Management of Wenger & Co. Vs.
Their Workmen  INSC 361 (11 December 1962)
GUPTA, K.C. DAS SHAH, J.C.
CITATION: 1964 AIR 864 1963 SCR Supl. (2) 862
CITATOR INFO :
R 1965 SC 839 (3) R 1966 SC 305 (47) RF 1966
SC 732 (10) F 1967 SC1206 (5) E 1967 SC1286 (14) E 1968 SC1076 (9) RF 1969 SC
360 (38) E 1970 SC 919 (8,36) R 1970 SC1421 (16) RF 1972 SC 343 (20) F 1974
SC1132 (13) RF 1976 SC2303 (1) RF 1981 SC1685 (2)
Industrial Dispute-Hotels and
Restaurants-Whether wine shops are part of the Hotel establishment-Financial
position of employer and wage Structure-Bonus-Remuneration of partnersExtent
and Scope of interference of this Court in appealFirm whether a legal
person-Tips-whether to be excluded in the matter of D.A., Gratuity
scheme-Whether justified when provident fund scheme
available-Misconduct-Involving moral turpitude-Retrospective operation of
award-Nature of the Tribunal's power-Constitution of India, Art. 136-Industial
Disputes Act, 1947 (14 of 1947), 8. 19A (4).
An industrial dispute arising out of the
demands made by the employees against 13 Hotel and Restaurant institutions in
Delhi was -referred for adjudication to the Industrial Tribunal and they were heard
together with another reference made to it concerning the disputes in the case
of two other hotels. The award given by the Tribunal in these two references
gave rise to the present four appeals by special leave, two of which had been
filed by the employees and the other two by the employers.
The main contentions in the appeals were the
following: it was contended on behalf of the employers that the Tribunal was in
error in dealing with the two hotels and eleven restaurants together inasmuch
as they were not similar in character. Their next contention was that the
Tribunal committed another error in treating the wine shops as part of the
restaurant establishment. Thirdly it was contended that in constructing the
wage structure the Tribunal did not consider properly the financial position of
The next contention was that the Tribunal
erred in reducing the amount of remuneration claimed by the employers for the
different partners who took active part in the management of their respective, establishments.
It was further contended on their behalf that since each one of the workers got
Rs. 50/-to 60/by way of tips no 863 D.A. should have been awarded to the
waiters. Another contention was that in view of the fact that Employees
Provident Fund Scheme had already been introduced in these establishments the
introduction by the award of a gratuity scheme was not justified. It was the
case of the employers that even if such a scheme was justified on principle the
scheme as contained in the present award is bad on merits.
It was further contended that the directions
of the Tribunal regarding the decisions of the service charges in the future
was outside the jurisdiction of the Tribunal, because this was not a matter
referred to it for adjudication. They lastly contended that the Tribunal had no
power to give retrospective operation to the award.
The employees contended, among other things,
that the bonus awarded was inadequate on the ground that the calculation made
by the Tribunal in respect of income-tax claimed by the employees as a prior
charge are obviously inconsistent with the decisions of this Court in recent
case of Tulsi Das Khimji v. Their Workmen,  1 S.C.R. 675.
Held, that though the nature of the service
rendered in Hotels is in some particulars different from that of the
Restaurants, both the establishments are constituents of the catering trade.
Taking into consideration that they are situated in similar localities and
carry on the same business it is desirable that terms and conditions of service
of the employees working in them should as far as possible be uniform; such
uniformity is conducive to industrial peace and harmony and to better,
efficient and satisfactory management.
The question whether there is functional integrality
between two units has to be decided according to the facts of each case.
Absence of functional integrality and the fact that the two units can exist one
without the other do not necessarily show that where they exist they are
necessarily separate units and do not constitute one establishment.
Associated Cement Co. Ltd. v. Their Workmen,
(1960) 1 L. L.L.J. 1, Pratap Press v. Their Workmen, (1960)1 L.L.J. 497,
Pakshiraj Studios v. Its Workmen, (1961) II L.L.J. 380, South Indian
Millowners' Association v.' Coimbatore District Textile Workers Union, (1962) 1
L. L. J. 223, Fine Knitting Co. Ltd. v. Industrial Court, (1962) 1 L. L. J. 271
and D.C.M. Chemical Works v. Its Workmen, (1962) 1 L.L.J. 388.
Wine shops and Restaurants form part of the
same establishment because there is unity of ownership, unity of 864 finance,
unity of management and unity of labour and they are not separately registered.
Where a wage structure is constructed and it
provides for increments the financial position of the employer has to be
considered. The hypothetical consideration that total prohibition may be
introduced in the near future, cannot play any part in the decision of the wage
problem in the present case. It would be open to the employers to raise a
dispute for the reduction in the wage structure in case they are able to show
that as a result of the introduction of total prohibition their financial
position is weakened to such an extent that they cannot bear the burden of the
wage structure directed by the award.
When this court entertain appeals in
industrial matters under Art. 136 of the Constitution it does not act as a
court of appeal on facts. It is only where general 'questions of law are raised
that this Court feels called upon to pronounce its decision on them.
