Lalappa Lingappa & Ors Vs.
Laxmi Vishnu Textile Mills Ltd., Sholapur [1981] INSC 29 (11 February 1981)
SEN, A.P. (J) SEN, A.P. (J) VENKATARAMIAH,
E.S. (J)
CITATION: 1981 AIR 852 1981 SCR (2) 796 1981
SCC (2) 238 1981 SCALE (1)268
CITATOR INFO :
E 1984 SC1842 (16) D 1986 SC 458 (3,6)
ACT:
Payment of Gratuity Act 1972-Section
4(1)-Scope of- Permanent workers on unauthorised leave-On termination of
services whether entitled to gratuity under section 4(1)- Badli workers-If
entitled to gratuity for badli period on being made permanent.
Words and phrases-"Continuous
service"-"Actually employed" and "actually worked"
meaning of.
Interpretation of statutes-Social welfare
legislation- Principles of interpretation.
HEADNOTE:
Gratuity is payable to an employee on the
termination of his employment after he has rendered continuous service under
the conditions mentioned in section 4(1) of the Payment of Gratuity Act 1972. The term "continuous service" has been defined
in section 2(c) to mean uninterrupted service and includes service which is
interrupted, among others, by leave or cessation of work not due to any fault
of the employee concerned. Explanation I to this section provides that an employee,
who is not in uninterrupted service for one year, shall be deemed to be in
continuous service, if he has been actually employed by an employer during the
twelve months immediately preceding the year for not less than 240 days except
when he is employed in a seasonal establishment. Explanation II provides that
an employee of a seasonal establishment shall be deemed to be in continuous
service, if he has actually worked for not less than 75% of the number of days
on which the establishment was in operation during that year.
Certain permanent employees of the
respondent, on termination of their employment, made a claim for payment of
gratuity in respect of every year during which they were in permanent
employment irrespective of whether they had actually worked for 240 days or
not.
On being made permanent the badli workers
claimed gratuity in respect of the period prior to their being made permanent
irrespective of whether in those years they had been actually employed for 240
days or not.
The respondent, however, paid gratuity
calculating the number of years in which they were actually employed for 240
days.
As regards the permanent employees, the
Labour Court held that they were governed by the substantive part of the
definition of continuous service in section 2(c) upon the basis that there was
no break in service; and as regards the badly employees, it held that they were
not entitled to gratuity in respect of the years in which they were not
actually employed for 240 days since they fell within Explanation I of section
2(c) of the Act.
797 The Appellate Authority upheld the view
of the Labour Court.
On appeal, as regards the permanent employees
the High Court held that unauthorised absence from work resulted in a break of
service and, therefore, the employees were not in uninterrupted service and
fell outside the substantive part of section 2(c) but came within Explanation
I. As regards badli workers it upheld the view of the authorities.
In appeal it was contended that the permanent
employees, even if they were absent without leave for a number of days in a
year and had actually worked for less than 240 days due to absence without
leave, were entitled to gratuity under section 4(1) since the jural
relationship of employer and employee continued during that period. The badli
employees on being made permanent became entitled to gratuity for the badli
period because of the fact that they were required to report for work at the
factory irrespective of whether they were provided with employment or not on
any day.
Dismissing the appeal.
