Jeewanlal (1929) Ltd.Etc. Vs. The
Authority under the Payment of Gratuity Act & [1984] INSC 163 (29 August
1984)
SEN, A.P. (J) SEN, A.P. (J) REDDY, O.
CHINNAPPA (J) VENKATARAMIAH, E.S. (J)
CITATION: 1984 AIR 1842 1985 SCR (1) 664 1984
SCC (4) 356 1984 SCALE (2)303
CITATOR INFO :
RF 1986 SC 458 (3) RF 1988 SC 587 (12)
ACT:
Payment of Gratuity Act 1972, Sections 4(2)
and 4(3) Monthly-rated employee-Computation of gratuity-Scope of expression
"fifteen days' wages"- Explained.
Interpretation of statutes Social Welfare
legislation- Beneficient rule of construction-Adoption of.
Social security measures-Application of
provisions- Doubt or difficulty arising-Necessity for Government to introduce
legislation to cure the defect without waiting for interpretation by highest
Court-Suggestion for setting up of National Labour Commission for Periodical
review.
Words & Phrases: appropriate
Government'-Meaning of Section 2(a)(1) Payment of Gratuity Act 1972.
HEADNOTE:
The respondent-a monthly-rated employee of
the appellant-a public limited company, ceased to be an employee on attaining
the age of superannuation after completing 35 years of service. Since he was
entitled to payment of Gratuity under the Payment of Gratuity Act, 1972, the
appellant calculated the amount of gratuity payable under sub-s.(2) of s.4 on
the basis that 'fifteen days' wages" meant half of the monthly wages last
drawn i.e., for 13 working days. there being 26 working days in a month, The
respondent being dissatisfied with this payment, made a claim under sub-s(1) of
s.7, before the Controlling Authority, for payment of an additional sum of
gratuity on the ground that the daily wages should be ascertained on the basis
of what he actually got for 26 days and the amount of "fifteen days'
wages" should be calculated accordingly, not by just taking half of his
wages for a month of 30 days or fixing his daily wages by dividing his monthly
wages by 30.
The Controlling Authority held; that for the
purpose of calculating "fifteen days' wages" it was necessary to
ascertain one day's wage and since a 665 month consists of 26 working days, the
amount of gratuity should be calculated by dividing the monthly wages last
drawn by 26 and multiplying by 'fifteen'; and not by just taking half of the
monthly wages or by dividing such monthly wages by 30.
On appeal, the Appellate Authority, held that
there was an error in the mode of computation of the amount of gratuity that
was payable, and held that the gratuity payable would have to be calculated at
half of the monthly rate of wages, i.e. wages earned in a consecutive period of
15 days and the daily wages had to be multiplied by "thirteen" and
not by "fifteen" for every completed year of service or part thereof
not exceeding six months. The amount of gratuity payable was accordingly
reduced.
The High Court under Article 226, held
following the decision of this Court in Shri Digvijay Woollen Mills Ltd.
etc. v. Mahendra Prataprai Buch etc. 1981 1
SCR 64 that in order to determine "fifteen days' wages" of a
monthly-rated employee under sub-s.(2) of s.4 of the Act, it was necessary to
determine one day's wages last drawn by him, and them multiply the same
"fifteen' times. and the resultant sum has to be multiplied by twenty to
arrive at the maximum amount of gratuity payable under sub-s.(3) of s.4 of the
Act. The orders of the Controlling Authority were restored.
In the Appeals and Special Leave Petitions it
was contended on behalf of the Management: that the words "fifteen days'
wages" occurring in sub-s.(2) of s.4 of the Act are clear and unambiguous
and must mean half a month's wages and therefore there was no scope for an
artificial calculation being made by dividing the wages for a month by the
number of working days.
Dismissing the Appeals and Special Leave
Petitions,
HELD: 1.(i) The Payment of Gratuity Act, 1972
was enacted to introduce a scheme for payment of gratuity for certain
industrial and commercial establishments as a measure of social security. The
significance of this legislation lies in the acceptance of the principle of
gratuity as a compulsory statutory retiral benefit. [672G;
673B] (ii) In construing a social welfare
legislation, the Court should adopt a beneficent rule of construction and 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 the language is plain and
unambiguous the Court must give effect to it whatever may be the consequence.
