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PETITIONER: SHRI DIGVIJAY WOOLLEN MILLS LTD. ETC.

       Vs.

RESPONDENT: MAHENDRA PRATAPRAI BUCH ETC.

DATE OF JUDGMENT23/07/1980

BENCH: GUPTA, A.C. BENCH: GUPTA, A.C. UNTWALIA, N.L.

CITATION:  1980 AIR 1944            1981 SCR  (1)  64  1980 SCC  (4) 106  CITATOR INFO :  R          1984 SC1842  (4,5,7,10,12)

ACT:      Payment of  Gratuity Act,  1972-Section 4(2)-Scope  of- Gratuity how calculated.

HEADNOTE:      Section 4(2)  of the  Payment  of  Gratuity  Act,  1972 provides that  for every  completed year  of service or part thereof in  excess of  six months,  the employer  shall  pay gratuity to  an employee at the rate of 15 days’ wages based on the rate of wages last drawn by the employee concerned.      The employers  sought to  pay gratuity  by dividing the workman’s monthly  wages by  30 and  computing the  15 days’ wages on  that basis  but  the  workman  demanded  that  his monthly wages  should be taken as what he got for 26 working days and  not by  taking half  of his wages in a month of 30 days.      The  Controlling   Authority   upheld   the   workman’s contention. In dismissing the employer’s petition under Art. 227 of  the Constitution  the High  Court  observed  that  a worker received  a full  month’s wages  not by  remaining on duty for  all the 30 days within a month but by remaining on work and  doing  duty  for  only  26  days  and,  therefore, gratuity payable to him should be calculated on this basis.      Dismissing the employers’ appeals, ^      HELD: The  view taken by the authorities, and upheld by the High  Court, is  not in any way unreasonable. Although a month  is   understood  to  mean  30  days,  the  manner  of calculating gratuity  payable under the Act to employees who worked for 26 days a month followed by the High Court cannot be called perverse. [67C]      Treating monthly  wages as wages for 26 working days is not new  or unknown.  The expression  "average of  the basic wage" occurring  in an  award has  been interpreted  by this Court to  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 to the workman. [67D & H]      Delhi Cloth  and General  Mills Company Ltd. v. Workmen

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and others etc., [1969]]2 SCR 107, referred to.

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1088 of 1976 and 480 of 1977.      Appeals from  the Judgments  and Orders dated 19-4-1976 and 12-10-1976  of the  Gujarat High  Court  in  S.C.A.  No. 495/76 and S.C.A. No. 1641/76 respectively.      P.R. Mridul,  P.H.  Parekh  and  C.B.  Singh  and  Miss Vineeta Caprihan for the Appellant in CA No. 480/77. 65      Gobind Das,  A.N. Karkhanis  and T.  Sridharan and Mrs. Sunanda Bhandare for the Respondent in CA No. 480/77.      Y.S. Chitale,  P.H. Parekh,  R. Karan  Jawala and  Miss Vineeta Caprihan for the Appellant in CA No. 1088/76.      Y.M. Tarkunde,  K.L.  Hathi  and  P.C.  Kapur  for  the Respondent in CA No. 1088/76.      Shanker  Ghosh,  G.B.  Pai,  and  D.N.  Gupta  for  the Intervener. (Superintendent, Mines and Quarries, Bisra Stone Lime Co. Ltd. & Anr.)      Anil Kumar  Gupta for  the Intervener  (Baba  Jha  Bhai Talekar).      The Judgment of the Court was delivered by      GUPTA, J.  .A common  question arises for consideration in these  two appeals  relating to  the mode  of calculating fifteen days’  wages  of  a  monthly  rated  employee  under section  4(2)   of  the   Payment  of   Gratuity  Act,  1972 (hereinafter referred to as the Act). Section 4(2) provides:           "For every  completed  year  of  service  or  part      thereof in excess of six months, the employer shall pay      gratuity to  an employee  at the  rate of fifteen days’      wages based  on the  rate of  wages last  drawn by  the      employee concerned:           Provided  that   in  the  case  of  a  piece-rated      employee, daily  wages shall be computed on the average      of the  total wages  received by  him for  a period  of      three months  immediately preceding  the termination of      his employment,  and, for  this purpose, the wages paid      for any overtime work shall not be taken into account:           Provided further  that in  the case of an employee      employed in  a  seasonal  establishment,  the  employer      shall pay the gratuity at the rate of seven days’ wages      for each season."      "Wages" has  been defined in section 2(s) of the Act as      follows:           ""wages" means  all emoluments which are earned by      an employee  while on  duty or  on leave  in accordance      with the  terms and  conditions of  his employment  and      which are  paid or  are payable  to  him  in  cash  and      includes dearness  allowance but  does not  include any      bonus, commission, house rent allowance, overtime wages      and any other allowance."      It is  not necessary  to state  the facts  in any great detail. In  both cases  the respondent  was a  monthly-rated employee and  the appellant,  a public  limited company, was his employer.  In  Civil  Appeal  No.  1088  of  1976  (Shri Digvijay Woollen Mills Limited-appellant v. 66 Shri  Mahendra  Prataprai  Buch-respondent)  the  respondent ceased  to   be  an   employee  on   attaining  the  age  of superannuation after  completing 19  years of  service.  The appellant company  calculated the amount of gratuity payable to him on the basis that fifteen days’ wages was half of the