HELD : 1. The High Court was right in holding
that the permanent employees were not entitled to payment of gratuity under
section 4(1) for the years in which they remained absent without leave and had
actually worked for less than 240 days in a year. [806A] The expression
"actually employed" used in Explanation I and "actually
worked" used in Explanation II, having regard to the context and purpose
with which they were enacted, are synonymous. An employee, who is not in
uninterrupted service for one year is deemed to be in continuous service, even
though he falls outside the substantive part of the definition in section 2(c)
provided he has been actually employed for 240 days in a year. In the case of
seasonal establishments, however, it is difficult to predicate the number of
days on which the establishment would be in operation in the year and an
employee of such a seasonal establishment shall be deemed to be in continuous
service, if he has actually worked for not less than 75% of the number of days
on which the establishment was in operation. [802 F-H] The badli workers do not
fall within the substantive part of the definition of "continuous
service", but are covered by Explanation I. They are, therefore, not
entitled to payment of gratuity for the badli period i.e. in respect of the
years in which no work was allotted to them due to their failure to report to
duty. Simply because a worker is required everyday to attend the mills for
ascertaining whether work would be provided to him or not, he cannot be deemed
to have rendered service and would not, on that account, be entitled to claim
gratuity. Gratuity is paid for services rendered. [807 C; 806D] Delhi Cloth and
General Mills Co. v. Its Workmen, [1969] 2 SCR 307 at 338, followed.
In construing a social welfare legislation,
the Court should adopt a beneficent rule of construction. If a section is
capable of two constructions, that construction should be preferred which
fulfils the policy of the Act, and is more beneficial to the persons in whose
interest the Act has been passed. Where the language is plain and unambiguous
the Court must give effect to it whatever may 798 be the consequences. In that
case the words of the statute speak the intention of the legislature. The
argument of inconvenience and hardship is a dangerous one and is only
admissible in construction where the meaning of the statute is obscure and
there are two methods of construction. In their anxiety to advance beneficent
purpose of legislation, the Courts must not yield to the temptation of seeking
ambiguity when there is none. [804G-H]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 436 of 1980.
Appeal by special leave from the Judgment and
Order dated 1-9-1978 of the Bombay High Court in Special Civil Application No.
200/78.
AND Civil Appeal No. 930 of 1980.
Appeal by special leave from the Judgment and
Order of the President, Industrial-Court, Bombay (Appellate Authority appointed
under Payment
of Gratuity Act, 1972), in Appeal PGA Nos. 34/78 and
36 to 119/79.
R. S. Kulkarni, Mrs. Veena Devi Khanna and V.
N. Ganpule for the Appellants and intervener.
F. S. Nariman, B. N. Srikrishna, R. P. Kapur,
H. S. Parihar and Shardul S. Shroff for the Respondents..
The Judgment of the Court was delivered by
SEN, J.-The controversy in these two appeals by special leave against a
judgment of the Bombay High Court and an order of the President, Industrial
Court, Bombay, turns on the construction of the expression `continuous service'
as defined in s.2(c) of the Payment of Gratuity Act, 1972.
The facts giving rise to these appeals are
these :
Eighty-five permanent employees of the
respondent who were on the regular muster roll, on termination of their
employment, made a claim for payment of gratuity for the entire period of their
service, i.e., in respect of every year during which they were in permanent
employment, irrespective of the fact, whether they had actually worked for 240
days in a year or not. Twenty-five badli employees of the respondent, who were
on the badli register, upon being made permanent, made a similar claim for
payment of gratuity for the badli period, i.e. in respect of the period prior
to their being made permanent, irrespective of the fact whether in those years
they had been actually employed for 240 days or not. The respondent, however,
calculated the number of years in which these employees were actually employed
for at least 799 240 days in a year and paid gratuity accordingly. The Labour
Court, which is the Controlling Authority, held in relation to the permanent
employees that they were governed by the substantive part of the definition of
`continuous service' in s. 2(c) of the Act, upon the basis that there was no
break in service, i.e., there was no question of their actual employment or
actual working for 240 days or more, but as regards the badli employees, it
held that they were not entitled to gratuity in respect of those years in which
they were not actually employed for 240 days since they fell within Explanation
I to s. 2(c) of the Act. That view of the Controlling Authority was affirmed in
appeal by the President of the Industrial Court, who is the Appellate
Authority. The High Court while upholding the view of these authorities in
respect of the badlis, has, however, reversed their decision with regard to the
permanent employees on the ground that unauthorised absence from work results
in a break of service and, therefore, they were not in uninterrupted service
and fell outside the substantive part of s. 2(c) but came within Explanation I.
