Holding

The Supreme Court dismissed the appeals, holding that the 1982 order was not retrospective, the Board’s claim under Section 32(v)(c) was waived, and the Section 36 exemption orders were invalid for not following the prescribed procedure of allowing rebuttal evidence.

Summary

The Tamil Nadu Housing Board was exempted from the Payment of Bonus Act, 1965 by two Government Orders issued under Section 36 of the Act (1979 and 1982). Employees of the Board challenged the exemptions, and the Madras High Court set aside the orders, directing the Board to pay statutory bonus from the 1978‑79 accounting year onward. On appeal, the Supreme Court held that the 1982 order was not retrospective, that the Board could not rely on Section 32(v)(c) for statutory exemption because it had waived that claim by seeking exemption under Section 36, and that the exemption orders were invalid as they were passed without giving the affected employees an opportunity to submit rebuttal evidence, a procedural requirement for the third category of conditional legislation. Consequently, the appeals were dismissed and the High Court’s orders were affirmed.

Issues considered

The 23 November 1982 exemption order – whether it operated retrospectively to cover accounting years 1978‑79 to 1981‑82.
Whether the Tamil Nadu Housing Board is statutorily exempt under Section 32(v)(c) of the Payment of Bonus Act, 1965.
Whether exemption orders issued under Section 36 of the Act are valid without affording the affected employees a chance to present rebuttal evidence or a hearing.

Legislation cited

Constitution of Indias. Article 21
Indian Evidence Act, 1872s. 115, s. 58
Payment of Bonus Act, 1965s. 10, s. 32(v)(c), s. 36, s. 8

Subjects

Payment of Bonus ActSection 36 exemptionConditional legislationWaiverEstoppelStatutory exemptionNatural justiceProcedural fairnessRetrospective legislationHousing BoardEmployee bonus

Judgment

STATE OF TAMIL NADU A
v.
K. SABAN AYAGAM AND ANR. ETC.

NOVEMBER 25, I 997

[S. B. MAJMUDAR AND M. JAGANNADHA RAO. JJ.] B

Payment of Bonus Act, 1965 :

Section 36-Exemption orders thereunder-Whether could be
restrospective-Order of exemption passed exempting TN. Housing Board C
from all the provisions of the Act-Such orders issued several years after the
expiry of the operation of the previous exemption order-Such an order
could be interpreted as granting exemption for the remaining part of the then
current accounting year from the date of issuance of the order and not as
operating retrospectively and granting exemption from the earlier accounting D
year-GO Ms No. 2018 dated 31-10-1979 and GO Ms No. 1033 dated 23-
11-1982 issued by the Government of Tamil Nadu.

Sections 32(v)(c) and 36-Plea of statutory exemption under Section
32(v)(c) and grant of exemption under Section 36-Housing Board of the
State of Tamil Nadu, in various legal proceedings, consistently taken the· E
view that it required exemption from the provisions of the Act-Held, the
High Court, on the principle of waiver and estoppel, rightly rejected the
Board's claim to statutory exemption from payment of bonus under Section
32(v)(c) of the Act-Estoppel-Sections 115 and 58 of the Evidence Act,
1872-Admission-Waiver.
F
Nature of opportuntiy to be afforded to employees-Persona/ hearing,
held not necessary-However; opportunity to submit rebuttal evidence or
material against the material famished by the employer seeking exemption,
is necessary-Adminstrative law-Natura/justice-Hearing or notice-Nature
of opportuntiy to be afforded before exercising power of conditional G
legislation.

Expression "other relevant circumstances"-Scope of-Held, has to be
read with the financial position of the claimant-establishments themeslves
and has to be seen on the touchstone of public interest to enable the
345 H
346 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.~.

. A formation of opinion qua claim of such existing establishments-Does not
refer to any future establishment, yet to be set up.

Section 32(v)(c)-Facts require lo be proved for claiming exemption
under-Restated.

B Nature of Act-Held, is a piece of welfare legislation-Constitution of
India-Article 21.

Administrative Law :

Subordinate legislation-Conditional legislation and delegated
C legislation-Distinction pointed out-Delegation of legislative function and
power-Delegated legislation viz-a-viz conditional legislation.

Conditional legislation-Classification of-Exercise ofpower in respect
of conditional legislation-Cannot be said to exclude totally the principles
of fair play, consultation or natural justice-Payment of Bonus Act, 1965-
D Section 36-Power of exemption under.

Words and phrases :

Words "other circumstances "-In the context of Section 36 of the
payment of Bonus Act, 1965.
E
In exercise of its power under Section 36 of the Payment of Bonus Act,
1965, the Housing and Urban Development Department of the State of Tamil
Nadu issued Government Order Ms No. 2018 dated 31-10-1979, exempting
the Housing Board of the State from all the provisions of the Act for a period
up to accounting year 1977-78. By a subsequent Government Order Ms No.
F 1033 dated 23-11-1982 which provided that having read the eariler Government
Order dated 31-10-1979 and other relevant letters, the Governor exercising
the power under Section 36 of the Act, exempted the Housing Board of the
State from all the provisions of the Act for a further period up to the
Accounting year 1982-83. The employees who were to get statutory bonus
G under the Act, feeling aggrieved by the said exemption orders, moved the
High Court. Their writ petition was allowed and the Housing Board was
directed to pay the minimum statutory bonus to the employees from the
Accounting year 1978--79 onwards. Writ appeal filed by the Housing Board
&nd the State Government was also dismissed. Hence this appeal by the State.

fl It was contended on behalfof the appellants that the employees of the
STATE v. K. SABA NAY AGAM 347
1
1
Board will not be entitled to the statutory bonus under the Act or. twin A
grounds: Firstly, in view of the statutory exclusion of the Housing Board
from the applicability of the Act as per Section 32(v)(c) of the Act; and
secondly, on the ground that the State of Tamil Nadu for the relevant years
had exercised its power of exempting the Housing Board under Section 36
of the Act from all the provisions of the Act
B
Rejecting the contentions and dismissing the appeal, this Court

HELD: I. On the language of the notification dated 23.11.1982 it is
not possible to countenance the contention of the appellants, viz., the State
Government and the Tamil Nadu Housing Board, that the said notification C
sought to apply the net of exemption retrospectively for earlier years 1978-
79 to 1981-82. The notification indicates that even though the Governor had
read the earlier Government Order dated 31.10.1979, he was pleased to
order that all the provisions of the Payment of Bonus Act will not apply to
the Housing Board for a further period up to Accounting year 1982-83. The
notification is dated 23.11.1982. Therefore, from that date onwards till the D
end of the Accounting Year 1982-83 exemption was granted. Nowhere in the
said notification it is stated that the author of the notification wanted the said
notification to retrospectively cover even earlier accounting years which had
already gone by. It has, therefore, to be held that the State of Tamil Nadu
while issuing the notification of 23.11.1982 for reasons best known to it, had E
thought it fit not to cover the earlier accounting years from 1978-79 to
1981-82 in spite of the fact that the earlier notification under section 36 of
the Act had ceased to operate on the expiry of the accounting year I 977-78.
1360-D-GI

2. In the reltvant proceedings spread over the year wherein the Housing F
Board has consistently taken the stand that it would require exemption from
the provisions of the Payment of Bonus Act by invoking the powers of the
State under Section 36 of the Act. In such circumstances, no fauit can be
found with the reasoning of the High Court that the Housing Board had
waived its contention that there was a statutory exemption for the Housing G
Board as per Section 32 (v)(c) of the Act. Simultaneous invocation of Sections
32(v)(c) and 36 of the Act during the course of present proceedings would
indicate that the Housing Board tried to blow hot and cold at the same time
by taking inconsistent positions. In fact the claim for statutory exempticn
under Section 32(v)(c) of the Act cannot stand if the power of exemption of
the State Government under Section 36 is invoked by the Housing Board. H
348 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A Similarly Section 36 of the Act would get out of the picture once Section 32
(v)(c) of the Act was resorted to by the Housing Board. But both the provisions
could not be simultaneously resorted to. Under these circumstances,
therefore, the High Court was right in not considering the case of the
Housing Board for statutory exemption under Section 32(v) (c) of the Act for
B the relevant accounting year wherein the Housing Board has tried to obtain
and actually got orders of exemption under Section 36 of the Act. One has,
therefore, to proceed on the basis that it was an admitted position on behalf
of the Housing Board during the relevant accounting years that it was
governed by the provisions of the Act and but for exempt ion under Section
36 of the Act it would be bound to pay the minimum statutory bonus as laid
C down by the Act to its employees. Obviously facts which are admitted need ~
not be proved. Therefore, it can certainly be held to be bound by its admissions
on these facts and it can be said to have waived its contention in this
connection for the relevant accounting years. It would amount to estoppel on
facts and not on law and would also certainly amount to a conscious giving
up of its claim for statutory exemption under the said provisions. Thus on
D the principle of waiver and estoppel the contention of the appellants has to
be repelled as has been rightly done by the High Court.
[362-B-G; 364-F-G; 365-C-D]

Housing Board of Haryana v. Haryana Housing Board Employees'
E Union, (19961 1 sec 951, referred to.

3. Before Section 32(v)(c) of the Payment of Bonus Act can be pressed
into service the following factual aspects have to be pleaded and proved by
an institution claiming exemption thereunder; (a) that it is a social welfare
institution; (b) that it is established not for the purpose of profit; and (c) even
F otherwise it is an institution which is established from its inception not for
the purpose of profit. This would require investigation into facts as to whether
the statute under which the Housing Board is created enjoins upon the
Housing Board functions which are likely to generate profit and whether in
fact profit gets generated by the exercise of permissible statutory functions
G by the Housing Board. (361-F-H; 362-Al

4. In the case of conditional legislation, the legislation is complete in
itself but its operation is made to depend on fulfilment of certain conditions
and what is delegated to an outside authority is the power to determine
according to its own judgement whether or not those conditions are fulfilled.
H In case of delegated legislation proper, some portion of the legislative power

..
ST ATE v. K. SABANA YAGAM 349
of the legislature is delegated tohhe outside authority in that the legislature A
though competent to perform both the essential and ancillary legislative
functions, performs only the former and parts with the latter. i.e., the ancillary
function of laying down details in favour of another for executing the policy
of the statute enacted. The distinction between the two exists in this that
whereas conditional legislation contain no element of delegation of legislative B
power and is therefore, not open to attack on the ground of excessive
delegation, delegated legislation does confer some legislative power on some
outside authority and is therefore, open to attack on the ground of excessive
delegation. (367-B-E(

Hamdard Dawakhana (Wakj) v. Union of India, (1960( 2 SCR 671, C
relied on.

