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PETITIONER: MANAGEMENT, GHAZIABAD ENGINEERING  CO (P) LTD.

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 18/07/1969

BENCH: SHAH, J.C. BENCH: SHAH, J.C. MITTER, G.K.

CITATION:  1970 AIR  390            1970 SCR  (1) 622  1969 SCC  (2) 319  CITATOR INFO :  D          1972 SC 343  (25)  E&R        1977 SC 941  (21)

ACT:     Industrial  Dispute--Gratuity--Scheme  framed   relating gratuity to consolidated wage not to basic  wage--Principles governing   framing  of scheme--Dearness allowance  at  flat rate--Practice--Courts      jurisdiction     under      Art. 136--Interference with findings of Tribunal.

HEADNOTE:     The  Industrial Tribunal on a reference of the  disputes between  the  appellant  company and its  workmen  framed  a gratuity  scheme.  The  gratuity payable  to  a  workman  on termination  of employment was to be computed on  the  total wage  packet  of the workman  including  dearness  allowance which he had last drawn.  The tribunal also awarded dearness allowance at a flat uniform rate for every 10 point rise  in the  cost of Consumer Price Index.  The Tribunal found  that the  financial position of the company was sound and it  had the capacity to bear the additional burden. In appeal,  this Court     HELD:  (i)  The usual pattern in fixing gratuity  is  to relate   it  to  the  basic  wage  or  salary  and  not   to consolidated  wage. A departure may be made from the  normal rule,  if there by some strong evidence or precedent in  the industry,  or conduct of the employer or  other  exceptional circumstances  to justify that course.  In .the  absence  of such evidence, gratuity should be related to the basic  wage and not to the  consolidated  wage packet. [627 D]     In  the  present case it was found  that  the  financial position of the company was sound but there was no  evidence that  the company was "making abnormally high profits",  nor was  there  any evidence that in its sister  concern  or  in other  engineering  concerns  in  the  region  there  was  a practice of awarding gratuity related to consolidated wages.     M/s.  British  Paints  (India)   Ltd.  v.  Its  Workmen, [1966]  2  S.C.R. 523, May & Baker (India.)  Ltd.  v.  Their Workmen,  [1961] II L.L.J. 94, British India Corporation  v. The  Workmen,  (1965)  Vol.  10  Factory  Law  Reports  244, Hindustan  Antibiotics   Ltd. v. Their Workmen,   [1967]  I.

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L.L.J 114, The Remington Rand of India Ltd. v. The  Workmen, [1968]  1  S.C.R. 164, and Delhi Cloth & General  Mills  Co. Ltd. v. The Workmen & Ors. [1969] 2 S.C.R. 307, referred to.     (ii)  The rise in dearness allowance was not related  to the  quantum  of basic wage or consolidated wage; it  was  a flat  uniform rate applicable to every workman.   Therefore, the. rise would not operate to give the workman, besides the additional  dearness  allowance, a  percentage  increase  in dearness allowance already paid as part of the  consolidated wage. [625 E-F]     (iii)  The Tribunal, on appreciation of  evidence  found that  the  financial  position of  the  company  was  sound. Assuming that the Tribunal was governed by the strict  rules prescribed  by  the  Evidence Act, Sitting  in  appeal  with Special   Leave  this  Court  would  not  be  justified   in interfering 623 with  the finding of the Tribunal even if it be open to  the criticism that a part of the evidence relied upon was not in law relevant. [624 F]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1408  of 1966.     Appeal  by  special leave from the AWard dated  May  19, 1965  February  23, 1966 of the Addl.  Industrial  Tribunal, Delhi  in Industrial Dispute No. 109 of 1965.     H.R.  Gokhale,  G.L.  Sanghi and  K.P.  Gupta   for  the appellant.     Urmila   Kapur   and   Bhajan   Ramrakhiani,   for   the respondents.     The Judgment of the Court was delivered by     Shah,   J.   By  order  February  24,  1965  the   Chief Commissioner of Delhi referred for adjudication,  industrial disputes  between  the  appellant company  and  its  workmen relating to dearness allowance and introduction of a  scheme of gratuity for the benefit of the workmen.  The  Industrial Tribunal, Delhi framed the following "gratuity scheme": (1) On death or retirement on    One months wages for each superannuation or on becoming    Year of service of part mentally or physically unfit     there of in excess of six for further service.             subject to a maximum of 15                                  months’s wages,In case                                  of death of Employee the                                  gratuity shall be payable                                  to his nominee or if there                                  is no nominee to his legal                                  heirs (2)On termination after five    15 days for each year of se- years’service for any  cause     rvice or part there of in whatsoever except by way of      exces of six months subject retrenchment or resignation      to a maximum of 15 months resignation.  subject            wages (3)On resignation after 10 years of service.                15 days wages for each year                                  of service or part thereof                                  in   excess of  six  months to a maximum of 15 months                                  wages     Provided  that  if termination is  for  any   misconduct causing  financial loss to the company, the amount  of  loss shall  be  deducted  from the  gratuity  payable.  The  word ’wages’  in this  Scheme shall mean the total pay packet  of