In support of these appeals, it was urged
that the High Court was in error in equating the phrase `actually employed'
with `actually worked'. It was submitted that though the word `service' has not
been defined in the Act, the emphasis is on the subsistence of the contract of
employment. It is urged that the word `employed' connotes a contract of employment
and both the permanent employees and badli employees, therefore, fall within
the substantive part of the definition of `continuous service' in s. 2(c). In
substance, the contention is that Explanation I to s. 2(c) covered only those
cases where there was a break in continuity of service, by reason of discharge
from service and re-employment. In regard to the permanent employees, it is
urged that they would be deemed to be in continuous service for purposes of
sub-s. (1) of s. 4 of the Act so long as their names are borne on the permanent
muster roll.
In other words, the submission was that the
jural relationship of employer and employee continues irrespective of whether
they had actually worked for 240 days or not.
With regard to the badli employees, it is
urged that once a person is given a badli card it matters little whether he
actually works for 240 days or not, since he had to report for work and his
employment is at the volition of the employer. Thus, the absence of the badli
employees on the days on which they were not provided with work, although they
reported for duty and there was an endorsement made to that effect in the badli
card, could not be treated as interruption of service. It was pointed out that
the badli employees had been put at par with the permanent employees and
enjoyed all such benefits such as bonus, 800 retrenchment compensation, lay-off
compensation, provident fund benefits, benefits under the Employees' State
Insurance Act and the Workmen's Compensation Act, leave under the Factories
Act, etc., and there was no reason why they should be deprived of the benefit
of gratuity for those years in which they had worked for less than 240 days
because of their absence without leave. We are afraid, this line of reasoning
cannot be accepted being against the scheme of the Act.
Two questions arise in these appeals. The
first is as to whether permanent employees are entitled to payment of gratuity
under sub s. (1) of s. 4 of the Act for the years in which they remained absent
without leave for a number of days in a year and had actually worked for less
than 240 days, due to absence without leave. The second is as to whether the
badli employees are entitled to such gratuity on becoming permanent employees,
for the badli period in respect of the years in which there was no work
allotted to them due to their failure to report to duty. These questions relate
to the years in which these employees were not actually employed for 240 days
in a year, due to their absence without leave.
The Payment of Gratuity Act, 1972
(hereinafter referred to as `the Act'), is enacted to introduce a scheme for
payment of gratuity for certain industrial and commercial establishments, as a
measure of social security. It has now been universally recognised that all
persons in society need protection against loss of income due to unemployment
arising out of incapacity to work due to invalidity, old age etc. For the wage
earning population, security of income, when the worker becomes old or infirm,
is of consequential importance. The provisions of social security measures
retiral benefits like gratuity, provident fund and pension (known as the triple
benefits) are of special importance. In bringing the Act on the statute book
the intention of the legislature was not only to achieve uniformity and
reasonable degree of certainty, but also to create and bring into force a
self-contained, all-embracing, complete and comprehensive code relating to
gratuity. The significance of this legislation lies in the acceptance of the
principle of gratuity as a compulsory, statutory retiral benefit.
For a proper appreciation of the question
involved, it is necessary to set out the relevant provisions of the Act.
Sub-section (1) of s. 4 reads as follows :
4. (1) Gratuity shall be payable to an
employee on the termination of his employment after he has rendered continuous
service for not less than five years,- (a) on his superannuation, or 801 (b) on
his retirement or resignation, or (c) on his death or disablement due to
accident or disease;
Provided that the completion of continuous
service of five years shall not be necessary where the termination of the
employment of any employee is due to death or disablement;
Provided further that in the case of death of
the employee, gratuity, payable to him shall be paid to his nominee or, if no
nomination has been made, to his heirs.
Explanation.-For the purposes of this
section, disablement means such disablement as incapacitates an employee for
the work which he was capable of performing before the accident or disease
resulting in such disablement.