The argument of inconvenience and hardship is only admissible in construction
where the meaning of the statue is obscure and there are two methods of
construction.
In an anxiety to advance the beneficent
purpose of the legislation, the Court must not yield to the temptation of
seeking ambiguity when there is none. [675B-D] 2.(1) The intention of the
Legislature in enacting sub- s.(2) of s.4 of the Act was not only to achieve
uniformity and reasonable degree of certainty, but 666 also to create and bring
into force a self-contained, all- embracing, complete and comprehensive code
relating to gratuity as a compulsory, retiral benefit. The quantum of gratuity
payable under sub-s(2) of s.4 of the Act has to be "fifteen days' wages"
based on rate of wages last drawn by the employee concerned for every completed
year of service or more in excess of six months 'subject to the maximum of 20
months' wages as provided by sub-s. (3). [676G-H; 677A] Shri Digvijay Woollen
Mills Ltd. etc. v. Mahendra Prataprai Buch etc.,[1981] 1 SCR 64, referred to.
Associated Cement Co. Ltd. Kistna Cement
Works, Kistna Guntur Distt. v. The Appellate Authority under Payment of
Gratuity Act (Regional Assistant Commissioner of Labour, Guntur) & Ors.
[1976] 1 LLJ 222 and Swamy & Ors. v. Controlling Authority under Payment of
Gratuity Act & Ors., [1978] 52 IFJ 138 over-ruled.
(ii) The word 'rate' appears twice in
sub-s.(2) of s.4 and it necessarily involves the concept of actual working
days. Although a month is understood to consist of 30 days, gratuity payable
under the Act treats the monthly wages as wages for 26 working days. [675A]
(iii) Sub-ss.(2) and (3) of the Act are designed to achieve two separate and
distinct objects and they operate at two different stages. While sub-s. (2)
provides for the mode of calculation of the amount of gratuity, sub-s:(3) seeks
to impose a ceiling on the amount of gratuity payable at 20 months wages. It is
meant to provide in incentive to employees to serve for the period of 30 years
or more. Sub- s.(2) of s.4 of the Act which uses the words "fifteen days'
wages" and not half a month’s wages, cannot be called in aid for
construction of the words "20 month' wages', appearing in sub-s.(3) of s.4
of the Act. [677F-G]
3. The definition of 'appropriate government'
in s.2 (a)(1) in relation to an establishment makes a distinction between
establishments and factories. In relation to an establishment belonging to, or
under the control of, the Central Government and of a factory belonging to, or
under the control of, the Central Government, the appropriate government is the
Central Government. But the Central Government is the appropriate government
only in relation to an establishment having branches in more than one State.
There is no like provision made in relation to such an establishment having
factories in different States. [678F-G]
4. Whenever doubt or difficulty is expressed
by the High Courts in the application of provisions of social security
measures, namely, retiral benefits, gratuity, provident fund etc., the
Government must always introduce legislation to cure the defect rather than
wait judicial interpretation by the highest Court.
[680H] Lalappa Lingappa and Ors. v. Laxmi
Vishnu Textile Mills., Ltd. [1981] 2 SCR 797. referred to.
667
5. The Government may consider the
desirability of setting up a National Labour Commission which may be entrusted
not only with the task of making periodical review of social welfare
legislations from time to time but also to suggest radical reform of the laws
relating to industrial relations which must be brought in tune with the
changing needs of the society. [681A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 2332 1970, 2432,2784-2877 of 1981 and 7447 to 7497 of 1983 Appeals by
Special leave from the Judgment and Order dated the 19th June, 1981 of the
Madras High Court in Writ Petition Nos. 338, 4263 of 1977, 4028/80, 2662/78,
4056, 2171, 2170/80, 4136/78,4339/80, 2028/78,2085/80, 2178/78,1590/76,3164,
2426/80, 2122/80, 2452/78, 4414/80, 2073/78, 1598/76, 1596/76, 4257/80, 614/79,
4057, 4254, 4411, 1732/80, 1597/76, 4259/80, 2664/78, 4252, 2175/80,2058/78,
3972/80, 26/79,4410/80,1592/76,3571, 4259, 4058, 3570, 2007/80,2169/78, 2135,
4331/80, 2665/78, 2006, 4255, 4022/80, 1595/76, 4054/80, 1594/76, 4026,2174/80,
2168/78, 3567/80,2172/78, 2133/80, 2469/78, 5470/78, 1593/76, 3569/80, 1551/76,
1591/76, 2008, 3156, 4029, 3165, 4055, 4409, 4408, 2427, 3412, 4024,4023,4412,3166/80,2663/78,
4225, 2134, 3157,4253/80, 2454/78,4027/80,2471/78, 1959/80,1635/76,
2453/78,2172,3163/80,2461/78,3158, 4053,4413/80,2073/78, 3568, 2005/80,1542,
1540, 1378, 1377/78,492, 339,340/77, 1541,1379/78, 3041/77,226/79,
3050,3056,3034 3038,3037/77,3767,4261,3058/77,168/79, 3766, 3039/77,3048, 3035,
3047, 4262, 4259, 3988, 3053, 4260, 4383/77,265/79, 4258, 2967,3055,3052, 3280,
3033, 3032, 3036, 3051,3049,3040,4381,4382, 3042/1977 & 264 of 1979.
