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PETITIONER: DELHI CLOTH & GENERAL MILLS CO., LTD.

       Vs.

RESPONDENT: WORKMEN AND ORS. ETC.

DATE OF JUDGMENT: 27/09/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V. GROVER, A.N.

CITATION:  1970 AIR  919            1969 SCR  (2) 307  CITATOR INFO :  RF         1970 SC 343  (26)  E&R        1970 SC1421  (11,12,16,17,19)  RF         1970 SC1967  (3,4)  F          1973 SC2344  (2,3)  R          1977 SC 941  (15)  RF         1980 SC1944  (5)  RF         1981 SC 852  (16,18)  R          1987 SC 447  (12)

ACT:      Industrial  Dispute--Gratuity Scheme--When  region-cum- industry principle is applicable--Whether gratuity should be related   to  basic  wage  or   consolidated   wage--Whether conditions  prevailing in the industry in the whole  country could   be   taken  into   consideration--Whether   age   of superannuation  should  also be  fixed--When  misconduct  of workmen  does  not affect gratuity--When  payable  to  badli workmen--Date  of  operation  of  award--Considerations  for fixing--’Average of basic wage’, meaning of.

HEADNOTE:     In  the  Delhi  region there  are  four  textile  units. namely,  the D.C.M., the S.B.M., the B.C.M., and the  A.T.M. The  D.C.M. and the S.B.M. are under one management.   Since 1940 they had also a common retirement benefit scheme with a scale  of  gratuity.  The ’ workmen in all  the  units  were receiving basic wages plus dearness allowance.  On March  4, 1958, an industrial dispute between the four units and their workmen was  referred to the Industrial Tribunal and one  of the matters in dispute related to gratuity.  The Tribunal in its  award  framed two schemes relating  to the  payment  of gratuity,  one   relating  to D.C.M. and  S.B.M.,   and  the other,  to B.C.M. and A.T.M.  They were made operative  from January  1, 1964.  Both employers and employees appealed  to this  Court.   On the questions: (1 ) Whether in view  of  a settlement between the management of A.T.M. and its  workmen it  was open to the Tribunal  to ignore  the settlement  and impose the scheme on the  management; (2) Whether in view of the  unstable financial condition  of A.T.M. the  burden  of payment of gratuity on A.T.M.  was  excessive;  (3)  Whether a  uniform scheme applicable to the entire industry  on  the

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region-cum-industry  basis should have been adopted  instead of schemes  applicable  to individual units; (4) Whether  in determining the quantum of gratuity, basic wage alone should be  taken  into  account  and  not  the  consolidated   wage including  dearness allowance; (5) Whether in deciding  this question, an overall view of similar and uniform  conditions in  the industry in different centers in the country,  could he  taken  into  consideration;  (6)  Whether  it  was   not necessary for the Tribunal to fix the age of  superannuation when  introducing  a gratuity scheme; (7)  Whether  gratuity should  have  been awarded even in cases  of  dismissal  for misconduct;   (8) Whether  provision should have  been  made for payment of gratuity to badli workmen irrespective of the number   of  days  for  which  they worked in  a  year;  (9) Whether the schemes should have been made operative from the date  of  reference;  and  (10) What is  the  scope  of  the expression ’average of the basic wage’..     HELD:  (1)  The  settlement  between  the  workmen   and management  of A.T.M. did not bar the jurisdiction   of  the Tribunal   to   make  the Scheme of gratuity  applicable  to A.T.M. [340]     Under the settlement all that was agreed to was, that an award should be made and if it he found that A.T.M. acquired financial  stability  then it would be liable  to  pay   the gratuity  to  its  workmen.   It was  not  agreed  that  the proceedings before the Tribunal  should be dropped and  that it 308 was only after A.T.M. became financially stable that a fresh claim should be made by the workmen. [320 D-F]     (2)  The trading accounts of A.T.M. showed   that  since 1959-60  the Mills had achieved some stability, and that  by 1961-62  all  previous losses were  wiped  out.   Therefore, though  it  was a much weaker unit than the others,  it  was financially stable from the date on which the scheme  became operative. [321 A-C]     (3) A unit-wise approach in framing the gratuity  scheme ’for  the  four units was appropriate in the  present  case. [323 B--C; 340 D--E]     No  inflexible  rule has been laid down  by  this  Court that  gratuity schemes should he framed only on the  region- cure-industry  principle.  In the present case, if a  common scheme  was framed for the entire industry in Delhi for  all four  units, in view of the financial condition  of  A.T.M., the benefits under such a scheme would be not only low,  but would  be  lower  than the existing  benefits  available  to workmen  in the D.C.M. and S.B.M. Units. [321 C--D,  H;  322 E---F, H]     Garment  Cleaning Works v. Its Workmen, [1962] 1  S.C.R. 711:  [1961] 1 L.L.J. 513 and Burhanpur Tapti Mills Ltd.  v. Burhanpur  Tapti Mills Mazdoor Sangh, [1965] 1  L.L.J.  453, followed.     Bharatkhand   Textile   Mfg.  Co.  v.   Textile   Labour Association [1960] 3 S.C.R. 329, explained.     (4) The Tribunal was in error in  relating the  gratuity awardable  to the workmen to the consolidated wage   instead of the  basic  wage. [340 G]     (a) In determining the scope of an industrial  reference words  used,  either  in  the  claim  or  in  the  order  of reference, should not necessarily be given the meaning  they have  under the Industrial Disputes Act.  Therefore,  merely because the expression "wages" in the Act includes  dearness allowance, the Tribunal could not base the  gratuity  scheme on consolidated wages. [325 D--F]     (b) An industrial tribunal cannot adjudicate on disputes

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not referred; but when called upon to adjudicate’ whether  a certain   scheme,  on the terms indicated in  the  reference should   be framed, such basic guidance does not  limit  its jurisdiction.   The Tribunal, in this case, was in error  in thinking  that in determining the rate  of gratuity  it  was limited  to  the number of days of service in the  order  of reference  as the applicable multiple.  On that  assumption, since  the gratuity would be too low if only basic wage  was chosen, it was not justified in choosing consolidated  wage. The  proper  procedure would have been to choose   only  the basic  wage  and  fix upon  a larger  number   of   days  of service  as the appropriate multiple. [327 E--H]     (c) The decisions of this Court in May and Baker (India) Ltd.  v. their Workmen, [1961] II L.L.J. 94 (S.C.),  British India  Corporation  v.  Its Workmen, [1965]  II  L.L.J.  556 (S.C.), British Paints (India) Ltd. v. Its Workmen, [1966] 1 L.L.J.  407  (S.C.), Hindustan Antibiotics  Ltd.   v.  Their Workmen, [1967] 1 L.L.J. 114- (S.C.) and  Remington Rand  of India  v.  The  Workmen,  [1968] 1  L.L.J.  542  (S.C.)  are conflicting and no principle can be extracted as to  whether basic  wage  or consolidated wage should be  considered  for purposes  of gratuity.  Ordinarily, in those  circumstances, this Court would not have interfered with the conclusion  of the  Tribunal choosing consolidated wage; but, the  Tribunal had failed 309 to  take into account the prevailing pattern in the  textile industry all over the country.  It is country-wide  industry and  in  that  industry, gratuity has never been granted  on the basis of  consolidated  wages. [329 C--F; 330 A]     (d) The primary object of industrial adjudication is  to adjust  the relations between employers and  employees  with the object of promoting industrial peace.  If the basic wage alone is taken for purposes of gratuity, it would produce in the present case, a scheme which deprives the workmen of the D.C.M.  and S.B.M. of benefits  which had been   granted  to them   under  the  voluntary  scheme   introduced   by   the management   of  those two units   and  disturb   industrial peace  therein.  But on  that account, the Tribunal was  not justified   in  introducing  a  fundamental  change  in  the concept  of gratuity  granted  by numerous  schemes  in  the textile  industry  all over the  country.   The  appropriate remedy  is  to  frame a scheme consistent  with  the  normal pattern   prevailing   in  the   industry   and   introduces reservations protecting benefits already acquired. [326 C-F]     (e)  In  the report of the Central Wage  Board  for  the cotton  textile industry, also, gratuity was directed to  be given  on the basis of wages excluding  dearness  allowance. [330 G]     (f)  In D..C.M. Chemical Works v. Its Workmen, [1962]  1 L.L.J.  388  (S.C.) this Court affirmed the  award  relating gratuity   to  consolidated  wages.  Though  the  unit  also belonged to D.C.M. it is a unit entirely independent of  the textile unit.  So, it cannot be regarded as an effective  or persuasive  precedent justifying variation from the   normal pattern   of  gratuity schemes in operation in  the  textile industry all over the country. [331 H; 332 A--B, D-E] (5) If all over the country, in textile centres, payment  of gratuity.  is  related  to the basic wage  and  not  to  the consolidated  wage  any  innovation Delhi  region  alone  is likely to give rise to serious industrial disputes in  other centres in the country.  If maintenance of industrial  peace is  a  governing principle of  industrial  adjudication,  it would be wise to maintain a ’reasonable degree of uniformity in the diverse units all over the country and not to make  a

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fundamental departure from the prevailing pattern.the  basic wage is low in all other centres, and if it does not play an important part, there is no reason why it should  play, only in the  Delhi region, a decisive part so as to make a  vital departure from schemes in operation in other centres in  the country.   The acceptance of the award the Tribunal  in  the present  case  is  likely  to  create  conditions  of  great instability  in other parts of the country  in  the  textile industry.  Therefore, the Tribunal’s award granting gratuity on the basis of consolidated wage could not be upheld.  [332 G--H; 333 A--E] (6)  It  is  not necessary, for a  gratuity   scheme  to  be effective,   that  here  should be fixation of  the  age  of superannuation. [323 C--D] Burhanpur Tapti Mills Case, [1965] 1 L.L.J. 453, referred Further,  on  the  terms of the reference the  plea  of  the employers  to  fix the age of superanuation was  beyond  the scope of the ’reference, nor was such fixation incidental to the framing of  the  scheme.  [323 H 324 c] (7) The object of providing a gratuity scheme is to  provide a  retiring  benefit to workmen who have rendered  long  and unblemished service to the employer and thereby  contributed to  the  prosperity  of the  employer.It  is  therefore  not correct to say that no misconduct, however grave, may not be visited  with forfeiture of gratuity. Misconduct  could   be (a) 310 technical misconduct which leaves no trail of  indiscipline; (b)  misconduct  resulting  in  damage  to  the   employers’ property which may  be compensated by forfeiture of gratuity or part thereof; and (c) serious misconduct such as acts  of violence  against  the  management or   other  employees  or riotous  or  disorderly behaviour in or near  the  place  of employment  which, though not directly causing  damage,   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 will  entail forfeiture  of gratuity due to the workmen. [324  F--G;  336 D--F; 341 A--B]     Garment   Cleaning   Works v. Its   Workmen,   [1962]  1 S.C.R. 711; (1961) I L.LJ. 513, Wenger & Ca. v. Its Workmen, [1963]  II L.L.J. 403 (S.C.), Motipur Zamindari (P) Ltd.  v. Their Workmen, [1965] II L.LJ. 139 (S.C.) Calcutta Insurance Co.  v.  Their  Workmen,  [1967]  II  L.LJ.  1  (S.C.),  and Remington Rand of India v. The Workmen, [1968] I L.L.J.  542 (S.C.). referred to.     (8)  The  award does not  require to  be  modified  with regard to badli workmen.     If  gratuity  is to be paid )for service  rendered  then there  are no grounds for holding that a badli workman  must be deemed to have rendered service giving rise W a claim  of gratuity,  merely because, for maintaining his name  on  the record  of the badli workmen, he is required to  attend  the mills. [338 A--B]     (9)  The award needs no modification with regard to  the date of commencement of the schemes.     The  liability of A.T.M. to pay gratuity arose after  it acquired   sufficient  financial  stability  and  the   unit acquired financial stability only from January 1, 1964.   If in  respect  of the A.T.M. which had  no   scheme.  gratuity becomes  operative from January 1, 1964, there is no  reason why respect of B.C.M. any different rule should be  provided for.  As regards D.C.M. and S.B.M. there was already a  more advantageous gratuity scheme in operation and the workmen in

