Remington Rand of India Ltd. Vs. The
Workmen  INSC 294 (17 October 1969)
17/10/1969 VAIDYIALINGAM, C.A.
CITATION: 1970 AIR 1421 1970 SCR (2) 935 1969
SCC (3) 913
RF 1973 SC2344 (3)
Industrial Dispute-Medical, benefit-Company's
Scheme for Calcutta employees whether applicable to Madras regionGratuity-Qualifying
period for workmen guilty of misconductWhether gratuity should be payable to
workmen guilty of violence, riotous behaviour etc.
An industrial dispute between the appellant
company and its workmen relating,. inter alia, to bonus, medical benefits anti
gratuity was, referred by the State Government of.
Madras on April 6, 1965 to the Industrial Tribunal
for adjudication. The. Tribunal awarded bonus at 2O,% of the consolidated wages
as provided in the Payment of Bonus Act, 1965. As to medical benefit& the
Tribunal diverted that the company should pay thecost of medicines prescribed
by the company's doctor and the full cost of hospitalisation when it was.
recomanded by the company's doctor. The Tribunal modified, the company'&
gratuity scheme in accordance with the workmen's demands. The company appealed
to, this Court against the award The question of bonus had to be considered,
in, the light of this Courtís decision in Japan Trading, Company's law. On the
question. of medical benefits the Court had to consider whether the company's
scheme for its Calcutta employees could be extended to Madras Region. In regard
to gratuity the main questions for consideration were as, to, the qualifying,
period forpayment of gratuity to workmen who were guilty of misconduct, and
whether gratuity should be payable for workmen whose misconduct consisted of
violence, riotous behaviour etc.
HELD: (i) In View of this Court's decision in
Jalian Trading Company's case the.Payment of Bonus Act, 1965 was not applicable
in respect of the year in question, and the bonus payable had to be calculated
in accordance with, the Full Bench, Formula. The award to that extent therefore
had to be set aside and remanded, to the Tribunal for determining the bonus in
accordance with the said Formula [937 E] Jalam Trading Co. v. Mill Mazdoor
Union,  1 SC.R. 15, referred to.
(ii) In the appellant company's earlier cases
relating to its Bangalore, Hyderabad and Kerala Branched this Court had held that
the Company's Calcutta scheme relating to medical benefit for its workmen was
fair and reasonable and had made the said scheme applicable to these areas
also. No substantial difference had been shown between these areas and the
Madras region affecting the question of medical benefit. These areas and the no
legitimate reason why the Calcutta scheme should not be applied to the workmen
in the present case. [The Court framed an eight point scheme for medical
benefit based on the Calcutta scheme] [939 A-940 C] Remington Rand of India v.
The Workmen, C.A. Nos. 856/68 etc. dt. 10-12-1968, applied.
(iii.) Once the principal, that gratuity is
paid to ensure good conduct throughout the period that the workman serves his
employer as laid drown 936 in Calcutta Insurance Co. some distinction in the
matter of the qualifying period between cases of resignation and retirement on
the one hand and dismissal for misconduct on the other becomes logically
necessary. Such a distinction cannot legitimately be assailed as unreasonable.
Similarly if the object underlying the scheme of gratuity is to secure
industrial harmony and satisfaction among workmen it is impossible to equate
cases of death, physical incapacity, retirement and resignation with cases of
termination of service incurred on account of misconduct. Besides, a longer
qualifying period in the latter cases would ensure restraint against wailful
use of violence and force, neglect etc. [948 E] As laid down in Delhi Cloth
& General Mills case that acts amounting to misconduct as defined in the
standing orders, when they are made, or the model standing orders, where they
are applicable differ in degree of gravity, nature and their impact on the
discipline and the working of the concern, and that though grave in their nature
all of them may not result in loss capable of being calculated in terms of
Amongst, them there would be some which would
forthwith disentitle the workman from retaining his employment and justifying
For the reasons given in the Delhi Cloth
& General Mills case it was necessary to modify the scheme of gratuity and
to add in cl. 5 thereof a proviso that in cases where there has been
termination of service on account of an employee found guilty of act or acts
involving violence against the management or other employees or riotous or
disorderly behaviour in or near the company's premises, the company would be
entitled to forfeit the gratuity which would otherwise be payable to the
concerned workmen. Clause 5 should also be modified so as to introduce therein
15 years continuous service as the qualifying period for earning gratuity in
cases when the service of an employee has been terminated on account of
misconduct and that such gratuity should be payable at the rate prescribed in cl.