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the workman including dearness which he was last drawing."     The Tribunal also directed that "all  workmen  who  were appointed in 1960 or earlier should get dearness   allowance at  Rs. 3 for every ten point rise in the cost  of  Consumer Price  Index base 1960 over and above their  existing  wages with effect from 624 1st January, 1965. In case of workmen appointed after  1960, the  consumer  price  index base 1960 on  the  date  of  his appointment  shall be found out and he shall be given Rs.  3 as   dearness  for every ten point rise in cost of  Consumer Price index base 1960 above it with effect from 1st January, 1965 or such later date on which the limit of 10 point  rise in  cost  of  Consumer Price Index  base  is  crossed."  The Tribunal  also  directed  that  dearness allowance will  not be enhanced till the limit of ten  points  be "crossed", and that  dearness  allowance once granted will not  be  reduced till the Consumer Price Index falls by more than  10 points. The Company has appealed to this Court  with  special leave.     In  the view of the  Tribunal, the  financial   position of   the company "is very sound" and that it has  "financial capacity  and,  stability to bear the additional  burden  of dearness allowance and of the gratuity scheme." In  reaching that  conclusion  the  Tribunal  relied  upon  a  news  item published in the newspapers that  2000 Russian Tractors were being   immediately  imported  by  the Company  even  though the agency of the Company was  being terminated. In  relying upon newspaper reports the Tribunal may have erred. But  the conclusion  of  the  Tribunal is rounded upon  a  review  of several  other  circumstances. It is true that one  of   the primary  lines  of business of the company  was  of  selling tractors as agents of Russian manufacturers. That agency was in  danger  of being terminated because the  State   Trading Corporation  had arranged to take over the agency.  But  the balance sheets of the company show that the agency was  only one  of  the many lines of business and the closure  of  the agency  of  the  tractor manufacturers  was  not  likely  to affect  the financial structure  of the  Company  seriously. The  Tribunal  has on appreciation of evidence come  to  the conclusion  that the financial position of the  company  was sound  and  assuming that the Tribunal is  governed  by  the strict  rules  prescribed by the Evidence  Act,  sitting  in appeal  with  special  leave we will  not  be  justified  in interfering  with the finding of the Tribunal even if it  be open  to  the criticism that a part of the  evidence  relied upon is not in law relevant.     The company had on its roll 244 workmen out of whom  118 entered  employment after 1960. The company has been  paying to  its  workmen wages consisting  of  two  components-basic wages  and  50  per  cent of the  basic  wages  as  dearness allowance.  Payment  of wages is made in this  form  to  all workmen  whether their employment commenced before the  year 1960 or thereafter. It is true that before 1960 the  company used  to make a consolidated payment without specifying  any amount of basic salary or dearness allowance. Since 1960  in every appointment letter  it  was expressly recited that the employee v,iII get a consolidated salary consisting of 2/3rd of the consolidated salary as basic wages and 625 the balance as dearness allowance. The company has  produced before  the  Tribunal  118 such letters  of  appointment  in respect  of all employees employed after the year  1960.  In respect   of the employees appointed prior to the year  1960 in  the salary register basic salary and dearness  allowance was separately entered though at the time of appointment  of

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employees  there  was  no  allocation  as  basic  wages  and dearness allowance.     There  is no dispute that since the year 1960 there  has been a rise in the cost of living. The Consumer Price  Index for  Industrial Workers which was 100 in 1960, had risen  to more  than  130 in 1965. The  management  of   the   company granted   dearness allowance to employees in other  concerns under  its management even though those other concerns  were not  financially  very sound. No serious argument  has  been advanced  before us that the rise in dearness  allowance  is not  Justified.  The  only ground of complaint  is  that  by relating the dearness allowance to the total wage packet the workmen are given a: rise both in the dearness allowance and in the basic wage     The Tribunal has awarded dearness allowance at the  flat rate  of  Rs.  3  for every 10 point rise  in  the  cost  of Consumer Price Index. The rise is not related to the quantum of  basic wage  or consolidated wage. It is a  flat  uniform rate applicable to  every workman.  The Tribunal was of  the view  that  the allocation between the basic  wage  and  the dearness  allowance was "not fair", but for the  purpose  of the  present reference,  the  question  is academic  because dearness  allowance   is  not  related  to  the  quantum  of salary that the workmen receive. The argument that the  rise will  operate to give to the workmen besides the  additional dearness  allowance,  a  percentage  increase  in   dearness allowance  already  paid as part of  the  consolidated  wage cannot  be accepted. We do not therefore see any  reason  to interfere  with  the   order passed by  "the  Tribunal  with regard  to the dearness allowance at the rate of Rs.  3  for every 10 point rise in the Consumer Price Index."     Gratuity   payable  to  a  workman  on  termination   of employment  is  to be computed on the total wage  packet  of the  workman including dearness allowance which he has  last drawn.  This  order makes a departure from the  normal  rule which  is  adopted  in industrial awards.  In  M/s.  British Paints  (India)  Ltd.  v. Its Workmen(1)  this  Court  while introducing  a  gratuity scheme for the first  time  in  the concern  directed  that  the  amount of  gratuity  shall  be related  to  the  basic  wage  or  salary  and  not  to  the consolidated  wage including dearness allowance.  A  similar order  was  made  in May and Baker  (India)  Ltd.  v.  Their Workmen(2).  It is true (1) [1966] 2 S.C.R. 523.    (2) [1961] II L.L 626 that  in  British India Corporation v.  The  Workmen(1),  an award  made by the Tribunal fixing the quantum  of  gratuity on   gross salary i.e., basic wage plus  dearness  allowance was upheld by this Court. The Court affirmed that the  usual pattern in fixing  the gratuity is to relate it to the basic wage,  but refused to interfere with the order because  the. practice  in  that   concern  was  to fix  gratuity  on  the consolidated wage.       similarly  in  Hindustan Antibiotics   Ltd  v.   their work    men(2), the  Tribunal directed  the employer to  pay gratuity  at  the rate of one half of wages for  each  month including  dearness allowance but excluding house  rent  and all  other  allowances for each completed  year  of  service subject to a maximum of  wages for ten months. In  rejecting the  claim  of the employers for relating  gratuity  to  the basic wage, this Court observed:               "If  the industry is a flourishing one, we  do               no  see  any reason why the labour  shall  not               have the benefit of both the schemes i.e.  the               employees  provident  fund  and  the  gratuity