The expression 'continuous service' has been
defined in s. 2(c) of the Act in these terms :
2. (c) "continuous service" means
uninterrupted service and includes service which is interrupted by sickness,
accident, leave, lay-off, strike or a lock- out or cessation of work not due to
any fault of the employee concerned, whether such uninterrupted or interrupted
service was rendered before or after the commencement of this Act.
Explanation I.-In the case of an employee who
is not in uninterrupted service for one year, he shall be deemed to be in
continuous service if he has been actually employed by an employer during the
twelve months immediately preceding the year for not less than- (i) 190 days,
if employed below the ground in a mine, or (ii) 240 days, in any other case,
except when he is employed in a seasonal establishment.
Explanation II.-An employee of a seasonal
establishment shall be deemed to be in continuous service if he has actually worked
for not less than seventy-five per cent of the number of days on which the
establishment was in operation during the year.
The Act is a piece of social welfare
legislation and deals with matters relating to payment of gratuity which, like
pension, provident 802 fund etc., is a retiral benefit. Interrupted service by
reason of sickness, leave, lay-off, strike, lock-out or cessation of work not
due to any fault of the employee concerned should not be regarded as a break in
continuity of his service. The inclusive part of the definition of 'continuous
service' in s. 2(c) is to amplify the meaning of the expression by including
interrupted service under certain contingencies which, but for such inclusion,
would not fall within the ambit of the expression 'continuous service'. There
were compelling reasons why the legislature gave an enlarged meaning to the
expression 'continuous service' in s. 2(c) of the Act, so that the workers who
have rendered long and meritorious service are not deprived of their right to
gratuity by reason of absence from duty due to circumstances beyond their
control.
The two Explanations have been inserted by
the legislature to define the words 'one completed year of service' to benefit
a class of employees who are not in uninterrupted service for one year. These
Explanations employ a fiction which converts service of (a) 190 days, if
employed below the ground in a mine, (b) 240 days, in any other case except
when employed in a seasonal establishment, in a period of 12 calendar months,
or (c) 75 per cent of the number of days which the seasonal establishment was
in operation, to be one complete year.
The main point in controversy in these
appeals is as to whether the expression 'actually employed' in Explanation I to
s. 2(c) must, in the context in which it appears, mean 'actually worked'. The
legislature has, no doubt, used two different expressions, namely, 'actually
employed', in Explanation I and 'actually worked' in Explanation II. But, they
are, in our view, having regard to the context and purpose with which they have
been enacted, synonymous.
Explanation I deals with the case of an
employee who is not in uninterrupted service for one year. Such an employee
shall be deemed to be in continuous service even though he falls outside the
substantive part of the definition in s. 2(c) provided he has been actually
employed for 240 days in a year. The expression 'actually employed' in
Explanation I must, therefore, mean 'actually worked'. There is a reason why a
different expression is used in Explanation II. In the case of a seasonal
establishment it is difficult to predicate the number of days on which the
establishment would be in operation in the year and an employee of such a
seasonal establishment shall, therefore, be deemed to be in continuous service
if he has actually worked for not less than 75% of the number of days on which
the establishment was in operation.
803 The history of the legislation is set out
in the Statement of Objects and Reasons accompanying the Bill.(1) The Bill
adopted by s. 2(c) the definition of the expression 'continuos service' as
defined in s. 2(b) of the Kerala Industrial Employees' Payment of Gratuity Act,
1970 and s.
2(c) of the West Bengal Employees' Payment of
Compulsory Gratuity Act, 1971, which reads :
2. In this Act unless the context otherwise
requires,- (c) "continuous service" means uninterrupted service and
includes service which is interrupted by sickness, accident, leave, strike
which is not illegal or a lock-out or cessation of work not due to any default
of the employee concerned.
