Amritsar Rayon & Silk Mills Vs.
Their Workmen  INSC 223 (2 August 1962)
02/08/1962 GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS MUDHOLKAR, J.R.
CITATION: 1966 AIR 1253 1966 SCR (3) 558
Industrial Dispute-Gratuity scheme, Framing
of-Validity -Employer's financial position Amount of gratuity-Ceiling, if and
when should be placed-Tribunal's determination to depend on relevant facts.
The present appeal arises out of an
industrial dispute between the appellant and the respondents. The Industrial
Tribunal gave an award and the appellant filed an appeal to this Court by way
of special leave.
The main contention of the appellant was that
no case bad been before the tribunal for the framing of a gratuity scheme. It
was further urged that even if a gratuity scheme had to be framed the tribunal
was in error in not placing any ceiling on the amount of gratuity payable to
the employees. The third point raised was that one month's basic wages which
had been provided by the scheme was excessive and it should be reduced to 15
days' basic wages.
Held, that having regard to the financial
position of the appellant the framing of the gratuity scheme was justified.
As a general rule, where is no provision for
superannuation and gratuity is, paid at a fairly reasonable rate a ceiling
should be placed on the amount of gratuity payable under the scheme. Even
though gratuity schemes framed in the same industry in the same region should
not disclose radical or violent differences the rate of gratuity which should
be awarded in'. a particular case will depend on the facts of that case.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 394 of 1961, Appeal by special leave from the Award dated November 6,1960,
of the Industrial Tribunal, Punjab, in Reference No. 43 of 1968.
M. C. Setalvad, Attorney-General for India,
559 S. K. Kapur, Bishambher Lal, B. N. Kripal and K. K. Jain, for the
Janardan Sharma, for the respondents.
1962. August, 2. The Judgment of the Court
was delivered by GAJENDRAGADKAR, J. This, appeal arises out of an industrial
dispute between the appellant Amritsar Rayon & Silk MillS, and its
workmen.The dispute originally related to seven demands made by the respondents
against the appellant and these seven demands were referred by the Punjab
Government for industrial adjudication to the Industrial Tribunal, Jullundur
under section 10(1)(d) of the Industrial Disputes Act, 1917. The Tribunal has
made its award in respect of these demands. In the present appeal, which has been
brought to this Court by special leave, we are concerned with the award in so
for as it deals with the respondents, claim for a gratuity scheme. The
appellant urged that no case had been made out for the framing of a gratuity
scheme. This plea has been rejected by the Tribunal and a gratuity scheme has
been framed. It is the propriety and the validity of this scheme which are
challenged before us by Mr, Kapoor on behalf of the appellant in this case.
The scheme framed by the Tribunal reads thus:(1)
In case of death of an employee while, he is in the service of the concern on
his becoming incapable of serving further due to physical or mental disability.
One month's basic wages for each year of his service, 560 In case of death, the
gratuity will be payable to the heirs or assigns of the deceased workmen.
(2) On termination of an employee’s service
by the concern after he has put in five year a service Half month's basic wages
for each year of his service.
(3) No gratuity would be payable to an employee
who designs his job 'but if he has served for fifteen years continuously and is
rendered unfit to serve further by old age or protracted ill health, he shall
be given gratuity calculated at the rate of one month's bastion wages for each
completed year of his service.
(4) No gratuity would be payable to an employee
who is dismissed for misconduct.
In rejecting the appellant's contention that
no scheme should be framed, the Tribunal has found that the appellant which was
started in 1934 is the biggest Textile Mills Is in Amritsar and its career so
far has been one of success all along the line. The invested capital of the
concern is Rs.14 lakhs and its working capital is Rs.2,70,000/-. On its roll
are employed 1,250 employees whose monthly wage bill comes to Rs.1,20,000/-. It
is admitted that the appellant has been paying :bonus to its workmen since 1946
and has allowed dividend on invested capital. It contributes to the Provident
Fund and the Employees State Insurance Scheme.
Having regard to this financial position of
the appellant, the Tribunal has held, and we think rightly, that the appellant
cannot successfully resist the demand for the framing of a gratuity scheme.
Mr. Kapoor, however, contends that even if a
gratuity scheme has to be framed, the Tribunal 561 was in error in not placing
any coiling on the amount of gratuity payable to the employees. In our opinion,
this contention is well-founded. Speaking generally, where there is no
provision for superannuation and gratuity is paid at a fairly reasonable rate,
gratuity schemes framed by Industrial Tribunals generally provide for a
ceiling, and so, we do not see how the Tribunal was justified in departing from
this generally accepted position... The rate fixed in the present case is not
unduly low and admittedly, there is no provision for superannuation. Therefore
we think that the appellant is “justified in contending that a ceiling should
be put on the amount of gratuity payable under the scheme. On the whole, we
think it would be reasonable if the maximum amount of gratuity payable under
the scheme is fixed at 15 months' basic wages. We ought to make it clear that
in coming to this conclusion we do not propose to lay down any hard and fast
rule that a ceiling must be placed in every case and that it should be of the
order of 15 months' basic wages; as we have repeatedly observed, in framing
gratuity scheme, all relevant factors have to be taken into account and so,
inevitably the schedule are likely to differ from case to case.