Sardar lnder Singh v. State of Rajasthan, 11957( SCR 605, referred to.

Hampton & Co. v. U.S., (276 U.S. 394(; The Queen v. Burah, (1898) 6
App. Cas. 889; Ruseell v. The Queen, (1882) 7 App. Cas. 829 and King D
Emperor v. Benoari/al Sarma, (1944( LR 72 I.A. 57, referred to.

5.1. When the legislature has completed its task of enacting a statute,
the entire superstructure of the legislation is ready but its future applicability
to a given area is left to the subjective satisfaction of the delegate who being E
satisfied about the conditi~ns indicating the ripe time for applying the
machinery of the said Act t~ a given area exercises that power as a delegate
of the parent legislative body. This would be an act of pure and simple
conditional legislation depending upon the subjective satisfaction of the
delegate as to when the Act enacted and completed by the parent legislature
is to be made effective. (370-H; 371-A-q F

Sardar lnder Singh v. State of Rajasthan, (1957( SCR 605; Tulsipur
Sugar Co. ltd v. Notified Area Committee, (1980( 2 SCC 295; Union of
India v. Cynamide India Ltd., (1987( 2 SCC 720 and Jalan Trading Co. (P)
Ltd. v. Mill Mazdoor Sabha, (1967( 1 SCR 151, referred to. G
Bowen v. Georgetown University Hospital, 488 US 204 (1988(, referred
to.

Schwartz's Administrative Law, (1976) Edn. Pp. 143-44; Schwartz's,
(1991) Ed., pp. 163-64; "Making Regulatory Policy.", Ed. Keath Hawkins H
350 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A and John Thompson, 119891p.199 and Cornelius M. Kerwin: ~'Rule Making
-How Government Agencies Write law and make Policy", (1994) p.6,
referred to.

5.2. There may be conditional legislation wherein the delegate has to
B decide whether and under what circumstances a completed Act of the parent
legislation which has already come into force is to be partially withdrawn
from operation in a given area or in given cases so as not to be applicable
to a given class of persons who are otherwise admittedly governed by the Act.
In such an eventuality if the satisfaction regarding the existence of condition
precedent to the exercise of such power depends upon pure subjective
C satisfaction of the delegate and if such an exercise is not to required to be
based on the prima facie proof of factual data for and against such an
exercise and if such an exercise is to uniformly apply in future to a given
common class of subjects to be governed thereby and when such an exercise
is not to be confined to individual cases only, then even in such category of
D cases while exercising conditional legislative powers the delegate may not
be required to have an objective assessment after considering rival versions
on the data palced before it for being taken into consideration by it in
exercise of such power of conditional legislation. 1371-E-HI

5.3. A delegate who exercises conditional legislation acting on its
E pure subjective satisfaction regarding existence of conditions precedent for
exercise of such power may not be required to hear parties likely to be
affected by the exercise of such power. Where the delegate proceeds to fill
up the details of the legislation for the future- which is part of the integrated
action of policy-making for the future, it is part of the future policy and is
F legislative. But where he merely determines either subjectively or objectively
- depending upon the "conditions" imposed in the statute permitting exercise
of power by the delegate -there is no legislation involved in the real sense
and therefore, applicability of principles of fair play, consultation or natural
justice to the extent necessary cannot be said to be foreclosed. Of course,
G the fact that in such cases of "conditional legislation" these principles are
not foreclosed does not necessarily mean that they are always mandated. In
a case of purely ministerial function or in a case where no objective conditions
are prescribed and the matter is left to the subjective satisfaction of the
delegate no such principle of fair play, consultaion or natural justice could
be attracted. That is because the very nature of the adminstrative
H determination does not attract these formalities and not because the
STA TE v. K. SABAN A Y AGAM 351

determination is legislative in c!iaracter. There may also be situations where A
the persons affected are unidentifiable class of persons or where public
interest or interests of State etc. preclude observance of such a procedure.
1372-D-GI

5.4. But there may be a third category of cases wherein the exercise
of conditional legislation would depend upon satisfaction of the delegate on B
objective facts placed by one class of persons seeking benefit of such an
exercise with a view to deprive the rival class of persons who otherwise might
have already got statuory benefits under the Act and who are likely to lose
the exist~ng benefit because of exercise of such a power by the delegate. In
... such type of cases the satisfaction of the delegate has necessarly to be based C
on objective consideration of the relevant data for and against the exercise
of such power. This exercise is not left to his subjective satisfaction nor it
is merely a ministerial exercise. Section 36 of the Payment of Bonus Act
falls in this type of conditional legislative functions. 1372-H; 373-A-C)

5.5. But for the exercise of exemption under Section 36, the employees D
of an institution governed by the sweep of the Act would be entitled to
minimum statutory bonus as per Section IO of the Act. Moreover, the Act
is a piece of welfare legislation enacted for the benefit of a large category
of workman seeking a living wage to make their lives more meaningful and
for fructifying the benevolent guarantee of Article 21 of the Constitution of E
India. While exercising the power under Section 36 of the Payment of Bonus
Act, the data which would be available from the establishment would obviously
be one-sided data in support of its claim for exemption. Therefore, in the
absence of any rebuttal data furnished by the other side which is likely to
be affected by such an exercise, namely, the opinion arrived at by the
appropriate Government, puerly based on the one-sided version and data F
submitted by the establishment or a class of establishments for claiming
exemption, would be a truncated opinion which would necessarily not amount
to an opinion on all relevant facts placed before it for and against the
exercise of such power of exemption qua a given establishment or a class of
establishments. The decision taken consequent to such opinion if challenged G
in a competent court, would be liable to be struck down. Therefore, implicit
in Section 36 is the direction to the appropriate Government by the legislature
that it should form its opinion on objective facts furninshed not only by the
establishment or class of establishment claiming such exemption but also by
the employees who are likely to be affected by the exercise of that power and
should necessarily get an opportunity to submit their material in rebuttal. H
352 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A It must, therefore, be held that in such category of cases of exercise of power
of conditional legislation objective assessment of relevant data furnished by
rival classes of persons likely to be affected by such an exercise cannot be
said to be ruled out or a taboo. It is also necessary to keep in view that in
such category of cases the delegate exercising power of conditional legislation
does not lay down a uniform course of conduct for a smaller class of persons
B at the cost of rival category of persons covered by the very same exercise
of power. To that extent there is a mini tis betweem these two rival categories
of persons. Such exercise may also cover existing situations as well as
future situations sought to be subjected to exemption for the period prescribed
in the order and may sometimes affect to any permissible extent even past
C transactions in individual cases. In the instant case the ligislation has ~

. -.
prescribed objective standards and has permitted the delegate to grant
exemption and to withdraw the benefit of the statute which is being enjoyed
by the persons and in such a situation, principles of fair play or consultation
or natural justice cannot be totally excluded.
1373-G-H; 374-G-H; 375-A-C; 376-F-H; 377-A-BJ
D
Visakhapatnam Port Trust v. Ram Bahadur Thakur (P) Ltd., 11997) 4
sec 582, relied on
6.1. The High Court was right in holding that the impugned exemption
E notifications issued from time to time by the State under Section 36 of the
Act were not legal and valid and they were issued without giving any
opportuntiy whatsoever to the employees of the Housing Board. 1378-DJ

6.2. However, the High Court's view that hearing should be given to
the affected employees of the establishment before the appropriate Government
F can exercise its power of exemption under Section 36 qua a given
establishment like the Housing Board cannot be sustained on the nature of
the power conferred under Section 36 of the Act on the appropriate
Government; otherwise instead of remaining a conditional legislative power
it would assume the characteristics of quasi-judicial power. All that is
G required for such an exercise is, therefore, not any personal hearing to be
granted to the employees likely to be affected by the said exercise but they
must be given at least an opportunity to put forward their rebuttal evidence
or material against the material furnished by the claimant-establishment.
1378-G-H; 379-CI

H 7.1. The following steps can be easily visualised for being followed by
ST ATE v. K. SABAN AYAGAM 353
the appropritate Government when moved by any establishment or class A
establishments for exemption under Section 36 of the Act for the relevant
year:

(a) The receipts of the establishments ' applications mentioning the
date of receipt of the applications and the ground on which they are based
has to be brought to the notice of the employees likely to be affected by grant B
of such applications and for that purpose notices can be suitably got affixed
by the appropriate Government on the notice boards of the concerns or
factory premises of the establishment where the workmen are working.

(b) Suitable public notices in newspapers having circulation in the area C
concerned may be given, the expenses reimbursable by the claimants to the
appropritate Government

(c) The employees concerned through their representative unions may
be permitted to file their written repsresentations with relevant data for
rebutting the material furnished by the claimants within the time-limit given D
in the notices.

(d) Personal hearing although not necessary, it may be still open in
appropriate cases for the Government to give opportunity of personal hearing
to the representatives of the establishments as well as of the employees, if E
any elucidation is required in this connection.

(e)If the employees concerned through their representative unions
seek an opportuntiy to look into the material supplied by the establishments
in support of their claims for exemption, inspection of such material can be
permitted to the unions of employees to enable them to file their F
representations and to furnish the data in rebuttal for opposing such claims.

(I) Strict time schedule can be fixed by the appropriate Government
within Which the entire exercise get completed. [379-H; 380-A-G]
G
7.2. The aforesaid procedural steps are illustrative and not exhaustive.
But they have to be read in Section 36 of the Act. However only in the
category of cases of conditional legislation in which Section 36 of the Acts
falls, the aforesaid procedure is required to be followed. It cannot have any
application to the other categories of.cases of exercise of powers of conditional
legislation. [381-D-F) H
354 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A 7.3. The High Court's decision that the impugned exemption
notifications issued under Section 36 from year to year by the State of Tamil
Nadu were null and void, has to be upheld not on the ground that hearing,
-
personal or otherwise, was not given to the employees but on the ground that
the procedure indicated by this Court hereinabove regarding exercise of
B powers of conditional legislations was admittedly not followed by the appellant-
State while passing the impugned orders of exemption in favour of the
Housing Board. It is also to be kept in view that the financial position and
other relevant circumstances are not independent of their nexus with the
existing claimant-establishment or class of establishments and they do not
refer to any future establishments which have yet not seen the light of day
C and which have not still employed any employees who could be said to have
earned any statutory benefits under the Act till then. Therefore the other
rclevi:nt circumstances as mentioned in Section 36 will have to be read wit!>
the financial position of the claimant-establishments themselves and their
other circumstances have to be seen on the touchstone of public interest to
enable the appropriate Government to form its opinion under Section 36 qua
D the claims of such existing establishments. [381-"F-G; 382-C-E]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4559 of 1989
Etc. Etc.