WITH
Civil Appeal Nos. 2985-87, 3398-3410 of 1981, 369-410, 450-59, 3091-3092 of
1982, 60/83, 2560/83, 10778 of 1983, Appeals by Special leave from the Order of
the Appellate Authority, Under the payment of Gratuity Act, Madras dated 29th
May, 31st January, 27th February, of 1981, 17th, & 30th April 16th December
& 20th December, 1982 in P.G.A. Nos. 24/81, 31/80,90/80,138,132, 131, 134,
139, 129, 137, 92, 133,91,136, 135, of 1980, 19-23, 25-28, 30,29,31-39 of 1981,
61, 69, 101, 98,66, 73, 50, 63, 60, 32, 33, 34, 35, 36, 57, 58, 59, 62, 64, 65;
67,68,74-79, 97, 668 99, 100 & 49 of 1980 2 & 6 of 1981, 458/81, 48/82
and 12 of 1981 AND Civil Appeal No. 2559 of 1984.
Appeal by Special leave from the Judgment and
Order dated 22nd March, 1984, of the Appellate Authority and the Regional
Labour Commissioner (Central) Madras Under the Payment of Gratuity Act, 1972 in
Appeal No 17 of 1983.
AND Special Leave Petition (Civil) Nos. 1819,
3324, 11382- 84, 14754 of 1982 and 4940 of 1984.
From the Orders dated the 19th July, 1981,
28th July & 12th August, 1982 and 16th February, 1984, of the Appellate
Authority and the Regional Labour Commissioner (Central) Madras Under the Payment
of Gratuity Act, 1972 in P.G.A.
Nos. 20/81, 1/77, 9/82, 10 & 11/82 and 16
of 1983 Soli J. Sorabjee, A.N. Haksar, S. Ramasubramaniam, Sanjay Mohan &
D.N. Gupta for the Appellants in CAS. 1970/81 & 2560/83.
Dr. Y.S. Chitale, S. Ramasubramaniam, Sanjay
Mohan, D.N. Gupta for the Appellants in CAS. 2432/81, 10778/83 & 2559/84.
S. Padmanabhan, S. Ramasubramaniam, Sanjay
Mohan & D.N. Gupta for the Appellants in CA. Nos. 2332/81 & 2985 of
1981 S. Ramasubramaniam, Sanjay Mohan & D.N. Gupta for Appellants in rest
of the Appeals and for Petitioners in Special Leave Petitions.
S.H. Mehta & M.C. Tiwari for Respondent
No. I in CA.
No. 3091/82.
H.S. Parihar for Respondent in CA. 60 of
1983.
Ambrish Kumar for the Respondent.
The Judgment of the Court was delivered by 669
SEN, J. These appeals by special leave and the connected special leave
petitions from the judgment and order of the Madras High Court dated June 19,
1981 raise a question of substantial importance. The question is whether the
words "fifteen days' wages" occurring in sub-s. (2) of s.4 of the
payment of Gratuity Act, 1972 (hereinafter referred to as the 'Act') in the
case of monthly-rated employes, can only mean half a month's wages, i.e., wages
which they would have earned in a consecutive period of 15 days or in 13
working days and therefore, in calculating the amount of gratuity payable to
such employees, the rate of wages earned by them has to be multiplied by
'thirteen" there being 26 working days in a month and not by
"fifteen".