3(d) of the scheme.
[948 G-949 D] Calcutta Insurance Co. Ltd. v.
Their Workmen,  2 S.C.R. 596. and Delhi Cloth & General Mills Co.
Ltd. v. The Workmen,  2 S.C.R. 307, applied.
Garment Cleaning Works v. Its Workmen, 
2 S.C.R. 711, Motipur Zamindari (P) Ltd. v. Workmen,  2 L.L.J. 139,
Employees v. Reserve Bank of India,  1 S.C.R. 25, 58, Remington Rand of
India Ltd. v.' Their Workmen,  1 L.L.J. 542, Remington Rand of India v.
The Workmen,  1 S.C.R. 164, 168 and Indian Oxygen & Acetylene Co Ltd.
case  1 L.L.J. 435, considered.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1551 of 1966.
Appeal by special leave from the Award dated
February 28, 1966 of the Industrial Tribunal, Madras'in I. D. No. 21 of 1965.
H. R. Gokhale and D. N. Gupta, for the
M. K. Ramamurthi, Shyamala Pappu and vineet
Kumar, for the respondents.
The Judgment of the Court was delivered by
Shelat, J. On demands for revision of wage-scales, dearness allowance, medical
benefit, bonus for the year 1963-64, gratuity 937 etc. having been made by the
workmen of the appellantcompany in its Madras and the other branches in that
region and disputes thereabout having arisen between the company and its said
workmen, the Government of Madras referred them by its notification dated April
6, 1965 for adjudication to the Industrial Tribunal, Madras. The Tribunal
granted some and rejected the rest of the demands. Aggrieved by the award the
company filed this appeal under special leave granted by this Court.
Though the award dealt with a number of
demands counsel for the appellant-company restricted its challenge against the
award on three subjects only. Consequently, we are, concerned in this appeal
with those three subjects only, namely, bonus for the year 1963-64, medical
benefits and revision by the Tribunal of the company's existing gratuity
As regards the bonus, the company had already
paid to the workmen bonus at the rate of 4 months' basic pay as against the
demand for the maximum bonus calculated in accordance with the Payment of Bonus
Act, 1965, and on consolidated as against the basic wages. The Tribunal
conceded that demand and granted bonus at 209% of the consolidated wages. In
view, however, of this Court's decision in Jalan Trading Co.
v. Mill Mazdoor Union,(1) Mr. Ramamurthi for
the workman conceded. that the Act cannot apply in respect of the year in
question and that the bonus payable for that year will have to be calculated on
the basis of the Full Bench Formula as approved by this Court. The award to
that extent, therefore, has to be set aside and remanded to the Tribunal for
determining the bonus in accordance with the said Formula.
On the question of medical facilities, the
workmen's demand is contained in paras 27 to 31 of their statement of claim
filed before the Tribunal according to which the workmen wanted the company to
reimburse all medical expenses incurred by them on production of bills therefore.
In paras 27 and 28 of the statement, it was stated that the company had a
scheme for medical benefit for its workmen at Calcutta made under the consent
award of 1962 and that there was no reason "why this amenity should be
refused to the workmen in this region". Para 30 of the statement stated
that there was a discussion between the parties regarding this demand when the
company agreed to appoint a medical officer for consultation by the workmen and
also to meet the cost of medicines upto Rs. 100 for a workman per year. This
offer, however, was rejected on three grounds: (1) that the condition as to the
ceiling was discriminatory, (2) that the ceiling was too low and (3) that there
was no warrant for not extending the benefit to workmen of the branch offices
(1)  1 S.C.R. 15.
