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CASE NO.: Appeal (civil)  252 of 2007

PETITIONER: Guru Jambheshwar University through Registrar

RESPONDENT: Dharam Pal

DATE OF JUDGMENT: 17/01/2007

BENCH: G.P. Mathur & Dalveer Bhandari

JUDGMENT: J U D G M E N T (Arising out of Special Leave Petition (Civil) No.15566 of 2005)

G. P. MATHUR, J.

1.      Leave granted.

2.      This appeal, by special leave, has been preferred against the  judgment and order dated 21.3.2005 of a Division Bench of High  Court of Punjab and Haryana, whereby the writ petition filed by the  appellant challenging the award dated 9.11.2004 of the Industrial  Tribunal-cum-Labour Court, Hisar, was summarily dismissed.

3.      The respondent Dharam Pal issued a notice dated 20.1.1998  under Section 2A of the Industrial Disputes Act, 1947 (hereinafter  referred to as ’the Act’) alleging that he was employed as an unskilled  workman by the appellant Guru Jambheshwar University, Hisar, on  2.10.1995, but his services were illegally terminated on 15.1.1998.    As the conciliation proceedings could not fructify, the Government of  Haryana referred the dispute under Section 10(1) of the Act for  adjudication by the Industrial Tribunal-cum-Labour Court, Hisar  (hereinafter referred to as ’the Labour Court") regarding the validity  of the termination of services of the respondent Dharam Pal and the  relief which he was entitled to get in case the termination order was  found to be illegal.   

4.      The respondent in his claim statement pleaded, inter alia, that  he was appointed as unskilled workman on the post of Mali (gardener)  in the University by a verbal order dated 2.10.1995; that he was  removed from service on 2.7.1997 but subsequently he was taken  back on duty on 15.10.1997; that he was illegally removed from the  service of the University on 15.1.1998; that the University was paying  wages of Rs.1638/- per month before his removal from service; that  the University had regular work and persons junior to him had been  retained in service and had been regularized; that the University was  forcing the workman to work on contract basis despite the fact that  there is work of regular nature; that the University was adopting  unfair labour practice and that his retrenchment was illegal as neither  any notice was given nor any compensation was paid to him at the  time of his retrenchment.  

5.      The Registrar of the University filed a reply on the grounds,  inter alia, that the respondent was engaged as Mali on daily wages on  2.12.1995 and not on 2.10.1995, as claimed by him; that he was  appointed for doing specific job of Mali in the Farming/Horticulture  Wing of the University; that the Government of Haryana on the basis  of the orders passed in CWP No.4522 of 1994 (Kulbhushan v. State of

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Haryana) by the High Court had issued instructions to the University  vide letter No.12/5-96/Ad.I(5) dated 17.1.1996 that no appointment on  daily wage basis should be made and all appointments should be made  on contract basis; that in accordance with the instructions all existing  employees in the University who were working on daily wage basis  were put on contract basis; that the respondent and some other  employees engaged on contract basis had been appointed without  following any procedure; that meanwhile the University advertised the  post of Mali for making regular appointments in order to comply with  the requirements of Articles 14 and 16 of the Constitution; that the  respondent also applied for the said post of Mali and appeared in  interview but he was not selected yet he was allowed to continue; that  consequent upon the closure of the farming operations in the  University and cessation of other seasonal work, the respondent was  given one month’s notice vide University letter no.485-500 dated  15.12.1997; that on completion of one month,  the services of the  respondent were retrenched vide order dated 15.1.1998; that a cheque  bearing no.416869 dated 15.1.1998 was also given to the respondent  in compliance of Section 25F(b) of the Act as retrenchment  compensation; that as there was some work in the University all the  employees who were retrenched earlier were called but the respondent  did not turn up for duty though 14 other employees reported for duty  and were engaged and a letter in this regard was sent to the Labour  and Conciliation Officer, Hisar on 21.5.1998. It was specifically  pleaded that the services of the respondent were retrenched after duly  complying with the provisions of Section 25F of the Act and that in  the regular selection held for the post of Mali the respondent was not  selected by the selection committee.   