A subsidiary question arises as to whether
the words "twenty months' wages" occurring in sub-s. (3) thereof
would only mean wages for 520 working days taking the actual working days in 20
months or must mean 600 days taking that a month consists of 30 days.
It is not necessary to state the facts in any
great detail. In all these appeals, the respondent in each case was a
monthly-rated employee and the appellant, a public limited company, was his
employer. The facts in each of these cases are more or less similar and it will
suffice to state the facts in one of them. In Civil Appeal No. 2332 of
1981-Messrs Jeeva lal (1929) Ltd. v. The Appellate Authority under the Payment
of Gratuity Act, Madras & Ors, the respondent ceased to be an employee on
attaining the age of superannuation after completing 35 year of service. Since
he was entitled to payment of gratuity under the Act, the appellant calculated
the amount of gratuity payable to him under sub-s. (2) of s. 4 on the basis
that "fifteen days' wages" meant half of the monthly wages last drawn
by him, i.e., for 13 working days, there being 26 working days in a month.
Being dissatisfied with such payment, the respondent made a claim under sub-s.
(1) of s. 7 of the Act before the Controlling Authority, Madras for
determination of the amount of gratuity payable to him. He made a demand for
payment of an additional sum as gratuity on the ground that his daily wages
should be ascertained on the basis of what he actually got for 26 working days
and the amount of "fifteen days' wages" should be calculated
accordingly, not by just taking half of his wages for a month of 30 days or
fixing his daily wages by dividing his monthly wages by 30.
The appellant contested the claim contending
that the words "fifteen days' wages" occurring 670 in sub-s. (2) of
s. 4 of the Act only meant half a month's wages and since a month consisted of
26 working days, the amount' of gratuity was rightly arrived at by multiplying
the daily wages by 'thirteen'.
The Controlling Authority by its order dated
September 23, 1978 held that for the purposes of calculating "fifteen
days' wages" it was necessary to ascertain one day's wage and since a
month consists of 26 working days, the amount of gratuity should be calculated
accordingly, i.e., by dividing the monthly wages last drawn by 26 multiplied by
'fifteen' and not by just taking half of his wages for a month of 30 days or by
dividing such monthly wages by 30. It accordingly directed the appellant to pay
Rs. 6069.00 as gratuity under sub-s. (1) of s. 4 of the Act. On appeal the
Appellate Authority, Madras by its order dated July 12, 1976 held that there
was an error in the mode of computation of the amount of gratuity payable to
the respondent. According to it, the gratuity payable to the respondent would
have to be calculated at half of his monthly rate of wages, i.e., wages he
would have earned in a consecutive period of 15 days and his daily wages had to
be multiplied by "thirteen" and not by "fifteen" forever
completed year of service or part thereof not exceeding six months. It
accordingly reduced the amount of gratuity payable to Rs. 5259.80 p.
It, however, appears that the Appellate
Authority in several other cases took a view to the contrary such as the one in
Civil Appeal No. 2432 of 1981 relating to the same employer, Messrs Jeevanlal
(1929) Ltd. as also in Civil Appeal No. 1970 of 1981 relating to another
employer, Messrs Madura Coats Ltd. as also in Civil Appeal No. 2559 of 1984
relating to M/s Binny Ltd. and upheld the orders of the Controlling Authority.
As a result of these conflicting orders passed by the Appellate Authority, the
employers in some of these cases and the employes in others had to file
petitions in the High Court under Article 226 of the Constitution and they have
been disposed of in the judgment under appeal. The High Court following the
decision of this Court in Shri Digvijay Woollen Mills Ltd. etc. v. Mahendra
Prataprai Buch etc. and that of the Bombay High Court in Lakshmi Vishnu Textile
Mills v. P.S. Mavlankar held that in order to determine "fifteen days'
wages" of a monthly rated employee under sub-s. (2) of s. 4 of the Act, it
was necessary 671 to determine one day's wage last drawn by him and then multiply
the same "fifteen" times, and the resultant sum had to be multiplied
by twenty to arrive at the maximum amount of gratuity payable under sub-s. (3)
of s. 4 of the Act. It accordingly restored the orders of the Controlling
Authority.
In support of these appeals, learned counsel
for the appellants submitted that the decision of this Court in Shri Digvijay
Woollen Mills Ltd. case does not lay down any principle but, on the contrary
the Court expressly observed that' it was not necessary to go into the question
as to the correctness of the conflicting views taken by different High Courts.'