Mr. Kapoor then contends that one month's
basic wages which has been provided for by clauses (1) and (3) is excessive and
it should be reduced to 15 days basic wages. This argument is that the usual
pattern of gratuity schemes in the Punjab shows that it is 15 days' basic wages
which is provided under similar clauses. In support of his argument, Mr. Kapoor
has referred us to some of the awards produced by him. In the gratuity scheme
framed in the New India Embroidery Mills, Chheharta, 15 days wages has been
adopted as the basis, but this award includes dearness allowance and so, this
provision is not very helpful because in the present came, the rate has been
fixed by 562 reference to the basic wages alone. The scheme framed in the
Niemla Textile Finishing Mills, Chheharta, is on the same lines as the scheme
under the New India Embroidery Mills and the same comment, therefore, falls to
be made about it. The gratuity scheme in the Technological Institute of
Textiles, Bhiwani, has adopted the basis of 1/2 month's basic wages for each
completed year of service, but there is no ceiling placed by the scheme. On the
other hand, the gratuity scheme in the Shambhu Nath & Sons Ltd., Amritsar,
adopts one month's basic wages for each completed year of service and so does
the scheme in the India Woollen Textile Mills, Chheharta, and the India Calico
Printing Mills. The Jagatjit Cotton Textile Mills Ltd., Phagwara, has 1/2
month's basic wages; the Punjab Distilling 'Industries Ltd, provides for one
month's basic wages; so does the New Egerton Woollen Mill, Dhariwal. The Jawala
Flour Mills Amritsar, provides for the rate of 1/2 month's basic wages in case
of workmen with five years of service and in case of workmen with service above
five years at the rate of one month's basic wages. It would thus be seen.that
the claim made by the appellant that the pattern of gratuity schemes in the
Punjab invariably shows the adoption of the rate of 15 days' basic wages for
each completed year of service, is not supported by the several awards produced
by the parties before us, and so, it cannot be said that the present award has
departed from any fixed uniform pattern in the matter.
Mr. Kapoor then referred to the decision of
this Court 'in Bharatkhand Textile Mfg. Co. Ltd. v. The Textile Labour Association
Ahmedabad(1) where the gratuity scheme provided, inter alia, for one month's
basic wages for each completed year of service for the Period before the coming
into force of the Employees Provident Funds Act, 1952, and half (1) (1960] 3 S.
C. R. 329.
563 a month's basic wages for each completed
year of service thereafter, subject to a maximum of 15 month's basic wages.
This shows that the award with which this
Court was dealing in that case had made a distinction between gratuity schemes
prior to 1952 and those subsequent to it, and this distinction was based on the
fact that the Employees' Provident Funds Act had come into force in 1952.
Therefore, we do not think it would be fair to suggest that because the scheme
thus framed was accepted by this Court in appeal it follows that this Court has
laid down that in every case half a month's basic wages should be paid after
Mr. Kapoor has also relied on the decision of
the Industrial Tribunal at Rajkot in Arvind Mills Co-operative Supply Society Ltd.,
Ahmedabad v. Their Workmen,(1). The scheme framed by the Tribunal in this case
no doubt provides for 16 day's basic wages as contended by Mr. Kapoor and
prescribes the ceiling of 10 month's basic wages.. Similarly. in the Rashtriya
Mill Majdoor Sangh, Bombay. v. Millowners' Association, Bombay (1) the gratuity
schemes framed appears to be substantially similar to the one framed in the
Bharatkhand Textile Mfg. Co. Ltd.(2). These decisions merely show that 15 days
basic wages has been adopted as a rate by some of the gratuity schemes framed
by Industrial Tribunals. We would, however, not be prepared to accept Mr. Kapoor's
contention that these decisions support the general argument that invariably
the rate of 15 days' basic wages must be adopted. That is a; question which has
to be decided by the Tribunal on the facts of each case; and though it may be
desirable that gratuity schemes framed in the same industry in the same region
should not disclose radical or violent differences, it would not be possible to
introduce uniformity by accepting the argument that 15 days (1) (1959) 2 L.L.J.
107 119 (2) (1956-57) II F.J. R. 372.
(3)  3 S.C.R. 329.
564 should be treated as the invariable rate
in the gratuity schemes. On the material adduced before us, we are not
prepared, to hold that the basis adopted by the award under appeal has made
either a violent or radical departure from the pattern prevailing in the same
industry in the Punjab or is otherwise unjustified on the merits. The fact that
we decline to interfere with the rate prescribed by the award under appeal does
not also mean that according to us, that rate should be adopted in other oases
without reference to the relevant facts in each of them.
The result is, the award. is modified by
prescribing a ceiling of 15 month's basic wages. The rest of the award is
confirmed. There would be no order as to costs.