6.      The parties adduced oral and documentary evidence in support  of their case before the Labour Court.   The Labour Court held that the  instructions issued by the Government showed that the monthly wages  of unskilled Mali were Rs.1642/-.  The respondent had been appointed  on 2.12.1995 and his services were terminated on 15.1.1998 and thus  he had completed two years and one month of service on the date  when he was retrenched from service.  He was thus required to be  paid 15 days’ average pay for completion of the first year of service  and 15 days’ average pay for completion of second year of service as  retrenchment compensation. It was further held that in order to  calculate the retrenchment compensation, the legal requirement was to  divide average monthly wage by 26 and not by 30, as a worker  ordinarily gets four weekly holidays and has to work only on 26 days  in a month.   For holding so, the Labour Court relied upon some  decisions of the High Courts and also a decision of this Court in  Jeevanlal (1929) Ltd. V. Appellate Authority under the Payment of  Gratuity Act and Ors. (1984) Lab IC 1458.   After holding so, it was  held that one day’s average pay of the respondent would be Rs.63.15  (Rs.1642/26) and thus the compliance of Section 25F(b) required  payment of Rs.63.15x15x 2 = Rs.1,894.50.  It was accordingly held  that the retrenchment compensation of Rs.1642/- paid by the  University to the respondent fell short of the amount which was  required to be paid under law and, therefore, there was non- compliance of Section 25F(b) of the Act which rendered the  retrenchment of the respondent as illegal.   It was further held that the  University had not produced any evidence to show that the respondent  had been gainfully employed after termination of his service, but  looking to the fact that he was engaged in a job which did not require  any qualification, it could not be held that he remained totally out of  job during the intervening period and, therefore, he was entitled to  50% back wages.  The Labour Court, accordingly, gave an Award  directing that the respondent be reinstated with continuity in service  and all other consequent service benefits along with 50% back wages  from the date of issuance of demand notice dated 21.1.1998 till  publication of the Award and full wages thereafter till his  reinstatement.  

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7.      The question which requires consideration is whether the  Labour Court was correct in holding that one day’s average pay of the  respondent should be calculated by dividing his monthly salary of  Rs.1642/- by 26 and the quotient so arrived at should be multiplied by  30 (15 x 2) as he had worked for two years and one month.  

8.      Sections 2(aaa) and 25F of the Industrial Disputes Act, 1947  read as under :- 2(aaa) "average pay" means the average of the wages payable                         to a workman--                   (i) in  the case  of monthly paid workman, in the three                      complete calendar months,

               (ii) in  the case  of weekly  paid workman, in the four                 complete weeks,                   (iii) in  the case of daily paid workman, in the twelve                        full working days,        preceding the  date on which the average  pay  becomes       payable if the  workman had  worked for three complete      calendar months or  four complete  weeks or twelve full      working  days,  as  the  case  may  be,  and  where  such       calculation  cannot  be  made,  the  average pay shall be      calculated  as  the average  of  the  wages  payable  to a      workman during the period he actually worked.   25F. Conditions precedent to retrenchment of  workmen.- No workman employed in  any industry  who  has  been in continuous service for not less than  one year   under an  employer shall  be retrenched  by  that  employer until--   (a) the workman has been given one month’s notice in  writing indicating the  reasons for retrenchment and the  period of notice  has expired, or the workman has been  paid in lieu of  such notice,  wages  for  the  period  of   the notice:   (b) the  workman has been paid, at the time of  retrenchment, compensation which shall be equivalent to  fifteen days’ average pay  for every  completed year of  continuous service or  any part  thereof in excess of six  months; and   (c) notice  in  the  prescribed  manner  is  served  on  the  appropriate Government  or such  authority as may be  specified by the appropriate Government by notification                 in the Official Gazette.