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those two units were not prejudiced by directing the  scheme applicable  to them,  to commence from January 1, 1964.   If effect was given to the schemes before January 1, 19’64,  it may   rake  up  cases  in  which  workmen  have   left   the establishment many years ago and it would  not be  conducive to  industrial  peace to allow such questions to  be  raised after  a long delay.  In the absence of any  principle,  the matter must be decided on considerations of expediency. [338 G--H; 339 A--D] (10)  The expression ’average of the basic wage’ means  wage earned by a workman during a month, divided by the number of days for which he had worked, and multiplied by 26 in  order to  arrive  at  the  monthly wage  for  the  computation  of gratuity payable. [333 C--D] [Appropriate   directions   modifying   the   schemes   were accordingly given.]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal  Nos.  2168, 2569, of 1966, 76, 123 and 560 of 1967. Appeals by special leave from the Award dated June 30, 1966 of the Industrial Tribunal, Delhi in I.D. No. 70 of 1958. S.T. Desai, Rameshwar Nath and Mahinder Narain, for the appellant (in C.A. No. 2168 of 1966) and respondents Nos. 1 and 2 (in C.As. Nos. 123 and 560 of 1967). 311     H.R. Gokhale, A.K. Sen, R.P. Kapur and 1. N. Shroff, for the appellant (in C.A. No. 256,9 of 1966) and respondent no. 3 (in C.As. Nos. 123 and 560 of 1967).     B. Sen, 1. D. Gupta, M.N. Shroff for 1. N. Shroff,   for the appellant (in C.A. No. 76 of 1967).     M.K.  Ramamurthi,  Madan  Mohan,  Shyamala   Pappu   and Vineet  Kumar, for the appellant (in C.A. No. 123 of  1967), respondents Nos. 1 (a) and 4(a) (in C.A. No. 2168 of  1966), respondent No. 1 (in C.A. No. 2569 of 1966), respondent  No. 1 (in C.A. No. 76 of 1967) and respondent No. 5 (in C.A. No. 560 of 1967).     V.C.  Parashar  and O.P. Sharma, for the  appellant  (in C.A.  No. 560 of 1967) respondents Nos. 1 (b) and  4(b)  (in C.A. No. 2168 of 1966) respondent No. 2 (in C.A. No. 2569 of 1968) and respondent No. 2 (in C.A. No. 76 of 1967). The Judgment of the Court was delivered by     Shah,  J.  These appeals arise out of an award  made  by the Industrial Tribunal, Delhi, in I.D. Reference No. 70  of 1958.  The first three appeals are filed by  the  employers, and  the  last  two  by the employees.   By  its  award  the Industrial Tribunal (Delhi, has framed two schemes  relating to  payment  of  gratuity to the workmen  employed  in  four textile  units  in the Delhi region. The employers  and  the workmen  are  dissatisfied with the schemes  and  they  have filed  these appeals challenging certain provisions  of  the schemes.     In  the Delhi region there are four textile  units;  the Delhi  Cloth  Mills  which will be referred to.  as  D.C.M.; Swatantra Bharat Mills--which will be referred to as S.B.M.; Birla  Cotton Mills-which will be referred to as B.C.M.  and Ajudhia  Textile Mills-which will be referred to  as  A.T.M. The D.C.M. and S.B.M. are under one management.  On March 4, 1958, the Chief Commissioner of Delhi made a reference under ss.   10(1)(d)    and 12(5) of the Industrial Disputes  Act, 1947,  relating  to  four matters in dispute, first of which is as follows:    "Whether a gratuity for retirement benefit scheme  should

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be  introduced  for all workmen on the following  lines  and what directions are necessary in this respect ?   1. for service less than 5 years---Nil.   2.  for  service between 5-10 years--15  days’  wages  for every year of service.   3.  for service between 10- 15 years--21 days’  wages  for every year of service. 312   4. for service over 15 years  one month’s wages for  every year of service." The  reference related to workmen only and did not apply  to the clerical staff or mistries.     There are two workmens’ Unions in the Delhi  region--the Kapra  Mazdoor Ekta Union  hereinafter called ’Ekta  Union’, and the other, the Textile Mazdoor Union.  The  Ekta   Union made  a  claim  principally  for  fixation  of  gratuity  in addition to the benefit of provident fund admissible to  the workmen  under  the  Employees Provident  Fund  Act,  to  be computed  on  the consolidated wages inclusive  of  dearness allowance.   The  Ekta Union submitted by its  statement  of claim  that  a  gratuity scheme  based  on  the  region-cum- industry  principle i.e. a uniform scheme applicable to  all the  four units be framed.  The Textile Mazdoor  Union  also supported the claim for the framing of  a gratuity scheme on the  basis of the consolidated wages of workmen but  claimed that  the  scheme  should be unit-wise.  At  the  trial,  it appears that both the Unions pressed for a unit-wise  scheme of gratuity.     The  Tribunal entered upon the reference in  respect  of the fixation of gratuity scheme in February 1964 and made an award on June 30, 1966, operative from January 1, 1964.  The award  was  published on August 4, 1966.  By the  award  two schemes were framed  one relating to the D.C.M. and  S.B.M., and   another relating to the B.C.M. and A.T.M.   Under  the second  scheme  the digit by which the number  of  completed year  of  service was to be multiplied  in  determining  the total gratuity was smaller than the digit applicable in  the case  of the D.C.M. and the S.B.M. The distinction was  made between the two sets of units, because the D.C.M. and S.B.M. were,  in  the view of the Tribunal, more  prosperous  units than the D.C.M. and A.T.M.  The A.T.M., it was found, was  a newcomer  in the field of textile manufacture, and  had  for many years been in financial difficulties.     The  D.C.M.  employs  more than  8,000  workmen  in  its textile unit; the S.B.M. has on its roll 5,000 workmen;  the B.C.M.  has  6,271  workmen  and  the   A.T.M.  has    1,500 workmen.   The  D.C.M. and S.B.M. have a  common  retirement benefit scheme in operation since the year 1940.  Under  the scheme  gratuity  payable to workmen is  determined  by  the length of service before retirement.  The scheme of gratuity in operation in the D.C.M. and S.B.M. is as that,                  "In case of retirement from service of  the               Mills as a result of physical  disability, due               to   over-age or on account of death  after  a               minimum of seven years’. 313 service in the concern:       7 years    ....   Rs.  350/-       8 years    ....   Rs.  425/-       9 years    ....   Rs.  500/-       10 years   ....   Rs.  575/-       11 years   ....   Rs.  650/-       12 years   ....   Rs.  725/-       13 years   ....   Rs.  800/-       14 years   ....   Rs.  875/-

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     15 years   ....   Rs.  950/-       16 years  ....    Rs. 1,050/-       17 years   ....   Rs. 1,150/-       18 years   ....   Rs.. 1,250/-       19 years   ....   Rs. 1,350/-       20 years   ....   Rs. 1’500/- The  scale of gratuity, it is clear, is independent  of  the individual  wage  scale of the workman.  In the  B.C.M.  and A.T.M. units there are no such schemes.     Till  the year 1958 there were no standardised wages  in the  textile  industry.   According to  the  Report  of  the Central Wage Board for the Cotton Textile Industry which was published  on  November  22, 1959, there were  in  India  39 regions  in  which the textile industry  was  located.   The basic monthly  wages of the workmen in the year 1958  varied between  Rs. 18/- in Patna and Rs. 30/- in  various  centers like  Bombay, Indore, Madras, Coimbatore, Madurai,  Bhiwani, Hissar, Ludhiana, Cannanore and certain regions in Rajasthan and  Delhi.  The Wage Board recommended in Paragraph-106  of its Report:                   "The  Board  has come  to  the  conclusion               that  an increase at the average rate  of  Rs.               8  per month per worker shall be given to  all               workers  in  mills  of  category  I  from  1st               January  1960, and a further flat increase  of               Rs.  2 per month per worker shall be given  to               them  from  1st  January  1962.  Likewise   an               increase  at  the average rate of  Rs.  6  per               month  per  worker shall be given to  all  the               workers  in  mills  of category  11  from  1st               January  1960, and a further flat increase  of               Rs.  2 per month per worker shall be given  to               them  from 1st January 1962.  These  increases               are  subject  to the condition that  the  said               sums of Rs. 8 and Rs. 6 shall ensure not  less               than  Rs.  7  and Rs. 5  respectively  to  the               lowest  paid, and that the increase of  Rs.  2               from 1st January 1962 shall be flat for all." Category  I  included the Delhi region.   Since  January  1, 1962,  the  basic  minimum  wage in  the  Delhi  region  is, therefore Rs. 40/Sup. CI/69--3 314 according  to the  recommendations of the  Wage  Board.   In Bombay City and Island (including Kurla),  the basic   wage, according  to  the Report of the Wage Board,  was  also  Rs. 30/and by the addition of Rs. 10 the basic wage of a workman came  to Rs. 40/-.  The workmen in other  important  textile centres also get the same rates.     The Tribunal was of the view that the average basic wage of  the workmen is Rs. 60/- since the implementation of  the Wage  Board in the Delhi region.  No argument  was  advanced before  this  Court  challenging  the  correctness  of  that assumption,  by the employers or the workmen.  It  was  also common  ground  that practically uniform basic  wage  levels prevail  in  all  the large  textile  centres  like  Bombay, Ahmedabad, Coimbatore and Indore.     Besides  the  basic wage the  workmen  receive  dearness allowance  under  diverse awards made  by   the   Industrial Tribunals  which  "seek  to neutralize the  cost  of  living index."  There  is also a provident fund  scheme  under  the Employees.  Provident Fund Act, 1962, whereunder  8-1/3%  of the basic wage and the dearnear allowance and the  retaining allowance for the time being in force is contributed by  the employee.   Besides,  there  is  a  right  to   retrenchment compensation   under  the Industrial Disputes Act, 1947  (s.