A firm is not a legal person within the
meaning of the Industrial Disputes Act. It is the partners of the firm who are
Tulsidas Khimji v. Their Workmen, [19631 1
S.C.R. 675, referred to.
It would not be right to treat the tips
received by the waiters as being wholly irrelevant to the decision of the
question about the matter of D.A. But it would not be right to make a
calculation about the tip; received and treat the said amount as a substitute
either whole or partial for the D.A. itself. What can be done is to bear in
mind the fact that tips are received and make some suitable adjustment in that
State Bank of India v. Their Workmen, (1939)
2 L.L J. 205 and Morthaclav v. Regent Street Florida Restaurant, (I 951) 2 K.B.
Workmen of M/s. A. Fingo's Ltd. v. M/s. A.
Fingo's Ltd., (1953) L.A.C. 480, referred to.
The object intended to be achieved by the
Provident Fund Scheme is not the same as the object of the gratuity scheme and
in any case where the financial position of the employer justi. fies the
introduction of both benefits, there is no reason why the employers should not
get the benefits of both the schemes.
865 Bharatkhand Textile Mfg. Co. Ltd. v.
Textile Labour Association, Ahmedabad, (1960) 2 L.L.J. 21 and Garment Cleaning
Works v. Its Workmen,  1 S.C.R. 71, followed.
For the termination of service caused by the
employer the minimum period of service for payment of gratuity should be five
years and if the employee resigns he would be entitled to get gratuity only if
he has completed ten years service or more. If the termination is the result of
misconduct which has caused financial loss to the employer that loss should be
first compen. sated from the gratuity payable to the employee.
Since the direction of the Tribunal for the
decision of the service charges in future is not covered by the terms of
reference that direction is invalid.
Under s. 17A (4) of the Industrial Disputes
Act, 1947, it is open to the industrial Tribunal to name the date from which it
should come into operation.
CIVIL APPELLATE JURISDTCTION: Civil Appeals
Nos. 609 and 610 of 1962.
AND Civil Appeals Nos. 622 and 623 of 1962.
Appeals by special leave from the award dated
1962, of the Industrial Tribunal, Delhi, in
1. D. Nos. 581 and 620 of 1959.
G.S. Pathak, Veda Vyasa, B. Datta, J. B.
C. Mathur and Ravinder Narain, for the
appellants (in C. A. Nos. 609 and 610 of 1962) and the respondents (in C.A.
Nos. 622 and 623 of 1962).
M.C. Setalvad, Attorney-General for India and
Janardan Sharma, for the respondents (in C. A. Nos. 609 and 610 of 1962) and
for the appellants (in C.A. Nos. 622 and 623 of 1962).
1962. December 11. The judgment of the Court
was delivered by 866 GAJENDRAGADKAR, J.-An industrial dispute arising out of
ten demands made by the employees against 13 Hotel and Restaurant institutions
in New Delhi, was referred by the Chief Commissioner, Delhi to the Industrial Tribunal
for adjudication. Reference in Ii. D. No. 581 of 1959 which was made on
September 9, 1959, included two Hotels-Claridge's Hotel and Nirula Hotel-,
whereas reference in I. D.
No. 620/1959 which related to United Coffee
House was made on December 12, 1959. These two references were consolidated by
the Tribunal and were heard together. Out of the demands made by the employees,
three demands were rejected by the Tribunal ; they were demands Nos. 4, 9 and
10. Demand No. 4 was in regard to medical
treatment, No. 9 was in regard to the revision of the hours of work of
Chowkidars and No. 10 was in regard to the recognition or appointment of
Central Negotiating Committee on Association or Union level. The other demands
have been partially allowed. The principal amongst these demands were a claim
for a wage structure with adequate provision for increment in scales, provision
for Provident Fund and Gratuity and Bonus for the years 1956-57, '57-58 and
58-59. There were, other subsidiary demands to which reference would be made
later. The award pronounced by the Tribunal in these two references has given
rise to four appeals by special leave before this Court. Appeals Nos.
609-610,/1962 have been preferred by the employers, whereas appeals Nos. 622
and 623/1962 have been filed by the employees.
It would be convenient to set out briefly the
broad features of the directions issued by the Tribunal in respect of the
employees' claims. The Tribunal has examined the employees' claim with regard
to bonus for the three years in question.
It took the claim for bonus in respect of
each one of the employers, it examined the financial position of the employer
for the respective years and determined the 867 question as to the available
surplus by the application of the Full Bench Formula in each individual case.
Claims made by the employers for deduction of certain items were examined in
the light of the comments made by the employees in respect of them. The usual
prior charges were taken into account, and on determining the available
surplus, directions were issued for the payment of bonus for the three
respective years. In some cases, the employer has been asked to pay bonus for
all the three years, while in some others the employer has been asked to pay
bonus for one or two years according as the available surplus justified or did
not justify the award of bonus for the particular year.