Reliance was placed on the decision of the learned Single Judge of the Andhra
Pradesh High Court in Associated Cement Co. Ltd. Kistna Cement Works, Kistna,
Guntur Distt. v. The Appellate Authority under Payment of Gratuity Act
(Regional Assistant Commissioner of Labour, Guntur) & Ors.
which was approved by a Division Bench of the
same High Court in Swamy & Ors v. Controlling Authority under Payment of
Gratuity Act & Ors. In all fairness to the learned counsel, it must be said
that they also brought to our notice the decisions of the Calcutta High Court
in Hukamchand Jute Mills Ltd. v. State of West Bengal & Ors.
that of the Bombay High Court in Lakshmi
Vishnu Textile Mills' case and that of the Gujarat High Court in Shri Digvijay
Woollen Mills' case taking a view to the contrary.
It is urged that the words, 'fifteen days'
wages" occurring in sub-s.(2) of s.4 of the Act are clear and unambiguous
and must mean half a month's wages and therefore there was no scope for an
artificial calculation being made by dividing the wages for a month by the number
of working days viz., 26 for determining the daily wages and multiplying the
same by "fifteen" to determine the amount representing 15 days wages
inasmuch as the wages of a monthly-rated employee were for all the 30 days of a
month and not 26 working days alone and therefore "fifteen days'
wages" in his case, would amount only to half a month's wage. It is
further urged that Parliament amended sub-s.(3) of s.4 of the Act on
recommendation of the Select Committee and raised the ceiling of gratuity from
15 months' wages to 20 months' wages and the reason given by the Select
Committee was that there should be an incentive for 672 employees to serve
beyond a period of 30 years. It is submitted that by providing for a maximum
gratuity of 20 months' wages the Select Committee meant that it should be
payable for a service of 40 years; and that, if the contention of the employees
were to prevail, the maximum gratuity would become payable even after
completion of 34 years and 8 months instead of 40 years. We are afraid, this
contention cannot prevail.
These submissions, broadly stated, give rise
to two question. The first is whether for the purpose of computation of
"fifteen days' wages" of a monthly-rated employee under sub-s.(2) of
s.4 of the Act, the monthly wages last drawn by him should be treated as wages
for 26 working days and his daily rate of wages should be ascertained on that
basis and not by taking the wages for a month af 30 days or fixing his daily
wages by dividing his monthly wages by 30. The second question is whether the
words "twenty months' wages" occurring in sub-s.(3) of s.4 of the Act
must be construed to mean wages for 520 days taking the actual working in days
in twenty months or must mean wages for 600 days taking that a month consists of
30 days. As regards the first, the answer must be in the affirmative in view of
the decision of this Court in Shri Digvijay Woollen Mills's case, but learned
counsel for the appellant want us to take a second look at is as, according to
them, nothing was settled in that case. As regards the second question, the
learned counsel contend that sub-ss.(2) and (3) of s.4 of the Act must receive
a harmonious construction as they provide for the mode of calculating the total
amount of gratuity payable to an employee upon termination of his services
under sub-s.(l) of s.4 of the Act and it is said that a month cannot mean 26
working days for the purpose of sub-s.(2) and 30 days for the purpose of
sub-s.(3).
The Payment of Gratuity Act, 1972 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 recognized 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 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 673
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.
As is true in every case involving
construction of a statute, our starting point must be the language employed by
the legislature. It is necessary to set out the relevant statutory provisions
of the Act. Sub-s.(1) of s.4 of the Act reads:
"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 (b) on his
retirement or resignation, or (b) on his death or disablement due to accident
or disease.