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25 FFF) and the Employees Insurance Scheme.. In view of  the observations of this Court in Burhanpur Tapti Mills Ltd.  v. Burhanpur  Tapti  Mills  Mazdoor Sangh(1), that  "It  is  no longer  open  to  doubt that a scheme  of  gratuity  can  be introduced  in  concerns where there.  already  exist  other schemes such as provident fund or retrenchment compensation. This  has been ruled in a number of cases of this Court  and recently  again  in  Wenger  &  Co.  and  others  v.   Their Workmen(2),  and  Indian  Hume Pipe Company  Ltd.  v.  Their Workmen(3).   It  is  held  in  these  cases  that  although provident  fund  and  gratuity are  benefits   available  at retirement  they  are not the same ,and one can  exist  with the  other",  no  serious argument  was  advanced  that  the existence  of  these  additional  benefits  disentitled  the workmen  to obtain benefits under a gratuity scheme  if  the employer is able to meet the additional burden.   But on behalf of all the employers it was, urged that  (1) in  determining  the quantum of gratuity, basic  wage  alone could  be taken into account and not the consolidated  wage; and  (2  )  it was necessary for the Tribunal  to  fix  when introducing   a  gratuity scheme the age of  superannuation. On  behalf of the D.C.M., S.B.M. and B.C.M. it was urged  in addition,  that  a  uniform scheme applicable to the  entire industry  on  the region-cumindustry basis should have  been adopted and not a scheme or schemes applicable to individual units.  On behalf of the A.T.M. (1) [1965] 1 L.L.J. 453,     (2) [1963] II L.L.J. 403. (3) [1959] II L.L.J. 830. 315 it  was  urged that its financial condition is not  and  has never  been stable and the burden of payment of gratuity  to workmen  dying or disabled or on voluntary  retirement  from service or when their employment is terminated is  excessive and  the Unit was unable, to bear that burden. It  was  also urged  on behalf of the A.T.M. that in view of a  settlement which was reached  between the management and workmen it was not  open  to the Tribunal to ignore the settlement  and  to impose  a  scheme for payment of gratuity in favour  of  the workmen in this reference.     While  broadly supporting the award of the Tribunal  the workmen  claim  certain modifications.   They claim  that  a shorter period of qualifying service for workmen voluntarily retiring  should be provided, and gratuity should be  worked out by the application of a larger multiple of days for each completed  year  of service; that the  ceiling  of  gratuity should be related to a larger number of months’ wages;  that gratuity   should   be  awarded  for  dismissal   even   for misconduct;  that  provision should be made for  payment  of gratuity  to  Badli workmen irrespective of the  number   of days  for  which they work in a year;  that  the  expression "average   of  the  basic  wage"  should  be   appropriately clarified  to  avoid disputes in the implementation  of  the gratuity scheme, and that the award should be made operative not from January 1, 1964, but from the date of the reference to the Tribunal.     The two schemes which have been flamed may be set out:                     ANNEXURE ’A’     "Gratuity scheme applicable to the Delhi Cloth Mills and the Swatantra Bharat Mills.’      Gratuity will be payable to the employees concerned, in this  reference, on the scale and subject to the  conditions laid down below:      1. On the death of an employee while in the service  of the  mill company or on his becoming physically or  mentally incapacitated for further service:

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    (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 service.       The gratuity will be paid in  each  case under clauses 1(a)  and 1(b) to the employee, his heirs or  executors,  or nominee as the case may        Provided that in no case will an employee, who is  in service on the date on which this scheme is brought 316               into operation be paid an mount less than what               he would have been entitled to under the  pre-               existing scheme of the Employees’ Benefit Fund               Trust.                     (ii)  Provided further that the  maximum               payment  to  be  made  shall  not  exceed  the               equivalent of 15 months  wages.                     (iii)  Provided further   that  gratuity               under  this scheme will not be payable to  any               employee  who  has already  received  gratuity               under the preexisting scheme of the Employees’               Benefit Fund Trust.                        2.   On   voluntary   retirement   or               resignation after 15 years’ service--15  days’               wages for each completed year of service.                        Provided that the maximum payment  to               be made shall not exceed the equivalent of  15               months’ wages.                        3.  On termination of service on  any               ground  whatsoever  except on  the  ground  of               misconduct   As  in clauses 1 (a)  and  1  (b)               above.                         Provided that the maximum payment to               be made shall not exceed the equivalent of  15               months’ wages.               4. Definitions:               (a) ’Wages’               The  term "wages" in the scheme will mean  the               average  of the basic wage plus the   dearness               allowance  drawn  during the  12  months  next               preceding  death,  incapacitation,   voluntary               retirements,  resignation  or  termination  of                             service and will not include overtime wages.               (b) "Basic wages"               The term "basic wage" will have the meaning as               defined in paragraph 110 of the Report of  the               First  Central Wage Board for  Cotton  Textile               Industry.               (c)    "Continuous   service"    means     un-               interrupted service and includes service which               may  be  interrupted on account  of  sickness,               authorised   leave,   strike  which   is   not               illegal,  lock-out or cessation of work  which               is  not due to any fault on the  part  of  the               employee:                      Provided  that interruption in  service               upto  six months’ duration at any one time and               18 317               months   duration  in  the  aggregate  of  the               nature other than those specified above  shall               not cause the employee to lose the credit  for               previous service in the Mills for the  purpose

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             of  calculation of gratuity, but at  the  same               time shall not entitle him to claim benefit of               gratuity for the period of such  interruption.               Service  for  the purposes ’of  gratuity  will               include service under the previous  management               whether  in  the  particular  mill   or  other               sister mill under the same management.               (d) "Resignation"               The    word   "resignation"    will    include               abandonment of service by an employee provided               he Submits his resignation within a period  of               three  months from the first day   of  absence               without leave.               (e) "Length of service"               For counting "length of service:’, fraction of               a year exceeding six months shall count as one               full year, and six  months  or  less  shah  be               ignored.               5. "Application for gratuity"                   Any  person eligible to claim  payment  of               gratuity  under this scheme shall, so  far  as               possible,  send a written application  to  the               employer within a  period  of  six months from               the date its payment becomes due.               6. "Payment of gratuity"                   The  employer  shall  pay  the  amount  of               gratuity  to the employee and in the event  of               his  death  before payment to  the  person  or               persons  entitled to it under clause  1  above               within a period of 90 days of the claim  being               presented to the employer and found valid.               7.  "Claims  by persons who are no  longer  in               service"--                   Claims  by  persons who are no  longer  in               service  of  the Company on the  date  of  the               publication   of   this  award  shall  not  be               entertained  unless the claims  are  preferred               within six months from the date of publication               of this award.               8. "Badli service"                   Gratuity  shall  be paid  for  only  those               years  of Badli service in which the  employee               has worked for not less than 240 days. 318               9. "Proof of incapacity"                   In proof of physical or mental incapacity,               it will be necessary to produce a  certificate               from any one of the Medical Authorities out of               a panel to be jointly drawn up by the parties.               10. "Nomination"                   (a) Each employee shall, within six months               from  the  date  of the  publication  of  this               award,   make   a  nomination  conferring  the               right  to receive the amount of gratuity  that               may  be due to him in the event of his  death,               before payment has been made.                   (b) A nomination made under sub-clause (a)               above  may, at any time, be modified   by  the               employee after giving a written notice of  his               intention  of doing so.  if  the nominee  pre-               deceases  the  employee, the interest  of  the               nominee  shall revert to the employee who  may               make  a  fresh nomination in respect  of  such               interest."                                        ANNEXURE ’B’

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                 "Gratuity scheme applicable  to the  Birla               Cotton  Spg.  &  Wvg. Mills  and  the  Ajudhia               Textile Mills.                   Gratuity will be payable to the  employees               concerned in this reference, on the scale  and               subject to the conditions laid down below:-                   1. On the death o/an employee while in the               service of the Mill company or on his becoming               physically   or  mentally  incapacitated   for               further service:                   (a)  After 5 years continuous service  and               less   than  10   years   service---One-fourth               month’s  wages  for  each  competed  year   of               service.                   (b)   After  continuous  service  of    10               years---One  third  month’s  wages  for   each               completed year of service.                   The  gratuity will be  paid in each   case               under  clauses 1(a) and 1(b) to the  employee,               his  heirs  or executors, or nominee,  as  the               case may be.                   Provided  that the maximum payment  to  be               made  shah  not exceed the  equivalent  of  12               months’ wages.                   2. On voluntary retirement or  resignation               after  15 years service--On the same scale  as               in 1 (b) above.                   Provided  that the maximum payment  to  be               made  shall  not exceed the equivalent  of  12               months’ wages.                   3.  On  termination  of  service  by   the               employer  for any reason whatsoever eXcePt  on               the  ground of misconduct--As in clauses  1(a)               and 1(b) above.     319               provided  that the maximum payment to be  made               shall not exceed the equivalent of 12  months’               wages."               [Clauses 4 to 10 of Annexure ’B’ are the  same               I   as  in  Annexure  ’A’  and  need  not   be               repeated.] Whether  against the A.T.M. the Tribunal was incompetent  to make an award framing a .scheme for payment of gratuity  may first be considered. Counsel for the A.T.M. urged that there was a settlement between the workmen and the  management  of the  A.T.M.  in  consequence  of  which  the  Tribunal   was incompetent  to make an award.  The facts on which  reliance was  placed are these: After ,the dispute was  referred  .to the Industrial Tribunal, there were negotiations between the management of the A.T.M. and workmen represented by the  two Unions and an agreement was reached, the terms whereof  were recorded in writing.  Clauses 6 and 11 (4) of the  agreement relate to the claim for gratuity:                    "6.  The workmen agree not to  claim  any               further increase in wages, basic or  dearness,               or  make any other demand involving  financial               burdens   on  the  Company  either  on   their               initiative  or as a result of any award,  till               such time as the Working of the mills  results               in profits.                     11. The parties hereto agree to  jointly               withdraw  in  terms of  this  settlement,  the               following pending cases and proceedings before               the  Courts,  Tribunals and  Authorities  and’               more especially--