The Tribunal then proceeded to deal with the
other demands made by the employees. The claim made by the employees for
suitable uniforms and other apparel according to the nature of the duties of
individual workman was, in substance, rejected by the Tribunal. It has,
however, ordered that all the managements, with the exception of Delhi
Restaurant, should give winter uniforms consisting of a woollen coat and a pair
of woollen trousers to Waiters, Bearers, Page Boys, Lift Boys, Peons and
Chowkidars and Butlers once in three years. Similarly, the managements have
been asked to give to 'Masalchis, Sweepers and Malis a woollen jersy once in
The Tribunal then examined the claim for
additional leave facilities and held that there was no justification for
granting separately sick leave as such. Three national holidays were allowed by
the employers on the January 26, August 15, and October 2. The Tribunal has
held that three more holidays should be allowed, one for Holi, one for Dussehra
and one for Diwali.
On the question of the introduction of Provident
Fund Scheme and the, Cratuity Scheme, the 868 Tribunal noticed the fact that
the P. F. Scheme had been introduced by the employers in accordance with the
requirements of the relevant statute. The employers' case that in view of the
fact that a P.F. Scheme had been introduced, no Gratuity Scheme should be
framed, was rejected and a provision has been made for the introduction of the
The Tribunal then proceeded to consider the
vexed question about the construction of a suitable wage structure, and in
dealing with this problem, the Tribunal first examined the point as to what
should be the minimum wage in those concerns. It appears that before the
Tribunal it was conceded by the managements that the total pay packet in the
case of Hotels should be Rs. 70/p.m. inclusive of service charges and in
respect of Restaurants Rs. 60/p.m. he Tribunal came to the conclusion that, on
the whole, it would be fair and reasonable if the minimum total wage packet
includes Rs. 65/p.m. Rs. 30/being the minimum basic wage and Rs. 351being a
flat dearness allowance payable to each one of the employees. Having thus
determined the minimum content of the total wage packet, the Tribunal took into
account the fact that several establishments gave food and accommodation to
some of their employees and it has accordingly directed that for food Rs. 15/should
be deducted from the D. A. for accommodation Rs. 51should be deducted and Rs.
7/or Rs. 3/50 nP. should be deducted for tea according as tea was given twice
or once. In other words, having fixed the flat rate of Rs. 35/for the payment
of D.A. the Tribunal provided for appropriate deductions for amenities which
the employers gave to their employees in this trade.
The Tribunal then classified the workmen into
unskilled, semi-skilled and skilled, and in the last category it provided for
two grades Grade II and Grade I. Having thus classified the employees in three
869 categories, the Tribunal prescribed a wage scale for each one of them. In
respect of this wage scale, the Tribunal has given certain appropriate
directions as to the adjustment of the employees in the new wage scale. One of
the important directions given in that behalf is on the usual lines that no
workman should be prejudicially affected by this process of adjustment and that
if he was getting higher emoluments than he would be entitled to by virtue of
the adjustment in the new wage scale, he would continue to get the higher
Then the Tribunal considered the question as
to whether the award should be given retrospective effect and it held that it
should come into effect as from January 1, 1961, the award having been
pronounced on March 16, 1962.
The employees in the Claridge's Hotel had
made a demand for a share in the service charges collected by the employer.
The Tribunal held that for the period prior
to the reference, the employer had paid to the employees about 3 months' wages
out of the service charges and so, it took the view that no further direction
was required in respect of the said period. It however, proceeded to issue a
direction to the management of the Claridge's Hotel that from April 1, 1962, it
should distribute 85 per cent of the service charges collected by it among the
workmen rateably according to and on the basis of the basic wage drawn by' each
one of them during the relevant year. That, in brief, is the nature of the
directions issued by the Tribunal in respect of the demands which have been
The first point which Mr. Pathak for the
employers has urged before us is that the Tribunal was in error in dealing with
the two Hotels and eleven Restaurants together. The argument is that the Hotels
and Restaurants are not similar in character 870 so as to justify the
employees' claims made against the two sets of establishments to be tried
together. Service in Hotels is usually non-stop 24 hours' service: in regard to
hotels, residence is provided for a number of employees, the nature of the
business is different and the nature and extent of the expenses incurred are
not also the same.
