M/S. British Paints (India) Ltd. Vs.
Its Workmen [1965] INSC 239 (4 November 1965)
04/11/1965 WANCHOO, K.N.
WANCHOO, K.N.
GAJENDRAGADKAR, P.B. (CJ) RAMASWAMI, V. SATYANARAYANARAJU,
P.
CITATION: 1966 AIR 732 1966 SCR (2) 523
CITATOR INFO:
RF 1969 SC 182 (2) R 1970 SC 390 (7) E 1970
SC 919 (27,36) RF 1972 SC 343 (20) RF 1972 SC1210 (18) RF 1972 SC2326 (29) R
1977 SC 941 (18,23) R 1984 SC 356 (2,4,7) R 1987 SC 51 (6) RF 1987 SC1527 (32)
ACT:
Industrial Disputes-Retiring age for
workmen-GratuityQuantum and minimum years of qualifying service.
HEADNOTE:
Two matters in dispute between the management
of a paints manufacturing company and their workmen, namely: (1) the are of
retirement of the workmen and (ii) the introduction of a gratuity scheme for them,
were referred to the Industrial Tribunal. Before the reference was made the
workmen were entitled to work so long as they were physically and mentally fit.
The Tribunal fixed the age of retirement for clerical and subordinate staff at
58 years and for the factory workmen at 55 )rears. The Tribunal also introduced
a gratuity scheme. It fixed 5 years minimum service in order to enable a
workman to earn gratuity and while fixing 21 days' basic wage or salary as the
quantum for gratuity for each completed year of service, included dearness
allowance in the words "basic wage or salary." Both the management
and workmen appealed to this Court. The workmen contended that : (i) the age of
retirement both for the staff of the head office and the factory workmen should
be fixed at 60 years, and (ii) 30 days' wages instead of 21 days should have
been fixed as the quantum for gratuity.
The management objected to the minimum period
of five years to enable a workman to earn gratuity even in the case of
voluntary retirement or resignation and contended for a longer minimum of
service. The management also urged that dearness allowance should not be
included in the basic wages for fixing the quantum of gratuity.
HELD:(i) The award of the Tribunal should be
modified, fixing :he age of retirement, for the clerical and subordinate staff
as well as for the factory-workmen, whether existing or future at the age of 60
years. [527 E] Age of retirement of 55 years was fixed in the last century in
government service and had become the pattern for fixing the age of retirement
everywhere. But considering the improvement in the standard of health and
increase in longevity, the age of retirement should be fixed ordinarily it the
higher level of 60 years. Since the work in the factory in the present case was
not particularly arduous as compared to that of the clerical and subordinate
staff, even in the case of factory-workmen there s no reason why the age of
retirement should be fixed at a lower level, especially when the management
could always terminate the services of a workman if he becomes physically or
mentally incapable of working, before the age of retirement. With the age of
retirement at 60 years here will be the added advantage that more experienced
workmen will be available to the management and that would be a cause for
greater efficiency. As there are no valid and cogent reasons for making a
difference in the age of retirement of existing workmen and those employed in
future, the future workmen, both clerical and subordinate staff as 524 well as
factory workmen, should also have the benefit of the same age of
superannuation. [526 B-D; 527 B-D] (ii)No case for increasing the quantum of
gratuity from 21 days basic wage to 30 days' basic wage had been made out by
the workmen, especially when there was a provident fund scheme also in force in
the concern and the workmen, were thus getting two retiring benefits. [529 H]
(iii)In the case of voluntary retirement or resignation by an employee before
reaching the age of superannuation, the minimum period of qualifying service
for gratuity should be 10 years, and not 5 years as prescribed by the Tribunal.