       Sub-section (b) of Section 25F requires payment of  retrenchment compensation to a workman which shall be equivalent  to 15 days’ average pay for every completed year of continuous  service or any part thereof in excess of six months.   Average pay has  been defined in Section 2(aaa) of the Act and, therefore, average pay  has to be determined strictly in accordance with the aforesaid  provision and not on the basis of some hypothetical calculation.   Section 2(aaa) contemplates four different kinds of wage period for  payment of wages.  Clause (i) speaks of monthly paid workman and  here the average wage has to be calculated by arriving at the average  or mean of three complete calendar months.  Clause (ii) refers to  weekly paid workman where the average pay would be the average or  mean of four complete weeks. Clause (iii) deals with daily wage

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workman and in this case the average pay would be the average or  mean of wages in twelve full working days.  The fourth category  would be a case where it is not covered by any of the sub-clauses (i),  (ii) or (iii) and in this case the average pay shall be calculated as the  average of the wages payable to a workman during the period he had  actually worked.    

9.      The language used in Section 2(aaa) is absolutely plain and  clear and there is not the slightest ambiguity in the same. It is well  settled principle that the words of a Statute are first understood in their  natural, ordinary or popular sense and phrases and sentences are  construed according to their grammatical meaning, unless that leads to  some absurdity or there is something in the context or in the object of  the statute to suggest to the contrary. The true way is to take the words  as the legislature have given them, and to take the meaning which the  words given naturally imply, unless where the construction of those  words is, either by the preamble or by the context of the words in  question, controlled or altered.   As is often said the golden rule is that  the words of a statute must prima facie be given their ordinary  meaning and natural and ordinary meaning of the words should not be  departed from unless it can be shown that the legal context in which  the words are used requires a different meaning. (See Principles of  Statutory Interpretation by Justice G.P. Singh Ninth Edition2004   pg.78-79).

10.     In the demand notice served by the respondent upon the  University under Section 2-A of the Act on 20.1.1998, it was stated  "that the University was paying him Rs.1638/- per month before  removal."   Again in para 2 of the claim statement which was filed by  the respondent before the Labour Court, wherein he described himself  as petitioner, it was stated "that the University was paying the  petitioner Rs.1.638/- per month before the removal."    In the reply, it  is also the specific case of the University that the respondent was  being paid on monthly basis at the rate of Rs.1642/- per month.   Therefore, there is no dispute that the respondent was being paid  wages on monthly basis though there is slight difference in the actual  amount which was being paid to him.  The Labour Court has recorded  a finding that a cheque for Rs.1642/- was given by the University to  the respondent as retrenchment compensation.  Since the respondent  was being paid wages on monthly basis, his average pay has to be  calculated in accordance with the formula given in clause (i) of  Section 2(aaa) of the Act which would mean the sum total of wages  paid to him in three complete calendar months immediately preceding  his retrenchment and dividing the said amount by three. The  respondent was being paid wages amounting to Rs.1642/- per month  in immediately three preceding months before his retrenchment.  Therefore, the "average pay" in accordance with Section 2(aaa)(i)  would come to Rs.1642/-. The respondent had worked for two years  and one month and, therefore, he was entitled to thirty (15 x 2) days of  average pay by way of retrenchment compensation in order to comply  with requirement of Section 25F(b) of the Act.  The "average pay" of  the respondent being Rs.1642/- per month and he being entitled to 30  days’ average pay by way of retrenchment compensation, he was  required to be paid Rs.1642/- as retrenchment compensation.  The  University gave him a cheque for Rs.1642/- at the time of his  retrenchment and, therefore, there was full compliance of Section  25F(b) of the Act.    

11.     The Labour Court has basically relied upon a decision of this  Court rendered in Jeevanlal (1929) Ltd. V. Appellate Authority under  the Payment of Gratuity Act and Ors. (1984) Lab IC 1458 for coming  to the conclusion that the respondent’s average pay has to be  calculated on per day basis by dividing the monthly salary drawn by  him by 26 and the quotient so arrived at should be multiplied by 30 in  order to determine the retrenchment compensation under Section

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25F(b) of the Act.  It, therefore, becomes necessary to consider the  aforesaid decision in detail. The issue involved in the said case   related to payment of gratuity.  Section 2(s) and sub-sections (1), (2)  and (3) of Section 4 of Payment of Gratuity Act at the relevant time  read as under :- "2(s)    "wages" means all emoluments which are earned  by an employee while on duty or on leave in accordance  with the terms and conditions of his employment and  which are paid or are payable to him in cash and includes  dearness allowance but does not include any bonus,  commission, house rent allowance, overtime wages and  any other allowances."