Therefore, it is urged that the Tribunal
committed a basic error in dealing with the two sets of establishments
We are not impressed by this argument. It is
significant that the history of industrial adjudication in respect of catering
establishments in New Delhi shows that restaurants and hotels have been grouped
together for the purpose of one adjudication in the past. It appears that in
1950, a similar industrial dispute in respect of 14 catering establishments was
referred to Mr. Dulat; amongst them were 3 Hotels and 11 Restaurants. In fact,
some of the Restaurants in the present proceedings were included in that
reference. Besides, there is no doubt that though the nature of the service
rendered by Hotels is in some particulars different from that of the
Restaurants, both the establishments are constituents of a catering trade. In
fact, Mr. Nirula is the Secretary of the Association whose membership is open
to both Hotels and Restaurants. It will be noticed that all the Restaurants
included in the reference, except the Delhi Restaurant which is situated at
Karolbagh, work in Connaught Place, and Claridge's Hotel is situated in
Aurangzeb Road which is also an important locality. Thus, the situation of the
Restaurants and the Hotels which have been included in the present reference
shows that they are carrying on the same business in about the same locality
and it is desirable that terms and conditions of service of the employees
working in them should, as far as possible, be uniform. Such uniformity is not
only conducive to peace and harmony amongst the employees and their employers,
but would be 871 helpful to the managements themselves because it would tend to
avoid migration of labour from one establishment to another. It is true that it
might have been possible to classify these restaurants according to the extent
of their custom and their general financial position and standing in the trade
: but no material has been produced before the Tribunal in that behalf and no
attempt appears to have been made to suggest to the Tribunal that it would either
be possible or appropriate to make any such classification. That is why we
think Mr. Pathak is not justified in attacking the award on the ground that in
approaching the problem, it has considered all the establishments together.
The next point which has been strenuously
pressed before us by Mr. Pathak on behalf of the employers is that in dealing
with the financial position of the managements, the Tribunal has committed an
error inasmuch as it has assumed that the wine shops and the restaurants form
part of the same establishment. It appears that in several cases the same
employer conducts a restaurant and a wine shop; and the argument is that in
determining the terms and conditions of service in these establishments, wine
shops should have been treated as separate units,-distinct from the
The question as to whether industrial
establishments owned by the same managements constitute separate units or one
establishment has been considered by this Court on several occasions.
.-'Several factors are relevant in deciding this question. But it is important
to bear in mind that the significance or importance of these relevant factors
would not be the same in each case; whether or not the two units constitute one
establishment or are really two separate and independent units, must be decided
on the facts of each case Mr. Pathak contends that the Tribunal was in error in
holding that the restaurants cannot 872 exist without the wine shops and that
there is functional integrality between them. It may be conceded that the
observation of the Tribunal that there is functional integrality between a
restaurant and a wine shop and that the restaurants cannot exist without wine
shops is not strictly accurate or correct. But the test of functional integrality
or the test whether one unit can exist without the other though important in
some cases, cannot be stressed in every case without having regard to the
relevant facts of that case, and so, we are not prepared to accede to the
argument that the absence of functional integrality and the fact that the two
units can exist one without the other necessarily show that where they exist
they are necessarily separate units and do not amount to one establishment. It
is hardly necessary to deal with this point elaborately because this Court had
occasion to examine this problem in several decisions in the past, vide
Associated Cement Companies Ltd. v. Their Workmen (1); Pratap Press, etc. v. Their
Workmen(2); Pakshiraja Studios v. Its Workmen (3);
South India Millowners' Association v.
Coimbatore District Textile Workers Union(4); Fine Knitting Co. Ltd. v. Industrial
Court (5) and D.C.M, Chemical Works v. lts Workmen(6).
Let us then consider the relevant facts in
the present dispute. It is common ground that wherever the employer runs a
restaurant and a wine shop, the persons interested in the trade are the same
partners. The capital supplied to both the units is the same. Prior to 1956,
wine shops and restaurants were not conducted separately, but after 1956 when partial
prohibition was introduced in New Delhi, wine shops had to be separated because
wine cannot be sold in restaurants. But it is significant that the licence for
running the wine shop is issued on the strength of the fact that the management
was running a wine shop before the introduction of prohibition. In fact, LII
licence to run wine shops has been given in many (1) (1960) 1 L.L.J. 1.
(3) (1961) 11 L.L.J.380 (5) (1962) 1 L.L.J.
(2) (1960) 1 L.L..T. 497.
(41 (1962) 1 L.L.L.J. 223.
(6) (1962) 1 L.L.J. 388.
873 cases to previous restaurants on
condition that the wine shops are run separately according to the prohibition
It is true that many establishments keep
separate accounts and independent balance sheets for wine shops and restaurants
; but that clearly is not decisive because it may be that the establishments
want to determine from stage to stage which line of business is yielding more
profit. Ultimately, the profits and losses are usually pooled, together. Thus,
generally stated, there is unity of ownership, unity of finances, unity of
management and unity of labour; employees from the restaurant can be
transferred to the wine shop and vice versa. Besides, it is significant that in
no case has the establishment registered the wine shops and the restaurants
separately under:,. 5 of the Delhi Shops and Establishments Act, 1954 (No. VII
of 1954). In fact when Mr. Nirula, the Secretary of the Employers' Association,
was called upon to register his wine shop separately, he protested and urged
that separate registration of the several departments was unnecessary; and that
clearly indicated that wine shop was treated by the establishment as one of its
departments and nothing more. The failure to register a wine shop as a separate
establishment is, in our opinion, not consistent with the employers' case that
wine shops are separate and independent units. Having regard to all the facts
to which we have just referred, we do not think it would be possible to accept
Mr. Pathak's argument that the Tribunal was in error in holding that the wine
shops and restaurants form part of the same industrial establishments.