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                          ...........................                     (4)  With regard to I.D. No. 70 of  1958               the workers    agree not to claim any benefits               that   ,may  be   granted  under   the   above               reference by the  Hon’ble  Industrial Tribunal               in  case the award is. given in favour of  the               workmen, subject to clause 7 above."                     (It is common ground that reference   to               el. 7 is   erroneous: it should be .to cl. 6.) The  workmen  and the management of the  unit  submitted  an application  before  the  Tribunal  on  December  28,  1959, admitting that there had been an "overall settlement" of all the  pending disputes between the management of  A.T.M.  and its  workmen  represented by the two Unions,  and  requested that  an  interim award be made in terms  of  the  agreement insofar  as the dispute related to the A.T.M.  No order  was passed  by  the Tribunal on that application.   On  June  4, 1962, the Manager of the A.T.M. applied to the Tribunal that an  interim award be pronounced in terms of  the  agreement. The  workmen had apparently changed their attitude  by  that time  and filed a written statement and requested  that  the ,prayer  contained  in paragraph 3 of  the  application  "be rejected 320 as  impermissible  in law".  The Tribunal made an  order  on November 26, 1962, and observed:                    "......the  only interpretation that  can               be  given  to clause 11(4) of  the  settlement               read with clause 7 is, that the workers of the               Ajudhia Textile Mills had bound themselves not               to claim any benefits that might be granted by               the  Tribunal  in  the award  on  the  present               reference, if it turns out to be in favour  of               the  workmen unless and until the  working  of               the Mills results in profit. The fact that the               passing  of  an  award  on  the  demands   was               envisaged  under the settlement goes  to  show               that  the demands were to be adjudicated  upon               in any case. The main case will now proceed in               respect of all the mills and the effect of the               settlement  and of the application dated  28th               December, 1959, and of the 5th July 1962  will               be considered at the time of the final award." But  in  making  the  final  award  the  Tribunal  did   not specifically refer to the settlement.  The terms of cl. 6 of the   settlement clearly show that if it be found  that  the A.T.M.  had  acquired financial stability, it will be liable to pay gratuity to the workmen. We are unable to agree  with the  contention  of  counsel  for the  A.T.M.  that  it  was intended  by the parties that the  adjudication  proceedings against  the A.T.M. should be dropped, and after the  A.T.M. became  financially stable a fresh claim should be  made  by the  workmen  on  which  a reference  may  be  made  by  the Government  for  adjudication  of  the  claim  for  gratuity against  the A.T.M.  The contention by the management of the A.T.M.  that the Tribunal was incompetent to  determine  the gratuity payable to the workmen of the A.T.M. must therefore fail.     The other contention raised on behalf of the A.T.M. that its  financial position was "unstable" need not  detain  us. The Tribunal has held that the A.T.M. was working at a  loss since the year 1953-54 and the losses aggregated to Rs. 6.22 lakhs  in  the year 1958-59, but  thereafter  the  financial position of the Unit improved.  The trading account for  the period  ending March 31, 1960, showed profits  amounting  to

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Rs. 3.10 lakhs.  In 1960-61 there was a surplus of Rs. 11.18 lakhs  out of which adjusting the depreciation,  development rebate  reserve and reserve  for  bad  and  doubtful  debts, there  was a balance of Rs. 7.10 lakhs.  In 1961-62 the  net profits  of  the  Unit amounted to Rs. 7.48  lakhs  and  the A.T.M.  distributed  Rs. 52,500/- as dividend.   In  1962-63 there  was  a  gross  profit of Rs.  4.18  lakhs  and  after adjusting depreciation and development rebate reserve  there was  a net deficit of Rs. 30,517/-.  In 1963-64 there was  a gross  profit  of  Rs.  14.29  lakhs  and  after   adjusting depreciation, reserve for doubtful debts, bonus to employees and development rebate reserve,  there re- 321 mained  a  net  profit  of Rs.  4.71  lakhs.   The  Tribunal observed  that  by 1961-62 all previous losses of  the  Unit were  wiped  out and that even during the  year  1962-63  in which  there  was  labour  unrest  the  gross  profits  were substantial and taking into consideration the reserves built by  the Company "the picture was not disheartening and  from the  great progress that had been made since  1959-60  there was  every  reason  to  think that  the  Mill  had  achieved stability  and  reasonable  prosperity and that  it  had  an assured  future", and the Company was in a position to  meet the burden of a modest gratuity scheme.  We see no reason to disagree with  the finding recorded by the Tribunal on  this question.     On behalf of the D.C.M., S.B.M., and B.C.M. it was urged that  normally gratuity schemes are framed on  the   region- cum-dustry  principle, i.e., a uniform scheme applicable  to all  Units  in  an industry in a region is  framed,  and  no ground  for departure from that rule was made out.   It  was urged   that   this  Court  has  accepted   invariably   the region-cum-industry  principle in fixing the rates at  which gratuity should be p.aid.  In our judgment no such rule  has been enunciated by this Court.  In Bharatkhand Textile  Mfg. Co. Ltd. v.  Textile Labour Association,  Ahmedabad(1), this Court in dealing with the question whether  the   Industrial Court  had committed an error in dealing with the claim  for gratuity on industry-wise basis negatived the contention  of the  employers that the unit-wise basis was the  only  basis which could be adopted in fixing the rates of gratuity.   It was observed at p. 345:                    "Equality  of competitive conditions   is               in a sense necessary from the point of view of               the employers themselves; that in fact was the               claim made by the Association which  suggested               that the gratuity scheme  should be framed  on               industry-wise  basis  spread  over  the  whole               of   the  country.   Similarly   equality   of               benefits such as gratuity is likely to  secure               contentment and satisfaction of the  employees               and  lead to industrial peace and harmony.  if               similar  gratuity schemes are framed  for  all               the   units  of  the  industry  migration   of               employees   from  one  unit  to  another    is               inevitably     checked,     and     industrial               disputes  arising  from unequal  treatment  in               that  behalf are minimaised.  Thus,  from  the               point of view of both employers and  employees               industry-wise   approach  is  on   the   whole               desirable." It  is  clear  that  the Court rejected  in  that  case  the argument  that rates of gratuity should be determined  unit- wise:  the Court did not rule that in all cases the  region- cum-industry principle should be adopted in fixing the rates

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of  gratuity. That was made explicit in a later judgment  of this Court: Burhanpur Tapti Mills Ltd. v. (1) [1960] 3 S.C.R. 329. 322 Burhanpur Tapti Mills Mazdoor Sangh(x).  This Court observed at p. 456:                   "......it has been laid down by this Court               that  there are two general methods of  fixing               the  terms  of a gratuity scheme.  It  may  be               fixed on the  basis of industry-cum-region  or               on  the  basis of  units.   Both  systems  axe               admissible  but  regard  must be  had  to  the               surrounding circumstances to select  the right               basis.  Emphasis must always be laid upon  the               financial  position  of the employer  and  his               profit-making   capacity whichever  method  is               selected."     In  Garment Cleaning Works v. Its Workmen(1) this  Court observed at p. 713:                    "......it  is one thing to hold that  the               gratuity  scheme  can, in a  proper  case,  be               flamed   on  industry-cum-region  basis,   and               another thing to say that  industry-cum-region               basis  is  the only basis  on  which  gratuity               scheme  can  be framed.  In fact, in  a  large               majority of cases gratuity schemes are drafted               on  the  basis of the units and it  has  never               been ,suggested or held that such schemes  are               not permissible." The Tribunal in the award under appeal observed:                     "There  are   .....   certain   peculiar               features  in  the  textile  industry  in  this               region which militate against an indnstry-cum-               region  approach.   Apart from the  fact  that               one  of  the four units, namely,  the  Ajudhia               Textile ’Mills is a much weaker unit than  the               rest   and   has passed  through  a  chequered               career  during  its existence, it  has  to  be               borne  in  mind that two of the  units  namely               D.C.M.  and S.B.M. which axe sister  concerns,               already  have some sort of a  gratuity  scheme               providing for two important retiral  benefits,               namely,  death and physical disablement  on  a               scale which is independent of  wage variations               and   is  not  unsubstantial  at   least   for               categories in the lower levels." The Tribunal further observed:                     "if  a common scheme is framed  for  the               entire textile industry at Delhi i.e. for  all               the  four units the quantum       of  benefits               under  that scheme will naturally have  to  be               much  lower in consideration of the  financial               condition of the Ajudhia Textile Mill, than if               a  unit-wise scheme is framed. Moreover  in  a               common  scheme  of  gratuity  the  quantum  of               benefits to be provided will have to be (1) [1965] 1 L.L.J 453. (2) [1962] 1 S.C.R. 711; [1961] I L.L.J. 513. 323               lower  than the benefits already available  to               workmen in the D.C.M. and S.B.M. units for the               most   important   contingencies   for   which               gratuity  benefits  are  meant, namely,  death               and  retirement  on  account  of  physical  or               mental  incapacity.   Such a lowering  of  the

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             quantum  of benefits would not in my  view  be               desirable   as  it  would  create   legitimate               discontent." In our judgment, no serious objection may be raised  against the  reasons set out by the Tribunal in support of the  view that  unitwise approach should be adopted in  the  reference before it and not the region-cum-industry approach.  No case is  there/ore made out for interference with the award  made determining the   rates of gratuity unit-wise.       We  also agree with the Tribunal that on the terms  of the  reference  it  was  incompetent  to  fix  the  age   of superannuation   forworkmen.  We are unable to hold  that  a gratuity  scheme  may  be implemented only  if  the  age  of superannuation  of the workmen is determined by  the  award. Support  was  sought  to  be  derived  by  counsel  for  the employers in support of his plea from the observations  made by this Court in Burhanpur  Tapti Mills Ltd.’s case(D, where in examining the nature  of  gratuity,  it was observed:                    "The    voluntary   retirement   of    an               inefficient  or old’ or worn  out employee  on               the  assurance  that he is to  get  a  retiral               benefit  leads to the avoidance of  industrial               disputes, promotes contentment among those who               look  for  promotions., draws better  kind  of               employees  and improves the tone and morale of               the industry.  It is beneficial all round.  It               compensates  the employee who as he grows  old               knows  that some compensation for the  gradual               destruction of his wage-earning  capacity   is               being   built  up.   By   inducing   voluntary               retirement  of  old and worn  out  workmen  it               confers on the employer a benefit akin to  the               replacing  of old and worn out machinery." There  is,  in our judgment, nothing in  these  observations which  justifies the view that a gratuity scheme  cannot  be effective  unless it is accompanied by the fixation  of  the age of superannuation for the workmen in the industry.     There is another objection to the consideration of  this claim made on behalf of the employers. By the express  terms of  reference the Tribunal is called upon to  adjudicate  on the question of fixation of gratuity: there is no .reference either  expressly or by implication to the fixation  of  the age  of superannuation and in the absence of  any  reference relating  to the fixation of the age of (1) [1965]  1  LL.J. 453. 324 superannuation,  the Tribunal was not competent to  fix  the age  of  superannuation.   A gratuity  scheme  may,  in  our judgment,   be  implemented even without fixing the  age  of superannuation.   The  gratuity scheme in operation  in  the D.C.M. and S.B.M. has been effectively in operation  without any age of superannuation for the workmen in the two  units. An   enquiry  into  the  question  of  fixing  the  age   of superannuation did not arise out of the terms of  reference. No such claim was made by workmen and’ even  in  the written statement  filed  by the employers no direct  reference  was made  to the fixation of the age of superannuation, nor  was there  any plea that before framing a gratuity  scheme   the Tribunal  should provide for the age of superannuation.   We agree  with  the  Tribunal  that  fixation  of  the  age  of superannuation  was  not incidental to the ,framing  of  the gratuity scheme ’and it was neither necessary nor  desirable that it should be fixed.   Counsel   for  the  employers  urged  that  the   Tribunal committed  a  serious error in relating the  computation  of

