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PETITIONER: REMINGTON RAND OF INDIA LTD.

       Vs.

RESPONDENT: THE WORKMEN

DATE OF JUDGMENT: 17/10/1969

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. SHELAT, J.M. RAMASWAMY, K. DUA, I.D.

CITATION:  1970 AIR 1421            1970 SCR  (2) 935  1969 SCC  (3) 913  CITATOR INFO :  RF         1973 SC2344  (3)

ACT: Industrial  Dispute-Medical,  benefit-Company’s  Scheme  for Calcutta  employees  whether applicable  to  Madras  region- Gratuity-Qualifying period for workmen guilty of misconduct- Whether  gratuity  should be payable to  workmen  guilty  of violence, riotous behaviour etc.

HEADNOTE: An industrial dispute between the appellant company and  its workmen  relating,. inter alia, to bonus,  medical  benefits anti  gratuity  was, referred by the  State  Government  of. Madras  on  April  6, 1965 to the  Industrial  Tribunal  for adjudication.   The.  Tribunal awarded bonus at 2O,% of  the consolidated wages as provided in the Payment of Bonus  Act, 1965.  As to medical benefit& the Tribunal diverted that the company should pay the- cost of medicines prescribed by  the company’s  doctor and the full cost of hospitalisation  when it  was. recomanded by the company’s doctor.   The  Tribunal modified,  the company’& gratuity scheme in accordance  with the workmen’s demands.  The company appealed to, this  Court against   the  award  The  question  of  bonus  had  to   be considered,  in, the light of this Courts decision in  Japan Trading,  Company’s  law.   On  the  question.  of   medical benefits  the  Court had to consider whether  the  company’s scheme  for  its  Calcutta employees could  be  extended  to Madras Region.  In regard to gratuity the main questions for consideration  were  as,  to, the  qualifying,  period  for- payment   of  gratuity  to  workmen  who  were   guilty   of misconduct,  and  whether  gratuity should  be  payable  for workmen whose misconduct     consisted of violence, riotous behaviour etc. HELD:     (i)  In  View of this Court’s decision  in  Jalian Trading Company’s case   the.Payment of Bonus Act, 1965  was not  applicable in respect of the year in question, and  the bonus  payable had to be calculated in accordance with,  the Full Bench, Formula.  The award to that extent therefore had to   be  set  aside  and  remanded,  to  the  Tribunal   for

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determining  the bonus in accordance with the  said  Formula [937 E] Jalam Trading Co. v. Mill Mazdoor Union, [1967] 1 SC.R.  15, referred to. (ii)  In the appellant company’s earlier cases  relating  to its Bangalore, Hyderabad and Kerala Branched this Court  had held that the Company’s Calcutta scheme relating to  medical benefit for its workmen was fair and reasonable and had made the   said  scheme  applicable  to  these  areas  also.   No substantial  difference had been shown between  these  areas and  the  Madras region affecting the  question  of  medical benefit.  These areas and the no legitimate reason  why  the Calcutta scheme should not be applied to the workmen in  the present  case. [The Court framed an eight point  scheme  for medical benefit based on the Calcutta scheme] [939 A-940 C] Remington  Rand  of India v. The Workmen, C.A.  Nos.  856/68 etc. dt. 10-12-1968, applied. (iii.)    Once  the  principal,  that gratuity  is  paid  to ensure  good conduct throughout the period that the  workman serves his employer as laid drown 936 in Calcutta Insurance Co. some distinction in the matter  of the  qualifying  period  between cases  of  resignation  and retirement  on the one hand and dismissal for misconduct  on the  other becomes logically necessary.  Such a  distinction cannot legitimately be assailed as unreasonable.   Similarly if the object underlying the scheme of gratuity is to secure industrial  harmony  and satisfaction among  workmen  it  is impossible  to equate cases of death,  physical  incapacity, retirement  and  resignation with cases  of  termination  of service  incurred  on  account of  misconduct.   Besides,  a longer  qualifying period in the latter cases  would  ensure restraint against wailful use of violence and force, neglect etc. [948 E] As  laid down in Delhi Cloth & General Mills case that  acts amounting  to misconduct as defined in the standing  orders, when they are made, or the model standing orders, where they are applicable differ in degree of gravity, nature and their impact on the discipline and the working of the concern, and that though grave in their nature all of them may not result in  loss  capable  of being calculated in  terms  of  money. Amongst,  them  there would be some  which  would  forthwith disentitle  the workman from retaining his  employment  and justifying his dismissal. For  the  reasons given in the Delhi Cloth &  General  Mills case  it was necessary to modify the scheme of gratuity  and to add in cl. 5 thereof a proviso that in cases where  there has  been termination of service on account of  an  employee found  guilty of act or acts involving violence against  the management  or other employees or riotous or disorderly  be- haviour in or near the company’s premises, the company would be entitled to forfeit the gratuity which would otherwise be payable  to the concerned workmen.  Clause 5 should also  be modified  so  as to introduce therein  15  years  continuous service  as the qualifying period for earning  gratuity  in cases when the service of an employee has been terminated on account  of  misconduct  and that such  gratuity  should  be payable  at the rate prescribed in cl. 3(d) of  the  scheme. [948 G-949 D] Calcutta  Insurance  Co.  Ltd. v. Their  Workmen,  [1967]  2 S.C.R. 596. and Delhi Cloth & General Mills Co. Ltd. v.  The Workmen, [1969] 2 S.C.R. 307, applied. Garment Cleaning Works v. Its Workmen, [1962] 2 S.C.R.  711, Motipur Zamindari (P) Ltd. v. Workmen, [1965] 2 L.L.J.  139, Employees v. Reserve Bank of India, [1966] 1 S.C.R. 25,  58,