[528 E] The reason for pro-tiding a longer
minimum period of earning gratuity in the case of voluntary retirement or
resignation is to see that workmen do no' leave one concern after another,
after putting in the short minimum service qualifying for gratuity; and
gratuity schemes usually provide for a longer minimum in the case of voluntary
retirement or resignation. [527 A-B] (iv)Gratuity should be paid at the rate of
21 days' basic wage or Wary for each completed year of service, but such basic
wage would not include dearness or any other allowance. [529 F] As the gratuity
scheme was being introduced for the first time in the concern, it would be
proper to follow the usual pattern of fixing the quantum of gratuity on basic
wages, excluding dearness allowance, especially when there was another retiring
benefit in the shape of provident fund already existing in the concern. [529 E]
Case law reviewed.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 246 and 287 of 1965.
Appeals by special leave from the Award dated
March 5 1964 of the Seventh Industrial Tribunal West Bengal in Case No. VIII-60
of 1963.
M. C. Setalvad, and D. N. MukherJee, for the
appellant in(C. A. No. 246/65) and respondent in (C.A. No. 287/65).
A.S. R. Chari and B. P. Maheshivari, for
respondent in (C.A. No. 246/65) and appellant in (C.A. No. 287/65).
The Judgment of the Court was delivered by
Wanchoo J These two appeals by special leave arise from thE same award of the
Seventh Industrial Tribunal, West Bengal, and will be dealt with together. Two
matters in dispute between the management and the workmen Were referred to the
tribunal relating to (i) the age of retirement of the workmen at the head
office and the factory of the company and (ii) the introduction of : gratuity
scheme for workmen employed at the head office and the factory. The tribunal
fixed the age of retirement for clerical an( ,subordinate staff at 58 years and
for workmen in the factory a 55 years.
The tribunal also introduced a gratuity
scheme after 5 2 5.
considering the objections raised to the
draft-scheme proposed by the company. of the two appeals one is by the company
relating to the gratuity scheme and the other by the workmen relating to the
age of retirement as well as to the gratuity-scheme.
We shall first consider the question of age
of retirement.
It may be mentioned that there was no
retirement age in force in this company and so the position when the reference
was made was that the workmen could continue to work so long as they were
physically or mentally fit. The workmen contended that the age of retirement
both for the head office and factory workmen should be fixed at 60 years. The
company however proposed that the age of retirement should be 55 years for all
workmen. The tribunal as already indicated has fixed the age of retirement at
58 years for clerical and subordinate staff and 55 years for factoryworkmen and
has apparently relied on the decision of this Court in Workmen of Jessop &
Co. Limited v. Jessop and Company Limited(1).
Now this is a case where there was no age of
retirement before the reference was made and the workmen whether at the head
office or at the factory were all entitled to work so long as they were
physically or mentally fit. So far as the existing workmen are concerned, we
think that the tribunal should have fixed the age of retirement at 60 years
both for the factory-workmen as well as head office workmen. It is enough in
this connection to refer to the decision of this Court in Guest, Keen,Williams
(Private) Limited v. Sterling(P.J.) (2) where in a similar situation this Court
fixed the age of retirement at 60 years in the case of existing workmen.
Then there is the question as to future
workmen and whether their age of retirement should also be fixed at the same
level as in the case of existing workmen. We are of opinion that generally
speaking there should not be any difference in the age of retirement of
existing workmen and others to be employed in future in a case like the present
unless there are special circumstances justifying such difference.
In this connection our attention is drawn to
the case of Guest, Keen, Williams (P) Limited(2) where the age of retirement of
future workmen was 55 years. In that case however the age of retirement of
future workmen wasfixed at 55 years by the Standing Order and the question
whether that age of retirement should be changed was not before this Court for
consideration. All that this Court had to consider in that case was whether the
age of retirement of existing employees, before the Standing Order fixing the
age of retirement at 55 years was intro(1) [1964] 1 L.L.J. 451.
(2) [1960] 1 S.C.R. 348 : [1959] 2 L.L.J.
405.
:526 educed, should be 60 years or not. In
the present company so far there is no age of retirement and unless there are
valid and cogent reasons for making a difference in the age of retirement of
existing workmen and those employed in future, the future workmen .should also
have the benefit of the same, age of superannuation.