That takes us to the question about the
financial position of the different establishments. The Tribunal has carefully
examined the relevant balance sheets and considered the profit and loss
position of each establishment for the three years in respect of which bonus
was claimed; they are 195657, 57-58 and 58-59. In constructing a wage
structure, industrial 874 adjudication has undoubtedly to take into account the
overall financial position of the employer because a scheme of wage structure
including scales of increment is a long-term scheme and before it is framed the
Tribunal must be satisfied that the burden imposed by the scheme would not be
beyond the means of the employer. In regard to the minimum wage, no such
consideration arises because it is the duty of an industrial employer to pay
the basic minimum to his employees. But when a wage structure is constructed
and it provides for increments, the financial position of the employer has to
be borne in mind. The Tribunal has recognised this. principle and on examining
the accounts produced before it, it has come to the conclusion that the
establishments in question have shown uniform prosperity and all of them,
except the Delhi Restaurant, can be properly characterised as established
concerns. Besides, it has referred to the fact that in the Delhi region, there
are various establishments which have pay scales for workmen, though, except for
the award made by Mr. Dulat, there were no previous instances of pay scales
having been introduced in restaurants in the awards or settlements cited before
the Tribunal. It was, however, urged before the Tribunal and the same plea has
been repeated before us that the possibility of the introduction of total
prohibition in New Delhi should have been borne in mind in considering the
problem of wage structure in the present proceedings. We do not think that the
award made by the Tribunal in this case can be validly attached on the ground
that the Tribunal refused to attach due importance to the apprehension
expressed before it by the employers that total prohibitition may soon be
introduced in New Delhi -and that may impair the prosperity of the trade. The
Tribunal has noticed that even after the partial introduction of prohibition,
the profits of the trade have not shown any adverse effect. On the contrary
they show an upward tendency, and the Tribunal 875 was not satisfied that there
was any evidence adduced before it to justify the contention that in the very
near future total prohibition would be introduced in New Delhi. It was urged by
the employees that all indications pointed to the fact that total prohibition
may not be introduced in New Delhi and the Tribunal thought, and we think
rightly, that it would be idle to speculate in this matter; if in course of
time, total prohibition is introduced and it materially affects the prosperity
of the trade, it would be open to the employers to raise a dispute for the
reduction in the wage structure and in case they are able to show that as a
result of the introduction of total prohibition their financial position is
weakened to such an extent that they cannot bear the burden of the wage
structure directed by the present award, the matter may have to be examined on
Therefore, we do not think that the
hypothetical consideration that total prohibition may be introduced in the near
future, can play any part in the decision of the wage problem in the present
That takes us to the question about bonus.
The main point which Mr. Pathak raised in regard to bonus was that the Tribunal
was in error in reducing the amount of remuneration claimed by the employers
for the different partners who took active part in running and supervising the
management of their respective establishments. It appears that whereas each
partner claimed a thousand rupees per month, the Tribunal has reduced it to Rs.
500/-, and in one case it has ordered that Rs. 500/p. m. should be paid to
three partners together. The argument is that this interference is wholly
unjustified. In dealing with this contention it is necessary to emphasise that
when this Court entertains appeals in industrial matters under Art. 136 of the
Constitution, it does not act as a Court of Appeal on facts.
It is only where 876 general questions of law
are raised that this Court feels called upon to pronounce its decisions on them
for the guidance of industrial adjudication in this country. The decisions of Industrial
Tribunals on questions of fact and their conclusions in matters within their
discretion are not usually revised by this Court under Art. 136. Besides, the
claim made by the employers by way of remuneration to the partners has not been
properly established by adequate evidence. That is the conclusion of the
Tribunal, and on the record it seems to be well founded. It also appears that
in some cases, the amounts of remuneration claimed are not debited in the books
of account; but the present claim is made for the purpose of working the Full
Therefore, on a question of this kind, we do
not think Mr. Pathak is justified in making a grievance before us under Art.
The learned Attorney-General for the
employees characterises the award in respect of bonus as inadequate and
contends that larger amounts should have been allowed, and he argues that the
calculations made by the Tribunal in respect of income-tax claimed by the
employers as a prior charge are obviously inconsistent with the recent decision
of this Court in the case of Tulsidas Khimji v. Their Workmen. (1) In that
case., the majority decision was that a firm is not a legal person within the
meaning of Industrial Disputes Act. It is the partners of the firm who are the
It is that fact that has to be taken into
account in considering the question of income-tax, even in other matters like
remuneration, etc., that is to say, the amount of tax payable by each partner,
qua the business of the firm, irrespective of their other sources of income or
loss, because notional is quite different from the actual, though not wholly
dissociated from it. Mr. Pathak has conceded that the calculations made by
(1)(1962) 1 L.L.J. 435, 441.
