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PETITIONER: M/S.  BRITISH PAINTS (INDIA) LTD.

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 04/11/1965

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. (CJ) RAMASWAMI, V. SATYANARAYANARAJU, P.

CITATION:  1966 AIR  732            1966 SCR  (2) 523  CITATOR INFO :  RF         1969 SC 182  (2)  R          1970 SC 390  (7)  E          1970 SC 919  (27,36)  RF         1972 SC 343  (20)  RF         1972 SC1210  (18)  RF         1972 SC2326  (29)  R          1977 SC 941  (18,23)  R          1984 SC 356  (2,4,7)  R          1987 SC  51  (6)  RF         1987 SC1527  (32)

ACT: Industrial   Disputes-Retiring  age  for   workmen-Gratuity- Quantum and minimum years of qualifying service.

HEADNOTE: Two  matters in dispute between the management of  a  paints manufacturing company and their workmen, namely: (1) the are of retirement of the workmen and (ii) the introduction of  a gratuity  scheme for them, were referred to  the  Industrial Tribunal.   Before the reference was made the  workmen  were entitled  to  work  so  long as  they  were  physically  and mentally fit.  The Tribunal fixed the age of retirement  for clerical  and  subordinate  staff at 58 years  and  for  the factory workmen at 55 )rears.  The Tribunal also  introduced a  gratuity  scheme.  It fixed 5 years  minimum  service  in order to enable a workman to earn gratuity and while  fixing 21  days’ basic wage or salary as the quantum  for  gratuity for  each  completed  year  of  service,  included  dearness allowance in the words "basic wage or salary." Both the management and workmen appealed to this Court.  The workmen contended that : (i) the age of retirement both  for the staff of the head office and the factory workmen  should be fixed at 60 years, and (ii) 30 days’ wages instead of  21 days  should  have been fixed as the quantum  for  gratuity. The management objected to the minimum period of five  years to  enable  a workman to earn gratuity even in the  case  of voluntary  retirement  or resignation and  contended  for  a longer  minimum of service.  The management also urged  that dearness allowance should not be included in the basic wages

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for fixing the quantum of gratuity. HELD:(i)  The  award  of the Tribunal  should  be  modified, fixing   :he  age  of  retirement,  for  the  clerical   and subordinate  staff  as  well  as  for  the  factory-workmen, whether existing or future,at the age of 60 years. [527 E] Age of retirement of 55 years was fixed in the last  century in government service and had become the pattern for  fixing the  age  of  retirement everywhere.   But  considering  the improvement  in  the  standard of  health  and  increase  in longevity, the age of retirement should be fixed  ordinarily it  the  higher level of 60 years.  Since the  work  in  the factory in the present case was not particularly arduous  as compared to that of the clerical and subordinate staff, even in the case of factory-workmen there s no reason why the age of  retirement should be fixed at a lower  level,  specially when the management could always terminate the services of a workman  if he becomes physically or mentally  incapable  of working,  before  the age of retirement.  With  the  age  of retirement at 60 years here will be the added advantage that more experienced workmen will be available to the management and that would be a cause for greater efficiency.  As  there are  no valid and cogent reasons for making a difference  in the age of retirement of existing workmen and those employed in future, the future workmen, both clerical and subordinate staff as 524 well as factory workmen, should also have the benefit of the same age of superannuation. [526 B-D; 527 B-D] (ii)No case for increasing the quantum of gratuity from  21 days basic wage to 30 days’ basic wage had been made out  by the  workmen,  especially when there was  a  provident  fund scheme  also in force in the concern and the  workmen,  were thus getting two retiring benefits. [529 H] (iii)In the case of voluntary retirement or resignation by  an employee before reaching the age  of  superannuation, the minimum period of qualifying service for gratuity should be 10 years, and not 5 years as prescribed by the  Tribunal. [528 E] The reason for pro-tiding a longer minimum period of earning gratuity in the case of voluntary retirement or  resignation is  to  see  that workmen do no’  leave  one  concern  after another,   after  putting  in  the  short  minimum   service qualifying  for  gratuity;  and  gratuity  schemes   usually provide  for  a  longer minimum in  the  case  of  voluntary retirement or resignation. [527 A-B] (iv)Gratuity  should be paid at the rate of 21 days’  basic wage  or Wary for each completed year of service,  but  such basic   wage  would  not  include  dearness  or  any   other allowance. [529 F] As  the gratuity scheme was being introduced for  the  first time in the concern, it would be proper to follow the  usual pattern  of fixing the quantum of gratuity on  basic  wages, excluding  dearness  allowance, especially  when  there  was another  retiring  benefit in the shape  of  provident  fund already existing in the concern. [529 E] Case law reviewed.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 246 and 287 of 1965. Appeals  by special leave from the Award dated March 5  1964 of  the Seventh Industrial Tribunal West Bengal in Case  No. VIII-60 of 1963.

