union v. Metropolitan Life Assurance Co., (1897) AC 647 (HL); Forbes
v. Git, (1922) 1 A.C. 256; R. v. Taunton, St. James, 9 B. and C. 836 and G
Re Barker, 25 Q.B.D. 285, referred to.

      Littleton by Coke 18th Edition, 146, referred to.

    2.2. A proviso to a Section cannot be used to import into the
enacting part something which is not t.1ere, but where the enacting part H
    1042                SUPREME COURT REPORTS [2003] SUPP. 6 S.C.R.

A   is susceptible to several possible meanings it may be controlled by the
    proviso. (1047-F-G)

         Ali MK. and Ors. v. State of Kera/a and Ors., (2003) 4 SCALE 197,
    referred to.

B          Jennings v. Kelly, (1940) A.C. 206, referred to.

         3. The documents referred to by respondent No. I are relating to
    a period when the Primary Banks were earning profits. Presently,
    admittedly, the Primary Banks are incurring losses, and there is no
C   allocable surplus.. That being the position, the documents in question
    do not help the respondents in any 'event. (1049-A-B)

         CIVIL APPELLATE JURISDICTION. : Civil Appeal No. 10091 of
    2003.

D       From the Judgment and Order dated 31.10.2001 of the Punjab and
    Haryana High Court in L.P.A. No. 571 of 1997.

           P.P. Rao, Anil K. Misra and Sanjay R. Hegde for the Appellant.

E          Vimal Chandra and S. Dave for the Respondents.

           The Judgment of the Court was delivered by

           ARIJIT PASAYAT, J. : Delay condoned.

F          Leave granted.

          The pivotal issue involved in this appeal relates to the question as to
    whether the employees working with Primary Agricultural Cooperative
    Banks (in short 'Primary Banks') are entitled to bonus at the same rate at
G   which it was paid to employees working in the Apex Bank (also described
    as 'State Bank') i.e. The Haryana State Cooperative Land Development
    Bank Limited. The Apex Bank is governed by the Haryana Cooperative
    Society Act, l 984 (in short the 'Act'). The appellant transacts its business
    mainly through Primary Banks which are its members. The members of
    the Apex Bank belonging to the area of operation of the particular Primary
H   Bank automatically become members of the concerned Primary Bank from
HARYANA COOP., LAND DEVELOPMENT BANK LTD "· HARYANA STATE COOP. LAND   J 043
DEVELOPMENT BANKS EM?LOYEES UNION (PASAYAT, J.]

the date of registration. Staff of the Primary Banks except class IV A
employees are drawn from the Apex Bank out of the cadre maintained by
it in terms of clause 70 of the model bye-laws applicable to the Primary
Banks. The respondent no. 1-union raised a demand stating that it is
entitled to bonus at the rate applicable to employees of the Apex Bank. The
claim was resisted by the Primary Banks on the ground that they are B
separate entities with separate Balance Sheet and Profit and Loss accounts
and have a distinct cooperative and corporate identity under the Act and,
therefore, i~ not required to pay bonus at the same rate as the employees
of the Apex Bank in terms of Payment of Bonus Act, 1965 (in short 'the
Act'). Accepting the writ petition filed by respondent no. I-union, learned C
 Single Judge of the Punjab and Haryana High Court directed payment of
 bonus at the rate payable to the staff working with the Apex Bank, which
is also described as the State Bank in the rules framed by the Registrar of
Cooperative Societies under Section 37(2) of the Act. The view was
confirmed by a Division Bench in Letters Patent Appeal by the impugned
judgment.                                                                   D
      Mr. P.P. Rao, learned senior counsel, appearing for appellant-Bank
submitted that the High Court lost sight of third proviso to Section 34 of
the Act, which clearly stipulated that the minimum bonus was 8.33 per cent
of the saJary or wages earned by the employee concerned during the E
accounting year, ifthe employer has no allocable surplus in the accounting
year or the amount of such allocable surplus is only that which for the
proviso to sub-section (2A) of Section 10 would entitle the employees only
to receive the amount of bonus which is less than the aforesaid percentage.