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gratuity  payable  to  the  workmen  on  retirement  on  the consolidated  monthly  wage  and  not  on  the  basic  wage. "Gratuity"   in  its   etymological   sense  means  a   gift especially  for  services  rendered or  return  for  favours received.   For  some  time  in  the  early  stages  in  the adjudication of industrial disputes, gratuity was treated as a gift made by the employer at his pleasure and the  workmen had  no right to claim it.  But since then there has been  a long  line of precedents  in which it has been ruled that  a claim  for gratuity is a legitimate claim which the  workmen may make and which in appropriate  cases may give rise to an industrial dispute.     In  Garment  Cleaning Works’ case(1)  it  was   observed that  gratuity is not paid to the employees gratuitously  or merely  as  a  matter of boon.  It is paid to  him  for  the service rendered by him to the employer.  The same view  was expressed  in  Bharatkhand Textile Mfg. Ltd.’s  case(2)  and Calcutta Insurance Ltd. v. Their Workmen(a).  Gratuity  paid to  workmen is intended  to  help them after  retirement  on superannuation,  death,  retirement,  physical   incapacity, disability or otherwise. The object of providing a  gratuity scheme is to provide a retiring benefit to workmen who  have rendered  long and unblemished service to the  employer  and thereby  contributed to the prosperity of the employer.   It is  one  of  the  ’efficiency-devices’  and  is   considered necessary   for   an ’orderly and humane  elimination’  from industry of superannuated or disabled employees who, but for such  retiring benefits, would continue in  employment  even though  they  function inefficiently. It is not paid  to  an employee .gratuitously or merely as a matter of boon; it  is paid to him for long and meritorious service rendered by him to the employer. (1) [1962] 1 S.C.R. 711.   (2) [1960] 3 S.C.R. 329. (3) [1967] II L.L.J. 1. 325     On the findings recorded by the Tribunal all the textile units  in the Delhi region are able to meet  the  additional financial  burden,  resulting  from  the  imposition   of  a gratuity  scheme.   The  D.C.M. and S.B.M.  have  their  own schemes  which  enable  the workmen  to  obtain  substantial benefit on determination of employment. The B.C.M. though  a weaker  unit is still fairly prosperous and is able to  bear the burden: so also the A.T.M.     But  the important question is whether these four  units should  be  made liable to pay gratuity  computed   on   the consolidated  wage  i.e.,  basic  wage  plus  the   dearness allowance.  The Tribunal was apparently of the view that  in determining the question the definition of the word "wages." in the industrial Disputes Act, 1947, would come  to the aid of work-men.   The expression "wages" as defined in s. 2(rr) of  the  Industrial  Disputes Act  means  all  remuneration, capable  of being expressed in terms of money, which  would, if  the  terms  of employment, expressed  or  implied,  were fulfilled,  be  payable  to  a workman  in  respect  of  his employment  or of work done in such employment and  includes among  other  things, such  allowances  (including  dearness allowance) as the workman is for the time being entitled to. But  we are unable to hold that in determining the scope  of an  industrial  reference, words used either  in  the  claim advanced or in the order of reference made by the Government under s. 10 of the Industrial Disputes Act must of necessity have  the  meaning they have under the  Industrial  Disputes Act.  Merely   because   the  expression  "wages"   includes dearness  allowance  within the meaning  of  the  Industrial Disputes  Act,  the  Tribunal  is not  obliged   to  base  a

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gratuity scheme on consolidated wages.     The Tribunal has observed that the basic average wage of a workman in the textile industry in the Delhi region may be taken  at Rs. 60/- per month, and the dearness allowance  at Rs.  100/per month, and even if full one month’s basic  wage is adopted as the minimum quantum of benefits to be  allowed in  the case of wage group with service of 5 years and  more the  scale  of  benefit would be very much  lower  than  the present  scale  in  the two contingencies  provided  in  the Employees  Benefit  Fund Trust Scheme in  operation  in  the D.C.M.  and  S.B.M.  And  observed the Tribunal:                   "In  view of the limitations of the  terms               of reference,     the quantum cannot exceed 15               days’  wages for every year of service from  5               to 10 years and 21 days’ wages for every  year               of  service  from  10-15  years.  Any  schemes               framed within the limitations of the terms  of               reference  on  the basis of basic  wage  alone               will  therefore   mean  a  scale  of  benefits               much lower than  even the present scheme under               the Employees Benefit Fund Trust. Such 326               a scheme cannot, therefore, be framed  without               causing grave injustice  and acute discontent,               because  it will mean the deprivation of  even               the present scale of benefits in the case of a                             large  body of workers.  In order to maintain,               so  far  as  possible, the  present  level  of               benefits I have, therefore, no alternative but               to frame for these two units a scheme based on               basic wage plus dearness allowance." A  scheme of gratuity based on consolidated wages  was  also justified  in the view of the Tribunal because it "was  also necessary  to  compensate for the  ever  diminishing  market value of the rupee".     The Tribunal did however observe that normally  gratuity is based not on the consolidated wage but on basic wage. But since 13,000 workmen out of a total of 20,000 workmen in the region  would  stand to lose the benefits  granted  to  them under a voluntary scheme introduced by the D.C.M. and S.B.M. a  departure  from  the normal pattern should  be  made  and gratuity  should be based on the consolidated monthly  wage. In  our judgment, the conclusion of the Tribunal  cannot  be supported.   The primary object of  industrial  adjudication is,  it  is  said,  to  adjust  the  relations  between  the employers  and employees or between employees inter se  with the object of promoting industrial peace, and a scheme which deprives  workmen of what has. been granted to them  by  the employer voluntarily would not secure industrial peace.  But on   that  account  the  Tribunal  was  not   justified   in introducing a fundamental change in the concept of a benefit granted to the workmen in the textile industry all over  the country by numerous  schemes., The appropriate remedy is  to introduce reservations  protecting benefits already acquired and  to  frame a scheme consistent with the  normal  pattern prevailing in the industry.     We consider it fight to observe that in adjudication  of industrial  disputes  settled legal principles  have  little play: the awards made by industrial tribunals are often  the result  of ad hoc determination of disputed  questions,  and each  determination forms a precedent for  determination  of other disputes.  An attempt to search for principle from the law  built up on those precedents is a futile exercise.   To the  Courts accustomed to apply settled principles to  facts

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determined  by the application of the judicial  process,  an essay into the unsurveyed expanses of the law of  industrial relations  with neither a compass nor a guide, but only  the pillars  of precedents is a disheartening  experience.   The Constitution  has however invested this Court with power  to sit in appeal over the awards of Industrial Tribunals  which are, it is said, rounded on the somewhat hazy background  of maintenance   of   industrial  peace,  which   secures   the prosperity of the industry and improvement of the conditions of workmen employed in the industry, and in 327 the absence of principles precedents may have to be  adopted as  guides--some what reluctantly to secure some  reasonable degree of uniformity of harmony in the process.      But   the  branch  of  law  relating   to    industrial relations   the  temptation  to  be  crusaders  instead   of adjudicators  must be firmly resisted.  It would not be  out of  place  to remember the statement of the law  made  in  a different  context   but nonetheless  appropriate  here---by Douglas,  J., of the Supreme Court of the United  States  in United Steel Workers of America v. Enterprise Wheel and  Car Corporation(1):                     "......as arbitrator does not sit to dis               pense his own brand of industrial justice.  He               may  of  course look for  guidance  from  many               sources, yet his  award. is legitimate only so               long   as  it  draws  its  essence  from   the               collective  bargaining agreement.    When  the               arbitrator’s  words manifest an infidelity  to               this obligation, courts have no choice but  to               refuse enforcement of the award." We may at once state that we are not for a moment suggesting that  the  law  of industrial  relations  developed  in  Our country has proceeded on lines parallel to the direction  of the law in the United States.     One  of the grounds which appealed to the   Tribunal  in relating  to the rate of gratuity to the  consolidated  wage was  the  existence  of a gratuity scheme in  the  D.C.M.  & S.B.M. and-the assumption that the Tribunal in  adjudicating a  dispute  is  always, in  exercise  of  its  jurisdiction, limited  when  determining  the  rate  of  gratuity  to  the multiple  number  of  days  of  service  in  the  order   of reference,  and cannot depart therefrom.  We are  unable  to hold  that  Industrial  Tribunal  is  subject  to  any  such restriction.  Its power is to adjudicate  the  dispute.   It cannot   proceed to adjudicate disputes not  referred:   but when called upon to adjudicate whether a certain scheme  "on the  lines indicated" should he framed, the  basic  guidance cannot be deemed to impose a limit upon its jurisdiction.     As  already stated, gratuity is not in its  present  day concept  merely  a  gift made by the employer  in  Iris  own discretion.   The workmen have in course of time acquired  a right  to gratuity on determination of  employment  provided the  employer  can  afford having regard  to  his  financial condition,  to  pay it. There is  undoubtedly  no  statutory direction  for  payment of gratuity as it is in  respect  of provident fund and retrenchment compensation. The conditions for the grant of gratuity are, as observed in Bharatkhand (1) [1960] 363 U.S. 593. 325 Textile Mfg. Co. Ltd.’s case(1),  (i) financial capacity  of the  employer;  (ii) his profit making capacity;  (iii)  the profits  earned by him in the past; (iv) the extent  of  his reserves; (v) the chances of his replenishing them; and (vi) the  claim for capital invested by him.  But these  are  not