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monthly wages  last drawn by him. The respondent demanded an additional sum  as gratuity  on the  ground that his monthly wages should  be taken  as what  he got for 26 working days, his daily  wages should be ascertained on that basis and his fifteen days’  wages worked  out accordingly,  not  by  just taking half  of his  wages for  a month of 30 days or fixing his daily  wages by  dividing his  monthly wages  by 30. The Controlling   Authority   under   the   Act   accepted   the respondent’s contention and his decision was affirmed by the appellate authority.  A division  bench of the High Court of Gujarat at  Ahmedabad summarily dismissed the petition under Article 227  of  the  Constitution  made  by  the  appellant company challenging  the decision  of the  authorities under the Act.  The learned Judges however gave reasons in support of the order made. The appeal before us is by special leave.      In  Civil  Appeal  480  of  1977  (The  Maharana  Mills Limited-appellant  v.   Shri  Gopal  Das  Ladhabhai  Kakkad- respondent) the  respondent resigned  his job after a little over 22  years of  service. The  appellant company  paid him gratuity calculating his daily wages by dividing his monthly wages by 30 and computing fifteen days’ wages on that basis. Here also  the  respondent  claimed  an  additional  sum  as gratuity and  the basis  of the claim was the same as in the other  appeal.   The  Controlling   Authority  accepted  the respondent’s contention and the appellate authority affirmed his decision  following the  view taken  by the Gujarat High Court in  the other case. In this case also the Gujarat High Court summarily  rejected the petition made by the appellant company challenging  the decision  of the  authorities under the Act.  This appeal  however is  brought on  a certificate granted by the High Court.      In dismissing  the petition  in Digvijay  Woollen Mills case the  division bench  of the Gujarat High Court observed as follows:           "The employee  is to  be paid  gratuity for  every      completed  year  of  service  and  the  only  yardstick      provided is  that the  rate of  wages last  drawn by an      employee concerned  shall be utilised and on that basis      at the  rate of  fifteen days’  wages for  each year of      service, the gratuity would be computed. In any factory      it is well known that an employee never works and could      never be  permitted to  work for all the 30 days of the      month. He  gets 52  Sundays in  a year as paid holidays      and, therefore, the basic wages 67      and dearness  allowance are always fixed by taking into      consideration  this  economic  reality........A  worker      gets full  month’s wages  not by  remaining on duty for      all the 30 days within a month but by remaining on work      and doing  duty for  only  26  days.  The  other  extra      holidays may  make  some  marginal  variation  into  26      working days,  but all  wage  boards  and  wage  fixing      authorities or  Tribunals in  the country  have  always      followed this  pattern of  fixation of  wages  by  this      method of 26 working days."      The view  expressed in the extract quoted above appears to be  legitimate and  reasonable. Ordinarily  of  course  a month is  understood to  mean 30  days, but  the  manner  of calculating gratuity  payable under the Act to the employees who work  for 26  days a  month followed by the Gujarat High Court cannot  be called  perverse. It  is not  necessary  to consider whether  another view  is possible.  The High Court summarily dismissed  the petition  of the  appellant in both the appeals  before  us  and  upheld  the  decision  of  the authorities under  the Act. We are not inclined to interfere

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with the  decision of  the High Court because it seems to us that the  view taken  by the  authorities is  not in any way unreasonable or  perverse. Incidentally,  to  indicate  that treating monthly  wages as  wages for 26 working days is not anything unique  or unknown,  we may refer to a passage from the judgment  of this Court in Delhi Cloth and General Mills Company Ltd.  v. Workmen and other etc.(1) which disposed of several  appeals  arising  out  of  an  award  made  by  the Industrial Tribunal, Delhi. In the award schemes were framed relating to the payment of gratuity. The expression "average of the basic wage" occurring in the schemes was explained by this Court as follows:           "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 68      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."      In the  view we  take we  do not  find it  necessary to consider the  decisions of  some of the High Courts cited at the bar  taking one  view  or  the  other  on  the  question involved in these appeals; also, the decisions based on some provisions of the Minimum Wages Act and other statutes which were relied  on by  either  side  are  in  our  opinion  not relevant on  the question  of computation  of fifteen  days’ wages under section 4(2) of the Payment of Gratuity Act.      The appeals  are dismissed, in civil appeal 480 of 1977 with costs,  in civil  appeal 1088  of 1976 this Court while granting special  leave on  September 22,  1976 had directed the appellant  to pay  the costs  of the appeal in any event accordingly  respondent  Mahendra  Prataprai  Buch  will  be entitled to his costs. P.B.R.                                    Appeals dismissed. 69