Provided that the completion 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." Sub-ss.(2) and (3) of s.4 of the Act
provide as follows:
"4(2): For every completed year of
service or part thereof in excess of six months, the employer shall pay
gratuity to an employee at the rate of fifteen days' wages based on the rate of
wages last drawn by the employee concerned:
Provided that in the case of a piece-rated
employee, daily wages shall be computed on the average of the total wages
received by him for a period of three months immediately proceeding the
termination of his employment, 674 and, for this purpose, the wages paid for
any overtime work shall not be taken into account:
Provided further that in the case of an
employee employed in a seasonal establishment, the employer shall pay the
gratuity at the rate of seven days' wages for each season.' "4(3): The
amount of gratuity payable to an employee shall not exceed twenty months'
wages." The term 'wages' is defined in s.2(s) as follows:
"2(s): "wages" means all
emoluments which are earned by an employee while on duty or on leave in
accordance with the terms and conditions of his employment and which are paid
or are payable to him in cash and includes dearness allowance but does not
include any bonus, commission, house rent allowance, overtime wages and any
other allowance." In dealing with interpretation of sub-ss.(2) and (3) of
s.4 of the Act, 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. Sub-s. (2) of s.4 of the Act provides for payment of gratuity at the
rate of "fifteen days' wages" based on the rate of wages last drawn
by the employee concerned for every completed year of service. The legislative
intent is obvious. Had the legislature stopped with the words "fifteen
days' wages" occurring in sub-s. (2) of s.4 of the Act there was something
to be said for the submission advanced by the learned counsel for the appellants
based upon the decision of learned Single Judge of the Andhra Pradesh High
Court in Associated Cement's case which was later approved by a Division Bench
of that Court in Swamy's case. But the legislature did not stop with the words
"fifteen days' wages" in sub-s. (2) of s.4 of the Act. The words
"fifteen days' wages" are preceded by the words "at the rate
of" and qualified by the words "based on the rate of wages last
drawn" by the employee concerned. The emphasis is not on what an employee
would have earned in the course of fifteen days during the month when his
employment was last terminated, but on the rate of fifteen days' wages for
every completed year of service, based 675 on the rate of wages last drawn by
the employee concerned.
The word 'rate appears twice in sub-s. (2) of
s.4 and it necessarily involves the concept of actual working days. In Shri
Digvijay Wollen Mills' case the Court rightly observed that although a month is
understood to consist of 30 days, gratuity payable under the Act treating the
monthly wages as wages for 26 working days is not new or unknown.
In construing a social welfare legislation,
the court should adopt a beneficent rule of construction and 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 a language is plain and
unambiguous, the Court must give effect to it whatever may be the consequence,
for, in that case, the words of the statute 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 beneficent purpose of legislation,
the courts must not yield to the temptation of seeking ambiguity when there is
none.
It is not correct to say that the decision in
Shri Digvijay Woolen Mills' case does not lay down any principle.
Gupta, J. speaking for the Court set out the
following passage from the Judgment of the Gujarat High Court in Shri Digvijay
Woollen Mills' case:
"The employer is to be paid gratuity for
every completed year of service and the only yardstick provided is that the
rate of wages last drawn by an employee concerned shall be utilized and on that
basis at the rate of fifteen days wages for each year of service, the gratuity
would be computed. In any factory it is well known that an employee never works
and could never be permitted to work for all the 30 days of the month. He gets
52 Sundays in a year as paid holidays and, therefore, the basic wages and
dearness allowance are always fixed by taking into consideration this economic
reality... A worker gets full month's wages not by remaining on duty for all
the 30 days within a 676 month but remaining on work and doing duty for only 26
days. The other extra holidays may make some marginal variation into 26 working
days, but all wage boards and wage fixing authorities or Tribunals in the
country have always followed this pattern of fixation of wages by this method
of 26 working days." And then observed:
"The view expressed in the extract
quoted above appears to be legitimate and reasonable." The learned Judge
then went on to say:
"Ordinarily of course a month is
understood to mean 30 days, but the manner of calculating gratuity payable
under the Act to the employees who work for 26 days a month followed by the
Gujarat High Court cannot be called perverse." He further observed that it
was not necessary to consider whether another view was possible and declined to
interfere under Art. 136 in a matter where the High Court had taken a view
favourable to the employees and the view taken could not be said to be in any
way unreasonable and perverse, and then added:
"Incidentally, to indicate that treating
monthly wages as wages for 26 working days is not anything unique or
unknown." We find that the same view has been taken by as many as three
High Courts viz. by the Calcutta, Bombay and Gujarat High Courts in the cases
referred to at the Bar. We find no compelling reason to take a view different from
the one expressed by this Court in Shri Digvijay Woollen Mills' case.