E From the Judgment and Order dated 22.2.89 of the Madras High Court
in W.A. No. 199 of I 983.

R. Mohan, A. Mariarputham and Mrs. Aruna Mathur for the Appellant.

Ambrish Kumar for the Respondents.
F The Judgment of the Court was delivered by

S. B. MAJMUDAR, J. Leave granted in the S.L.Ps.

As common questions of law and fact arise in this groups of appeals
G they were heard together and are being disposed of by this common judgment.
The State of Tamil Nadu and the Tamil Nadu State Housing Board (hereinafter
referred to as 'the Housing Board') as appellants in these appeals have raised
a contention for our consideration as to whether the Payment of Bonus
Act, 1965 (hereinafter referred to as 'the Act') will be applicable to the employees
of the Housing Board during the relevant accounting years from 1978-
H 79 onwards. lt is contended on behalf of the appellants that the employees
STATE v. K. SABANAYAGAM iS.B. MA.IMUDAR . .I.] 355
of the Board will not be entitled to the statutory bonus under the Act on twin A
grounds. Firstly, in view of the statutory exclusio'l of the Housing Board from
the applicability of the Act as per Section 32(v)(c) of the Act: and secondly,
on the ground that the State of Tamil Nadu for the relevant years had
exercised its power of exempting the Housing Board under Section 36 of the
Act from all the provisions of the Act. In the writ petitions filed by employees B
of the Housing Board the High Court of Madras has taken the view that the
Housing Board is not entitled on the facts of the cases to earn statutory
exemption under Section 32(v)(c) of the Act and the orders of exemption·
issued by the state of Tam ii Nadu in exercise of its powers under Section 36
of the Act in favour of the Housing Board for the relevant years, were not
legally sustainable. The High Court has also taken the view that in any case C
the State of Tamil Nadu had no authority to retrospectively grant exemption
under Section 36 of the Act for the earlier accounting years. Net result of the
impugned orders is that the Housing Board has been directed to make payment
of statutory bonus to the employees from accounting year 1978-79 onwards.

It may be mentioned that while admitting these appeals to final hearing D
the stay of impugned orders was not granted. Resultantly we are informed
that but for one year, for all the rest of the years the amounts of bonus in
dispute have already been released by the Housing Board and paid to its
employees.
E
Background facts and the relevant statutOI)' scheme

For highlighting the aforesaid controversy between the parties 1t 1s
necessary to note a few introductory facts. The Housing Board is a statutory
body established under the Tamil Nadu State Housing Board Act, 1961. As
the preamble of the said Act shows it is to provide for the execution of F
housing and improvement schemes, for the establishment of a State Housing
Board and for certain other matters. By the Central Act, namely, the Payment
of Bonus Act. 1965 every factory as defined by clause (m) of Section 2 of
the Factories Act, 1946 and every other establishment in which twenty or
more persons are employed on any day in the accounting years, are covered G
by the sweep of the Act as per Section I thereof. The employees of such
establishments as per section 8 of the Act are entitled to be paid by their
employers in an accounting year, bonus, in accordance with the provisions
of the Act provided he has worked in the establishment for not less than
thirty working days in that year. Section I 0 which deals with 'Payment of
minimum bonus' lays down that, 'subject to the other provisions of this Act, H
356 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A every employer shall be bound to pay to every employee in respect of the
accounting year commencing on any day in the year 1979 and in respect of
every subsequent accounting year, a minimum bonus which shall be 8.33 per
cent of the salary or wage earned by the employees during the accounting
year or one hundred rupees, whichever is higher, whether or not the employer
B has any allocable surplus in the accounting year'. Section 32 of the Act giv~s
classes of employees who are statutorily exempted from the applicability of
the Act, Relevant provisions thereof lay down that, 'nothing in this Act shall
apply to (i) ... :(ii)... :(iii) ... :(iv) ... :(v) employees employed by-(a) ... :(b) ... : and (c)
institutions (including hospitals , chambers of commerce and social welfare
institutions) established not for purposes of profit'. Section 36 of the Act
C deals with 'Power of exemption' and reads as under :

"36. Power of exemption ,-lfthe appropriate Government, having regard
to the financial position and other relevant circumstances of any
establishment or class of establishments, is of opinion that it will not
be in public interest to apply all or any of the provisions of this Act
D thereto, it may, by notification in the official Gazette exempt for such
period as may be specified therein and subject to such conditions as
it may think fit to impose, such establishment or class of establishments
from all or any of the provision of this Act."

In exercise of its powers under Section 36 of the Act the State of Tamil
E
Nadu by Government Order Ms. No. 2018 dated 31st October 1979 in the
Housing and Urban Development Department directed that the Tamil Nadu
Housing Board was exempted from all the provisions of the payment of Bonus
Act 1965 for a period upto accounting year 1977-78. A similar Government
Order Ms. No. 1033 in the same Department was issued on 23rd November
F 1982 exempting the Tamil Nadu Housing Board from all the Provisions of the
Payment of Bonus Act. 1965 for a further period upto accounting year 1982-
83. We are told that for subsequent years similar such Government Orders
under Section 36 of the Act were issued by the State of Tamil Nadu in favour
of the Tamil Nadu Housing Board. The employees who were to get.statutory
G bonus under the Act naturally felt aggrieved by the said exemption orders of
the State of Tamil Nadu and moved various writ petitions in the High Court
on diverse grounds. The earliest Petition No.2343 of 1981 before the High
Court was heard by a learned Single Judge of the High Court, Mohan, J, (as
he then was), wherein the claim of bonus was confined by the employee from .
accounting year 1978-79 onwards. This writ petition was allowed and the
H Housing Board was directed to pay the minimum statutory bonus to the
STATE v. K. SABAN AYAGAM [S.B. MAJMUDAR. J.] 357

employee from the accounting year 1978-79 onwards. The learned Single A
judge voided the exemption orders issued by the State of Tamil Nadu under
Section 36 the Act qua the relevant accounting years. Writ Appeals preferred
.. by the Housing Board as well as the State of Tamil Nadu were disposed of
by the impugned common judgment by a Division Bench of the High Court
speaking through Nainar Sundaram, J., (as he then was). That has resulted B
in Civil Appeal No.4559of1989. Following this decision the High Court also
granted similar relief for successive years to the employees concerned after
declaring the exemption orders for the relevant years, as issued by the State
of Tamil Nadu under Section 36 of the Act, to be null and void. That is how.
in this group of appeals the State of Tamil Nadu and the Housing Board have
sought to re-agitate their main grievances against the claim of the employees C
for statutory bonus under the Act for the relevant years.

Rival Contentions

Learned senior counsel, Shri R. Mohan for the appellants vehemently
contended that the High Court in the impugned judgments has patently erred D
in taking the view that the State of Tamil Nadu in exercise of its powers under
Section 36 of the Act had no authority and jurisdiction to grant exemption
retrospectively for the· earlier accounting years. This submission was
canvassed in the light of the aforesaid two Government Orders dated 31st
October 1979 and 23rd November 1982. It was next contended that even E
otherwise the Housing Board had earned statutory exemption under Section
32(v)(c) of the Act as it was a social welfare institution established not for
the purposes of profit and consequently its employees could not claim any
bonus under the Act. It was ultimately contended that in any view of the
matter once power of exemption which is in the nature of conditional legislation
was exercised by the State of Tamil Nadu under Section 36 of the Act, the F
orders of exemption for the relevant years as issued by the State of Tamil
Nadu could not have been declared to be null and void on the ground that
before invoking such power of exemption the State had not given opportunity
of hearing to the employees concerned who we.re likely to be affected by the
grant of such exemption,
G
Learned counsel for the respondent employees represented by their
unions on the other hand submitted that the impugned orders of the High
Court were quite justified on the facts and circumstances of the cases. That
the Government Order dated 23rd November 1982 was rightly held by the
High Court to be inoperative so far as it tried to retrospectively grant the H
358 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A exemption under Section 36 of the Act for earlier accounting years to the
Housing Board as such an exercise of power is not contemplated by the said
Section. It was next contended that question of availability of statutory
exemption to the Bqard under Section 32(v)(c) of the Act does not arise on
the facts and circumstances of the present cases inasmuch as it was the stand
B of the Housing Board itself before the High Court and even before the State
that the Act was applicable to it and it would have been required to pay the
bonus and for exempting it from its liability the exemption p0wers of the State
under Section 36 of the Act were invoked by the Board and that too
successfully. It was submitted that questions whether the Housing Board was
an institution in the nature of social welfare institution and whether it was
C established not for the purposes of profit, required investigation of facts and
when such contentions which raise mixed question of law and fact were not
canvassed earlier by the Housing Board and on the contrary the Housing
Board had accepted its statutory liability to be covered by the Act but for
the invocation of the powers of the State under Section 36 it could be said
that such contentions on the facts of the present cases were waived by the
D housing Board and the Housing Board was rightly held to be estopped from
raising such contentions before the High Court as held in the impugned
judgments. In the alternative it was tried to be submitted that even on merits
this contention had no substance as the Housing Board in the light of the
relevant provisions of the Act cannot be said to be an institution established
E not for the purposes of profit. In this connection it was submitted that there
was ample evidence on record including admissions on the part of the
authorities of the Housing Board themselves that various other Housing
Boards like the West Bengal Housing Board, Gujarat Housing Board and
other Housing Boards were paying bonus under the Act to their employees.
That in view of this stand taken by the Board itself, for invoking the power
F of exemption by the State Government under Section 36 of the Act, this Court
may not examine the merits of this contention especially when bonus amounts
for the relevant years have already been paid by the Housing Board to its
employees. It was lastly contended that the High Court was justified in taking
the view that the impugned exemption orders issued by the State from time
G to time were null and void as no opportunity of hearing was given to the
employees by the State while issuing the impugned orders which had a direct
pernicious and adverse effect on their civil rights and amounted to depriving
them of their statutory right of bonus under the Act. That implicit in Section
36 is the requirement for the appropriate Government to have a look at the
rival contentions which may have to be put forward before the appropriate
H Government by the claimants of exemption on the one hand and their employees
STATE v. K. SABAN AYAGAM {S.B. MAJ MU DAR . .l.l 359

likely to be adversely affected by such exemptions on the other hand, before A
such drastic power of exemption having pernicious civil consequences and
evil effects on the employees on their pay packet could be visited on the
employees for whom minimum statutory bonus as granted by the Act of the
Parliament was sort of a deferred wage.