938 This demand is dealt with by the Tribunal
in para 14 of the award. It is clear therefrom that the union's contention
before the Tribunal was that there was no reason why "this amenity of
medical facility which the company has granted to its Calcutta workmen should
be refused to the workmen of the Madras region". The contention thus
clearly was that the company having made a scheme for its Calcutta employees,
it was discriminatory to refuse such a scheme to its workmen in Madras region.
It is equally clear that the offer made by the company and referred to in the
statement of claim by the workmen was rejected as it contained a ceiling which
was not in its Calcutta scheme, and it was, therefore, that its offer was
considered discriminatory. In view of these contentions the Tribunal agreed
that a scheme for medical benefit for this region was called for. The Calcutta
scheme was not produced before the Tribunal and therefore the Tribunal
proceeded to frame its own scheme. The Tribunal rejected the demand for
reimbursement of all medical expenses in respect of which bills would be
produced as it felt that such a provision would lead to abuses including the
obtaining of false bills. Instead, the Tribunal directed that the company
should pay the cost of such medicines as are prescribed by the company's
doctor, if supported by genuine bills, and should also pay all cost of
hospitalisation if and when it was recommended by the company's doctor.
Counsel for the company objected to this part
of the award on the grounds (1) that the Tribunal was not justified in throwing
on the company the entire burden of medical expenses including the cost of
hospitalisation even in cases of major diseases which workmen might suffer or
contact, (2) that it was no part of the employer's obligation to provide for
such expenses and that too to an unlimited degree, and (3) that the award
should have provided a ceiling both in respect of the cost of medicines and of
The argument was that the grievance of the
workmen was that denial of the medical amenity to them as the one given to its
Calcutta workmen was discriminatory, and therefore, if the Tribunal decided to
concede the demand, it should have been on the same lines as the Calcutta
scheme. Mr. Ramamurthi, on the other hand, contended that (a) it was an
accepted principle that though a company may have an all India organisation, it
was not necessary that if should have uniform conditions of service in all the
regions and that, therefore, merely because the company has a medical scheme
for its Calcutta office it did not follow that scheme must also be applied to
its workmen in Madras region, and (b) that the scheme framed by the Tribunal
was fair and should not be interfered with in order only to bring it in line
with that of Calcutta.
939 In a recent decision concerning this very
company and its, workmen in Bangalore, Hyderabad and Kerala branches (Remington
Rand of India v. The Workmen)(1), this Court had to consider this very
question. The Tribunals in those cases. had, as in this case, made schemes
which imposed the burden of medical facilities on the company without any
ceiling and extended therein such benefit to the family members of the workmen
also. In those cases, on our finding the company's Calcutta scheme to be fair
and reasonable, we substituted it for the schemes framed by the, respective
Tribunals. The Calcutta scheme is thus in operation in those areas also.
Counsel for the workmen has not shown to us any substantial difference between
those areas and the Madras region affecting, the question of medical benefit.
We,, therefore, find no legitimate reason why
the Calcutta scheme should not be applied to these workmen. It is true that
medical benefit is excepted in that scheme for certain diseases of a contagious
and epidemic nature. That presumably was done on the ground that for such
diseases the primary duty to give relief is of the State and not of the
employer. For the reasons given in that decision, we set aside the directions
given by the Tribunal in this. behalf and substitute them by the following
1. When a workman during the course of his
duty requires medical attention, and where such attention is given by the
company's doctor (i.e. a doctor or doctors nominated by the company including a
doctor nominated as a part-time doctor) and medicines are prescribed by him,
the cost of such prescription should be borne by the company;
2. In the event of a workman falling sick at
his residence and the illness is other than a venereal disease, leprosy,
smallpox, typhoid or cholera, he should be paid the cost of the medicines
3. Bills or cash vouchers pertaining to such
prescription should be produced for counter signature of the company's doctor
before payment is authorised;
4. Disease of a serious nature requiring
hospitalisation will be subject to consideration by the company;
5. At the time of employment the company will
be entitled to get the prospective employees examined by the company's doctor
and their employment will be subject to being found medically fit;
6. All company employees who are presently
employed or those employed in future will be medically (1) C.A. Nos. 856. 1475
and 2119 of 1968, decided on December 10, 1968.