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exhaustive  and there may be other  material  considerations which may have to be borne in mind in determining the  terms and  conditions of the gratuity scheme.  Existence of  other retiring  benefits such as provident fund  and  retrenchment compensation  or other benefits do not destroy the claim  to gratuity: its quantum may however have to be adjusted in the light of the other benefits.     We  may repeat that in matters relating to the grant  of gratuity  and even generally in the settlement  of  disputes arising   out  of industrial relations, there are  no  fixed principles, on the application of which the problems arising before  the Tribunal  or  the Courts  may    be   determined and    often    precedents   of cases determined  adhoc  are utilised to build up claims or to resist them.  It would  in the  circumstances  be  futile to  attempt  to.  reduce  the grounds of the decisions given by the Industrial  Tribunals, the  Labour Appellate Tribunals and the High Courts  to  the dimensions  of  any recognized principle.   We  may  briefly refer  to a few of the precedents relating to the  grant  of gratuity.  In May and Baker (India) Ltd. v. Their Workmen(2) the  claim  of the workmen to fix gratuity on the  basis  of gross salary was rejected by the Industrial Tribunal and the quantum  was  related   to   basic  salary  i.e.,  excluding dearness  allowance.   The view taken by  the  Tribunal  was affirmed by this Court. In British India Corporation v.  Its Workmen(3) the existing gratuity scheme directed payment  of gratuity  in  terms  of consolidated  wages.   The  Tribunal however  modified  the scheme while retaining the  basis  of consolidated  wages  which  was held  to  be  justified  and reasonable. This Court observed that prima facie gratuity is awarded not by reference to consolidated wages but on  basic wages  and  the  Tribunal  had made a departure  from  that. But in the view of the Court no interference with the scheme framed  by  the Tribunal was called for. In  British  Paints (India)  Ltd.  v.  Its Workmen(4)  the  Court  followed  the judgment  in May and Baker (India) Ltd.(a) that it would  be proper to follow the usual pattern of fixing the quantum  of gratuity on basic wage excluding dearness allowance. But the same  principle  was  not  adhered to  in  all  cases.   For instance in Hindustan Antibiotics Ltd. v. Their  Workmen(5), it was observed: (1)  [1960] 3 S.C.R. 329.        (2) [1961] II L.L.J. 94                                                      (S.C.). (3)  [1965] II L.L.J. 556 (S.C.). (4) [1966] I L.L.J. 407. (5)  [1967] I L.L.J. 114 (S.C.)==A.I.R. 1967 S.C. 948. 329                  "The  learned counsel for the Company  then               argued  that there is a flagrant violation  or               departure  from the accepted norms  in  fixing               the wage structure and  the dearness allowance               and  therefore,   as an exceptional  case,  we               should set aside the award of the Tribunal and               direct it to. re-fix the wages." In  that case the Tribunal had awarded gratuity  related  to consolidated wages and without any contest the order of  the Tribunal  was confirmed. In Remington Rand of India  v.  The Workmen(1)  it was contended on behalf of the employer  that the  Tribunal was not justified in awarding gratuity on  the basis  of  consolidated wages and should have awarded it  on the basic wages alone.  In dealing with that plea this Court Observed  that  the Tribunal was on the facts  of  the  case justified in proceeding in that way.     It  is  not  easy to extract  any  principle.from  these cases;   as precedents they are conflicting.  If the  matter rested there,  we could not interfere with the conclusion of

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the  Tribunal,  but  the Tribunal has failed  to  take  into account  the prevailing pattern in the textile industry  all over  the country.  The textile industry is spread over  the entire country, in pockets some large other small. There are large  and  concentrated  pockets  in  certain  regions  and smaller pockets in other regions.  Except in two or three of the  smaller States, textile units are to be found all  over the  country.  It  is a country-wide industry  and  in  that industry,  except  in  one case  to  be  presently  noticed, gratuity   has   never  been  granted   on  the   basis   of consolidated wages.  Out of 39 centres in which the  textile industry  is located there is no centre in  which  gratuity. payable  to  workmen in the textile  industry  pursuant   to awards   or settlements is based on consolidated wages.   In the  two  principal  centres  viz.,  Bombay  and  Ahmedabad, schemes  for payment .of gratuity to workmen in the  textile industry  the rates of gratuity are related to basic  wages. The B.C.M. have tendered before the Tribunal a chart setting out the names of textile units in which the gratuity is paid to the workmen on basic wages. These are the Textile  Units, Bhavnagar   (Gujarat)  Shahu  Chhatrapati  Mills,   Kolhapur (Maharashtra);   Jivajirao  Cotton  Mills,  Gwalior  (Madhya Pradesh); Madhya Pradesh Mill-owners Association,  (Indore), Bombay,  Ahmedabad (Gujarat); New Sherrock Spg. &  Wvg.  Co. Ltd.  Nadiad  (Gujarat); Raja Bahadur Motilal  Mills,  Poona (Maharashtra);    Shree   Gajanan   Wvg.    Mills,    Sangli (Maharashtra); T.I.T. Bhiwani (Haryana);  Jagatjeet   Cotton Mills,  Phagwada (Punjab); 36 Textile Mills in West  Bengal; and Umed Mills (Rajasthan).  It is true that the chart  does not  set  out the gratuity schemes, if any, in  all  the  39 centres  referred to in the Report of the First Wage  Board, but the chart relates to a fairly representative segment  of the industry.  No evidence has been (1) [1968] I L.L.J. 542. 3Sup. Cl/69--4 330 placed  before  the  Court  to  prove  that  in  determining gratuity  payable under any other scheme in a  textile  unit the  rate is related to consolidated wages.  The  two  large centres in which the industry is concentrated are Bombay and Ahmedabad.   In  Rashtriya Mill Mazdoor  Sangh,  Bombay,  v. Millowners  Association  Bombay(1), a scheme was  framed  by the  Industrial  Court, exercising power  under  the  Bombay Industrial Relations Act 11 of 1947, in which the quantum of gratuity   was  related  to  the  basic  wages  alone.    In paragraph-27  at p. 583 the Tribunal rejected  the  argument advanced by counsel for the workmen that since benefits like provident    fund,   retrenchment    compensation,     State Insurance  Scheme,  are granted in terms of  monthly  wages, gratuity should also be related to consolidated wages.  They observed  that in a large majority of awards of  the  Labour Appellate  Tribunals and Industrial. Tribunals gratuity  had been awarded in terms of basic wages, and that,                   "The basic wages reflect the differentials               between  the  workers  more  than  the   total               wages,    as    dearness  allowance   to   all               operatives is paid at a flat rate varying with               the  cost  of  living  index.   The   gratuity               schemes  for  the  supervisory  and  technical               staff as well as for clerks are also in  terms               of basic wages." They  accordingly  related gratuity with the  average  basic wage  earned  by  the workman  during  the   twelve   months preceding  death,  disability,  retirement,  resignation  or termination of service. The scheme in the Bombay region  was

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adopted   in   the  dispute  between  the   Textile   Labour Association and the Ahmedabad Mill Owners Association.   The award  is   reported  in  the  Textile  Labour  Association, Ahmedabad  v.  Ahmedabad  Millowners’  Association(2).   The question  whether gratuity should be fixed on the basis  ,of consolidated  wages  was apparently not mooted, but  it  was accepted  on  both  the  sides  that   gratuity   should  be related to basic wages.  An appeal  against  that   decision in the Ahmedabad Millowners’ Association case(2) was brought before  this Court in Bharatkhand Textile Manufacturing  Co. Ltd.’s  case(3),  but no objection was raised to  the  award relating  gratuity  to basic wages.  In the  report  of  the Central Wage Board for the Cotton Textile Industry, 1959, in paragraph-110  gratuity  was  directed to be  given  on  the basis.  of wages plus the increases given  under  paragraph- 106, but excluding the dearness allowance.     The only departure from the prevailing pattern to  which our  attention is invited was made by the  Labour  Appellate Tribunal  in regard to the textile units in  the  Coimbatore Region:  Rajalakshmi Mills Ltd. v. Their Workmen(4).   There was apparently (1) [1967] Industrial Court Reporter 561. (2)  [1958] I L.LJ. 349. (3)  [1960] 3 S.C.R. 329. (4)  [1957] II L.L.J. 426. 331 no  discussion  on  the question about the  basis  on  which gratuity  should be awarded.  The Labour Appellate  Tribunal observed:                     2.  "In  all  the  appeals  there  is  a               contest   by   the mills on  the  subject   of               gratuity,   and  it  is  contended  that   the               gratuity  as awarded is too high.  Both  sides               had much to say on the subject of the gratuity               scheme  as given by the  adjudicator.   During               the course of the hearing we indicated to  the               parties the lines on which the gratuity scheme               could  be  suitably  altered  to  meet   their               respective points of view.                     3.  We accordingly give  the   following               scheme  in substitution of the scheme at  Para               85 of the award:                     ’All  persons with more than five  years               and less than ten years’ continuous service to               their credit, on termination of their  service               by the company, except in cases of  dismissals               for  misconduct  involving  moral   turpitude,               shall  be  p.aid gratuity at the rate  of  ten               days’   average  rate  of  pay  inclusive   of               dearness allowance for  each completed year of               service.’                          ..............................." But this award was modified later by the Industrial Tribunal in  Coimbatore  District Mill Workers’ Union and  Others  v. Rajalakshmi  Mills  Co. Ltd.(1)  The earlier award  made  in 1957  was  sought  to  be  reviewed  before  the  Industrial Tribunal.   The Tribunal observed that it would be the  duty of the Tribunal to modify a gratuity scheme based upon  some agreement  or settlement if the terms of that agreement  are found to be onerous and oppressive. The Tribunal stated that the original scheme was not applicable to all the units  and taking  into  consideration  the  statutory  provident  fund scheme and "the fact that recently basic wages and  dearness allowance  have leaped up", there was no. justification  for including  the  dearness allowance in any  new  scheme  that