877 the Tribunal in dealing with the question
of income-tax in the working of the formula must now be regarded as erroneous
and that would clearly negative his plea that the bonus should not have been
awarded or the amount awarded should have been less. It is true that the
employees claim additional bonus on this ground; but we are not satisfied that
the difference made by a fresh calculation of the income-tax according to the
decision of this Court would justify any addition to the amount already awarded
by the Tribunal by way of bonus for the respective years in question.
The next question to consider is about the
As we have already pointed out, the employers
conceded that the wage packet in the case of Hotels should be Rs. 70/p.m.
including service charges and in the case of Restaurants should be Rs. 60/-,
and the Tribunal has fixed the minimum content of the wage packet at Rs. 65/p.m.
We see no reason to interfere with this decision. The Tribunal has fixed Rs.
35/as a flat rate for dearness allowance and has provided for appropriate
deductions from the said amount for amenities like food, residence and tea
which the employers provide to some of their employees. We see no reason to
interfere with this part of the award as well.
The categories of workers into unskilled,
semi-skilled and skilled also appear to us to be fully justified, and on the
material adduced on the record, no case has been made out against the said
The main controversy in respect of the wage
structure has centered round the problem of Dearness Allowance qua the waiters.
Mr. Pathak has strenously contended that no D.A.,should be paid to the waiters
at all, because, he argues, each one of them gets Rs. 50/to Rs. 60/p.m. by way
of tips in each one of these establishments. The Tribunal has taken the view
that the tips earned by the waiters 878 must be excluded from consideration in
dealing with the question of D.A., and in support of this view it has referred
to a decision of this Court in the case of State Bank of India v. Their Workmen
(1). Mr. Pathak contends that the Tribunal was obviously in error in relying
upon this decision in support of its conclusion on the question of tips. This
contention is well-founded. In the case of State Bank of India this Court was
considering the question as to whether bonus could be said to be a part of
remuneration within the meaning of that term under ss. 2 and 10 (1) (b) (2) of
the Banking Companies Act, 1949 (unamended by Act XCV of 1956), and the
decision was that in s. 10 the word " remuneration" has been used in
its widest sense, and in that sense, it would undoubtedly include the profit
bonus. It appears that in the course of discussion of the bar, the decision in
the case of Mrottaslav v. Regent Street Florida Restaurant (2) was cited, and
so, it had to be incidentally considered. That decision was in regard to tips
and it held that when a customer gives a tip to a waiter, the money becomes the
property of the latter. It was observed by this Court that the English decision
itself showed that the word ""remuneration must be given its meaning
with reference to the context in which the word occurs in the statute and that
the said decision would not justify cutting down the amplitude of the
expression used by the relevant provision of the Banking statute with which the
Court was concerned. It is hardly necessary to point out that this decision
cannot be cited as relevant in determining the question as to whether tips paid
to waiters in hotels and restaurants should not be taken into account in
dealing with the problem of D.A. On the other hand, it does appear that in
Workmen of M/s. A. Fingo's Ltd. v. M/s. A. Fingo's Ltd., (3) the Labour
Appellate Tribunal confirmed the award passed by the original Tribunal by which
Rs. 15/had been orderd to be deducted from the D.A. payable to boys and
butlers. It was found in (1) (1959) 11 L.L.J. 205. (2) (1951) 2 K.B. 277.
(3) (1953) L.A.C. 480.
879 that case on un-contradicted evidence
that the value of the tips received by the boys and butlers would be about Rs. 15/or
so per head per month. Mr. Pathak contends that in the light -of this
precedent, the Tribunal should have considered the amount of tips which waiters
receive in hotels and restaurants and should not have directed D.A. to be paid
to them at the flat rate of Rs. 35/p.m.
The learned Attorney-General has supported
the finding of the Tribunal and has referred to an earlier award passed by the
same Tribunal in an industrial dispute between the Management of the Marina
Hotel and its workmen in 1958 where the Tribunal refused to consider the tips
in dealing with the problem of wage structure including D.A. The said Tribunal
took the same view when it pronounced its award in an industrial dispute
between the management of the Hotel Ambassador and its employees in 1960. The
learned Attorney General also suggested that the compromise award between the
Swiss Hotel and its employees reached on December 31, 1959, would tend to
support his case that tips may not be taken into account in dealing with the
question of D. A.
The question thus raised before us needs to
be carefully examined. The employees contend that the basis of D.A. is that the
employer should make a suitable addition to the amount of basic wage in order
to neutralise the rise in the cost of living and it is not open to him to
contend that he is absolved from his liability to provide for either partial or
complete neutralisation of the rise in the cost of living because his customers
pay tips to his employees. Tips are paid not by the employer but by the
customers and they are paid not only for the service received in the restaurant
or the hotel, but for the promptness shown by the waiter and his smartness and
efficiency. Besides it is urged that the 880 amount of tips is variable and
uncertain and so, it would be unreasonable to take such an uncertain and
indefinite factor into account in fixing the amount of D. A., On the other
hand, the employers contend that tips are paid as a matter of conventional
requirement in all restaurants and hotels and they are paid not so much to the.
waiters as individuals but as waiters working in a particular establishment.