940 examined by the company's doctor once a
year or at such other periodical intervals determined by the company but the
results of such medical examinations will not be prejudicial to the workmen's
7. In case a workman is found medically unfit
to continue in service, the company will decide his case in consultation with
the union's secretary; and
8. This scheme will come to an end as and
when the Employees' State Insurance Scheme is extended to the employees
The question of laying down any ceiling need
not be considered as the company, we are told, is agreeable to extend this
scheme in this region.
The third item in respect of which the
company challenges the award is the revision made by the Tribunal of the
existing gratuity scheme. The workmen's demand in this respect was : (1) that
the maximum limit of 15 months' salary should be enhanced to 20 months' salary,
and (2) that the provision in the existing scheme that no gratuity would be
payable to a workman dismissed on the ground of misconduct should be
substituted by a provision that even in such cases gratuity should be payable
but the company would be entitled to deduct from such gratuity amount the
amount of financial loss, if any, resulting from such misconduct.
The Tribunal's view was that these demands
were reasonable and accordingly made modifications in the existing scheme.
At first, Mr. Gokhale objected to this part
of the award. first ly on the ground that the Tribunal ought not to have
allowed gratuity even in cases of dismissal for misconduct, and secondly, that
the qualifying period in the case of termination of service by the company
otherwise than for misconduct should be 10 years and not the graded periods
from 5 to 15 years as provided in the award. On second thoughts he did not
press the second objection. and therefore, nothing need be said about it. He,
however, contended that if gratuity even in cases of dismissal for misconduct
is to be made payable, a provision should be made that it would be forfeited if
the misconduct is a gross one involving violence, riotous behaviour etc. and
for the rest of the cases, the qualifying period should be 15 years of
These objections involve a principle, and
therefore, need serious consideration. The principle invoked by Mr. Gokhale is,
firstly, that since gratuity is paid as a reward for long and meritorious
service it would be inconsistent with that principle to award gratuity in cases
of dismissal for misconduct, for. such cases cannot be treated as cases of
meritorious service, and 941 secondly, the provision in such cases for
deduction only of financial loss resulting from misconduct committed by the
workman is neither proper nor consistent with the principle on which gratuity
is made payable by an employer. A workman may be guilty of gross misconduct,
such as riotous behaviour or assault on a member of the staff. Such misconduct
may not result in any financial loss to the company, and therefore, the workman
would be paid full gratuity amount.
The contention was that it would be a serious
anomaly that while a workman, who has caused some damage to the company's
property and is dismissed on the ground that he was guilty of misconduct would
have the gratuity amount payable to him reduced to the extent of that damage,
another workman, who, for instance, assaults and causes injury, even a serious
injury, to another employee would, though liable to be dismissed, be entitled
to the full gratuity merely because the misconduct of which he is guilty,
though graver in nature, does not result in pecuniary loss to the company.
In support of his contention, Mr. Gokhale
leaned heavily on two recent decisions of this Court in Calcutta Insurance Co.
Ltd. v. Their Workmen(1) and The Delhi Cloth & General Mills Company Ltd.
v. The Workmen(2). Relying on these decisions, he urged, that in cases of
dismissal for misconduct, the qualifying period should not be as prescribed by
the Tribunal but must be 15 years of continuous service. Mr. Ramamurthi, on the
other hand, contended that the principle that gratuity is a reward for long and
meritorious service and that for a single misconduct after such service, such
misconduct should not result in deprivation of gratuity except to the extent of
the actual monetary loss caused to the employer has been long accepted in
industrial adjudication and should not be abandoned, and that the two decisions
relied on by Mr. Gokhale should not be construed as having the cumulative
result of enhancing the qualifying period and also depriving gratuity in cases
of dismissal for misconduct. The first decision, according to him, lays down an
increase in the qualifying period from 10 years, which generally used to be the
period for earning gratuity, to 15 years, and the second lays down Certain
exceptions to the accepted rule that deduction of monetary loss resulting from
misconduct was sufficient. He argued that neither of the two decisions lays
down that both the consequences must follow where a workman is dismissed for
misconduct, even if such misconduct has not resulted in any monetary loss to
In view of these contentions it becomes
necessary for us to examine the earlier decisions cited before us before we
come to (1)  2 S.C.R. 596.