"4(1) : Gratuity shall be payable to an employee on the  termination of his employment after he has rendered  continuous service for not less than five years :

(a)     on his superannuation; or (b)     on his retirement or resignation; or (c)     on his death or disablement due to accident of  disease.

Provided that the completion of five years shall not  be necessary where the termination of the employment of  any employee is due to death or disablement :

Provided further that in the case of death of the  employee, gratuity payable to him shall be paid to his  nominee or, if no nomination has been made, to his heirs.

Explanation - For the purpose of this section, disablement  means such disablement as incapacitates an employee for  the work which he was capable of performing before the  accident or disease resulting in such disablement.

(2)   For every completed year of service or part thereof  in excess of six months, the employer shall pay gratuity  to an employee at the rate of fifteen days’ wages based  on the rate of wages last drawn by the employee  concerned :

         Provided that in the case of a piece rated employee,  daily wages shall be computed on the average of the total  wages received by him for a period of three months  immediately 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.    

(3)  The amount of gratuity payable to an employee shall  not exceed twenty months’ wages."

       While interpreting the aforesaid provisions, the Court held as  under in para 10 of the reports : 10.     In dealing with interpretation of sub-sections (2) and (3)  of Section 4 of the Act, we must keep in view the scheme of the  Act.  Sub-section (1) of Section 4 of the Act incorporates the  concept of gratuity being a reward for long, continuous and  meritorious service.  Sub-section (2) of Section 4 of the Act  provides for payment of gratuity at the rate of "fifteen days’  wages" based on the rate of wages last drawn by the employee

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concerned for every completed year of service.  The legislative  intent is obvious.   Had the legislature stopped with the words  "fifteen days’ wages", occurring in sub-section (2) of  Section 4  of the Act, there was something to be said for the submission  advanced by the learned counsel for the appellants based upon  the decision of the learned single Judge of the Andhra Pradesh  High Court in Associated Cement’s case (1976) Lab IC 926)  which was later approved by a Division Bench of the Court in  Swamy’s case (1978 Lab IC 1285).   But the legislature did not  stop with the words "fifteen days’ wages" in sub-section (2) of  Section 4 of this Act.  The words "fifteen days’ wages" are  preceded by the words "at the rate of" and qualified by the  words "based on the rate of wages last drawn" by the employee  concerned.   The emphasis is not on what an employee would  have earned in the course of fifteen days during the month  when his employment was last terminated, but on the rate of  fifteen days’ wages for every completed year of service based  on the rate of wages last drawn by the employee concerned.   The word ’rate’ appears twice in sub-section (2) of Section 4  and it necessarily involves the concept of actual working days.   In Digvijay Woollen Mills’ case  (AIR 1980 SC 1944) the  Court rightly observed that although a month is understood to  consist of 30 days, gratuity payable under the Act treating the  monthly wages as wages for 26 working days is not new or  unknown." (emphasis supplied)         Paragraph 12 of the reports is also relevant and the same is  being reproduced below : 12.   It is not correct to say that the decision in Shri Digvijay  Woollen Mills’ case (AIR 1980 SC 1944) does not lay down  any principle. Gupta, J. speaking for the Court set out the  following passage from the judgment of the Gujarat High Court  in Shri Digvijay Woollen Mills’ case (para 4) :

"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 utilized and on that basis at the rate of fifteen days’  wages for each year of service, the gratuity would be  computed.   In any factory it is well known that an  employee never works and could never be permitted to  work for all the 30 days of the month. He gets 52  Sundays in a year as paid holidays and, therefore, the  basic wages and dearness allowance are always fixed by  taking into consideration this economic reality\005\005.. A  worker gets full month’s wages not by remaining on duty  for all the 30 days within a month but remaining on work  and doing duty for only 26 days.   The other extra  holidays may make some marginal variation into 26  working days, but all wage boards and wage fixing  authorities or Tribunals in the country have always  followed this pattern of fixation of wages by this method  of 26 working days."

