The Garment Cleaning Works Vs. Its
Workmen  INSC 75 (3 March 1961)
CITATION: 1962 AIR 673 1962 SCR Supl. (1) 711
CITATOR INFO :
R 1964 SC 864 (25) R 1966 SC 305 (41) R 1966
SC 732 (2) NF 1967 SC1286 (12) RF 1969 SC 182 (12) R 1970 SC 919
(14,18,34,35,36) E 1970 SC1421 (13,14,15)
Industrial Dispute-Gratuity-Scheme framed by
Tribunal- Validity-The Industrial Disputes Act, 1947 (14 of 1947). S. -12(5).
The Industrial Tribunal, on a reference under
S. 12 Of the Industrial Disputes Act, 1947, framed a gratuity scheme for the
appellant company. The company challenged the validity of some of the provisions
of the scheme on the grounds, inter alia, (1) that the scheme was framed on the
basis of the units, while it should have been done on industry-cum- region
basis, (2) that the scheme provided for the award of gratuity on the retirement
or resignation of a workmen after ten years' service instead of fixing the
period as fifteen years, and (3) that cl. (ii)(b) of the scheme which provided
that if a workman was dismissed or discharged for misconduct causing financial
loss to the works, gratuity to the extent of the loss should not be paid to the
workman concerned, was erroneous, because, on principle, misconduct put a blot
on the character/of his service and that disqualified him from any claim of
Held:(1) that industry-cum-region basis is
not the only basis on which a gratuity scheme could be framed and one framed on
the basis of the units cannot be challenged as in- valid.
The Bharatkhand Textile Manufacturing Co.
Ltd. v. The Textile Labour Association, Ahmedabad,  3 S.C.R. 329, explained.
(2) that the clause in the scheme prescribing
ten years' minimum service to enable an employee to claim gratuity is valid.
The Express Newspapers (P.) Ltd. v. Union of
India,  S.C.R. 12, explained.
(3) that gratuity is not paid to an employee gratuitously
or merely as a matter of boon, but is paid to him for the service rendered by
him to the employer; consequently he should not be wholly deprived of the
benefit thus earned by long and meritorious service even though at the end of
such service he might have been found guilty of misconduct which entailed his
dismissal. Accordingly, cl. (ii)(b) of the scheme is a valid provision.
CIVIL APPELLATE JURISDICTION: Civil Appeal No
621 of 1960.
Appeal. by special leave from the Award dated
January 15, 1960, of the Industrial Tribunal, Bombay, in Reference (I.T.) No.
94 of 1959, 712 B. Sen and I. N. Shroff, for the appellant.
C. L. Dhudia and K. L. Hathi, for the
1961. April 3. The Judgment of the Court was
delivered by GAJENDRAGADKAR, J.-Two demands made by the respondents, the
workmen of the appellant company, the Garment Cleaning Works, Bombay, were
referred for industrial adjudication to the industrial tribunal under s. 12(5)
of the Industrial Disputes Act, XIV of 1947. These demands were for gratuity
and provident fund respectively. The tribunal has framed a gratuity scheme and
has passed an order that the appellant should draw up a scheme of provident
fund on the lines of the model provident fund scheme drawn by the Government
under the Employees' Provident Funds Act, 1952 (XIX of 1952), with a rate of
contribution of 6 1/4 per cent. of total wages. Both the gratuity scheme as
drawn up and the directions as to the drawing up of a provident fund scheme are
challenged by the appellant by its present appeal which it has brought to this
Court by special leave.
In regard to the direction as to the gratuity
scheme the argument which has been urged before us by Mr. Sen is that the
problem of starting such a scheme should have been considered on an
industry-cum-region basis and considerations relevant to the said basis should
have been taken into account. In support of this argument he has relied upon a
judgment of this Court in The Bharatkhand Textile Mfg. Co. Ltd. & Ors. v.