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M.   C. Setalvad, and D. N. MukherJee, for the appellant in- (C.  A. No. 246/65) and respondent in (C.A. No. 287/65). A.S. R. Chari and B. P. Maheshivari, for respondent in (C.A. No. 246/65) and appellant in (C.A. No. 287/65). The Judgment of the Court was delivered by Wanchoo J These two appeals by special leave arise from  thE same award of the Seventh Industrial Tribunal, West  Bengal, and  will  be dealt with together.  Two matters  in  dispute between the management and the workmen Were referred to  the tribunal  relating  to  (i) the age  of  retirement  of  the workmen  at the head office and the factory of  the  company and  (ii) the introduction of : gratuity scheme for  workmen employed  at the head office and the factory.  The  tribunal fixed  the age of retirement for clerical  an(  ,subordinate staff at 58 years and for workmen in the factory a 55 years. The tribunal also introduced a gratuity scheme after 5 2 5. considering  the  objections  raised  to  the   draft-scheme proposed  by the company.  of the two appeals one is by  the company relating to the gratuity scheme and the other by the workmen relating to the age of retirement as well as to  the gratuity-scheme. We  shall first consider the question of age of  retirement. It  may  be mentioned that there was no  retirement  age  in force in this company and so the position when the reference was made was that the workmen could continue to work so long as  they  were  physically or  mentally  fit.   The  workmen contended  that  the  age of retirement both  for  the  head office and factory workmen should be fixed at 60 years.  The company  however proposed that the age of retirement  should be  55  years  for all workmen.   The  tribunal  as  already indicated  has fixed the age of retirement at 58  years  for clerical  and  subordinate staff and 55 years  for  factory- workmen  and has apparently relied on the decision  of  this Court  in  Workmen  of Jessop & Co. Limited  v.  Jessop  and Company Limited(1). Now  this  is a case where there was no  age  of  retirement before the reference was made and the workmen whether at the head  office or at the factory were all entitled to work  so long as they were physically or mentally fit.  So far as the existing  workmen are concerned, we think that the  tribunal should have fixed the age of retirement at 60 years both for the  factory-workmen as well as head office workmen.  It  is enough  in this connection to refer tothe decision  of  this Court   in   Guest,  Keen,Williams  (Private)   Limited   v. Sterling(P.J.) (2) where in a similar situation this   Court fixed the ageof  retirement  at 60 years in  the  case  of existing workmen. Then there is the question as to future workmen and  whether their  age  of retirement should also be fixed at  the  same level as in the case of existing workmen.  We are of opinion that  generally speaking there should not be any  difference in  the age of retirement of existing workmen and others  to be  employed  in future in a case like  the  present  unless there are special circumstances justifying such  difference. In  this  connection our attention is drawn to the  case  of Guest,  Keen,  Williams  (P) Limited(2)  where  the  age  of retirement  of  future workmen was 55 years.  In  that  case however  the age of retirement of future workmen was-  fixed at  55 years by the Standing Order and the question  whether that age of retirement should be changed was not before this Court  for  consideration.   All  that  this  Court  had  to consider  in that case was whether the age of retirement  of existing employees, before the Standing Order fixing the age of retirement at 55 years was intro-