      It was submitted that the High Court erroneously held that Rule 21 F
has overriding effect vis-a-vis the aforesaid provision. It was further
submitted that merely because the members of the staff were drawn from
the Apex State Bank, it does not mean that they continued to be the
employees of the State Bank. On the contrary, they are employees of the
Primary Bank with different service conditions. It was further submitted G
that if really allocable surplus was to be taken as a whole including the
financial results of both the Apex Bank and the Primary Banks for payment
at par with that of the employees of the Apex Bank, then there has to be
aggregation of the profits of the Primary Banks which are running· at loss
with that of the Apex Bank. Unless that is done there was no ratio_nale for H
      1044                SUPREME COURT REPORTS [2003] SUPP. 6 S.C.R.

- A the direction given by the High Cou1t to pay at par with the employees
      of the Apex Bank.

            Per contra, learned counsel for the respondent no. I-union submitted
      that the High Court has correctly analysed the legal position. In any event,
  B   the appellant itself was adopting the formula approved by the High Court
      in terms of Rule 21. Reference was made to certain correspondences made
      by the Managing Director in the matter of bonus i.e. letter dated 28.8.1980
      (relating to payment of bonus for year 1978-79).

             In order to appreciate ~he rival submission a few provisions need to
  C be noted. Sections 3, IO, 34 and 34-A are as under:
                "3. Establishment to include departments undertakings and
                branches:-

                Where an establishment consists of different departments or
  D             undertakings or has branches, whether situated in the same place
                or in different places, all such departments or undertakings of
                branches shall be treated as parts of the same establishment for
                the purpose of computation of bonus under this Act.

                Provided that where for any accounting year a separate balance
  E             sheet and profit and loss account are prepared and maintained in
                respondent of any such department or undertaking or branch then,
                such department or undertaking or branch shall be treated as a
                separate establishment for the purpose of compensation of bonus
                under this Act for that year, unless such department or undertak-
  F             ing or branch was immediately before the commencement qfthat
                account year treated as part of the establishment for the purpose
                of computation of Bonus.

                I 0. Payment of Minimum Bonus - Subject to the other provisions
                of this Act, every employer shall be bound to pay to every
  G             employee in respect of the accounting year commencing on any
                day in the year 1979 and in respect of every subsequent account-
                ing year a minimum bonus which shall be 8.33 per cent of the
                salary or wage earned ~y the employee during the accounting year
                or one hundred rupees, whichever is higher, whether or not the
  H             employee has any allocable surplus in the accounting year.
HARYANA COOP., LAND DEVELOPMENT BANK LTD v. HARYANA STATE COOP. LAND   1045
DEVELOPMENT BANKS EMPLOYEES UNION (PASAYAT. J]

          Provided that where an employee has not completed fifteen years A
          of age at the beginning of the accounting year the provisions of
          this Section shall have effect in relation to such employee as if
          for the words "one hundred rupees" the words "sixty rupees" were
          substituted.
                                                                               B
          34. Employees and employers are to be precluded from entering
          into agreements for grant of bonus under a different formula -
          Nothing contained in this Act shall be construed to preclude
          employees employed in any establishment or class of establish-
          ments from entering into agreement with their employer for C
          granting them an amount of bonus under a formula which is
          different from that under this Act.

          Provided that no such agreement shall have effect unless it is
          entered into with the previous approval of the appropriate Gov- D
          ernment.

          Provided further that any such agreement whereby the employees
          relinquish their rights to receive the minimum bonus under sub-
          section (23A) of Section l 0 shall be null and void and in so far E
          it purports to deprive them of such right;

          Provided also that such employees shall not be entitled to be paid
          bonus in excess of -

                                                                               F
          (a)   8.33 per cent of the salary or wage earned by them during
                the accounting year if the employer has no allocable surplus
                in the accounting year or the amount of such allocable
                surplus is only so much that, but for the provisions of sub-
                section (2A) of S·ection I 0, it would entitle the employees G
                only to receive an amount of bonus which is less than the
                aforesaid percentage; or

          (b)   Twenty per cent of the salary or wage earned by them during
                the accounting year.
                                                                               H
    1046                SUPREME COURT REPORTS [2003) SUPP. 6 S.C.R.