Considering that there has been a general
improvement in the standard of health in this country and also considering that
longevity has increased, fixation of age of retirement at 60 years -appears to
us to be quite reasonable in the present circumstances. Age of retirement at 55
years was fixed in the last century in -government service and had become the
pattern for fixing the age of retirement everywhere. But time in our opinion
has now come considering the improvement in the standard of health and increase
in longevity in this country during the last fifty years that the age of
retirement should be fixed at a higher level, and we consider that generally
speaking in the present circumstances fixing the age ,of retirement at 60 years
would be fair and proper, unless there are special circumstances justifying
fixation of a lower age of retirement.
Now so far as the clerical and subordinate
staff are concerned, we are of opinion that there is no reason for any
difference in the age of retirement as between the existing staff and the
future staff. Their work is exactly the same, and in the circumstances there
;should be the same age of retirement.
As to the factory workmen, it is urged that
their age of retirement should be fixed at a lower level as work in the factory
is more arduous than the work of clerical and subordinate staff, and in this
connection reliance is placed on the decision of this Court in Jessop and
Company(1) where one age was fixed for clerical and .subordinate staff and a
slightly lower age was fixed for the factory workmen. Here again we are of
opinion that generally speaking, there is no reason for making a difference in
the age of retirement as between clerical and subordinate staff on the one hand
and 'factory workmen on the other, unless such difference can be justified on
cogent and valid grounds. It is only where work in the factory is of a
particularly arduous nature that there may be reason for fixing a lower age of
retirement for factory workmen as compared to clerical and sub-ordinate staff.
This appears to have been no in the case of jessop and Company(1) for that was
a heavy engineering concern, where presumably work in the factory was much more
arduous as com(1)[1964] 1 L.L.J. 451.
527 pared to the work of clerical and
subordinate staff. There might therefore have been then some justification for
fixing a lower -age, of retirement for factory workmen in the case of those
factories where the work is of a particularly arduous nature. But the present
company is a paints manufacturing company and there is in our opinion no reason
to suppose that the work in the factory in the present case is particularly
arduous as compared to the work of clerical and subordinate staff. We therefore
think that even in the case of future factory-workmen in the present concern
there is no special reason why the age of retirement should be fixed at a lower
level. It is of course always possible for an employer to term nature the
services of a workman if he becomes physically or mentally incapable of working
before the, age of retirement. This power being there, there is no reason to
suppose that there will be inefficiency in work on account of fixing the age of
retirement at 60 years; on the other hand with the age of retirement at 60
years there *HI be added advantage that more experienced workmen will be
available to the management and that would be a cause for greater efficiency.
On the whole therefore we are of opinion that the age, of retirement in the
case of factory workmen also in the present company should be fixed at the age
of 60 years. We therefore modify the award of the tribunal and fix the age of
retirement for the clerical and subordinate staff as well as for the
factory-workmen, whether existing or future, at the age of 60 yews.
We now turn to the gratuity scheme. Two
points have been urged on behalf of the company in this connection. The
tribunal has fixed five years minimum service in order to enable a workman to
earn gratuity. This has been provided in the event of -(a) death of an employee
while in service of the company, (b) discharge or voluntary retirement of an
employee on grounds of medical unfitness, (c) voluntary retirement or
resignation before reaching the age of superannuation, (d) retirement on
reaching the age of superannuation, or (e) termination of service by the
company for reasons other than misconduct resulting in loss to the company in
money and property. The management objects to the minimum period being five
years in the case of voluntary retirement or resignation before reaching the
age of superannuation. It is contended that gratuity schemes usually provide
for a longer minimum of service in the case of voluntary retirement or resignation
before reaching the age of superannuation. We think that there is substance in
this contention. The reason for providing a longer minimum period for earning
gratuity in the case of 528 voluntary retirement or resignation is to see that
workmen do not leave one concern after another after putting the short Minimum
service qualifying for gratuity. A longer minimum in the case of voluntary
retirement or resignation makes it more probable that the workmen would stick
to the company where they are working. That is why gratuity schemes usually
provide for a longer minimum in the case of voluntary retirement or
resignation. We may in this connection refer to the Express Newspapers
(Private) Limited v. the Union of India(1) where a short minimum for voluntary
retirement or resignation was struck down.