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(1) [1964] 1 L.L.J. 451. (2) [1960] 1 S.C.R. 348 : [1959] 2 L.L.J. 405. :526 educed,  should be 60 years or not.  In the present  company so  far there is no age of retirement and unless  there  are valid  and cogent reasons for making a diference in the  age of  retirement  of existing workmen and  those  employed  in future, the future workmen .should also have the benefit  of the same, age of superannuation. Considering that there has been a general improvement in the standard of health in this country and also considering that longevity has increased, fixation of age of retirement at 60 years  -appears to us to be quite reasonable in the  present circumstances.   Age of retirement at 55 years was fixed  in the  last century in -government service and had become  the pattern  for fixing the age of retirement  everywhere.   But time in our opinion has now come considering the improvement in the standard of health and increase in longevity in  this country  during  the  last  fifty  years  that  the  age  of retirement  should  be  fixed  at a  higher  level,  and  we consider   that   generally   speaking   in   the    present circumstances  fixing  the age ,of retirement  at  60  years would   be  fair  and  proper,  unless  there  are   special circumstances   justifying  fixation  of  a  lower  age   of retirement. Now  so  far  as  the clerical  and  subordinate  staff  are concerned, we are of opinion that there is no reason for any difference in the age of retirement as between the  existing staff and the future staff.  Their work is exactly the same, and  in the circumstances there ;should be the same  age  of retirement. As  to  the factory workmen, it is urged that their  age  of retirement  should be fixed at a lower level as work in  the factory  is  more  arduous than the  work  of  clerical  and subordinate staff, and in this connection reliance is placed on the decision of this Court in Jessop and Company(1) where one age was fixed for clerical and .subordinate staff and  a slightly lower age was fixed for the factory workmen.   Here again we are of opinion that generally speaking, there is no reason  for making a difference in the age of retirement  as between  clerical and subordinate staff on the one hand  and ’factory workmen on the other, unless such difference can be justified  on  cogent and valid grounds.  It is  only  where work in the factory is of a particularly arduous nature that there may be reason for fixing a lower age of retirement for factory  workmen  as compared to clerical  and  sub-ordinate staff.   This appears to have been no in the case of  jessop and  Company(1)  for that was a heavy  engineering  concern, where  presumably work in the factory was much more  arduous as com- (1)[1964] 1 L.L.J. 451. 527 pared to the work of clerical and subordinate staff.   There might therefore have been then some justification for fixing a lower -age, of retirement for factory workmen in the  case of  those  factories  where the work is  of  a  particularly arduous  nature.   But  the  present  company  is  a  paints manufacturing company and there is in our opinion no  reason to suppose that the work in the factory in the present  case is particularly arduous as compared to the work of  clerical and subordinate staff.  We therefore think that even in  the case of future factory-workmen in the present concern  there is  no  special reason why the age of retirement  should  be fixed at a lower level.  It is of course always possible for an  employer to terminature the services of a workman if  he

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becomes  physically or mentally incapable of working  before the, age of retirement.  This power being there, there is no reason to suppose that there will be inefficiency in work on account of fixing the age of retirement at 60 years; on  the other hand with the age of retirement at 60 years there  *HI be  added  advantage that more experienced workmen  will  be available  to the management and that would be a  cause  for greater  efficiency.   On  the whole  therefore  we  are  of opinion  that the age, of retirement in the case of  factory workmen  also in the present company should be fixed at  the age  of  60  years.  We therefore modify the  award  of  the tribunal and fix the age of retirement for the clerical  and subordinate  staff  as  well  as  for  the  factory-workmen, whether existing or future, at the age of 60 yews. We  now turn to the gratuity scheme.  Two points  have  been urged  on  behalf of the company in  this  connection.   The tribunal  has fixed five years minimum service in  order  to enable  a workman to earn gratuity.  This has been  provided in  the event of -(a) death of an employee while in  service of the company, (b) discharge or voluntary retirement of  an employee  on  grounds of medical  unfitness,  (c)  voluntary retirement  or  resignation  before  reaching  the  age   of superannuation,  (d)  retirement  on  reaching  the  age  of superannuation, or (e) termination of service by the company for  reasons other than misconduct resulting in loss to  the company  in money and property.  The management  objects  to the minimum period being five years in the case of voluntary retirement  or  resignation  before  reaching  the  age   of superannuation.   It  is  contended  that  gratuity  schemes usually provide for a longer minimum of service in the  case of  voluntary retirement or resignation before reaching  the age of superannuation.  We think that there is substance  in this contention.  The reason for providing a longer  minimum period for earning gratuity in the case of 528 voluntary  retirement or resignation is to see that  workmen do  not  leave one concern after another after  putting  the short  Minimum  service qualifying for gratuity.   A  longer minimum  in the case of voluntary retirement or  resignation makes  it more probable that the workmen would stick to  the company  where  they  are working.   That  is  why  gratuity schemes usually provide for a longer minimum in the case  of voluntary  retirement  or  resignation.   We  may  in   this connection refer to the Express Newspapers (Private) Limited v. the Union of India(1) where a short minimum for voluntary retirement or resignation was struck down. Again  in The Garment Cleaning Works v. Its  Workmen(2),  10 years minimum was prescribed to enable an employee, to claim gratuity if he resigned. In the Management of Wenger and Company v. Their workmen(3), a distinction was made between termination of service by the employer and termination resulting from resignation given by an  employee.  In the first case the minimum was fixed at  5 years;  in  the second the minimum period was  fixed  at  10 years by this Court. We  therefore modify the gratuity scheme in this regard  and order   that  in  the  case  of  voluntary   retirement   or resignation  by  an  employee before  reaching  the  age  of superannuation, the minimum period of qualifying service for gratuity  should  be  ten  years,  and  not  five  years  as prescribed by the tribunal. The next point that has been urged on behalf of the  manage- ment  in  this  connection is that the  tribunal  has  while fixing  21  days’ basic wage or salary as  the  quantum  for gratuity  for  each  completed  year  of  service   included