The intention of the legislature enacting
sub-s. (2) of s. 4 of the Act 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 as a
compulsory, retiral benefit. The quantum of gratuity payable under sub- s. (2)
of s.4 of the Act has to be fifteen days' wages based on the rate of wages last
drawn by the employee concerned for every completed year of service or more in
excess of six 677 months' subject to the maximum of 20 months' wages as
provided by sub-s. (3) thereof. The whole object is to ensure that the employee
concerned must be paid gratuity at the rate of fifteen days' wages for 365 days
in a year of service. The total amount of gratuity payable to such employee at
that rate has to be multiplied by the number of years of his service subject to
the ceiling imposed by sub- s. (3) of s.4 of the Act viz., that such amount
shall not exceed 20 months' wages. The construction of sub-s. (2) of s.4 of the
Act adopted by the learned Single Judge of the Andhra Pradesh High Court in
Associated Cement Company's case, and later approved by a Division Bench of that
Court in Swamy's case would make it utterly unworkable. If the determination of
the amount of gratuity payable under sub-s.
(2) of s.4 depends on the number of calendar
days in a month in which the services of the employee concerned terminates, the
quantum of gratuity payable would necessarily vary between an employee and an
employee, belonging to the same class, drawing the same scale of wages, with
like service for the same number of years. Obviously, this could not have been
the legislative intention.
The next question is: whether a month cannot
mean 26 working days for purposes of sub-s. (2) of s.4 of the Act and 30 days
for purposes of sub-s. (3) thereof. It is said that if a month under sub-s. (2)
connotes 26 working days in a month for purposes of calculating the amount of
gratuity, then the rule of harmonious construction requires that the words
"20 months' wages" in sub-s. (3) thereof must mean wages for 520
working days taking the actual working days in 20 months and not 600 days taking
that a month consists of 30 days. The contention is wholly misconceived.
Sub-ss. (2) and (3) of s.4 of the Act are designed to achieve two separate and
distinct objects and they operate at two different stages. While sub-s. (2)
provides for the mode of calculation of the amount of gratuity, sub-s. (3)
seeks to impose a ceiling on the amount of gratuity payable at 20 months wages.
It is meant to provide an incentive to employee to serve for the period of 30
years or more By no rule of construction, sub-s. (2) of s.4 of the Act which
uses the words "fifteen days' wages" and not half a month’s wages, be
called in aid for construction of the words "20 months' wages"
appearing in sub-s. (3) of s.4 of the Act.
We do not think it necessary to deal at
length with the last and 678 third question raised in some of these appeals
viz, the objection to the jurisdiction of the Controlling Authority under s. 3
of the Act to entertain the claim against some of the appellants. It is said
that Messers Jeevanlal (1929) Ltd. is an all-India concern having its branches
in more than one State and therefore the 'appropriate government' within the
meaning of s.2 (a) (1) (b) of the Act in relation to them is the Central
Government for purposes of s. 3. The appropriate government is the Central
Government in relation to an establishment belonging to or under the control of
the Central Government or having branches in more than one State or of a
factory belonging to, or under the control of the Central Government or in the
case of a major port, mine, oil field, or railway company. Section 2 (a) (1) of
the Act reads as follows:
"2: In this Act, unless the context
otherwise requires (a) "appropriate government" means- (i) in
relation to an establishment- (a) belonging to, or under the control of, the
Central Government, (b) having branches in more than one State, (c) of a
factory belonging to, or under the control of, the Central Government, (d) of a
major port, mine, oil field or railway company, the Central Government, (ii) in
any other case, the State Government:
It would appear that the definition of
appropriate government in s.2 (a) (1) in relation to an establishment makes a
distinction between establishments and factories. In relation to an
establishment belonging to, or under the control of, the Central Government and
of a factory belonging to, or under the control of, the Central Government, the
appropriate government is the Central Government. But the Central Government is
the appropriate government only in relation to an establishment having branches
in more than one State. There is no like provision made in relation to such an
establishment having factories in different States. We feel that the point
relating to the jurisdiction of the Controlling Authority under s.3 of the Act.
does not really arise. It appears that Messrs Jeewanlal(1929) Ltd 679 have
their registered and head office at Calcutta and branch offices and factories
at Calcutta, Bombay and Madras and sales offices at Delhi, Hyderabad and
Cochin. It has also two factories in Madras viz., Shree Ganeshar Aluminium
Works and Messrs Mysore Premier Metal Factory. It employs about 300 members of
clerical staff at the head office and its branch offices throughout the country
as well as in its two factories and employs about 1300 workmen in its factories
at Calcutta, Bombay and Madras. We are inclined to the view that the
Controlling Authority had jurisdiction to entertain the claim of an employee
working in an office attached to a factory as such an office would be an
adjunct of the factory but that is not the question before us. The Controlling
Authority has in fact, confined the adjudication of claims in relation to
workmen who were employed at the two factories at Madras but declined to
entertain the claims of employees who were working either at the branch office
at Madras or at the office attached to the factories in question. That being
so, the contention relating to jurisdiction of the Controlling Authority under
s.3 of the Act must fail.