Again in The Garment Cleaning Works v. Its
Workmen(2), 10 years minimum was prescribed to enable an employee, to claim
gratuity if he resigned.
In the Management of Wenger and Company v.
Their workmen(3), a distinction was made between termination of service by the
employer and termination resulting from resignation given by an employee. In
the first case the minimum was fixed at 5 years; in the second the minimum
period was fixed at 10 years by this Court.
We therefore modify the gratuity scheme in
this regard and order that in the case of voluntary retirement or resignation
by an employee before reaching the age of superannuation, the minimum period of
qualifying service for gratuity should be ten years, and not five years as
prescribed by the tribunal.
The next point that has been urged on behalf
of the management in this connection is that the tribunal has while fixing 21
days' basic wage or salary as the quantum for gratuity for each completed year
of service included dearness allowance in the words "basic wage or
salary". It is urged that the usual pattern of gratuity scheme provides
for gratuity on basic wages, and dearness allowance generally speaking is not
included in basic wages for fixing the quantum of gratuity. It is further urged
that by including dearness allowance within the definition of "basic wages
or salary" as given in the scheme in this case, the tribunal has really
more or less doubled the quantum of gratuity for each completed year of service.
There is in our opinion force in this contention also. In May and Baker (India)
Limited v. Their workmen(4), the workmen claimed in this Court that gratuity
should be fixed on gross salary.
In that case the tribunal had fixed the
quantum on basic salary i.e. it had not included (1)[1955] S.C.R.12, at p. 158.
(3)A.I.R. 1964 S.C. 864.
(2)[1962] 1 S.C,R. 711, 714.
(4) [1961] 11 L.L.J.
529 dearness allowance for this purpose and
the reason given by the tribunal for fixing the quantum of gratuity on basic
salary was that the workmen in that case were getting double retiring benefit,
namely both gratuity and provident fund.
That view of the tribunal was upheld by this
Court.
On the other hand, it has been urged that in
some cases quantum of gratuity has been fixed on gross salary i.e. basic wages
plus dearness allowance and in this connection reference was made to British
India Corporation v. The Workmen (1). In that case this Court upheld the award
of the tribunal fixing gratuity on the basis of consolidated wages.
This Court pointed out that the usual pattern
was to fix quantum of gratuity on the basis of basic wages but refused to
interfere in that case because the practice in the concern in that case already
existing was to fix gratuity on consolidated wages.
In the present case also there is a provident
fund scheme in force. So with the introduction of the gratuity scheme, the
employees will be getting double retiring benefit. In such circumstances we are
of opinion that the tribunal should not have defined basic wages so as to
include dearness allowance. Besides as the gratuity scheme is being introduced
for the first time in this concern, it would be proper to follow the usual
pattern of fixing the quantum of gratuity on basic wages (excluding dearness
allowance), especially when there is another retiring benefit in the shape of
provident fund already existing in this concern.
We therefore modify the award of the tribunal
in this respect and order that gratuity should be paid at the rate of 21 days'
basic wages or salary for each completed year of service, and this basic wage
will not include dearness allowance or any other allowance. Subject to these
modifications, the scheme framed by the tribunal will stand.
The workmen have also assailed the gratuity
scheme and their case is that they should have been granted 30 days wages as
prayed for by them instead of 21 days' basic wages fixed by the tribunal. We do
not think there is any case for increasing the quantum of gratuity fixed by the
tribunal at 21 days' basic wages as modified by us for each completed year of
service, for there is a provident fund scheme also in force in this concern and
the workmen are thus getting two retiring benefits. No other point has been
pressed before us.
(1) (1965) Vol. 10 Factory Law Reports 244.
5 30 We therefore partly allow the appeal of
the company and make the two modifications in the gratuity scheme as indicated
above. We also partly allow the appeal of the workmen and fix the retirement
age for all workmen-existing or future clerical, subordinate and factory
workmen at 60 years. In the circumstances we make no order as to costs in both
the appeals.
Appeals allowed in part.
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