The Textile Labour Association, Ahmedabad (1). In that case the industrial
court had no doubt dealt with a claim for gratuity made by the workmen on the
industry-cum-region basis, and an attack against the validity of the said
approach made by the employer in regard to the scheme was repelled by this
It would, however, be noticed that all that
this Court decided in that case was that it was erroneous to contend that a
gratuity scheme could never be based on industry-cum- region basis, and in
support of this conclusion several considerations were set forth in the (1)
3 S.C.R. 329.
713 judgment. It is clear that it is one
thing to hold that the gratuity scheme can in a proper case be framed on
industry- cum-region basis, and another thing to say that industry-cum-region
basis is the only basis on which gratuity scheme can be framed. In fact, in a
large majority of cases gratuity schemes are drafted on the basis of the units
and it has never been suggested or held that such schemes are not permissible.
Therefore the decision in the case of the Bharatkhand Textile Mfg. Co. Ltd.(')
does not support the proposition for which Mr. Sen contends.
Mr. Sen has then criticised some of the
provisions in the gratuity scheme. Clause (ii) (a) of the gratuity scheme
provides that on retirement or resignation of a workman after ten years'
service ten day's consolidated wages for each year's service should be awarded
as gratuity. Mr. Sen quarrels with this provision. He contends that no gratuity
should be admissible under this clause until and unless fifteen years' service
has been put in by the employee. In support of this argument Mr. Sen has referred
us to certain observations made by this Court in the case of The Express
Newspapers (Private) Ltd. & Anr. v. The Union of India & Ors. (2). In
that case the provisions of s. 5 (1)(a) (iii) of the Working Journalists
(Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955),
was struck down on the ground that its provisions violated the fundamental
right guaranteed by Art. 19(l)(g) The conclusion of this Court was that the
provision for gratuity made by the said clause to an employee who had put in
three years' service imposes an unreasonable restriction on the employer's
right to carry on business and is therefore liable to be struck down as
unconstitutional. Dealing with that provision this Court incidentally observed
that where the employee has been in continuous service of the employer for a
period of more than fifteen years he would be entitled to gratuity on his
resigning his post. Mr. Sen contends that this observation indicates that an
employee who resigns his post cannot be entitled to any gratuity (1)  3
S.C.R. 329. (2)  S.C.R. 12, 154.
90 714 unless he has put in fifteen years'
service. In our opinion, the observation on which this argument is based was
not intended to lay down a rule of universal application in regard to all
gratuity schemes, and so it cannot be made the basis of an attack against a
gratuity scheme where instead of fifteen years' service 10 years' minimum
service is prescribed to enable an employee to claim gratuity at the rate
determined if he resigns after ten years, service.
Therefore, we do not think that the provision
of cl. (ii)(a) can be successfully challenged as being unreasonable.
Clause (iv) is then challenged by Mr. Sen.
This clause provides that if a workman is dismissed or discharged for
misconduct causing financial loss to the works gratuity to the extent of the
loss should not be paid to the workman concerned. Mr. Sen contends that this
clause is inconsistent with the principles on which gratuity claims are
generally based. Gratuity which is in the nature of retrial benefit is based on
long and meritorious service, and the argument is that if the service of an
employee is terminated on the ground of misconduct it would not be open to him
on principle to claim gratuity because misconduct puts a blot on the character
of his service and that disqualifies him from any claim of gratuity. In this
connection he has referred us to the definition of 'retrenchment' contained in
s. 2 (oo) of the Industrial Disputes Act. Retrenchment, according to the
definition, means, inter alia, the termination by the employer of the service
of a workman for any reason whatsoever, otherwise than as a punishment
inflicted by way of disciplinary action. Mr. Sen suggests that the retrenchment
benefit and gratuity are payments made to the employee for a similar purpose,
and if dismissal of an employee for misconduct does not entitle him to a claim
for retrenchment benefit so should gratuity be denied to him in case he is
dismissed for misconduct. A similar argument is based on the rules framed under
the Employees' Provident Funds Act, 1952. Rule 71 of the Provident Funds Scheme
Rules provides for certain deductions from the account of a member dismissed
for Serious and willful misconduct. By analogy 715 it is urged that this rule
also shows that a dismissed employee is not entitled to gratuity. We are not
impressed by these arguments.