The tips thus received by the employees are incidental to their work as waiters
and cannot be completely dissociated from it. In theory and in law, it may be
true that the tips received by the waiters become their property, but they are
received by them as an incident of their employment and so, it would be
unreasonable not to take them into account in fixing the D. A., In our opinion,
in dealing with this question, it would not be appropriate to adopt an academic
or a doctrinaire approach. In considering the problem of wage structure in
regard to hotels and restaurants, industrial adjudication has necessarily to
adopt a pragmatic approach and in fixing the wage structure and the D. A., it
has to take care to see that the legitimate demand of the employees is met without
doing injustice to the employer and without acting unfairly by him. If the
object of D. A. is to neutralise the rise in the cost of living, it would be
purely doctrinaire to ignore altogether the fact that as waiters working in
their respective establishments they invariably get some amount of tips from
the customer , and so, we think it would not be right to treat the tips
received by the waiters as being wholly irrelevant to the decision of the
question about the matter of D. A. Similarly, it would not be right to make a
calculation about the tips received and treat the said amount as a substitute,
either whole or partial, for the D. A. itself. All that we can do is 881 to
bear in mind the fact that tips are received and make some suitable adjustment in
that behalf It would, of course, not be right to treat these tips as
substantially amounting to payments made by or on behalf of the employers for
if that were so, logically, it may be open to the employers' to say that the
said tips may be taken into account even while fixing a basic wage. That
clearly is not and cannot be the employers case. It is true that the amount of
tips may vary and in that sense be uncertain. But if evidence adduced by the
parties satisfactorily proves that each waiter would invariably receive a
certain amount of tips in the minimum, it would not be unfair or un just to
take such a minimum amount into account in determining the quantum of D. A. at
a flat rate. Such an approach, we think, would do no injustice to the
employees' claim for D. A. and would be fair to the employers as well.
We have, therefore, examined the evidence to
find out what amount can be reasonably taken to be the minimum which a waiter
is bound to get in each one of the establishments before us. As often happens,
the witnesses examined by the managements have made overstatements on the point
and witnesses examined by the Union have made understatements.
According to the former set of witnesses,
more than Rs. 60/are received by the waiter by way of tips every month, whereas
according to the latter, between Rs. 10/to Rs. 15/are received per month. Some
employers claimed that if their waiters were sent out for service, they
themselves compensated the waiters for the loss of their tips caused by outside
service and paid appropriate amounts to them in that behalf, and in support of
this claim, evidence, documentary and oral, was adduced. We are satisfied that
the said evidence is not reliable and the claim, based on it is untenable.
Tips. are paid by the customers and not by employers in any case. It is common ground
that 882 since the introduction of prohibition, tips paid to the employees in
the restaurants and hotels have gone down. But it seems to us that there is no
difficulty whatever in holding that each one of the waiters gets at least Rs.
10/p. in. by way of tips. This conclusion may amount to an under estimate in
regard to some of the establishments before us because it is likely that
waiters employed in the more prosperous establishments must be receiving by way
of tips amounts very much larger than Rs. 10/p. in., but in the absence of
adequate and satisfactory evidence in respect of each one of the establishments
with which we are concerned, it would not be safe or advisable to make a
definite finding that more than Rs. 10/are received by waiters in each one of
these establishments. That being the state of evidence adduced by the employers
in the present proceedings, we would content ourselves with accepting the
principle that in fixing D. A., a reasonable deduction may be made in respect
of waiters on the ground that they receive a certain amount of minimum tips
from the customers every day. We are, therefore, inclined to think that in the
case waiters who receive tips, it would not be unfair or unjust to direct that
a deduction of Rs. 10/should be made from Rs. 35/per month. In the case of
waiters who receive food, tea and accommodation from their employers, Rs. 27/p.
in. are already ordered to be deducted from the D. A. In respect of these waiters,
we direct that only Rs. 8/should be further deducted on account of tips because
we have no doubt that Do deduction can be made on account of these
considerations from the basic wage.
That takes us to the question of the gratuity
scheme framed by the Tribunal. Mr. Pathak no doubt attempted to argue that in
view of the fact that Employees' Provident Fund Scheme has already been
introduced in these establishments, it would 883 not be right to burden the
employers with the additional liability of the gratuity scheme. This argument
has been considered by this Court on several occasions and has been
consistently rejected. The object intended to be achieved by the Provident Fund
Scheme is not the same as the object of the Gratuity Scheme and in any case,
where the financial position of the employer justifies the introduction of both
benefits, there is no reason why ,the employees should not get the benefit of
both the P. F. Scheme and the Gratuity Scheme, vide Bhuratkhand Textile
Manufacturing Co. Ltd. v. Textile Labour Association, Ahmedabad, (1) and
Garment Cleaning Works v. Its Workmen (2). Besides, in dealing with the
financial obligation involved by the introduction of a gratuity scheme, it is
necessary to bear in mind that the magnitude of the theoretical impact does not
matter so much as the extent of the Actual impact of the scheme. As has been
pointed out by this Court in Bharatkhand Textile Mafg. Co. Ltd. (1) there are
two ways of looking at the problem of the burden imposed by the gratuity scheme.