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             scheme.  Gratuity  is an  additional  form  of               relief  for the workmen to fall back upon.  If               the industry can bear the burden, there is  no               reason  why he shall not be entitled  to  both               the   retirement   benefits.   The    Tribunal               considered all the relevant circumstances: the               stability  of the concern, the profits made by               it in the past,  its  future prospects and its               capacity  and came to the conclusion that,  in               the  concern in question,  the  labour  should               be   provided  with  a  gratuity   scheme   in               addition    to  that  of  a   provident   fund               scheme.There  was no justification to  disturb               this conclusion."     In  The Remington Rand of India Ltd. v.  The  Workmen(8) this  Court  declined  to interfere with the  order  of  the Tribunal awarding gratuity related to the consolidated  wage including  dearness  allowance "in view of  the  flourishing nature  of the concern, the enormous profits it was  making, the  reserves  it had built up as also in view of  the  fact that  it was paying gratuity to. executives on the basis  of consolidated wages." In The Delhi Cloth & General Mills Co., Ltd.  v. The Workmen & Ors. (4) this  Court had to  consider whether  gratuity   payable  to  workmen   in   the  textile industry  in  the  Delhi region should be  related  to.  the consolidated wage. After referring to the  decisions   which were  brought  to the notice of the Court, it  was  observed that:      "It  is  not easy to extract any principle  from  these cases:as  precedents they  are conflicting  ....  The (1) (1965) Vol. 10 Factory Law Report, 244. (2) [1967] I L.L.J. 114. (3) [1968] 1 S.C.R.164. (4) [1969] 2 S.C.R. 307. 627               Tribunal  has failed to take into account  the               prevailing pattern in the textile industry all               over  the  country  ....It  is  a  countrywide               industry:  and in   that  industry, except  in               one case to be presently noticed, gratuity has               never   been  granted   on   the   basis    of               consolidated wages."     The  Court  after  referring to the  schemes  framed  in respect of the industries in Bombay and Ahmedabad and  other industries concluded that "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."     There  is  no  clear  evidence on  the  record,  and  no precedents  have  been brought to our notice, to  justify  a departure from the normal rule that the quantum of  gratuity is  related  not to the consolidated wage packet but to  the basic wage. A departure may be made from the normal rule, if there be some strong evidence or precedent in the  industry, or   conduct   of   the  employer   or   other   exceptional circumstances to justify that course. In the absence of such evidence, we are of the view that gratuity should be related to  the basic wage and not to the consolidated wage  packet. In the present case it is found that the financial  position of  the Company is sound but there is no evidence  that  the company  is "making abnormally high profits" ’nor  is  there any  evidence  that  in  its sister  concerns  or  in  other engineering  concerns in the region there is a  practice  of

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awarding gratuity related to consolidated wages. It  was urged on behalf of the company that even though  the workmen  had, in the claim made by them, demanded  a  scheme of . gratuity benefit at the rate of 15 days wages for  each year of service in case of  death or retirement on attaining the   age   of  superannuation or on  becoming  mentally  or physically  unfit  for further service,.  the  Tribunal  had awarded  gratuity at the rate of one month’s wages for  each year  of service subject to a maximum of 15  months’  wages. But the claim was made on the footing that the wages were to include dearness allowance.  When the claim is not accepted, we cannot hold the workmen bound by the multiples.     We  make no modification in clause (1 ) of  the  scheme. We modify the scheme in so far as it relates to the dearness allowance  and  direct  that for the last  sentence  of  the gratuity scheme the following shall be substituted:                  "The word ’wages’ in the scheme shall  mean               basic salary or emoluments excluding  dearness               ’allowance and 628 other  allowances and benefits payable to the workman  which he had last drawn."     Subject to the above modification, the appeal fails  and is  dismissed.  There will be no order as to  costs  in  the appeal. Y.P.                  Scheme modified and appeal dismissed. 629