The Bill was referred to a Select Committee,
and the Select Committee by its Report presented to the Lok Sabha on May 2,
1972 proposed three vital changes in the definition of the expression
'continuous service' in s. 2(c), namely, (1) for the purpose of computation of
the period of continuous service, the entire period whether interrupted or
uninterrupted, before or after the commencement of the Act, had to be taken
into account, (2) the period of strikes or lay-offs were to be considered as
part of 'continuous service', and (3) the benefit of sub-s. (1) of s. 4 was to
be extended by alegal fiction in the care of an employee who was not in
uninterrupted service for one year. subject to the fulfillment of the conditions
laid down in Explanations I and II.
The legislative intent is brought out in the
Report of the Select Committee. The Note of the Committee with regard to the
two Explanations bears out that the expression 'actually employed' in
Explanation I and the expression 'actually worked' in Explanation II were used
in the same sense. The Note reads : (2) The Committee also feel that an
Explanation may be added to the definition of 'continuous service' to the
effect that an employee who works- (a) in a mine below the ground for 190 days,
or (b) in any other case, for 240 days. in a year, should be deemed to be in
continuous service.
The Committee also feel that in the case of
persons employed in seasonal establishments, such persons, would 804 be deemed
to be in continuous service if they had been employed for 75 per cent of the
days during which the establishment had been in operation during the season.
that was the intention with which the two
Explanations were added to the definition of 'continuous service' in s. 2(c) of
the Act.
The expression 'continuous service' in the
context of a gratuity scheme was interpreted by this Court in M/s Jeewanlal
(1929) Ltd., Calcutta v. Its Workmen(1) as follows :
"Continuous service" in the context
of the scheme of gratuity framed by the tribunal in the earlier reference
postulates the continuance of the relationship of master and servant between
the employer and his employees. If the servant resigns his employment service
automatically comes to an end. If the employer terminates the service of his
employee that again brings the continuity of service to an end.
If the service of an employee is brought to
an end by the operation of any law that again is another instance where the
continuance is disrupted; but it is difficult to hold that merely because an
employee is absent without obtaining leave that itself would bring to an end
the continuity of his service. Similarly, participation in an illegal strike
which may incur the punishment of dismissal may not by itself bring to an end
the relationship of master and servant. It may be a good cause for the
termination of service provided of course the relevant provisions in the
standing orders in that behalf are complied with; but mere participation in an
illegal strike cannot be said to cause breach in continuity for the purposes of
gratuity.
(emphasis added) The legislature has departed
from the meaning given by this Court in the above case to the expression
'continuous service' by incorporating the words 'not due to any fault on the
part of the employee concerned', to give to that expression a restricted legal
connotation.
In construing a social welfare legislation,
the court should adopt a beneficient rule of construction; if a Section is
capable of two constructions, that construction should be preferred which
fulfils the policy of the Act, and is more beneficial to the persons in whose
interest the Act has been passed. When, however, the language is plain and
unambiguous, as here, we must give effect to it whatever may be the
consequences, for; in that case, the words of the statute 805 speak the
intention of the legislature. When the language is explicit, its consequences
are for the legislature and not for the courts to consider. The argument of
inconvenience and hardship is a dangerous one and is only admissible in
construction where the meaning of the statute is obscure and there are two
methods of construction. In their anxiety to advance beneficient purpose of
legislation, the courts must not yield to the temptation of seeking ambiguity
when there is none.
In dealing with interpretation of sub-s. (1)
of s.4, we must keep in view the scheme of the Act. Sub-s. (1) of s.4 of the
Act incorporates the concept of gratuity being a reward for long, continuous
and meritorious service. The emphasis therein is not on 'continuity of
employment', but on rendering of 'continuous service'. The legislature inserted
the two Explanations in the definition to extend the benefit to employees who
are not in uninterrupted service for one year subject to the fulfillment of the
conditions laid down therein. By the use of a legal fiction in these
Explanations, an employee is deemed to be in 'continuous service' for purposes
of sub-sec. (1) of s.4 of the Act. The legislature never intended that the
expression 'actually employed' in Explanation I and the expression 'actually
worked' in Explanation II should have two different meanings because it wanted
to extend the benefit to an employee who 'works' for a particular number of
days in a year in either case. In a case falling under Explanation I, an
employee is deemed to be in continuous service if he has been actually employed
for not less than 190 days if employed below the ground in a mine, or 240 days
in any other case, except when he is employed in a seasonal establishment. In a
case falling under Explanation II, an employee of a seasonal establishment, is
deemed to be in continuous service if he has actually worked for not less than
75 per cent of the number of days on which the establishment was in operation
during the year.