(2)  2 S.C.R. 307.
942 the cases of Calcutta Insurance Co.
Ltd.(1) and the Delhi Cloth & General Mills Co. Ltd.(2).
The question as, to whether gratuity should
be, payable even though the concerned workman is dismissed for misconduct
appears to have been raised for the first time is The Garment Cleaning Works v.
Its Workmen(3). The objection there raised related to cl. 4 of the gratuity
scheme: framed by the Tribuml which provided that even if a workman was
dismissed or discharged for misconduct, gratuity would still be payable except
that if such a misconduct resulted in financial loss, tothe works, gratuity
should be paid after, deducting such loss. The contention urged by counsel, but
which failed,, was that such a clause was, inconsistent with the principle on,
which gratuity claims were based, namely, that they were in the nature of
retiral benefit based' on. long and meritorious, service.
Therefore, if a workman was guilty of
misconduct and was dismissed or discharged, it would be a blot on his long and
meritorious service and in such a case it would not be open to him to claim
gratuity. This was a general argument and was repelled as such is clear from
what the Court said at page 715 of the Report :
"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 he may have been found
guilty of misconduct which entails his dismissal. Grautuity 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 neceasarily be denied to him whatever
may be, the nature of misconduct for his dismissal-Therefore we do, not. think
that it would be possible to accede to the general argument that in all cases
where the &mice of an employee is terminated for misconduct gratuity should
riot be paid to him." The words "why it should necessarily be denied
to him whatever may be the nature of misconduct occurring in the earlier part
of the passage and the words "general argument that in all cases where the
service of an employee is terminated for misconduct gratuity should not be
paid" and the reference by the Court to certain awards made by tribunals
where simple misconduct was distinguished from grave misconduct and forfeiture
of gratuity (1) 2 S.C.R. 596. (2)  2 S.C.R. 307.
(3)  2 S.C.R. 711.
943 was provided for the letter occurring
after this passage clearly show firstly that the Court was dealing with and
repelled the general proposition that without any distinction between simple
and gross misconduct there should be forfeiture in all cases of dismissal for
misconduct of whatsoever nature, and secondly, that though the Court approved
the scheme which provided that gratuity should be paid after deducting
financial loss resulting from the workman's misconduct, the Court did not lay
down any principle that gratuity should be paid in cases of grave misconduct
involving even violence which though it may not result in financial damage may
yet be more serious than the one which results in monetary loss.
The decision thus is not an authority for the
proposition that even if a workman were guilty of misconduct, such as riotous
behaviour or an assault on another employee, industrial adjudication should not
countenance a provision for forfeiture of gratuity in such cases merely because
it does not result in monetary loss or that such a provision would be
inconsistent with the principle that gratuity is not a boon or a gratuitous
payment but one which is earned for long and meritorious service.
In Motipur Zamindari (P) Ltd. vs. Workmen(1)
the only question considered was whether the award was justified in providing
forfeiture of gratuity in a case where the misconduct involved moral turpitude.
The Court following Garment Cleaning Works ( 2 ) directed that instead of
forfeiture, the clause should provide deduction of the amount of monetary loss,
if any, caused by such misconduct.
It is clear that no one canvassed the
question as to whether a provision in a gratuity scheme that a workman should
forfeit gratuity in the event of his committing misconduct involving violence
or riotous behaviour within or around the works premises would be justified or
not. Nor was it considered whether it would be anomalous to provide for
exaction of compensation from gratuity amount in case of misconduct involving
moral turpitude while not making any provision against misconduct, such as the
use of violence or force, which though not resulting in monetary loss, yet is
unquestionably of a graver nature. The case of Employees v. Reserve Bank of
India(3) was again a case wherethere was a general clause in the gratuity
scheme providing forfeiture in cases of dismissal for misconduct whatsoever and
where in view of the decision in Garment Cleaning Works (2 )" the Bank
conceded to substitute the rule by providing deduction from gratuity the amount
of monetary loss occasioned by the misconduct for which dismissal is ordered.