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Remington  Rand  of India Ltd. v.’ Their Workmen,  [1968]  1 L.L.J. 542, Remington Rand of India v. The Workmen, [1968] 1 S.C.R.  164, 168 and Indian Oxygen & Acetylene Co Ltd.  case [1956] 1 L.L.J. 435, considered.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1551 of 1966. Appeal  by special leave from the Award dated  February  28, 1966  of the Industrial Tribunal, Madras’in I. D. No. 21  of 1965. H.   R. Gokhale and D. N. Gupta, for the appellant. M.   K. Ramamurthi, Shyamala Pappu and vineet Kumar, for the respondents. The Judgment of the Court was delivered by Shelat, J. On demands for revision of wage-scales,  dearness allowance,  medical  benefit, bonus for  the  year  1963-64, gratuity                             937 etc.  having  been  made by the workmen  of  the  appellant- company in its Madras and the other branches in that  region and  disputes thereabout having arisen between  the  company and its said workmen, the Government of Madras referred them by its notification dated April 6, 1965 for adjudication  to the Industrial Tribunal, Madras.  The Tribunal granted  some and  rejected  the rest of the demands.   Aggrieved  by  the award  the  company filed this appeal  under  special  leave granted by this Court. Though the award dealt with a number of demands counsel  for the  appellant-company restricted its challenge against  the award  on  three  subjects  only.   Consequently,  we   are, concerned  in  this appeal with those three  subjects  only, namely,  bonus  for the year 1963-64, medical  benefits  and revision by the Tribunal of the company’s existing  gratuity scheme. As  regards the bonus, the company had already paid  to  the workmen bonus at the rate of 4 months’ basic pay as  against the  demand for the maximum bonus calculated  in  accordance with the Payment of Bonus Act, 1965, and on consolidated  as against the basic wages.  The Tribunal conceded that  demand and  granted  bonus at 209% of the consolidated  wages.   In view, however, of this Court’s decision in Jalan Trading Co. v.  Mill  Mazdoor Union,(1) Mr. Ramamurthi for  the  workman conceded.  that the Act cannot apply in respect of the  year in  question and that the bonus payable for that  year  will have to be calculated on the basis of the Full Bench Formula as  approved  by  this Court.  The  award  to  that  extent, therefore, has to be set aside and remanded to the  Tribunal for  determining  the  bonus in  accordance  with  the  said Formula. On the question of medical facilities, the workmen’s  demand is  contained in paras 27 to 31 of their statement of  claim filed  before  the Tribunal according to which  the  workmen wanted  the  company  to  reimburse  all  medical   expenses incurred by them on production of bills therefore.  In paras 27  and 28 of the statement, it was stated that the  company had a scheme for medical benefit for its workmen at Calcutta made  under the consent award of 1962 and that there was  no reason "why this amenity should be refused to the workmen in this  region".  Para 30 of the statement stated  that  there was  a discussion between the parties regarding this  demand when  the  company agreed to appoint a medical  officer  for consultation  by  the workmen and also to meet the  cost  of medicines upto Rs. 100 for a workman per year.  This  offer,