A            34A. Effect of laws and agreements inconsistent with the Act -
             Subject to the provisions of Section 31 A and 34, the provisions
             of this Act shall have effect notwithstanding anything inconsistent
             therewith contained in any other law for the time being in force
             or in the terms of any award, agreement, settlement, or contract
             of service."
B
         Third proviso to Section 3 makes it clear that where for any
    accounting year, a separate ·Balance Sheet and Profit and Loss account are
    prepared and maintained in respect of any department or undertaking or
C   branch, such department or undertaking or branch shall be tre2ted as a
    separate establishment for the purpose of computation of bonus under the
    Act for that year, unless for the previous period such department or
    und~rtaking or branch was treated as a part of the establishment for the
    purpose of computation of bonus .. Similarly, third proviso to Section 34
D   deals with modalities for working out entitlement for bonus ..

          The normal function of a proviso is to except something out of the
    enactment or to qualify something enacted therein which but for the
    proviso would be within the purview of the enactment. As was stated in
    Mullins v. Treasurer of Survey, [1880) 5 QBD 170, (referred to in Shah
E   Bhojraj Kuverji Oil Mills and Ginning Fact01y v. Subhash Chandra Yograj
    Sinha, AIR (1961) SC 1596 and Calcutta Tramways Co. Ltd. v. Corpo-
    ration of Calcutta, AIR ( 1965) SC 1728); when one finds a proviso to a
    section the natural presumption is that, but for the proviso, the enacting
F   part of the section would have included the subject matter of the proviso.
    The proper function of a proviso is to except and to deal with a case which
    would otherwise fall within the general language of the main enactment
    and its effect is confined to that case. It is a qualification of the preceding
    enactment which is expressed in terms too general to be quite accurate.
G   As a general rule, a proviso is added to an enactment to qualify or create
    an exception to what is in the enactment and ordinarily, a proviso is not
    interpreted as stating a general rule. "If the language of the enacting part
    of the statute does not contain the provisions which are said to occur in
    it you cannot derive these provisions by implication from a proviso." Said
H   Lord Watson in West Derby Union v. Metropolitan Life Assurance Co.,
HARYANA COOP., LAND DEVELOPMENT BANK LTD."· HARYANA STATE COOP. LAND   1047
DEVELOPMENT BANKS EMPLOYEES L'NION (PASAYAT. J.]

(1897 AC 647)(HL). Normally, a proviso does not travel beyond the A
provision to which it is a proviso. It carves out an exception to the main
provision to which it has been enacted as a proviso and to no other. (See
A.N Sehgal and Ors. v. Raje Ram Sheoram and Ors., AIR (1991) SC 1406,
Tribhovandas Haribhai Tamboli v. Gujarat Revenue Tribunal and Ors.
AIR (1991) SC 1538 and Kera/a State Housing Board and Ors. v. B
Ramapriya Hotels (P) Ltd. and Ors., [1994] 5 SCC 672.)

    "This word (proviso) hath divers operations. Sometime it worketh
a qualification or limitation; sometime a condition; and sometime a
covenant" (Coke upon Littleton 18th Edition, 146)                              C
      "If in a deed an earlier clause is followed by a later clause which
destroys altogether the obligation created by the earlier clause, the later
clause is to be rejected as repugnant, and the earlier clause prevails .... But
if the later clause does not destroy but only qualifies the earlier, then the D
two are to be read together and effect is to be given to the intention of the
parties as disclosed by the deed as a whole" (per Lord Wrenbury in Forbes
v. Git, (1922) I A.C. 256).