Points for Consideration
B

In the light of the aforesaid rival contentions the following points arise
for consideration :

I. Whether the exemption order dated 23rd November I 982 is bad
inasmuch as it seeks to retrospectively apply to earlier accounting C
years I 978-79, I 979-80, I 980-8 I and 1981-82,

2. Whether the provisions of the Act are not applicable to the
Housing Board in view of Section 32(v)(c) of the Act.

3. Whether the exemption orders issued by the State of Tamil Nadu D
from time to time during the relevant years as per Section 36 of
the Act are null and void as no hearing was admittedly given
by the State of Tamil Nadu to the employees likely to be affected
by such exercise of power of exemption before issuing such
orders.
E
We shall deal with these points for determination seriatim.

Point No.I

So far as the alleged retrospective effect of Government Order dated F
23rd November 1982 is concerned, we have to keep in view that earlier
Government Order of exemption under Section 36 of the Act was dated 31st
October I 979. The said order recited that, in exercise of the powers conferred
by section 36 of the Payment of Bonus Act 1965 (Central Act 21of1965), the
Governor of Tamil Nadu hereby exempts the Tamil Nadu Housing Board, from G
all the provisions of the said Act for a further period upto the accounting year
1977-78. That was followed by the impugned notification/Government Order
Ms. No. I 033 dated 23rd November I 982. It recited that having read the earlier
Government Order dated 3 I st October I 979 and other relevant letters from the
chairman of the Housing Board, the Governor, in exercise of the powers
conferred by section 36 of the payment of Bonus Act, 1965 (Central Act 21 H
360 SUPREME COURT REPORTS [19971 SUPP. 5 S.C.R.

A of 1965), exempts the Tamil Nadu Housing Board, from all the provisions of
the said Act for a further period upto the accounting year 1982-83. It was
vehemently contended by learned senior counsel for the appellants that first
notification of 31st October 1979 exempted the Housing Board from the
provisions of the Act for a further period upto accounting year 1977-78 and
B in continuation thereof the second notification was issued on 23rd November
1982 by which exemption from the provisions of the Act was further extended
upto the accounting year 1982-83 and, therefore, the second notification
certainly sought to cover earlier accounting years 1978-79, 1979-80, 1980-81
and 1981-82. That such an exercise, according to learned senior counsel for
the appellants, was legally pem1issible for the State under Section 36 of the
C Act as it was an exercise of power of conditional legislation and that the High
Court ha'cl wrongly held that such a power could not be exercised
retrospectively. We would have been required to closely examine this
contention but for the fact that on the language of the notification dated 23rd
November 1982 it is not possible to countenance the contention of learned
senior counsel for the appellants that the said notification on its express
D temiinology sought to apply the net of exemption retrospectively for earlier
years 1978-79 to 1981-82. On the language of the notification it appears clear
that even though the Governor had read the earlier Government Order dated
31st October 1979 as recited in the notification all that the Governor was
pleased to order was that all the provisions of the Act will not apply to the
E Housing Board for a further period upto accounting year 1982-83. The
notification is dated 23rd November 1982. Therefore, from that date onwards
till the end of the accounting year 1982-83 exemption was granted. Nowhere
in the said notification it is stated that the author of the notification wanted
the said notification to retrospectively cover even earlier accounting years
which had already gone by. If such was the intention of the author of the
F notification the wording of the notification would have clearly mentioned that
the provisions of the Act would not apply for a further period from 1978-79
upto the accounting year 1982-83. Such temiinology is conspicuously absent
in the notification of 23rd November 1982. We must, therefore, hold that state
of Tamil Nadu while issuing the notification of 23rd November 1982, for
G reasons best known to it, had thought it fit not to cover the earlier accounting
years from 1978-79 to 1981-82 in spite of the fact that the earlier notification
under Section 36 of the Act had ceased to operate on the expiry of the
accounting year 1977-78 as seen from the express wording of the earlier
notification dated 31st October 1979.

H In view of the aforesaid conclusion of ours, therefore, it will not become
STATE v. K. SABAN AYAGAM [S.B. MAJMUDAR, J.] 361
necessary to examine the further question whether the notification dated 23rd A
November 1982 could be legally issued with any retrospective effect. This
question becomes academic in the light of the express language of the said
notification as discussed by us earlier. We, therefore, hold that the ultimate
decision of the High Court that the notification dated 23rd November 1982
had no retrospective effect, is justified but we express no opinion on the B
question whether the purported retrospective effect given by the notification
to the claim of exeption for the earlier accounting years was legally permissible
under Section 36 or not. This wider question is kept open. Point No. I is,
therefore, answered in the negative for the aforesaid reasons which are
different from those which appealed to the High Court.
Point No. 2 c
The contention of learned senior counsel for the appellants is that the
Bouns Act itself does not apply to the Housing Board in view of Section
32(v)(c) of the Act extracted hereinabove. A mere look at the said provision
shows that the Bonus Act will not apply to employees employed by the
establishment established not for the purposes of profit. The appellants' D
contention is two-fold. Firstly it is a social welfare institution and secondly
it is established not for the purposes of profit. It is statutorily established for
undertaking beneficial activities for the people of Tamil Nadu with a view to
supplying them housing accommodation at reasonable costs and to save
them from exploitation by builders; that the Housing Board has also to E
undertake various other beneficial functions of public interest as per the
provisions of the Act. So far as this contention is concerned the High Court
in the impugned judgment has taken the view that by their own act the
Housing Board accepted that the Act applies to it and, therefore, it by
passing various resolutions sought for exemption from the Act by invoking
the powers of the State of Tamil Nadu under Section 36 of the Act. In this F
connection it has to be kept in view that before Section 32(v)(c) of the Act
can be pressed in service the following factual aspects have to be pleaded
and proved by the Housing Board-
1. That it is a social welfare institution;

2. That it is established not for the purposes of profit; and G
3. Even otherwise it is an institution which is established from its
inception not for the purposes of profit.

This would require investigation into facts as to whether the Statute
under which the Housing Board is created enjoins upon the Housing Board H
,,

362 SUPREME COURT REPORTS (19971SUPP.5 S.C.R.
\
A functions which are likely to generate profit and whether in fact profit gets t
generated by the exercise of permissible statutory functions by the Housing
Board. These questions which are factual questions would be required to be
considered if properly pleaded by the Housing Board. Instead of pressing in
service these factual aspects for consideration the Housing Board had
consistently relied upon the exemption power of the state Government under
B Section 36 of the Act for the accounting years in question. In this connection
the High Court relied upon various proceedings of the Housing Board spread
over years wherein the Housing Board has consistently taken the stand that
it would require exemption from the provisions of the Act by invoking the ,
powers of the State under Section 36 of the Act. We have gone through these •
relevant proceedings referred to by the High Court in the impugned judgment
C and these proceedings dated 28th February l 978 and 4th May 1979 clearly
give out a picture about the stand of the Housing Board even before the
present litigation saw the light of the day. Once it is the case of the Housing
Board itself that the Act would apply to it in the light of the statutory
functions carried out by it and, therefore, there was need to get exemption
D from the Act under Section 36 of the Act no fault can be found with the
reasoning of the High Court that the Housing Board had waived its contentions
that there was a statutory exemption for the Housing Board as per Section
32(v)(c) of the Act. It is obvious that if the Housing Board was statutorily
exempted under the said provision there was no need for the Housing Board
to invoke the powers of the State of Tamil Nadu under Section 36 of the Act
E for getting exemption from the Act by satisfying the State of Tamil Nadu that
it is an establishment which in public interest r.~quires such exemption having
regard to its financial position and other relevant circumstances. Simultaneous
invocation of Sections 32(v)(c) and 36 of the Act during the course of present
proceedings would indicate that the Housing Board tried to blow hot and cold
at the same time by taking inconsistent positions. In fact the claim for
F statutory exemption under Section 32(v)(c) of the Act cannot stand if the
power of exemption of the State Government under Section 36 is invoked by
the Housing Board. Similarly Section 36 of the Act would get out of picture
once Section 32(v)(c) of the Act was resorted to by the Housing Board. But
both the provisions could not be simultaneously resorted to. Under these
circumstances, therefore, the High Court was right in not considering the case
G of the Housing Board for statutory exemption under Section 32(v)(c) of the
Act for the relevant accounting years wherein the Housing Board had tried
to obtain and actually got orders of exemption under Section 36 of the Act.
In this connection it is useful to refer to the Notes of proceedings of 4th May
1979 under Item 277 of the agenda of the Special Board meeting of the
Housing Board wherein its Chairman had prepared the Note to the following
H effect:

(
STATE v. K. SABANA YAGAM [S.B. MA.IMUDAR, .I.] 363
" .... :......... The Tamil Nadu Housing Board was exempted from the A
provisions of the payment of Bonus.Act under Section 36 of the Act
for (sic) the temporary periods upto the end of 1973-74. This exemption
had necessarily to be obtained for the reason that the Tamil Nadu
Housing Board is governed under the .Industrial Disputes Act
according to the orders issued in G. O.Ms. No. 9139. H. U. lll/2/69- B
2, dated 14.3.69 (Copy appended herewith) when the Housing Board
is governed under the Industiral Disputes Act, the applicability of the
Bonus Act is not obligatory but it is statutory. As_ the financial
position of the Board in the past was not sound enough, the payment
exemption was previously sought for by the Board .............. ,."