Thus, in none of the cases cited before us the question as to; what should be
the minimum qualifying period in cases of dismissal (1)  2 L.L.J. 139.
(3)  1 S.C.R. 25, at 58.
944 for misconduct and the question as to
whether a provision for forfeiture of gratuity in the event of such dismissal
having been ordered for misconduct involving violence were either canvassed or
considered. On the other hand, in a recent decision between this very company
and its workmen in Bangalore region (Remington Rand of India Ltd. v. Their
Workmen)(1), the gratuity scheme made by the Tribunal provided for a qualifying
period in cases of termination of service otherwise than for misconduct, but no
qualifying period was provided for cases where termination of service was by
way of punishment for misconduct. This Court accepted the objection of the
company on the ground of this omission and laid down the qualifying period of
15 years' service in such cases. In this decision the Court followed the
earlier decision in Calcutta Insurance Co.(2) In another such case (Remington
Rand of India vs. The Workmen(3), where the dispute concerned the workmen of
the company in Kerala region 15 years service was provided as the qualifying
period in cases of dismissal for misconduct.
In the case of Calcutta Insurance Co.(2) on a
contention having been raised that the qualifying period for earning gratuity
in cases of retirement and resignation should be 15 years' service and that no
gratuity should be payable in cases of dismissal for misconduct, the Court
examined the earlier decisions commencing from the Indian Oxygen &
Acetylene Co. Ltd.(4) to the case of Garment Cleaning Works(5) 'and registered
its demurrer against the observation made in the latter case that as gratuity
was earned by an employee for long and meritorious service, it should
consequently be available to him even though at the end of such service he may
have been found guilty of misconduct entailing his dismissal. In so doing the
Court at page 608 of the Report remarked :
"In principle, it is difficult to concur
in the above opinion. Gratuity cannot be put on the same level as wages. We are
inclined to think that it is paid to a workman to ensure good conduct
throughout the period he serves the employer. "Long and meritorious
service" must mean long and unbroken period of service meritorious to the
end. As the period of service must be unbroken, so must the continuity of
meritorious service be a condition for entitling the workman to gratuity. if a
workman commits such misconduct as causes financial loss to his employer, the
employer would under the general law have a right of action against the
employee for (1) [19681 1 L.L.J. 542. (2)  2 S.C.R. 596.
(3)  1 S.C.R. 164, at 168. (4) (1956] 1
(5)  2 S.C.R. 711.
945 the loss caused and making a provision
for withholding payment of gratuity where such loss caused to the employer does
not seem to aid to the harmonious employment of laborers or workmen. Further,
the misconduct may be such as to undermine the discipline in the workers a case
in which it would be extremely difficult to assess the financial loss to the
employer." Continuity, in other words, must govern both the service and
its, character of merit odiousness. The Court further observed that a mere
provision in a gratuity scheme enabling an employer to, deduct from the
gratuity amount the actual loss caused as a. result of misconduct for which the
workmen incurs the punishment of dismissal or discharge cannot sub serve
industrial peace and harmony, firstly, because an employer even without such a.
provision has under the law the right of action for claiming damages, a right
not taken away by industrial law, and secondly,. because a misconduct resulting
in dismissal may be such as may undermine discipline in the workmen, in which
case it would be extremely difficult to assess the financial loss. As regards
the qualifying period, the Court laid down 10 years service in cases, of
resignation or retirement and "following the principles laid down in the
former decisions of this Court" provided 15 years' service for qualifying
for gratuity in cases of dismissal for mis-conduct.
In the case of Delhi Cloth & General
Mills Co. Ltd. (1) an objection was raised on behalf of the workmen to cl. 3 of
the gratuity scheme framed by the Tribunal. That clause provided as follows :
"On termination of service on any ground
whatsoever except on the ground of misconduct as in cl. 1 (a) and 1 (b)
above." Cl. 1 (a) and 1 (b) provided for payment of gratuity in the event of
the death of an employee while in service or on his being physically and
mentally incapacitated for further service and' laid down the rates and the
qualifying periods as follows :
(a) After 5 years continuous service and less
than 10 years' service-12 days' wages for each completed year of service (b)
After continuous service of 10 years-15 days' wages for each completed year of
The effect of cl. 3, therefore, was that in
case of termination of service an employee would be entitled to get gratuity at
the above (1) C.A. Nos.2168, 2569 of 1966 and 76, 123 and 560 of 1967, decided
on September 27, 1968.