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might be framed for the new Mills; and that it would be most undesirable to have two sets of gratuity schemes in the same region  with  varying rates.  In the view  of  the  Tribunal there should be a uniform scheme for all the Mills, old  and new,  and on that ground also the retention of the  dearness allowance under the old scheme must be refused.     Counsel for the workmen relied upon an award made by the Industrial  Tribunal in the Chemical Unit belonging  to  the D.C.M.  which is published in D.C.M. Chemical Works  v.  Its Workmen(2).   In   that  case  gratuity   was   related   to consolidated wages. The unit though belonging to the  D.C.M. is entirely independent of the tex- (1) [1964] I L.L.J. 638.   (2) [1962] 1L.L.J. 388. 332 tile  unit.  The Company was treating that unit as  separate from  the  textile  unit and distinct for  the  purpose   of recruitment  of lab.our, sales and conditions of service for the  workmen  employed  therein.   The  Chemical  Unit   had separate muster-rolls  for  its employees and transfers from one  unit  to.  the other, even where  such  transfers  were possible,   considering  the  utterly  different  kinds   of businesses  carried on in the different units, usually  took place  with  the  consent of  the  employee  concerned.   In upholding  the  gratuity  scheme  which  was  based  on  the consolidated wages, this Court observed:                   "As to the burden of the scheme, we do not               think  that,  looking at it from  a  practical               point of view and taking into account the fact               that there are about 800 workmen in all in the               concern,  the  burden per year  would’be  very               high,   considering  that  the    number    of               retirements  is  between  three  to  four  per               centum of the total strength." The  gratuity  scheme was in a chemical unit, and not  in  a textile  unit.  The judgment of this Court  merely  affirmed the  award  of  the Tribunal and sets  out  no  reasons  why gratuity should be related to consolidated wages.  We do not regard  the  affirmance by this Court of the  award  of  the Industrial Tribunal as an effective or persuasive  precedent justifying  a variation from the normal pattern of  gratuity schemes  in operation in the textile industry all  over  the country.     It  is clear that in the gratuity schemes  operative  at present to which our attention has been invited, in force in the  textile industry payment of gratuity is related not  to consolidated  wages  but to basic wages.  It  is  true  that under  the  scheme which is in operation in the  D.C.M.  and S.B.M. payment which is related to the length of service may in some cases exceed  the  maximum awardable under a  scheme of gratuity benefit related to basic wages.  That cannot  be a  ground for making a vital departure from  the  prevailing pattern  in the other textile units in the country.  But  it may  be  necessary to protect the interest  of  the  members governed by the original scheme.     Determination  of gratuity is not based on any  definite rules.  In each case it must depend upon the  prosperity  of the  concern,  needs  of  the  workmen  and  the  prevailing economic conditions, examined in the light of the  auxiliary benefits  which  the  workmen may get  on  determination  of employment.  If all over the country in the textile  centres payment of gratuity is related to the basic wages and not on consolidated  wages  any innovation in the Delhi  region  is likely to give rise to serious industrial disputes in  other centres all over the country.  The award if confirmed  would not ensure industrial peace: it is likely to foment  serious

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unrest in 333 other  centres.   If maintenance of industrial  peace  is  a governing principle of industrial adjudication, it would  be wise  to maintain a reasonable degree of uniformity  in  the diverse  units  all  over  the country and  not  to  make  a fundamental departure from the prevailing pattern.  We  are, therefore,  of the view that the Tribunal’s  award  granting gratuity on the basis of consolidated wage cannot be upheld. Tiffs  modification will not, however, affect  the  existing benefits which are available under the schemes framed by the D.C.M. and S.B.M. insofar as those two units are. concerned.     Mr.  Ramamurthi for the workmen also. contended that  in the  matter of relating gratuity to  wages--consolidated  or basic--the   principle  of  region-cum-industry  should   be applied  and  an  "overall  view  of  similar  and   uniform conditions  in  the  industry’ in different centres"  should not  be adopted.  It was also urged that the basic  wage  is very low and the class of wage to which gratuity was related played  a  very  important  part  in  the  determination  of gratuity.  The basic wage is however low in all the  centres and if it does not play an important part in other  centres, we see no reason why it should play only in the Delhi region a  decisive  part so as to make a vital departure  from  the scheme in operation in the other centres in the country.  We are  strongly impressed by the circumstance that  acceptance of  the award of the Tribunal in the present case is  likely to  create  conditions  of great instability  all  over  the country  in the textile industry.  In that view, we  decline to uphold  the order of the Tribunal fixing gratuity on  the basis of consolidated wages inclusive of dearness allowance.     We may refer to the contentions advanced by counsel  for the  workmen  in  the two appeals filed  by  them.   It  was urged,,  that  the Tribunal was in error in denying  to  the workmen gratuity when employment is determined on the ground of  misconduct.  It was urged that it is now a rule  settled by decisions of this Court that the employer is bound to pay gratuity  notwithstanding termination of employment  on  the ground  of  misconduct.   It  may be  noticed  that  in  the Rashtriya   Mill  Mazdoor  Sangh’s  case(1)    and  in   the Ahmedabad  Millowners’  Association  case(2)  provision  was expressly made denying gratuity to the workmen dismissed for misconduct.   But in later cases a less rigid  approach  was adopted.  In  Garment  Cleaning Works  case(3)  tiffs  Court observed:                   "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.  Gratuity is not paid  to  the               employee gratui- (1) [1957] Industrial Court Reporter, 561. (2) [1958] I L.L.J. 349. (3) [1962] 1 S.C.R. 711. 334               tously  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               necessarily  be denied to him whatever may  be               the nature of misconduct of his dismissal."

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In  later judgments also the Courts  upheld  the view   that the denial of the right to gratuity is not justified even if employment   is  determined  for  misconduct.   In   Motipur Zamindari (P) Ltd. v. Their Workmen ( 1 ), this Court opined that  the  workmen  should not be wholly  deprived  o.f  the benefit earned by long and meritorious service, even  though at  the  end  of  such service he may  be  found  guilty  of misconduct  entailing  his  dismissal,  and  therefore   the condition  in a gratuity scheme that no gratuity  should  be payable  to a workman dismissed "for  misconduct   involving moral  turpitude"  should be held  unjustified.   The  Court therefore  modified  the condition and directed  that  while paying   gratuity  to  a  workman  who  was  dismissed   for misconduct  only  such amount should be deducted  .from  the gratuity  due  to him in respect of which the  employer  may have suffered loss by the misconduct of the employee.     A similar view was expressed in Remington Rand of  India Ltd.’s  case (2). In  Calcutta  Insurance  Company  Ltd. ’s case(3)  however  protest was raised against  acceptance  of this rule without qualification.  Mitter, J., observed at p. 9  that  it was difficult to concur in  principle  with  the opinion  expressed  in the Garment Cleaning  Works  case(4). Mitter, J., observed:                  "We   are   inclined  to  think   that   it               (gratuity) 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 the loss caused, and making a               provision for withholding payment of .gratuity               where  such  loss was caused to  the  employer               does  not  seem  to  aid  to  the   harmonious               employment of labourers 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." (1) [1965] II L.L.J. 139.       (2) [1968] I L.L.J. 542. (3) [1967] II L.L.J. 1.         (4) [1962] 1 S.C.R. 711. 335 "Misconduct"  spreads  over  a wide  and  hazy  spectrum  of industrial  activity: the most seriously subversive  conduct rendering  an employee wholly unfit for employment  to  mere technical  default  are  covered  thereby.   The  parliament enacted  the  Industrial Employment (Standing  Orders)  Act, 1946,  which  by  s.  15  has  authorised  the   appropriate Government  to make rules to carry out the purposes  of  the Act  and in respect of additional matters to be included  in the  Schedule.   The Central Government has  framed  certain model  standing  rules by notification  dated  December  18, 1946,  called ’The Industrial Employment  (Standing  Orders) Central Rules, 1946’.  In Sch. I-Model Standing  Orders--cl. 14 provides: (1) .................................... (2)  A workman may be suspended for a period  not  exceeding four  days at a time, or  dismissed without  notice  or  any compensation in lieu of notice, if he is found to be  guilty

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of misconduct. (3)  The  following acts and omissions shall be  treated  as misconduct :-- (a) wilful insubordination or disobedience, whether alone or in  combination with others, to any lawful   and  reasonable order of a superior, (b)  theft,  fraud  or dishonesty  in  connection  with  the employer’s business or property, (c)  wilful  damage  to  or  loss  of  employer’s  goods  or property, (d) taking or giving bribes. or any illegal gratification, (e) habitual absence without leave or absence without  leave for more than 10 days, (f) habitual late attendance, (g)   habitual  breach  of  any  law  applicable    to   the establishment, (h) riotous or disorderly behaviour during working hours  at the establishment or any act subversive of discipline, (i) habitual negligence or neglect of work, (j)  frequent repetition of any act or omission for which  a fine may be imposed to a maximum of 2 per cent of the  wages in a month, (k)  striking  work or inciting. others to  strike  work  in contravention  of the provisions of any law, or rule  having the force of law."                    ’ 336 A  bare  perusal of the Schedule shows that  the  expression "misconduct"  covers a large area of human conduct.  On  the one   hand  are  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  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 type of misconduct would of  would  not involve to the employer loss capable of being compensated in terms of money was made: it was broadly stated in the  eases 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   of   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

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of this Court e.g. Wenger & Co. v. Its Workmen(1), Remington Rand of India Ltd. case(2)  and Motipur  Zamindari  (P) Ltd.’s case(a) 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(1)   and   Motipur Zamindari   (P)  Ltd.’s case(3) applies only to those  cases where there has been by actions wilful 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  dis- (1) [1963] II L.L.J. 403.  (2) [1968] I L.L.J. 542 (S.C.). (3) [1965] II L.L.J. 139 (S.C.). 337 orderly  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.     It  was urged on behalf of the workmen that the  minimum period  of  15 years fixed for voluntary retirement  is  too long and it should be reduced to 10 years. In Hume Pipe  Co. Ltd. v. Their Workmen(1) and Hydra (Engineers) Private  Ltd. v.  The  Workmen(2) the minimum period  for  qualifying  for gratuity on voluntary retirement was fixed at 15 years.   In other  cases  a  shorter period of  10  years  was  adopted: Garment  Cleaning  Works(a); British Paints (India) Ltd.(4); Calcutta Insurance Co. Ltd.(5), and Wengel & Company(x).     Counsel   for   the  employers  have    accepted    that qualifying length of service for voluntary retirement should be reduced to 10 years.  Counsel for the employers have also accepted  that  having  regard  to  all  the  circumstances, notwithstanding the direction given by the Tribunal and  the schemes prevailing in the other parts of the country in  the textile industry, the maximum gratuity should not exceed  20 months’  basic wages and not 15 months’ as directed  by  the Tribunal.  Further  counsel for the D.C.M. and  S.B.M.  have agreed  that  in  case  of  termination  of  employment   on voluntary  retirement one full months basic wages  for  each completed  year  of service not exceeding 20  months’  wages should  be granted to workmen.  Counsel for the  B.C.M.  has agreed that gratuity at the rate of 21 days’ wages for  each completed year of service in case of voluntary retirement or resignation  after  10  years’ service  may  be  awarded  as gratuity to the workmen. Counsel for the A.T.M. has shown no disinclination to fall in line with this suggestion. Counsel for  the  A.T.M.  has  also  not  objected  to   appropriate adjustments   in  view  of  the  concessions  made  by   the management of the D.C.M., S.B.M. and B.C.M.     It  was  urged  by  counsel for  the  workmen  that   in providing  that gratuity shall be paid to Badli workmen  for only those years in which a workman has worked for 240 days, the  Tribunal has committed an error.  It was urged  that  a Badli workman has to register himself with the management of the  textile  unit and is required every day to  attend  the factory  premises  for ascertaining whether  work  would  be provided  to  him, and since a Badli workman has  to  remain available  throughout the year when the factory is  open,  a condition  requiring that the Badli workman has  worked  for not  less than 240 days to qualify for gratuity  is  unjust. We (1) [1959] II L.L.J. 830. (2) C.A. No. 1934 of 1967 decided on April 30, 1968. (3)  [1962] 1 S.C.R. 711. (4)  [1966] I L.L.J. 407 (S.C.)