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dearness allowance in the words "basic wage or salary".   It is urged that the usual pattern of gratuity scheme  provides for   gratuity  on  basic  wages,  and  dearness   allowance generally speaking is not included in basic wages for fixing the  quantum  of  gratuity.  It is  further  urged  that  by including dearness allowance within the definition of "basic wages  or salary" as given in the scheme in this  case,  the tribunal  has  really more or less doubled  the  quantum  of gratuity  for each completed year of service.  There  is  in our opinion force in this contention also.  In May and Baker (India) Limited v. Their workmen(4), the workmen claimed  in this  Court that gratuity should be fixed on  gross  salary. In  that  case the tribunal had fixed the quantum  on  basic salary i.e. it had not included (1)[1955] S.C.R.12, at p. 158. (3)A.I.R. 1964 S.C. 864. (2)[1962] 1 S.C,R. 711, 714. (4) [1961] 11 L.L.J. 529 dearness allowance for this purpose and the reason given  by the  tribunal  for fixing the quantum of gratuity  on  basic salary was that the workmen in that case were getting double retiring  benefit, namely both gratuity and provident  fund. That view of the tribunal was upheld by this Court. On  the  other hand, it has been urged that  in  some  cases quantum  of  gratuity has been fixed on  gross  salary  i.e. basic  wages plus dearness allowance and in this  connection reference  was  made  to British India  Corporation  v.  The Workmen(1).  In that case this Court upheld the award of the tribunal fixing gratuity on the basis of consolidated wages. This  Court  pointed out that the usual pattern was  to  fix quantum of gratuity on the basis of basic wages but  refused to  interfere  in  that case because  the  practice  in  the concern in that case already existing was to fix gratuity on consolidated wages. In the present case also there is a provident fund scheme in force.  So with the introduction of the gratuity scheme, the employees will be getting double retiring benefit.  In  such circumstances we are of opinion that the tribunal should not have   defined  basic  wages  so  as  to  include   dearness allowance.    Besides  as  the  gratuity  scheme  is   being introduced  for the first time in this concern, it would  be proper to follow the usual pattern of fixing the quantum  of gratuity  on  basic wages  (excluding  dearness  allowance), especially  when  there is another retiring benefit  in  the shape  of provident fund already existing in  this  concern. We  therefore  modify  the award of  the  tribunal  in  this respect  and order that gratuity should be paid at the  rate of 21 days’ basic wages or salary for each completed year of service,  and  this  basic wage will  not  include  dearness allowance   or  any  other  allowance.   Subject  to   these modifications, the scheme framed by the tribunal will stand. The workmen have also assailed the gratuity scheme and their case is that they should have been granted 30 days wages  as prayed for by them instead of 21 days’ basic wages fixed  by the  tribunal.   We  do  not think there  is  any  case  for increasing the quantum of gratuity fixed by the tribunal  at 21  days’ basic wages as modified by us for  each  completed year  of service, for there is a provident fund scheme  also in  force in this concern and the workmen are  thus  getting two  retiring  benefits.  No other point  has  been  pressed before us. (1)  (1965) Vol. 10 Factory Law Reports 244. 5 30 We therefore partly allow the appeal of the company and make

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the  two modifications in the gratuity scheme  as  indicated above.   We also partly allow the appeal of the workmen  and fix  the retirement age for all workmen-existing  or  future clerical,  subordinate and factory workmen at 60 years.   In the  circumstances we make no order as to costs in both  the appeals. Appeals allowed in part. 531