In the said Note it has been further mentioned as under :
c
"Under the rules, the payment of minimum bonus will be 8.1/3% of the
pay for persons who are drawing less then .Rs. 1600 per month,
subje~t to a maximum of Rs. 750 per annum, presently,· the West
Bengal Housing Board and Gujarat Housing Board are paying bonus D
for their employees. It is also ascertained from the Government of
West Bengal that they are making payment of bonus to their employees
at the rate of 8.1/3% treating the Board as an 'Industry' under the
Industrial Disputes Act. The payment is made by them from their
revenues only, which they are able to earn by adding different profits
in the sale of buildings by public auctions etc, on the same analogy, E
the Housing Board may also derive income in the near future and
there may not be any difficulty in meeting this expenditure in this
regard from its available funds. Besides the Housing Board with its
assets and liabilities is earning more and more every year. The income
derived by way of rental, leasing of shops and stalls, etc., will F
undoubtedly go towards profit to certain extent.

In the circumstances, it appers not necessary to seek for the exemption
of the Government from the payment of minimum bonus of 8.1/3%
which is a statutory right as per the orders issued in G.0.Ms. No.
1045, Finance, dated 1.11.1977. The Government have also directed G
that when payment of bonus to the employees of the public sector
undertakings is strictly in accordance with the provisions of the
Bonus Act such cases need not be referred to the Government for
approval. No deviation from the Bonus Act should normally be made.
However, if any deviation is proposed to be made by way of payment
of ex gratia or any other incentive in cash or any kind, then only it H
364 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A should carry the prior approval of the Government."

In view of this clear stand taken by the Chairman of the Housing Board
at the relevant time it becomes obvious that it was never in the contemplation
of the Housing Board that it was statutorily exempted from the Act and from
the obligation to pay the minimum bonus to the employees as per section
B 32(v)(c) of the Act when other Housing Boards as mentioned therein were
also paying bonus to their employees. It was also noted by the Housing
Boards in these proceedings spread over years that other Housing Board like
West Bengal Housing Board and Gujarat Housing Board were also paying

C
bonus to their employees. Under these circumstances, the Housing Board had
rightly taken the stand that the Payment of Bonus Act would apply to it and
that is the reason why it sought exemption from the operation of the Act
under Section 36 from the Tamil Nadu Government from time to time.
-
We may mention that by a decision of a Bench of two learned judges
of this Court in the case of Housing Board of Haryana v. Haryana Housing
D Board Employees' Union and others, [ 1996] I SCC 951 Bouns Act is held
applicable to Haryana Housing Board by holding that it is not entitled to
statutory exemption from the Act under Section 32 as a local authority. We
are informed that accordingly bonus is being paid by the said Board to its
employees as per the Bonus Act.

E rn this connection it is, therefore, too late in 'the day for the Tamil Nadu
Housing Board to take of somersault and to try to submit that despite its
. consistent course a conduct spread over decades accepting the position that
it was statutorily liable to pay the minimum bonus as per the Act, but for the
exemption sought by it under Section 36 of the Act, in fact the Act itself did
not apply to it under Section 32(v)(c) of the Act and all attempts to get
F exemption from the Act under Section 36 were misconceived or uncalled for
or an exercise in futility. We must, therefore, proceed on the basis that it was
an admitted position on behalf of the Housing Board during the relevant
accounting years with which we are concerned that it is governed by the
provisions of the Act and but for exemption under Section 36 of the Act it
G would be bound to pay the minimum statutory boo.us as. laid down by the Act
to its employees. On the basis of this admitted position and stand on behalf
of the Housing Board the High Court was quite justified in observing that the
Housing Board had waived its objections regarding non-applicability of the
Act under Section 32(v)(c) of the Act in the present cases. There is no
question of any estoppel against statute as tried to be submitted by learned
H senior counsel for the appellants in this connection. On factual aspects if a
.
STATE v. K. SABANAYAGAM [S.B. MA.TMUDAR, .I] 365
consistent stand is taken by the Housing Board to the effect that it is A
governed by the Act, implicit in the stand is the .admission on facts that
statutory exemption under Section 32(v)(c) of the Act factually is not earned
by the Board. When on facts the Housing Board has not thought it fit to raise
such a factual dispute or contention for the relevant accounting years its
stand admitting the non-existence of the relevant d~ta for invoking Section B
32(v)(c) of the Act must be held binding to the Housing Board. It is obvious
that facts which are admitted need not be proved. The Housing Board itself
by its conduct admitted non-existence of relevant factual data for invoking
the powers under Section 32(v)(c) of the Act. Therefore, it can certainly be
held to be bound by its admissions on these facts and it can at least to the
lowest be said to have waived its contention in this connection for the C
relevant accounting years. It would amount to estoppel on facts and not on
law and would also certainly amount to a conscious giving up of its claim for
statutory exemption under the said provision. Thus on the principle of waiver
and estopp,el the second contention of the appellants has to be repelled as
has been rightly done by the High Court. Point No, 2 is, therefore, answered
in the negative. D
Point No.3

This takes us to the last contention canvassed on behalf of the
appellants. It is true that Section 36 of the Act is held by a Constitution Bench
of this Court to be a place of conditional legislation. In the case of Jalan E
Trading Co. (Privale Ltd.) v. Mill Mazdoor Union, [ 1967] 1 SCR 151 the
majority of the Constitution Bench speaking through J. C. Shah. J. while
interpreting Section 36 of the Act has made the following pertinent
observations:

"By s. 36 the appropriate Government is invested with power to F
exempt an establishment or a class of establishment from the operation
of the Act, proyided the Government is of the opinion that having
regard to the financial position and other relevant circumstances of
the establishment, it would not be in the public interest to apply all
or any of the provisions of the Act. Condition for exercise of that G
power is that the Government holds the opinion that it is not in the
public interest to apply all or any of the provisions of the Act to an
establishment or class of establishment, and that opinion is fo•mded
on a consideration of the financial position and other relt vant
circumstances. Parliament has clearly laid down principles and has
given adequate guidance to the appropriate Government in H
366 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A implementing the provisions of s.36. The power so conferred does not
amount to delegation of legislative authority; Section 36 amounts to
conditional legislation, and is not void, whether in a given case,
power has been properly exercised by the appropriate Government
would have to be considered when that occasion arises."

B The said observations have been made for repelling the challenge to the
vires of Section 36 of the Act on the ground that it amounted to excessive
delegation of the legislative power or was violative of Article 14 of the
Constitution of India. The question with which we are concerned in the
present proceedings was not on the anvil of scrutiny before the Constitution
C Bench of this Court in that case, namely, whether before exercising powers
under Section 36 as a delegate of conditional legislative function the appropriate
Government was estopped from consideril!g that rival version or rebuttal
evidence that may be offered by the employees whose employer seeks
exemption from the Act under Section 36 thereof. The distinction between
delegated legislation and conditional legislation is a clear and well settled one.
D In this connection we may usefully refer to a constitution Bench decision of ·
this Court in the case of Hamdard Dawakhana (Wakj) Lal Kuan. Delhi and
another v. Union of India and others, [1960] 2 SCR 6711. Kapur. J. speaking
for the constitution Bench has made the following pertinent observations at
page 695 of the Report :
E
" ............ The distinction between conditional legislation and delegated
· legislation is this that in the former the delegate's power is that of
determining when a legislative declared rule of conduct shall become
effective : Hampton & Co. v. U.S., [276 U.S. 394] and the latter
involves delegation of rule making power which constitutionally may
F be exercised by the administrative agent. This means that the legislature
having laid down the broad principles of its policy in the legislation
can then leave the details to be supplied by the administrative
0

authority. In other words by delegated legislation the delegate
completes the legislation by supplying details within the limits
prescribed by the statute and in the case of conditional legislation the
G
power oflegislation is exercised by the legislature conditionally leaving
to the discretion of an external authority the time and manner of
carrying its legislation into effect as also the determination of the area
to which it is to extend; [The Queen v. Burah (1878) 6 App. Cas. 889;
Russell v. Tire Queen (1882) 7 App. Cas. 829. 835 : King Emperor v.
H Benoarila/ Sarma (1944) L.R. 72 I.A. 57; Sardar /nder Singh v. State
STATEv.K.SABANAYAGAM[S.B. MAJMUDAR,J.) 367
of Rajasthan. [1957] SCR 6051. Thus when the delegate is given the A
power of making rules and regulations in order to fill in the details to
carry out and subserve the purposes of the legislation the manner in
which the requirements of the statute are to be met and the rights
there in created to be enjoyed it is an exercise of delegated legislation.
But when the legislation is complete in itself and the legislature has B
itself made the law and the only function left to the delegate is to
apply the law to an area or to determine the time and manner of
carrying it into effect, it is conditional legislation.".

It is thus obvious that in the case of conditional legislation, the
legislation is complete in itself but its operation is made to depend on C
fulfilment of certain conditions and what is delegated to an outside
authority, is the power to determine according to its own judgment
whether or not those conditions are fulfilled. In case of delegated
legislation proper, some portion of the legislative power of the
Legislature is delegated to the outside authority in that, the Legislature,
though competent to perform both the essential and ancillary legislative D
functions, performs only the former and parts with the latter, i.e., the
ancillary function of laying down details in favour of another for
executing the policy of the Statute enacted. The distinction between
the two exists in this that whereas conditional legislation contains no
element of delegation of legislative power and is, therefore, not open E
to attack on the ground of excessive delegation, delegated legislation
does confer some legislative power on some outside authority and is
therefore open to attack on the ground of excessive delegation: In this
connection we may also refer to a decision of this Court rendered in
the case of Sardar Jnder Singh v. State of Rajasthan, AIR (1957) SC
510 where in it is laid down that when an appropriate Legislature F
enacts a law and authorises an outside authority to bring it into force
in such area or at such time as it may decide, that is conditional and
not delegated legislation.

A number of decisions of this Court were pressed in service by the
learned senior counsel for the appellants to submit that there is no question G
of giving any hearing to the affected parties by an agent who exercises
conditional legislative power. We may briefly refer to them.