946 rates if he had put in service for the
aforesaid periods, but would forfeit it if the termination was due to any misconduct
committed by him. The objection was that this provision was inconsistent with
the decisions so far given by this Court, that according to those decisions the
only provision permissible to the Tribunal was to enable Ox employer to deduct
actual monetary loss arising from misconduct, and that therefore, the mere fact
that a workman's service was terminated for misconduct was no ground for
depriving him altogether of gratuity earned by him as a result of his long and
meritorious service, until the date, when he commits such misconduct. In
examining, the validity of this contention the Court analysed the previous
decisions and pointed out that none of them laid down a general principle, that
an industrial tribunal cannot _justifiably provide that an employer need not be
made to pay gratuity even where, the workman had incurred termination of
service on account of his having committed misconduct, not merely technical but
of a grave character. The Court observed that in some decisions this Court, no
doubt, had held that the fact that dismissal of a workman on account of his
having committed misconduct need not entail forfeiture and that it would be
sufficient to forfeit partially the gratuity payable to him to the extent of
monetary loss caused to the employer. But then no decision had laid down as a
principle that a provision for such forfeiture cannot be justified, however
grave the misconduct may be, provided it had not caused monetary loss. The
Court noticed that the trend in the earlier decisions was to deny gratuity in
all cases where the, workman's service was terminated for misconduct but that
in later years in cases such as the Garment Cleaning Works(1) "a less rigid
approach" was adopted. The Court then observed:
"A bare perusal of the Schedule (Model
Standing Orders) shows that the expression "misconduct' covers a large
area of human conduct. On the one hand arc the habitual late attendance,
habitual negligence and neglect of work on the other hand are riotous or
disorderly behaviour during working hours at the establishment or any act
subversive of discipline, wilful insubordination or disobedience. Misconduct
falling under several of these latter heads of misconduct may involve no direct
loss or damage to the employer, but would render the functioning of the
establishment impossible or extremely hazardous. For instance, assault on the
manager of an establishment may not directly involve the, employer in any loss
or damage, which could be equated in terms of money, but it would render the
working of the establishment impossible. One may also (1)  2 S.C.R. 711.
947 envisage several acts of misconduct not
directly involving the establishment in any loss, but which are destructive of
discipline and cannot be tolerated. In none of the cases cited any detailed
examination of what misconduct would or would not involve to the employer loss
capable of being compensated in terms of money was made. It was broadly stated
in the cases which have come before this Court that notwithstanding dismissal
for misconduct a workman will be entitled to gratuity after deducting the loss
occasioned to the employer. If the cases cited do not enunciate any broad
principle we think that in the application of those cases as precedents a
distinction should be made between technical misconduct which leaves no trail
indiscipline, misconduct resulting in damage
to the employer's property, which may be compensated by forfeiture of gratuity
or part thereof, and serious misconduct which though not directly causing
damage,, such as acts of violence against the management or other employees or
riotous or disorderly behaviour, in or near the place of employment is
conducive to grave indiscipline. The first should involve no forfeiture: the
second may involve forfeiture of an amount equal to the loss directly suffered
by the employer in consequence of the misconduct and the third may entail
forfeiture of gratuity due to the workmen. The precedents of this Court, e.g.,
Wenger & Co. v. Its Workmen [1963(2) L.L.J.
388], Remington Rand of India Ltd.'s case
[1968(1) L.L.J. 542] and Motipur Zamindari (P) Ltd.'s case [1965(2) L.L.J. 139]
do not compel us to hold that no misconduct however grave may be visited with
forfeiture of gratuity.