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(5) [1967] II L.L.J. 1 (S.C.). (6)  [1963] II L.L.J. 403 (S.C.) 338 are unable to agree with that contention.  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.  The direction  is  unexceptionable and the contention must be rejected.         -     It   was  also  urged  by  Mr.  Ramamurthi   that    the expression "average of the basic wage" in the definition  of "wages"  in  cl.  4  of the  Schemes  is  likely  to  create complications   in  the  implementation  of   the   Schemes. He  .urged that if the wages earned  by  a workman during  a month  are divided  by the  total number  of  working  days, the  expression "wages" will have an artificial meaning  and especially   where  the  workman  is  old  or  disabled   or incapacitated  from rendering service, gratuity payable   to him  will  be substantially reduced.  We do not  think  that there  is any cause for such apprehension.   The  expression "average of  the  basic wage" can only mean the wage  earned by  a workman during a month divided by the number  of  days for  which  he has worked and multiplied by 26 in  order  to arrive  at the monthly wage for the computation of  gratuity payable.    Counsel   for  the  employers  agree   to   this interpretation.     It  was  then urged that whereas the reference  to.  the Industrial  Tribunal was made by the  Delhi   Administration sometime  in March 1958, the award is .given effect to  from January  1, 1964, and-for a period of nearly six  years  the workmen  have been deprived of gratuity, when the  delay  in the  disposal of the proceedings was no.t due to. any  fault or  delaying  tactics  on  the part  of  the  workmen.   The reference  was made in the first week of March,  1958.   The Textile  Mazdoor  Union  then applied  to  be  impleaded  on September  15,  1958, the D.C.M. and S.B.M. moved  the  High Court  of Punjab at Delhi and obtained an order for stay  of proceedings in writ petition filed against the order of  the Tribunal  impleading the Textile Mazdoor Union.   That  writ petition was dismissed in February 1961 and the  proceedings were  resumed on December 12, 1962.  Thereafter  preliminary issues  were  decided and on December 3, 1963,  ,an  interim award  relating  to  other  disputes  was  made.   It  must, however,  be  noticed that there were four  claims  and  the claim relating to gratuity was taken in hand by the Tribunal after  disposal  of  the other claims.   Neither  party  was dilatory  in  the  prosecution  of  any  claim  before   the Tribunal.  It has also to be noticed that in the D.C.M.  and S.B.M.  there  was  in fact a  gratuity  scheme  already  in operation.   The  liability of the A.T.M.  to  pay  gratuity arises   after  that  unit  acquired  sufficient   financial stability and it is not suggested that the unit had acquired financial  stability  before January 1, 1964.    The  is.sue remains  a live issue only in respect of the B.C.M.   It  is true that the gratuity 339 scheme  of  the D.C.M., and S.B.M. was related only  to  the length of service and did not take into account the  varying rates of wages received by the workmen.  But the question if at  all  would, be one of making minor  adjustments  in  the liability  of the two units to pay gratuity in the event  of gratuity  being  payable under this award at a  higher  rate than  the gratuity  awardable  under  the scheme already  in

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operation  in  the two units.  If in respect of  the  A.T.M. which  had  no scheme gratuity for  all  practical  purposes becomes  operative from January 1, 1964, we do not  see  any reason  why  in  respect of the B.C.M.  any  different  rule should  be  provided  for.  Again, the  Tribunal  has  fixed January  1,  1964, as the date for the commencement  of  the schemes.  Giving the schemes effect before January 1,  1964, may  rake  up  cases. in which the  workmen  have  left  the establishments many years ago.  It would not be conducive to industrial peace to allow such questions to be raised  after this long delay.  The question is not capable of solution on the  application of any principle and must be   decided   on the  consideration of expediency.  We do not think that  any ground is made out for altering the award of the  Industrial Tribunal in this behalf.     It  was  then urged that in any event the   workmen   of the D.C.M. and S.B.M. should not be deprived of the right to gratuity under the scheme of the two u,nits, if gratuity  at a higher rate is payable to them under the voluntary scheme. This contention must be accepted.  We direct that in respect of  all workmen of the D.C.M. and S.B.M. who  were  employed before   January  1, 1964, and continued to remain  employed till  that  date, gratuity at the higher of  the  two  rates applicable  to  each  workman when he  becomes  entitled  to gratuity  either computed under the Employees  Benefit  Fund Trust scheme of the D.C.M. and S.B.M. or under the terms  of this award shall be paid.  Workmen employed after January 1, 1964, will be entitled to the benefit of this award alone.     Industrial  disputes  have given  rise  to  considerable strife  holding up development of industry and the  economic welfare  of  the  nation.   Awards have  been  made  by  the Tribunals  often  on considerations adhoc and  based  on  no principle  and Courts have upheld or modified  those  awards without  enunciation of any definite or  generally  accepted principle.  In the present case we have been largely  guided b37  the  consideration of securing a reasonable  degree  of uniformity  in  the  fixation of  gratuity  in  the  textile industry,  for,  in  our view, a  departure  made  from  the prevailing  pattern in one region is likely to give rise  to claims all over the country for modification of the gratuity schemes  in operation, and have been accepted as fixing  the basis.  of  gratuity  schemes.   If  having  regard  to  the deteriorating  value of the rupee, it is  thought  necessary that more generous benefits should  be  available  to  the 340 workmen  by way of gratuity, the remedy lies not before  the adjudicators  or  the  Courts, but  before  the  legislative branch  of  the State.  In respect of the  bonus,  provident fund,  retrenchment compensation, State Insurance Schemes as well  as medical benefits, legislation has  been  introduced bringing  a  reasonable  degree of  certainty  in  the  laws governing the various benefits available to the workmen  and we  are  of  the view that even in  respect  of  gratuity  a reasonably uniform scheme may be evolved by the Legislatures which could prevent resort to the adjudicators in respect of this complicated matter of dispute between the employers and the employees.  It may no.t be difficult to evolve a  scheme which  would  meet  the  legitimate  claims.  of  both   the employers   and  the  employees  and  which   might,   while eliminating  cause for friction,’ simultaneously conduce  to greater certainty in the administration of the law governing industrial disputes, and secure benefits to the employers as well  as the employees and conduce to the prosperity of  the industry as well as of the workmen. We propose to summarise the effect of our judgment:

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                 (1)  A unit-wise approach in  framing  the               gratuity   scheme  for  the  four  units   was               appropriate,   and  on  the   terms   of   the               reference the plea of the employers to fix the               age of superannuation was beyond the scope  of               reference.   The  financial condition  of  the               D.C.M.,    S.B.M.    and   B.C.M.    justifies               imposition of gratuity schemes as from January               1, 1964. Even the A.T.M. which is the  weakest               of  the four units is financially stable  from               the   date  on  which   the   award    becomes               operative;                   (2) The settlement between the workmen and               the   A.T.M.  did  not  operate  to  bar   the               jurisdiction  of  the  Tribunal  to  make  the               scheme  of gratuity payable to the workmen  of               the A.T.M.;                   (3)  That  the Tribunal was  in  error  in               relating gratuity awardable to the workmen  to               the consolidated wage;                   (4)   That  the  minimum  period   for   .               qualifying for voluntary retirement should  be               reduced to 10 years and one months basic  wage               in the case of D.C.M. and S.B.M. and 21  days’               basic  wage in the case of B.C.M.  and  A.T.M.               for  each completed year of service should  be               paid  but not exceeding 20  months   wages  in               the  aggregate. (This direction is  made  with               the   consent   of  the   Advocates   of   the               employers); 341                   (5)  That workmen dismissed or  discharged               from  service  for  misconduct  will  not   be               entitled  to  gratuity if  guilty  of  conduct               involving   acts  of  violence   against   the               management or other employees,  or riotous  or               disorderly  behaviour in or near the place  of               employment;                   (6)  No  modification need  be  made  with               regard to Badli workmen;                   (7)  The award needs no modification  with               regard to the date of operation of the  award;               and                   (8)  The workmen of the D.C.M. and  S.B.M.                             who  commenced  service and continued to  serve               till  January 1, 1964, and thereafter will  be               entitled  to elect at the time  when  gratuity               becomes  due to claim gratuity either  on  the               scheme  in force under the  Employees  Benefit               Fund  Trust  of the employers  or  under  this               award. We  have  made  some incidental changes  to  streamline  the scheme. On the view we have taken of the schemes,   Annexure ’A’relating  to the D.C.M. and S.B..M. of the award will  be modified in the following respects:                      In  clause 1 (a) instead of  "12  days’               wages",  the expression "20 days’ wages"  will               be substituted;                      In clause 1 (b) for the expression  "15               days’ wages",               the  expression  "1  month’s  wages"  will  be               substituted;                      In  proviso (ii)  to clause 1  for  the               expression "15 months’ wages", the  expression

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             "20 months’ wages" will be substituted;                       In  clause  2 for  the  expression."15               days’  wages", the expression "1 months  wages               will be substituted;  and for the expression ’               15  years service , 10 years service  will  be               substituted;                       In  the  proviso to clause 2  for  the               expression "15 months’ wages", the  expression               "20 months’ wages" will be substituted;                        In  clause 3 in the proviso  for  the               expression "15 months’ wages", the  expression               "20 months’ wages" will be substituted;                         Clause  3  will be  followed  by  an               Explanation: "Explanation.--The  expression  "misconduct"   means    acts involving   violence   against  the  management   or   other employees, or riotous or disorderly behaviour in or near the place of employment. 342     Where  the workman is guilty of conduct  which  involves the management in financial loss, the loss occasioned may be deducted from the gratuity payable."     In clause 4 the words "plus the dearness allowance" will be omitted.     The remaining clauses will stand unaffected except  that for   the  words  "within  six  months  from  the  date   of publication  of  this Award"’ the words "within  six  months from the date of this judgment" will be substituted.      Annexure ’B’ relating to the B.C.M. and A.T.M. will  be modified in the following respects:      In clause 1 (a) for the expression "one fourth  month’s wages", the expression "15 days’ wages" will be substituted;       In clause 1 (b) for the expression "one third  month’s wages", the expression "21 days’ wages" will be substituted;       In the proviso for the expression "12 months’  wages", the expression "20 months’ wages" will be substituted;        In  clause 2 for the words "15 years’  service",  the expression "10 years’ service" will be substituted;        In   clause 3 in the proviso for the  expression  "12 months’  wages", the expression "20 months’ wages"  will  be substituted  and it will be followed by the  Explanation  of "misconduct" as in Annexure ’A’.         In clause 4 the words "plus the dearness  allowance" will be omitted. There will be no order as to costs in these appeals. V.P.S.                           Award modified accordingly. 343