In the case of Tulsipur Sugar Co. Ltd. v. The Notified Area Committee.
Tulsipur, (1980] 2 SCC 295 Venkataramiah, J.. speaking for this Court had to
consider the nature of power entrusted to the State under Section 3 of U.P. H
368 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A Town Areas Act, 1914 under which the State Government by notification ..
.0.
could deClare and define town areas where the U.P. Town Areas Act could
apply. Considering this exercise of the power being in the nature of a conditional
legislation it was held that the power of the Legislature to make a declaration
under that Section is legislative in character because the applicability of the
B rest of the provisions of the Act to the geographical area which is declared
as a town area is dependent upon such declaration. The maxim of audi alteram
partem does not become applicable to the case by necessary implication.
Section 3 does not require the State Government to make declaration after
giving notice of its intention so to do to the members of the public and
inv_iting their representations regardi.1g such action. Our attention was also
C invited to a decision of this Court in the case of Union of India and Anr. v.
Cynamide India Ltd and Anr., [1987] 2 SCC 720. In that case the Court was
concerned with the question whether price fixation under Paragraph 3 of
Drugs (Prices Control) Order, 1979 was an executive function or a legislative
function. Treating it to be a legislative function Chinnappa Reddy, J., speaking
for the Court observed that the legislative action, plenary or subordinate, is
D not subject to rules of natural justice. In the case of Parliamentary legislation,
the proposition is self-evident. In the case of subordinate legislation, it may
happen that Parliament may itself provide for a notice and for a hearing in
·which case the substantial non-observance of the statutorily prescribed mode
of observing natural justice may ~ave the effect of invalidating the subordinate
E legislation. But, where the legislature has not chosen to provide for any
notice or hearing, no one can insist upon it and it will not be permissible to
read natural justice into such legislative activity. Jt was further observed in
paragraph 27 of the Report that the price fixation .under paragraph 3 of the
said Order being a legislative activity, the principles of natural justice are not
attracted. In this connection Chinnappa Reddy, J, in paragraph 7 of the Report
F has made the following pertinent observations :

"A price fixation measure does not concern itself with the interests of
an individual manufacturer or producer. It is generally in relation to a
particular commodity or class of commodities or transactions. It is a
direction of a general character, not directed against a particular
G
situation. It is intended to operate in the future. It is conceived in the
.. interest of the general consumer public. The right of the citizen to
obtain essential articles at fair prices and the duty of the State to so
provide them are transformed into the power of the State to fix prices
and the obligation of the producer to charge no more then the price
H fixed. Viewed from whatever angle, the angle of general application,
STATEv.K.SABANAYAGAM[S.B. MAJMUDAR,J.] 369
the perceptiveness of its effect, the public interest served, and the A
rights and obligations flowing therefrom, there can be no question
that price fixation is ordinarily a legislative activity. Price fixation may
occasionally assume an administrative or quasi-judicial character when
it relates to acquisition or requisition of goods or property from
individuals and it becomes necessary to fix the price separately in B
relation to such individuals. Such situations may arise when the
owner of property or goods is compelled to sell his property or goods
to the government or its nominee and the price to be paid is directed
by the legislature to be determine according to the statutory guidelines
laid down by it. In such situations the determination of price may
acquire a quasi-judicial character. c
The aforesaid observations .clearly show that even while exercising a
delegated legislative function or while acting in exercise of conditional
legislative power the delegate may in a given case be required to consider
viewpoint ofrival parties which may be likely to be affected by the exercise
of such power. We must keep in view that Section 36 is not held to be a piece D
of delegated legislation as authoritatively ruled by the Constitution Bench of
this court in Jalan Trading Co. 's case (supra). Therefore, we must proceed
on the basis that it is a piece of conditional legislation only.

It will be noticed from the above rulings in Hamdard Dawakhana E
(supra), Sardar lnder Singh (supra) and Tulsipur Sugar Co. Ltd., (supra)
which are cases of 'conditional legislation' that this Court while dealing with
mere extension of the provisions of an Act to other areas, persons etc. has
categorically held the same to be 'conditional' legislation. On the other hand
price fixation etc. was treated in Cyamide (supra) as 'delegated' legislation,
the reason being that in the case of delegated legislation the Legislature lays F
down the policy broadly leaving it to the delegate to supply details while in
the case of conditional legislation the legislation is complete and the
Legislature leaves it to the delegate to exercise discretion as to the time and
manner of carrying the legislation into effect as also the determination of the
area to which it is to extend. This is clear from the decision of the constitution G
Bench in Hamdard Dawakhana's case (supra). In fact, even in Cynamide
case (supra), which is a case of delegated legislation dealing with price
fixation, Chinnappa Reddy, J, pointed out that an action of the delegate, while
supply;ng details of the legislation lays down the policy for the future as in
\ price fixation cases and therefore the action of the delegate is legislative in
. character and precludes application of principles of natural justice. But the H
L

370 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A learned judge agreed that where the delegate is making factual decisions on
the basis ofpast or existing facts, it amounts to 'adminstrative adjudication'
and different consideration can apply. The learned judge said that there is a
real distinction between a 'legislative act' and 'adminstrative adjudication' (p.
736):

B "... ,'.adjudication determines past and present facts and declares rights
and liabilities while legislation indicates the future course of action."

and quoted Schwartz's Administrative Law (1976 Edn. pp 143-144). See now
Schwartz (1991 Ed. P. 163-64) quoting Scalia, J. in Bowen v. Georgetown
University Hospital, (1988) 488 US 204 (2 I 7 and 22 I) to the effect that,
c
"a rule is a statement that has legal consequences only for the future
and adjudication deals with what the. law was, rule making deals with
that the law will be."

Oliver Wendell Holmes said that a "rule is the skin of a living policy it
. ·D hardens an inchoate normative judgment into the frozen form of words ... .I ts
issuance marks the transformation of policy from the private wish to public
expectation .. ;.. the framing of a rule is the climactic act of the policy making
process. (Quoted by Prof. Colin Diver, Dean of Pennsylvanic Law School in
'Making Regulatory Policy' Ed. Keith Hawkins & John Thompson I 989 p.
E 199) (Referred to in Rule Making How Government Agencies Write Law and
make policy-Corentius M. Kerwin, 1994, page 3). Kerwin says at page 7.

"Rules, like legislation, attempt to structure the future. By creating
new conditions, eliminating existing ones, or preventing others from
coming into being, rules implement legislation that seeks to improve
F the quality of life. The term 'future effect' is thus a crucial element in
the definition of rules because it allows a clear contrast to situations
in which agencies issue decisions, acting in their judicial capacity .... An
order. applies existing rules to past or existing circumstances. Although
an ort:(er may have a future effect... its primary purpose is not the
creation of policy or law to create new conditions."
G [Emphasis supplied]

Conditional legislation can, therefore, be broadly classified into three
categories-

In the first category when the Legislature has completed its task of
H enacting a Statute, the entire superstructure of the legislation is ready but its
STATE v. K. SABA NAY AGAM [S.B. MAJMUDAR, J.) 371
further applicacility to a given area is left to the subjective satisfaction of the A
delegate who being satisfied about the conditions indicating the ripe time for
applying the machinery of the said Act to a given area exercises that power
as a delegate of the parent legislative body, Tulsipur Sugar Co. 's case{supra)
is an illustration on this point. When the Act itself is complete and is enacted
to be unifonnly applied in future to all those who are to be covered by the
sweep of the Act, the Legislature can be said to have compieted its task. All B
that it leaves to the delegate is to apply the same uniformly to a given area
indicated by the parent Legislature itself but at ·an appropriate time. This
would be an act of pure and simple conditional legislation depending upon
the subjective satisfaction of the delegate as to when the said Act enacted
and completed by the parent legislature is to be made effective. As the parent
legislature itself has laid down a binding course of conduct to be followed C
by all and sundry to be covered by the sweep of the legislation and as it has
to act as a binding rule of conduct within that sweep and on the basis of
which all their future actions are to be controlled and guided, it can easily by
visualised that if the parent· legislature while it enacted such law was not
required to hear the parties likely to be affected by the operation of the Act,
its delegate exercising in extremely limited and almost ministerial function as D
an agent. of the principal legislature applying the Act to the area at an
appropriate time is also not supposed and required to hear all those who are
likely to be affected in future by the binding code of conduct unifonnly laid
down to be followed by all within the sweep of the Act as enacted by the
parent legislature.
E
However, there may be second category of conditional legalisation
wherein the delegate has to decide whether and under what circumstances a
completed Act of the parent legislation which has already come into force is
to be partially withdrawn from operation in a given area or in given cases so
as not to be applicable to a given class of persons who are otherwise
admittedly governed by the Act. When such a power by way of conditional F
legislation is to be exercised by the delegate a question may arise as to how
the said power can be exercised. In such an eventuality if the satisfaction
regarding the existence of condition precedent to the exercise of such power
depends upon pure subjective satisfaction of the delegate and if such an
exercise is not required to be based on the prima facie proof of factual data
for and against such an exercise and if such an exercise is to unifonnly apply G
in future to a given common class of subjects to be governed by such an
exercise and when such an exercise is not to be confined to individual cases
only, then even in such category of cases while exercising conditional legislative
powers the delegate may not be requried to have an objective assessment
after considering rival versions on the data placed before it for being taken
into consideration by it in exercise of such power of conditional legislation. H
372 SUPREME COURT REPORTS [1997) SUPP. 5 S.C.R.

A For example if a tariff is fixed under the Act exemption power is conferred on
the delegate whether to grant full exemption or partial exemption from the tariff
rate it may involve such an exercise of conditional legislative function wherein
the exercise has to be made by the delegate on its own subjective satisfaction
and once that exercise is made whatever exemption is granted or partially
granted or partially withdrawn from time to time would be binding on the
B entire class of persons similarly situated, and who will be covered by the
sweep of such exemptions, partial or whole, and whether granted or withdrawn,
wholly or partially, and in exercise of such a power there may be no occasion
to hear the parties likely to be affected by such an exercise. For example from
a settled tariff say if earlier 30% exemption is granted by the delegate and then
reduced to 20% all those who are similarly situated and covered by the sweep
C of such exemption and its modification cannot be permitted to say in the
absence of any statutory provision to that eff~ct that they should be given
a hearing before the granted exemption is wholly or partially withdrawn.

In the aforesaid first two categories of cases delegate who exercises
conditional legislation acting on its pure subjective satisfaction regarding
D existence of conditions precedent for exercise of such power may not be
required to hear parties likely to be affected by the exercise of such power.
Where the delegate proceeds to fill up the details of the ligislation for the
furture which is part of the integrated action of policy-making for the future,
it is part of the future policy and is legislative. But where he merely determines
either subjectively or objectively-depending upon the "Conditions" imposed
E in the statute permitting exercise of power by the delegate-there is no legislation
involved in the real sense and therefore, in our opinion, applicability of
principles of fair play, consultation or natural justice to the extent necessary
cannot be said to be foreclosed, of course,. the fact that in such cases of
'conditional legislation' these principles are not foreclosed does not necessarily
mean that they are always mandated. In a case of purely ministerial function
F or in a case where no objective conditions are prescribed and the matter is
left to the subjective satisfaction of the delegate (as in categories one and
two explained above) no such principles of fair play, consultation or natural
justice could be attracted. That is because the very nature of the adminstrative
determination does not attract these formalities and not because the
determination is legislative in character. There may also be situations where
G the persons affected are unidentifiable class of persons or where public
interest or interests of State etc, preclude observance of such a procedure.