    A statutory proviso "is something engrafted on a preceding enact-          E
ment" (R. v. Taunton, St James, 9 B. & C. 836).

      "The ordinary and proper function of a proviso coming after a general
enactment is to limit that general enactment in certain instances" (per Lord
Esher in Re Barker, 25 Q.B.D. 285).
                                                                               F
      A proviso to a section cannot be used to import into the enacting part
something which is not there, but where the enacting part is susceptible
to several possible meanings it may be controlled by the proviso [See
Jennings v. Kelly, (1940) A.C. 206].
                                                                               G
    The above position was noted in Ali MK. & Ors. v. State of Kera/a
and Ors., (2003) 4 SCALE 197.

     The allocable surplus is an amount calculated out of the available
surplus. How the available surplus is to be computed is provided under H
    1048               SUPREME COURT REPORTS [2003] SUPP. 6 S.C.R.
A Section 5 of the Act. It is determined after deducting from the gross profit
    such amounts as are detailed in Section 6 of the Act. The inevitable result
    is that the gross profit has to be worked out and therefrom the prior charges
    mentioned in clauses (a) to (d) of Section 6 are to be deducted. Gross profit
    is determined in terms of Section 4 of the Act. In case of non-banking
B   companies, it is calculated in the manner prescribed in the Second Schedule
    while in case of banking company it is calculated in the manner specified
    in the First Schedule. The payment of minimum bonus is provided in
    Section IO of the Act and is fixed at 8.33 percentage of the salary or wages
    earned by the employee. The entitlement of higher bonus comes in case
    the allocable surplus permits payment of higher bonus in terms of the
C   applicable fonnula. A reading of the impugned judgment shows that the
    High Court was of the view that Rule 21 had overriding effect vis-a-vis
    Secdon 34, by referring to Section 34-A of the Act. The view is clearly
    untenable. Rule 21 was interpreted to mean as if all other provisions of
    the Act had to give way to Rule 21. It is really not so. Sections 34 and
D   34-A make the position_ clear. The Primary Banks have independent
    corporate existence and were undisputedly maintaining separate Balance
    Sheet and Profit and Loss account. Therefore, proviso to Section 3 of the
    Act has full appl!cation. Unfortunately, the High Court did not take into
    account the effect of the proviso to Section 3, and third proviso to Section
E   34.

          As noted above, separate books of accounts were maintained and
    separate Balance Sheet and Profit and Loss account were prepared. The
    primar; co-operative banks are distinct corporate entities with their own
    respective registration or Incorporation. As observed by this Court in Mis.
F   Alloy Steel Project v. The Workmen, [1971] 1 SCC 536 and The K.C.P.
    Employees' Association, Madras v. The Management of K.C.P. Ltd.,
    Madras and Ors., [1978] 2 SCC 42, where in a company having number
    of undertakings separate accounts are kept for each separate undertaking
    though it is not a requirement of the Companies Act, 1956 (in short 'the
G   Company Act'), they shall be treated ·as different undertakings for the
    purpose of the Act. These aspects do not appear to have been considered
    by the High Court which erroneously proceeded to hold about Rule 21
    having overriding effect over Section 34. Rules are framed under Section
    32 1of the Act. Therefore, question of Rules have oveniding effect does
H   not arise.
HARYANA COOP., LAND DEVELOPMENT BANK LTD. v. HARYANA STATE COOP. LAND       1049
DEVELOPMENT BANKS EMPLOYEES UNION (PASAYAT, J.]

      Coming to the relevance of documents referred to by the respondent A
no. 1 it is to be seen that those relating to a period when the Priinary Banks
were earning profits. Presently, admittedly, the Primary Banks are incur-
ring losses, and there is no allocable surplus. That being the position, the
documents in question do not help the respondents in any event.
                                                                                    B
       The impugned judgment is indefensible and is set aside and the writ
petition filed before the High Court shall stand dismissed. The appeal
succeeds, but in the circumstances without any order as to costs.

K.K.T.                                                            Appeal allowed.