One is to capitalise the burden on actuarial basis and that would naturally
show theoretically that the burden would be very heavy; the other is to look at
the scheme in its practical aspect and this would show that, speaking broadly,
no more than 3 to 4 per cent of the employees retire every year. It is
desirable that in assessing the impact of the gratuity scheme on the financial
position of the employer, this practical approach should be taken into account.
Thus considered, we see no reason to accept Mr. Pathak's argument that the
financial position of the employers would be unable to bear the practical
burden which the gratuity scheme would impose on them, vide Sone Valley
Portland Cement Co. v. Its Workmen(3).
Turning then to the merits of the scheme, we
are satisfied that some modifications must be made.
(1) (1950) II L.L.J. 21. (2) (1962) 1 S.C.R.
(3)  1 L.L.J. 218.
884 The scheme made by the Tribunal provides
For service of less than two years. Nil.
For continuous service of Fifteen day's basic
pay two years and more, on for every year of completed termination of service
of service subject to a maximum the workman for whatever of twelve month's pay.
reason except by way of dismissal for
misconduct, involving moral turpitude.
The first criticism which Mr. Pathak has made
against this provision is that the clause about misconduct involving moral
turpitude is unusual and would create complications.
This position is not disputed by the learned
Attorney General. We would, therefore, delete the words "involving moral
turpitude" from the said provision. The second criticism made by Mr.
Pathak against the provision is that the limit of two years imposed by the
provision is unduly liberal. We think this criticism also is well-founded.
Besides, a distinction must be made between
the termination of service caused by the employer and the termination resulting
from the resignation given by the employee. We would, therefore, provide that
for termination of service caused by the employer, the minimum period of
service for payment of gratuity should be five years, and in regard to this
category of termination of service, we would like to add that if the
termination is the result of misconduct which has caused financial loss to the
employer, that loss should be first compensated from the gratuity payable to
the employee and the balance, if any, should be paid to him-.
In regard to resignation, we would like to
provide that if the employee resigns, he would be entitled to get gratuity only
if he has completed ten years' service or more. The rate prescribed by the
Tribunal for the payment 885 of gratuity and the ceiling placed by it in that
behalf would remain the same.
There is one more point which still remains
to be considered, and that is in regard to the claim for a share in the service
charges in respect of the Claridge's Hotel.
We have already indicated the nature of the
directions issued by the Tribunal in that behalf. The Tribunal has held that no
direction need be issued in respect of the employees' claim for a share in the
service charges for a period prior to the date of the award. It has, however,
purported to issue a direction in respect of the division of the service
charges in future, and Mr. Pathak contends that this direction is outside the
jurisdiction of the Tribunal because this was not a matter referred to it for
its adjudication. Paragraph I (d) of the reference clearly supports Mr.
Pathak's contention. This clause is worded thus :
"Are the workmen entitled to share the
service charges collected previously by different managements up to the date of
reference of this dispute ? if so, what should be the percentage and what
directions are necessary in this respect ?" It is plain that the claim
which has been referred to the Tribunal for adjudication does not cover a
period subsequent to the date of reference. This position is not disputed.
We must accordingly set aside the direction
issued by the Tribunal in respect of the division of service charges in future.
Mr. Pathak no doubt attempted to argue that
the directions given by the award in respect of uniforms and holidays should be
revised. We are not impressed by Mr. Pathak's argument on these points. These
are matters of detail which it was for the Tribunal to consider on the merits
and the grievance made by Mr. Pathak raises no question of law 886 on which we
can interfere with the decision of the Tribunal.
The last point urged by Mr. Pathak is in
regard to what he characterised as retrospective operation of the award. It appears
that the present demands were made by the employees on October 1, 1958 and the
references were made on September 9, 1959 and December 12, 1959 respectively.
Tile award was pronounced on March 16, 1962 and it has directed that its
directions should take effect from January 1, 1961.
Technically -speaking, this direction cannot
be said to be retrospective because it takes effect from a date subsequent to
the date of the reference. Under s. 17A(4) or the Industrial Disputes Act, 1947
(No. 14 of 1947), it is open to the Industrial Tribunal to name the date from
which it should come into operation, and in cases where the Industrial Tribunal
thinks that it is fair and just that its award should come into force from a
date prior to the date of reference, it is authorised to issue such a
When such a direction is issued, it may be
said appropriately that the award takes effect retrospective Apart from this
technical aspect of the matter', if in the circumstances of this case, the
Tribunal held that the Award should take effect not from the date of reference
but from a later date which was January 1, 1951, we see no reason why we should
interfere with its direction.
The result is, the appeals preferred by the
employers partially succeed inasmuch as the provisions made by the award in
respect of dearness allowance, Gratuity and future distribution of service
charges have been modified. The appeals preferred by the employees fail and are
There would be no order as to costs.
C.A. Nos. 609-610 of 1962 allowed in part.