But there may be a third category of cases wherein the exercise of
conditional legislation would depend upon satisfaction of the delegate on
objective facts placed by one class of persons seeking benefit of such an
H exercise with a view to deprive the rival class of persons who otherwise might

j
STA TE v. K. SABANA YAGAM [S.B. MAJMUDAR, J.] 373
have already got statutory benefits under the Act and who are likely to lose A
the existing benefits because of exercise of such a power by the delegate. In
such type of. cases the satisfaction of the delegate has necessarily to be
based on objective consideration of the relevant data for and against the
exercise of such power. May be such an exercise may not amount to any
judicial or quasi-judicial function. Still it has to be treated to be one which
requires objective consideration of relevant factual data pressed in service by B
one side and which could be tried to be rebutted by the other side who would
be adversely affected if such exercise of power undertaken by the delegate.
In such a third category of cases of conditional legislation the Legislature
fixes up objective conditions for the exercise of power by the delegate to be
applied to past or existing facts and for deciding whether the rights or
liabilities created by the Act are to be denied or extended to particular areas, C
persons or groups. This exercise is not left to his subjective satisfaction nor
it is mere ministerial exercise. Section 36 of the Act with which we are
concerned falls in this third category of conditional legislative functions. A
mere look at the said Section shows that before an appropriate Government
can form its opinion regarding grant of partial or full exemption to any
establishment or class of establishments which are otherwise already covered D
by the sweep of the Act the following factual conditions must be found to
have existed at the relevant time to enable the delegate to exercise its powers
under the Act :

l. The financial position of the establishment or class of
establishments, as the case may be, must be such that it would E
not be in public interest to apply all or any of the provisions of
the Act to such establishment or establishments.

2. There may be other relevant circ~mstances pertaining to such
establishment or establishments which would require exercise of
such power of exemption. F
3. Such exercise must be in public interest as1 a whole and not
confined to the personal or private interest o'f the establishment
or establishments concerned. ·· '

Now it is obvious that but for the exercise of power of exemption under G
by
Section 36 the employees of an institution governed :the sweep of the Act
would be entitled to minimum statutory bonus as per Section I 0 of the Act.
It has also to be kept in view that Bonus Act is a piece 'of welfare legislation
enacted for the benefit of large category of workmen seeking a living wage
to make their lives more meaningful and for fructifying the benevolent guarantee
of Article 21 of the Constitution of India. Bonus is tre~ted as deferred wage, H
374 SUPREME COURT REPORTS 11997] SUPP. 5 S.C.R.

A When the Parliament in its wisdom has enacted such a beneficial piece of
social legisla'tion which already guarantees minimum statutory bonus to
employees governed by it, if their employers are to be allowed to earn
exemption from the sweep of such a beneficial legislation which would ipso
facto adversely affect entire class of their employees, the conditions for
exercise of such power of exemption have to be strictly and objectively
B fulfilled by the repository of such a drastic power. A statutory right already
accrues to employees under the Act. If the establishment employing such
workmen or employees is desirous of depriving the statutory right of minimum
bonus to its employees it may move the appropriate Government for exemption
under Section 36 of the Act as has been done in the present case by the
C Housing Board obviously confining' its request to the accounting years in
question. It is obvious that when such an establishment moves the appropriate
Government invoking its power of exemption it has to submit relevant factual
data about its financial position and other relevant circumstances in which it
is placed during the relevant year which would necessitate the appropriate·
Government in pub! ic interest and not necessarily only in the private interest
D of such employer or establishment to get satisfied that it should be exempted
and insulated from the rigours of the provisions of the Act guaranteeing
statutory minimum bonus to its employees. Such establishment, therefore,
would naturally point out that its financial position and other relevant
circumstances are such that it may be that if it is required to pay the minimum
bonus to its employees it would not only be a catastrophe for such
E establishment or class of establishments but a situation might arise when in
public interest such establishments in order that they may effectively exist
and may not be wiped off may be given a statutory protection by way of
exemption from the operation of the relevant provisions of the Act by the
appropriate Government under Section 36 of the Act. It is obvious that when
such a case is tried to be made out by the establishment concerned invoking
F powers of the State under Section 36, the State would not act merely as a post
office and accept as a gospel truth what the establishment states. It will have
to apply its objective mind on the relevant data before it can legitimately
exercise its power of exemption under Section 36 of the Act qua such an
establishment or a class of them. While exercising that power the data which
G would be available from the establishment would obviously be one-sided data
in support of its claim for exemption. The employees who are likely to be
deprived of their minimum statutory bonus as per the Act would be the rival
class of persons who are necessarily likely to be adversely affected if such
exemption is granted to the establishment on the basis of the one-sided data
in support of its claim. Therefore, in the absence of any rebuttal data furnished
H by the other side which is likely to be affected by such an exercise, namely,
STATE v. K. SABANA YAGAM [S.B. MAJMUDAR, .I.] 375
the employees the opinion arrived at by the appropriate Government, purely A
based on the one-sided version and data submitted by the establishments of
a class of establishments for claiming exemption, would be a truncated opinion
which would necessarily not amount to an opinion on all relevant facts placed
before it for and against the exercise of .such power of exemption qua a given
establishment or a class of establishments. If such data in rebuttal is not
allowed to be furnished to the appropriate Government before it decides to B
exercise its power of exemption under Section 36 of the Act qua the
establishment or a class of establishments its decision would always remain
a truncated of a lopsided one and would be liable to be voided on the ground
of non-application of mind on relevant facts and data. It would remain a still-
born decision and the moment it is challenged in a competent court it would C
be liable to be struck down immediately and for consideration of such a
challenge the competent court seized of the matter would naturally require the
other side, which is likely to be affected by such an exercise of power of
exemption, to furnish its data by way of rebuttal and once such material is
furnished the truncated and one-sided decision of the appropriate Government
would be required either to be re-con.sidered by the Government itself or the D
court may be required to perform that task which was left incomplete by the
appropriate Government while arriving at its opinion for exempting the claimant
establishment from the rigours of the Act in that eventuality there would
always be the necessity of remanding the proceedings for re-consideration by
the appropriate Government and then the appropriate Government will have E
to consider not .only the data furnished by the establishment claiming the
exemption but also the data in rebuttal which will travel to the appropriate
Government via the court's order and thereafter the appropriate Government
will have to undertake the very same exercise once again de nova under
Section 36 of the Act and at that stage it will have the benefit of comprehensive
consideration of the data furnished by the claimant- establishment for exemption F
on the one hand and the rival data furnished in rebuttal by the aggrieved
employees on the other and then the opinion would become comprehensive
and objective. In the setting of the section, therefore, and the way it will work,
as discussed earlier, implicit in the section is the direction to the appropriate
Government by the Legislature that it should form its opinion on objective G
facts furnished not oniy by the establishment or a class of establishments
claiming· such exemption but also by the employees who are likely to be
affected by the exercise of such power and who should necessarily get an
opportunity to submit their material in rebuttal. If this requirement is not read
in the Section the exercise of power of exemption qua the establishment or
a class of establishments which will have a direct pernicious adverse effect H
376 SUPREME COURT REPORTS (1997] SUPP. 5 S.C.R.

A on the employees who would otherwise earn statutory benefit of the provisions
of the Act would always remain a truncated, inchoate, half-baked and a still-
born exercise of power and only on remand by competent court the exercise
would become an informed one. Thus the rnbmission of learned senior
counsel for the appellants would make the exercise under Section 36 of the
B Act one in futility. To instill life in such an exercise and to make it
comprehensive and kicking it has to be held that before an appropriate
Government, which is approached by an establishment or a class of
establishments for ex,!mpting them from the relevant provisions of the Act for
a given accounting year, arrives at any opinion for exercise of such power it
must take into consideration the rival version and material evidence in rebuttal
C furnished by the class of employees who are likely to be affected by such
exercise of power and thereafter if such an opinion is arrived at by the
appropriate Government on a comprehensive consideration of the rival
versions and then the power is exercised, such an exercise would not become
vulnerable on the ground of non-application of mind on relevant facts and
subject to the challenge of such exercise on the ground that it was a ma/a
D fide or colourable exercise of power' or condition precedent were not satisfied
such an exercise of power would not be likely to be found fault with by any
competent court before which such an order under Section 36 is brought on
the anvil of scrutiny. Therefore, in the aforesaid third category of cas~s even
though the delegate is said to be exercising conditional legislative power it
E cannot be said to be entrusted by the legislature with the function of a purely
subjective natu!·e based on its sole discretion, nor can it be said to be
exercising such power for binding uniformly the whole class of persons
without benefiting one class at the cost of the other class of persons who
are subjected to the exercise of such exemption power. It must, therefore, be
held that in such.third category of cases of exercise of power of conditional
F legislation objective assessment of relevant data furnished by rival classes of
persons likely to be affected by such an exercise cannot be said to be ruled
out or a taboo to such an exercise of power. It is also necessary to keep in
view that iri such category of cases the delegate exercising power of
conditional legislation does not lay down a uniform course of conduct to be
G followed by the entire class of persons covered by the sweep of such an
exercise but lay down a favourable course of conduct for a smaller class of
persons at the cost of rival large category of persons covered by the very
same exercise of power. To that extent there is a mini !is between these two
rival categories of persons likely to be affected by such an exercise by the
delegate. Such exercise may also cover existing situations as well as future
H situations sought to be subjected to the exem pticn for the period prescribed
STA TE v. K. SABAN AYAGAM [S.B. MAJMUDAR, J.] 377
in the order and may sometimes affect to any permissible extent even past A
transactions in individual cases. Such type of exercise of power cannot be
said to rule out consideration of rival viewpoint on the question of grant of
exemption to an establishment or to class of establishments from the relevant
provisions of the Act. In the case before us the legislation has prescribed
objective standards and has permitted the delegate to grant exemption and B
to withdraw the benefit of the statute which is being enjoyed by the persons
and in our opinion, in such a situation, principles of fair play or consultation
or natural justice cannot be tota~ty. excluded.

