COFFEE BOARD EMPLOYEES ASSOCIATION AND ORS. versus A. C. SHIV.A GOWDA AND ORS.

Citation: [1991] SUPP. 3 S.C.R. 387 · Decided: 11-12-1991 · Supreme Court of India · Bench: P.B. SAWANT · Disposal: Appeal(s) allowed

Judgment (excerpt)

COFFEE BOARD EMPLOYEES ASSOCIATION AND ORS. 
A 
V. 
A. C. SHIV.A GOWDA AND ORS. 
DECEMBER 11, 1991 
[P. B. SAW ANT AND B. P. JEEV AN REDDY , JJ.] 
Coffee Act, 1942: Section 32. 
Coffee Board-Employees engaged for storing, curing and marketing 
coffee-Ex-gratia payment made to employees at the minimum rate at which 
bonus is payable under the Payment of Bonus Act-Payment made out of the 
Pool Fund constituted under the Ac I-field payment made was for the purpose 
mentioned in Section 32 and was the ref ore valid. 
The appellant-Coffee Board engaged employees for storing, curing 
and marketing coffee. After obtaining previous sanction of the Central 
Government, the Board made an ex-gratia payment to these employees 
equivalent to the minimum bonus payable to the workmen under the 
Bonus Act for the year 1964-65 to 1968-69. The said payment was made 
out of the Pool Fund constituted under the Coffee Act. The respondent-
Coffee planters challenged the said payment by filing petitions in the High 
Court and a Single Judge of the High Court upheld the payment as legal. 
On appeal the Division Bench or the High Court reversed the 
decision of the Single Judge by holding: (i) that the Bonus Act was inap-
plicable to the Coffee Board and therefore no bonus was payable under the 
Act; (ii) the payment made was illegal because it was not covered by 
Section 32. The Coffee Board and the Board Employees Association tiled 
appeals in this Court. 
It was contended on behalf of the respondent-coffee planters that 
section 32(2)(b) which refers to the cost of storing, curing and marketing 
coffee deposited in and of administering the surplus pool will not include 
B· 
c 
o: 
E 
F 
the payment made to the employees because the Board engages no 
G 
workman for the said purpose; the Board gives contracts and the contrac-
-
tors get the work done through their own workmen who are not employees 
of the Board. 
. Allowing the appeals and setting aside the decision of the Division 
Bench, this Court, 
H 
387 
388 
SUPREME COURT REPORTS 
[1991) SUPP. 3 S. C. R. 
A 
HELD: 1. An ex-gratia payment to the staff is a well recognised 
legitimate mode of incentive payment. Incentives are necessary for secur-
ing from the workmen cooperation and efficient work. In the absence of 
efficiency, the cost oUhe work undertaken is bound to increase. In the long 
term, such payment helps to keep down the costs and acts in the interests · 
of the industry. The decision to make the payment has, therefore, to be left 
B entirely to the discretion of the management. Since the payment in 
question was ex-gratia and not as bonus, the question whether the Bonus 
Act applied or not was irrelevant. The Division Bench of the High Court 
erred in considering the question as to whether the Bonus Act was 
applicable to the Coffee Board or not. ~391 B, 389~G] 
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·D 
·E 
2. It is evident from the record that the Board does employ workmen 
for storing and marketing of coffee as well as for administering the surplus · 
pool of coffee. Even assuming that there is a dispute as to whether curing · 
is done by the Board's employees, it is not disputed that those who were 
paid, the ex-gratia payment from the Pool Fund were engaged also for 
storing and marketing of coffee as well as for administering the surplus 
pool of coffee. Therefore, the payment made to the said employees would 
legitimately be a part of the costs of storing and marketing coffee as well 
as of administering the surplus pool of coffee. (390 F-GJ 
Sub-se<;tion(2) of Sectton 32 does not require that the cost of storing 
and marketing of coffee as well as of administering the surplus pool of 
coffee should be incurred only in terms of the salaries paid to the 
concerned staff and not otherwise. Whether the payment is made by way 
of salary or by way of ex-gratia payment over and above the salary, it 
would legitimately constitute the cost of the labour engaged in the said 
work. Thus, all legitimate payments made to the staff would constitute the 
F . cost of labour engaged in the said activities. In the circumstances, the 
Division Bench erred in holding that the payment in question from the 
Pool. Fund was unauthorised. (391 A-C, 390-H] 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3097-3099 of 
. 1979. 
G 
From the Judgment apd Order dated 23.8. 79 of the Kamataka High Court 
in W.P.No. 90 to 92 of 1974. 
WITH 
Civil Appeal Nos. 3100-3103 of 1979. 
H 
From the Judgement and Order dt 23-8-79.of the Ka

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