In our _judgment, the rule set out by this
Court in Wenger & Co.'s case and Motipur Zamindari (P) Ltd.'s case applies
only to those cases where there has be-en by actions wailful or negligent any
loss occasioned to the property of the employer and the misconduct does not
involve acts of violence against the management or other employees, or riotous
or disorderly behaviour in or near the place of employment. In these
exceptional cases-the third class of cases the employer may exercise the right
to forfeit gratuity; to hold otherwise would be to put a premium upon conduct
destructive of maintenance of discipline." In this view, the Court
modified cl. 3 of the scheme by adding an explanation, the effect of which was
that though the employer could not deprive the workman of the gratuity in all
cases of misconduct, he could do so where it consisted of acts involving
violence against the management or other 'employees or riotous 5Sup.Cl/70-15
948 or disorderly behaviour in or near the place of employment and also gave
right to the employer to deduct from gratuity such amount of loss as is
occasioned by the workman's misconduct. We may mention that the Court did not
alter the qualifying period in cases of misconduct since no objection appears
to have been raised on that ground.
As against the contention that a provision in
accordance with these two decisions should be introduced in the scheme under
examination, Mr. Ramamurthi submitted that the two decisions should not be
construed as if they laid down principles which should have the cumulative
effect, firstly, as to the qualifying period, and secondly, as to deprivation
of gratuity in cases specified in the Delhi Cloth & General Mills case(1).
It is true that this decision does not lay down that the qualifying period in
cases of misconduct should be 15 years as was held in Calcutta Insurance
Company(2). But, as aforesaid, that was because that question was not raised,
while in the Calcutta Insurance Co.
case(2) it was expressly raised and the Court
laid down that in such cases it would be proper to provide 15 years continuous
service as a criterion.
Once the principle that gratuity is paid to
ensure good conduct throughout the period that the workman serves his employer
is accepted as laid down in Calcutta Insurance Co.(2) some distinction in the
matter of the qualifying period between cases of resignation and retirement on
the one hand and dismissal for misconduct on the other becomes logically
necessary. Such a distinction cannot legitimately be assailed as unreasonable.
Similarly, if the object underlying schemes of gratuity is to secure industrial
harmony and satisfaction among workmen it is impossible to equate cases of
death, physical incapacity, retirement and resignation with cases of
termination of service incurred on account of misconduct. Besides, a longer
qualifying period in the latter cases would ensure restraint against wailful
use of violence and force neglect etc. No serious argument was advanced that such
a distinction would not be reasonable. The objection was against the insertion
of both and not against the merit of such distinction.
As regards the clause as to misconduct, it is
not possible to disagree with the proposition laid down in the Delhi Cloth
& General Mills case(-) that acts amounting to misconduct as defined in the
standing orders, where they are made, or the model standing orders, where they
are applicable, differ in degree of (1) 11969] 2 S.C.R. 307.
(2) (19671 2 S.C.R. 596.
949 gravity, nature and their impact on the
discipline and the working of the concern, and that though grave in their
nature and results, all of them may not result in loss capable of being
calculated in terms of money. Amongst them there would be some which would forthwith
disentitle the workman from retaining his employment and justifying his
dismissal. For the reasons given in the Delhi Cloth & General Mills'
case(1) with which we, with respect, concur, we must agree with counsel for the
company that it is necessary to modify the scheme and to add in cl. 5 thereof a
proviso that in cases where there has been termination of service on account of
an employee found guilty of act or acts involving violence against the
management or other employees or riotous or disorderly behaviour in or near the
company's premises, the company would be entitled to forfeit the gratuity which
would otherwise be payable to the concerned workman. Cl. 5 should also be
modified so as to introduce therein 15 years continuous service as the qualifying
period for earning gratuity in cases where the service of the employee has been
terminated on account of misconduct and that such gratuity should be payable at
the rate prescribed in cl. 3(d) of the scheme.
The appeal is allowed and the award is set
aside to the extent aforesaid. The gratuity scheme and the scheme for medical
benefit, as revised by the Tribunal, are modified as stated above. So far as
the question of hours is concerned, that question is remanded to the Tribunal
to decide it in accordance with the observations made hereinabove. The Tribunal
will give liberty to the parties to adduce for that purpose such further
evidence as they think necessary.
There will be no order as to costs.
Y.P. Appeal allowed.