It has been our unfortunate experience that a
beneficient measure like Payment of Gratuity Act 1972 providing for a scheme of
retiral benefit, has been beset with many difficulties in its application. It
need not be over emphasised that a legislation of this kind must not suffer
from any ambiguity. In the recent past, the Court in Lalappa Lingappa and Ors.
v. Laxmi Vishnu Textile Mills Ltd.
faced with the problem as to whether the
expression "actually employed" in Explanation I to s.2 (c) of the Act
must, in the context in which it appeared, meant "actually worked".
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'. But the use of the words
'actually employed' in Explanation 1 to s.2 (c) of the Act created a
difficulty. The Court observed that it was not permissible to attribute
redundancy to the words 'actually employed' and, accordingly, held that the
expression 'actually employed' in Explanation I to s.2 (c) of the Act meant
'actually worked'. The law declared by this Court in Lalappa Lingappa's case,
supra, resulted in denial of gratuity to a large number of permanent 680
employees, whose short-term absence had remained unregularised, due to lack of
appreciation of the significance for the purpose of working out their
entitlement to gratuity. It is to be regretted that the Government waited for a
period of three years before introducing the Payment of Gratuity (Amendment)
Bill, 1984 to remove the lacuna in the definition of continuous service in s.2
(c) of the Act by specifically providing that a period of absence in respect of
which no punishment or penalty has been imposed would not operate to interrupt
the continuity of service for the purpose of payment of gratuity. It also
amplified the definition of continuous service under s.2 (c) of the Act. Such a
belated legislation must have worked great injustice to a large number of
permanent employees.
In these cases now before us, the Court is
faced with the problem of determining the mode of calculating the amount of
gratuity payable to the employees concerned under sub-s. (1) of s.4 of the Act
upon the termination of their services. It turns on the much vexed question as
to the true meaning of the words "fifteen days' wages" occurring in
sub- s. (2) of s.4 of the Act. The section does not specify how the rate of
wages last drawn by such employees are to be determined for the purpose of
determining the rate of "fifteen days' wages" under sub-s. (2) of s.4
of the Act.
This gave rise to some doubt and difficulty
amongst different High Courts in computation of the retiral benefit.
It is always an unequal struggle between the
capital and labour, and these cases furnish an instance where workmen after
putting in long and meritorious service for over 30 years or more have been
driven from one court to another for the last 12 years due to the reason that
the words "fifteen days' wages" occurring in sub-s. (2) of s.4 of the
Act were susceptible of two possible conflicting constructions. In a situation
like this, the Government should have intervened at once to introduce a Bill
for inserting an appropriate provision in the Act specifying the mode of
calculating the rate of wages last drawn by such employees for the purpose of
determining the rate of "fifteen days' wages" under sub- s. (2) of
s.4 of the Act.
In retrospect, we wish to impress upon the
Government that whenever such doubt or difficulty is expressed by the High
Courts in the application of provisions of social security measures viz.,
retiral benefits, gratuity, provident fund and pension and the like, 681 they
must always introduce legislation to cure the defect rather than wait for
judicial interpretation by the highest Court. We may also add that the
Government may consider the desirability of setting up a National Labour
Commission which may be entrusted not only with the task of making periodical
review of such social welfare legislations from time to time but also to
suggest radical reform of the laws relating to industrial relations which must
be brought in tune with the changing needs of the society.
In the result the appeals as well as the
special leave petitions must fail and are dismissed with costs throughout.
The costs are quantified at the sum of Rs.
10,000 two-thirds of which shall be deposited with the Supreme Court Legal Aid
Committee of which Shri Subba Rao is the Hony. Secretary and the remaining
one-third shall be paid to the respondent.
N.V.K. Appeals and petitions dismissed.
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