In this connection we may also refer to a decision of the Court in the
case of Visakhapatnam Port Trust and another v. Ram Bahadur Thakur Pvt, C
Ltd and others, (1997] 4 SCC 582 wherein this Court had to consider the
question whether the appropriate Government while modifying or concealing .
the rates of wharfage charges framed by the Visakhapatnam Port exercising
powers under Section 52 and 54 of the Major Port Trusts Act, 1963 was
required to hear the parties likely to be affected by such an exercise.
Considering the scheme of Section 52, 53 and 54 of said Act it was held that D
the scale of rates and statement of conditions framed by the Port once
sanctioned by the Central Government and published by the Board in the
official gazette operate on their own and at this stage parties affected were
not to be heard. However while considering the modification or cancellation
of rates in exercise of power under Section 54 of the said Act the Central E
Government could appropriately consider the representations of the parties
likely to be affected by such modification. In paragraph 15 of the Report on
point No. 4 the following observations were made in this connection :

" ...... .It is axiomatic that a legislative exercise or exercise by a
subordinate legislative agency imposing any tax or fee or charges F
would not require the affected parties to be heard before such charges
or impost are levied. But this argument of Shri Bobde may be relevant
at the stage of section 52 of the Act wherein the scales of rates and
statements of conditions framed by the Board are put up for prior
sanction of the Central Government. However the said situation would G
not prevail when a grievance is made by the aggrieved parties
concerned who submit that the sanctioned scales of rates which are
prevalent and operative require modification of cancellation in public
interest as they are unre~sonable, excessive or wholly or partly lack
the back-up of quid pro quo. As and when such grievances are made
and are required to be examined by the Central Government in exercise H
378 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A of its statutory powers and functions under Section 54 of the act, if ·
the Central Government gets convinced that in public interest
appropriate modifications of cancellation of rates are required to be
made, then it would be the statutory obligation of the Central
Government to direct the Board concerned accordingly and it will be
equally the duty of the Board to carry out such suggested
B modifications or cancellations as directed by the Central Government.
At that stage if the objections of aggrieved parties are directed to be
considered by the Central Government in public interest no fault can
be found with such a direction. ·~·
'-.)

C The aforesaid decision also supports the case of the respondents that in
appropriate cases representation of aggrieved parties can be considered by
the statutory authorities for arriving at a just and balanced conclusion on
relevant facts.

On the aforesaid conclusion of ours we cannot find fault with the
D decision rendered by the High Court that the impugned exemption notifications
issued from time to time by the State of Tamil Nadu under Section 36 of the
Act were not legal and valid and they were issued without giving. any
opportunity whatsoever to the employees of the Housing Board to have then.
say when tliey were necessarily adversely affected!he exercise of such power
even though it was an exercise of conditional legislative power. Such an
E exercise of power did not fall within any of the first two categories of
delegated Legislations but squarely fell within the third category of such an
exercise of power.

However still a question remains as to whether the Higli Court was
justified in taking the view tliat hearing should be given to the affected
F employees of establishment before the appropriate Government can exercise
its power of exemption under Section 36 qua a given establishment like the
Housing Board.

Now if it is contended that any personal hearing is to be given to the
employees likely to be affected by the exercise of such power either personally
G
or through their accredited representatives like the trade union leaders or
others then such a contention cannot be sustained on the nature of the power
conferred under Section 36 of the Act on the appropriate Government,
otherwise instead of remaining a conditional legislative power it would assume
the characteristics of a quasi-judicial power. It must be kept in view that the
H appropriate Government does not adjudicate upon the rights and obligations
STA TE v_ K. SABAN AYAGAM [S.B. MAJMUDAR, J.] 379
1
of parties nor does it decide any lis between the parties. All that It does while A
exercising powers under Section 36 of the Act is to form an opinion on the
satisfaction of objective facts regarding financial position and other relevant
circumstances in connection with the claimant-establishment or class of
establishments which would require in public interest and not necessarily
purely in the private interest of the claimants that relevant provisions of the B
Act should not be made applicable to those claimants for a given period of
time. Once the bona fide exercise of power under Section 36 is undertaken
the logical consequence is that the benefit otherwise flowing from the scheme
-{
of the Act may not be available to the class of employees affected thereby,
for that limited period during which the exemption continues. All that is
required for such an exercise is, therefore, not any personal hearing to be C
granted to the employees likely to be affected by the said exercise but they
must be given at least an opportunity to put forward their rebuttal evidence
or material against the material furnished by the claimant-establishment so
that the appropriate Government can have_ an objective assessment of the
relevant data with a view to arriving at a rational, well-informed and reasonable
opinion on a· comprehensive consideration of pros and cons of the fact D
situations concerned calling for such an exercise of power on its part.

In the light of the aforesaid conclusion of ours the question remains as
to what procedure should be followed by the appropriate Government in such
cases. The following steps can be easily visualished for being followed by E
the appropriate Government when moved by any establishment or class of
- ·•' establishments for exemption under Section 36_ of the Act for the relevant
years :

I. When such applications are received by the appropriate
· Government which necessarily have to be supported by F
relevant data by the claimants, the receipt of such
applications has to be brought to the notiee of the employees
likely to be affected by grant of such applications and for
that purpose notices_ can be suitably got affixed by the
appropriate Government on the notice boards of the
concerns or factory premises of the establishments where G
the workman are working mentioning the dates on which
such applications are received and the grounds on which
such exemption are claimed under such applications.
'\' 2. Suitable public notice in newspapers having circulation in
the area of operation of such establishments can be got H
380 SUPREME COURT REPORTS (1997] SUPP. 5 S.C.R.

A published and for that purpose suitable expenses can be
required to be reimbursed by the claimants to the appropriate
Government.
3. The concerned employees through their representative union
may, under these circumstances, be permitted to file their
B written representations with relevant data for rebutting the
material furnished by the claimants so that the rival version
put forward by the employees also will become available to
the appropriate Government before it forms its opinion. For
that purpose the public notice and the notice to be affixed
on the notice boards of the concerns should indicate as to
c within what reasonable time such representations may be
furnished with relevant data by the representative unions of
the employees concerned.
4. Though it is not necessary for the appropriate Government
before forming its opinion under Section 36 of the Act on
D the basis of the data furnished by the rival parties to give
any personal hearing either to the claimant-establishment or
to the representative union of the employees, it may be still
open in appropriate cases for the Government, if so thought
fit, to give opportunity of personal hearing to the
E representatives of the establishments as well as of the
employees if any elucidation is required in this connection.

5. For making the aforesaid exercise effected if the concerned
employees through their representative unions seek an
opportunity to look into the material supplied by the
F establishments in support of their claims for exemption,
inspection of such material can be made available to the
unions of employees to enable them to file their
representations and to furnish the data in rebuttal for
opposing such claims.

6. Strict time schedule can be fixed by the appropriate
G
Government within which the entire exercise can get
completed so that the proceedings may not drag on for
indefinite number of months. Under the circumstances,
therefore, it would always be open to the appropriate
Government on receipt of such applications for exemption
H under Section 36 to fix the time schedule of four to six weeks
-
STATE v. K. SABAN A YAGAM [S.B. MAJMUDAR. L] 381
from the date of publication of such notices about receipt A
of applications for exemption as aforesaid within which the
employees through their representative unions, if so advised,
may file their representations and within the same time they
may be given an opportunity, if so required, to . have
inspection of the material furnished by the claimant-
establishment in support of their claim applications. Once B
• such time schedule is followed no written representations
would ultimately be required to be entertained after the time
limit fixed for receipt of such representations from the
employees' unions likely to be affected by the grant of such
exemption so that within a short time thereafter as C
expeditiously as possible the appropriate Government can
form its opinion, if any and complete the exercise if it is of
the opinion that all the requisite conditions for exercise of
the power under Section 36 of the Act have been found to
have existed qua the claimant-establishment or class of
establishments for an appropriate period for which such D
exemption is to be granted.
The aforesaid procedural steps are illustrative and not exhaustive. But
they have to be read in Section 36 of the Act so as to make the Section
workable and the exercise of power can be insulated. against attack on the
ground of irrational exercise of power, we make it clear that only in the third E
category of cases of conditional legislation in which Section 36 of the Act
falls, as discussed by us, the aforesaid procedure is required to be followed.
It cannot have any application to the first two categories of cases of exercise
of powers of conditional legislation.
On the aforesaid conclusion of ours we must hold that the ultimate F
decision of the High Court on Point No. 3 that the impugned exemption
notifications issued under Section 36 from year to year by the state of Tamil
Nadu were null and void, has to be upheld not on the ground that hearing,
personal or otherwise, was not given to the employees but on the ground that
the procedure indicated by us hereinabove regarding third category of cases G
of exercise of powers of conditional legislations was admittedly not followed
by the appellant-State while passing the impugned orders of exemption in
favour of the Housing Board. The third point for determination is, therefore,
answered in the affirmative in the aforesaid terms.

Before parting we may mention one submission canvassed by learned H
382 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A counsel for the Housing Board. He submitted that Section .36 of the Act also
entitles the appropriate Government to take into consideration other relevant
circumstances for exempting any establishment or class of establishments
-
from the provisions of the Act. That this may involve a policy decision on
the part of the Government to give impetus to a class of industries in an area
B where the industrial development may be less so that new industries in that
area can be attracted and their operation costs may be reduced. We fail to
appreciate how such type of circumstances are to be kept in view by the
appropriate Government while considering the rival versions put forward by
existing establishment or class of establishments on the one hand and their
employees on the other who are likely to be affected by such exercise of
C power. It is also to be kept in view that the financial position and other
relevant circumstances are not independent of their nexus with the existing
claimant-establishment or class of establishments and they do not refer to any
future establishment which have yet not seen the light of the day and which
have not still employed any employees who could be said to have earned any
statutory benefits under the Act till then. Therefore, the other relevant
D circumstances as mentioned in Section 36 will have to be read with the
financial position of the claimant-establishments themselves and their other
circumstances have to be seen on the touchstone of public interest to enable
the appropriate Government to form its opinion under Section 36 qua the
claims of such existing establishments. This submission of learned counsel
E for the Housing Board, therefore, does not advance the case of the Board any
further.

In view of our aforesaid decision on all the three points, therefore, these
appeals fail and are dismissed. In the facts and circumstances of the case
there will be no order as to costs.

R.K.S. Appeals dismissed.