In our judgment, the High Court rightly observed:
"It is important to bear in mind that in Explanation I the legislature has
used the words 'actually employed'. If it was contemplated by Explanation I
that it was sufficient that there should be a subsisting contract of
employment, then it was not necessary for the legislature to use the words
'actually employed'." It is not permissible to attribute redundancy to the
legislature to defeat the purpose of enacting the Explanation. The expression
'actually employed' in Explanation I to s.2 (c) of the Act must, in the context
in which it appears, mean 'actually worked'. It must accordingly be held that
the High Court was right 806 in holding that the permanent employees were not
entitled to payment of gratuity under sub-s. (1) of s.4 of the Act for the
years in which they remained absent without leave and had 'actually worked for
less than 240 days in a year.
As regards badli employees, there can be no
doubt that they are not in uninterrupted service and, therefore, they do not
fall within the substantive part of the definition 'continuous service' in
s.2(c), but are covered by Explanation I. In Delhi Cloth and General Mills Co.
v. Its Workmen(1) the Court, while dealing with a gratuity scheme, repelled the
contention urged on behalf of the badli employees that since they had to
register themselves with the management of the textile mills and were required
every day to attend the mills for ascertaining whether work would be provided
to them or not, the condition requiring that they should have worked for not
less than 240 days in a year to qualify for gratuity was unjust and observed:
If gratuity is to be paid for service
rendered, it is difficult to appreciate the grounds on which it can be said
that because for maintaining his name on the record of the badli workmen, a
workman is required to attend the mills he may be deemed to have rendered
service and would on that account be entitled also to claim gratuity.
Standing Order No. 3 as settled by the
Industrial Court under s.36(3) of the Bombay Industrial Relations Act, 1946 for
Operatives in Cotton Textile Mills, in so far as material, provides.
(3) Operatives shall be classed as (1)
Permanent;
(2) Probationer; (3) Badlis; (4) Temporary
Operatives;
and (5) Apprentices.
xx xx A "badli" is one who is
employed on the post of a permanent operative or probationer who is temporarily
absent.
xx xx It is not denied that the Management
has got a separate register for the badli employees and that those who need
work and when they call at the gate of the mills for work, such number of them
are employed by the mills to fill up the vacancies of permanent operatives or
probationers who are absent on a particular day either on account of illness or
for any other cause.
807 The Report of the Badli Labour Enquiry
Committee, Cotton Textile Industry, 1967, no doubt shows that the badli
employees are an integral part of the textile industry and that they enjoy most
of the benefits of the permanent employees; but there may not be any continuity
of service as observed by this Court in the Delhi Cloth Mills' case (supra).
The badli employees are nothing but substitutes.
They are like 'spare men' who are not
'employed' while waiting for a job : Conlon v. Glasgow. Vallabhdas Kanji (P)
Ltd. v. Esmail Koya & Ors. taking the view to the contrary, does not appear
to lay down a good law. Accordingly, we uphold the view that the badli
employees are not covered by the substantive part of the definition of 'continuous
service' in s.2(c), but came within Explanation I and, therefore, are not
entitled to payment of gratuity for the badli period, i.e. in respect of the
years in which there was no work allotted to them due to their failure to
report to duty.
The result, therefore, is that the appeals
must fail and are accordingly dismissed. There shall be no order as to costs.
P.B.R. Appeals dismissed.
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