And then observed : "The view expressed in the extract quoted above appears  to be legitimate and reasonable."

The learned Judge then went on to say : "Ordinarily of course a month is understood to mean 30  days, but the manner of calculating gratuity payable  under the Act to the employees who work for 26 days a  month followed by Gujarat High Court cannot be called  perverse."

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He further observed that it was not necessary to consider  whether another view was possible and declined to interfere  under Article 136 in a matter where the High Court had taken a  view favourable to the employees and the view taken could not  be said to be in any way unreasonable and perverse, and then  added :

"Incidentally, to indicate that treating monthly wages as  wages for 26 working days is not anything unique or  unknown."         \005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005

12.     It may be noted that Section 4(2) of the Payment of Gratuity  Act uses the expression "the employer shall pay gratuity to an  employee at the rate of fifteen days’ wages based on the rates of  wages last drawn by the employee."   On account of the language used  in Section 4(2) it becomes necessary to find out the rate of wages  which necessarily involves the concept of actual working days.  It was  on the basis of the aforesaid language of the provisions under the  Payment of Gratuity Act that this Court in the case of Jeevanlal  (supra) observed that "although a month is understood to consist of 30  days, gratuity payable under the Payment of Gratuity Act treating the  monthly wages as wages for 26 days is not new or unknown."

13.     The principle laid down in the case of Jeevanlal (supra) and  Shri Digvijay Woollen Mills Ltd. v. M.P. Butch AIR 1980 SC 1944  can have no application for determining the retrenchment  compensation under Section 25F(b) of the Act as the word "average  pay" occurring herein has been defined in Section 2(aaa) of the Act.    The concept of 26 working days was evolved having regard to the  definition of the word "wages" as given in Section 2(s) of Payment of  Gratuity Act, which uses the expression "all emoluments which are  earned by an employee while on duty or on leave."  Therefore, there is  no warrant or justification for importing the principle of 26 working  days for determining the compensation which is payable in terms of  Section 25F(b) of the Act.    

14.     There is another important feature which deserves notice.   Subsequent to the decision of this Court in Jeevanlal (supra) an  explanation has been added after second proviso to Section 4(2) of the  Payment of Gratuity Act, by Act No.22 of 1987, which reads as  under:- "Explanation :- In the case of a monthly rated employee, the  fifteen days’ wages shall be calculated by dividing the monthly  rate of wages last drawn by him by twenty-six and multiplying  the quotient by fifteen."

       By adding the explanation, the legislature has brought the  statute in line with the principle laid down in the case of Jeevanlal  (supra) and has given statutory recognition to the principle evolved,  viz. that in case of monthly rated employee the fifteen days’ wages  shall be calculated by dividing the monthly rate of wages by twenty  six and multiplying the quotient by fifteen.  But, no such amendment  has been made in the Industrial Disputes Act.   If the legislature  wanted that for the purposes of Section 25F(b) also the average pay  had to be determined by dividing the monthly wages by twenty-six, a  similar amendment could have been made.   But the legislature has  chosen not to do so.   This is an additional reason for holding that the  principle of "twenty-six working days" is not to be applied for  determining the retrenchment compensation under Section 25F(b) of  the Act.

15.     We are, therefore, of the opinion that the view taken by the  Labour Court is clearly erroneous in law and has to be set aside.   The  High Court did not go into the question at all and summarily

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dismissed the writ petition by a one line order observing that the  compensation offered to the workman was short of the amount  actually due.   

16.     For the reasons discussed above, the appeal is allowed.   The  order dated 21.3.2005 passed by the High Court and the award of the  Labour Court dated 9.11.2004 are set aside.   It is held that the  University had paid the retrenchment compensation to the respondent  Dharam Pal in accordance with law and there is no infirmity in the  order passed whereby his services were terminated.  No costs.