On principle if gratuity is earned by an
employee for long and meritorious service it is difficult to understand why the
benefit thus earned by long and meritorious )service should not be available to
the employee even though at the end of such service lie may have been found
guilty of misconduct which entails his dismissal. Gratuity is not paid to the
employee gratuitously or merely as a matter of boon. It is paid to him for the
service rendered by him to the employer, and when it is once earned it is
difficult to understand why it should necessarily be denied to him whatever may
be the nature of misconduct for his dismissal.
Then, as to the definition of retrenchment in
the Industrial Disputes Act, we are not satisfied that gratuity and
retrenchment compensation stand exactly on the same footing in regard to the
effect of misconduct on the rights of workmen. The rule of the provident fund
scheme shows not that the whole provident fund is denied to the employee even
if he is dismissed but it merely authorises certain deductions to be made and
then to the deductions thus made do not revert to the employer either. Therefore
we do not think that it would be possible to accede to the general argument
that in all cases where the service of an employee is terminated for misconduct
gratuity should not be paid to him. It appears that in awards which framed
gratuity schemes sometimes simple misconduct is distinguished from gross
misconduct and a penalty of forfeiture of gratuity benefit is denied in the
latter case but not in the former, but latterly industrial tribunals appear
generally to have adopted the rule which is contained in el. (ii) (b) of the
present scheme. If the misconduct for which the service of an employee is
terminated has caused financial loss to the works, then before gratuity could
be paid to the employee he is called upon to compensate the employer for the
whole of the financial loss caused by his misconduct, and after this
compensation is paid to the employer if any balance from the gratuity claimable
716 by the employee remains that is paid to him. On the whole we are not
satisfied that the clause thus framed by the Industrial Tribunal in the present
case needs to be revised.
The last contention raised by Mr. Sen in
regard to the gratuity scheme has reference to cl. (v) of the scheme.
This clause provides that for calculating
years of service the entire service of the workmen should be taken into
account. Mr. Sen contends that though the word "continuous" has not
been used either in cl. (v) or in clauses (i), (ii) and (iii) we should make it
clear that the service referred to in all the said clauses referred to
This position is not disputed by Mr. Dudhia
for the respondents. We would accordingly make it clear that the service
referred to in clauses (i), (ii) and (iii) refers to continuous service.
That takes us to the appellant's grievance
against the direction issued by the Tribunal in regard to the framing of the
provident fund scheme on the lines of the model provident fund scheme drawn by
the Government in the Employees' Provident Funds Act. Mr. Sen contends that in
issuing this direction the tribunal has not properly assessed the extent of the
financial obligation which the scheme would impose upon the appellant and the
limited nature of its financial capacity. It appears that when the appellant
produced its balance-sheet and other relevant papers it claimed privilege under
s. 21 of the Industrial Disputes Act. Inevitably the Tribunal could not discuss
the figures disclosed by the said books in its award though it must have
examined the said figures carefully. In the result the tribunal has naturally
contented itself with the general observation as to the financial position of
the appellant. It has observed that the question to consider in framing the
provident fund scheme is whether the employer has made good profits, whether
its future is assured, whether it has capacity to build up adequate reserves.
Having thus posed the question the Tribunal
ha,-, come to the conclusion that the appellant satisfies all these
requirements. Mr. Sen contends that the 717 tribunal did not take into account
the fact that the appellant has no reserve&, and that it had borrowed large
loans. We do not see how that would enable the appellant now to agitate a
question which is purely a question of fact. Mr. Sen realised the difficulties
in his way because, since his client had claimed the privilege of s. 21 the
Tribunal was fully justified in not discussing the figures in its award. He,
therefore, faintly suggested that we may remand the case subject to any order
as to costs that we may deem fit to make and ask the Tribunal to reconsider the
matter in the light of the relevant documents, and he assured us that he would
not claim privilege under s. 21 after remand. This request is plainly
untenable. If the appellant wanted the tribunal to consider the figures and
state its conclusions in the light of the said figures in its award it need not
have claimed privilege under s. 21 at the trial. It is now too late to suggest
that the privilege be waived and that the matter be considered afresh by the
tribunal or by us in the appeal. Therefore we see no reason to interfere with
the direction given by the Tribunal in regard to the framing of the provident
The result is the appeal fails and is
dismissed with costs.