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however,  was  rejected  on  three  grounds:  (1)  that  the condition as to the ceiling was discriminatory, (2) that the ceiling  was too low and (3) that there was no  warrant  for not  extending the benefit to workmen of the branch  offices outside Madras. (1)  [1967] 1 S.C.R. 15. 938 This demand is dealt with by the Tribunal in para 14 of  the award.   It is clear therefrom that the  union’s  contention before  the Tribunal was that there was no reason why  "this amenity of medical facility which the company has granted to its Calcutta workmen should be refused to the workmen of the Madras  region".  The contention thus clearly was  that  the company having made a scheme for its Calcutta employees,  it was discriminatory to refuse such a scheme to its workmen in Madras  region.  It is equally clear that the offer made  by the company and referred to in the statement of claim by the workmen was rejected as it contained a ceiling which was not in  its  Calcutta scheme, and it was,  therefore,  that  its offer  was  considered  discriminatory.  In  view  of  these contentions  the Tribunal agreed that a scheme  for  medical benefit for this region was called for.  The Calcutta scheme was  not  produced  before the Tribunal  and  therefore  the Tribunal  proceeded to frame its own scheme.   The  Tribunal rejected  the  demand  for  reimbursement  of  all   medical expenses  in respect of which bills would be produced as  it felt  that such a provision would lead to  abuses  including the  obtaining  of  false  bills.   Instead,  the   Tribunal directed  that  the  company should pay  the  cost  of  such medicines  as  are prescribed by the  company’s  doctor,  if supported by genuine bills, and should also pay all cost  of hospitalisation  if  and  when it  was  recommended  by  the company’s doctor. Counsel  for the company objected to this part of the  award on  the grounds (1) that the Tribunal was not  justified  in throwing  on  the  company  the  entire  burden  of  medical expenses including the cost of hospitalisation even in cases of major diseases which workmen might suffer or contact, (2) that it was no part of the employer’s obligation to  provide for  such expenses and that too to an unlimited degree,  and (3)  that the award should have provided a ceiling  both  in respect  of  the cost of medicines and  of  hospitalisation. The argument was that the grievance of the workmen was  that denial  of the medical amenity to them as the one  given  to its  Calcutta workmen was discriminatory, and therefore,  if the  Tribunal decided to concede the demand, it should  have been  on the same lines as the Calcutta scheme.   Mr.  Rama- murthi,  on  the other hand, contended that (a)  it  was  an accepted  principle  that though a company may have  an  all India organisation, it was not necessary that if should have uniform  conditions of service in all the regions and  that, therefore,  merely because the company has a medical  scheme for  its Calcutta office it did not follow that scheme  must also  be  applied to its workmen in Madras region,  and  (b) that  the scheme framed by the Tribunal was fair and  should not  be  interfered with in order only to bring it  in  line with that of Calcutta.                             939 In  a recent decision concerning this very company and  its, workmen   in  Bangalore,  Hyderabad  and   Kerala   branches (Remington Rand of India v. The Workmen)(1), this Court  had to  consider  this very question.  The  Tribunals  in  those cases. had, as in this case, made schemes which imposed  the burden  of  medical facilities on the  company  without  any ceiling  and  extended therein such benefit  to  the  family

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members of the workmen also.  In those cases, on our finding the company’s Calcutta scheme to be fair and reasonable,  we substituted  it  for the schemes framed by  the,  respective Tribunals.   The  Calcutta scheme is thus  in  operation  in those areas also.  Counsel for the workmen has not shown  to us  any substantial difference between those areas  and  the Madras  region affecting, the question of  medical  benefit. We,,  therefore, find no legitimate reason why the  Calcutta scheme  should not be applied to these workmen.  It is  true that medical benefit is excepted in that scheme for  certain diseases   of  a  contagious  and  epidemic  nature.    That presumably was done on the ground that for such diseases the primary  duty to give relief is of the State and not of  the employer.   For the reasons given in that decision,  we  set aside  the directions given by the Tribunal in this.  behalf and substitute them by the following scheme :               1.    When a workman during the course of  his               duty  requires  medical attention,  and  where               such  attention  is  given  by  the  company’s               doctor (i.e. a doctor or doctors nominated  by               the company including a doctor nominated as  a               part-time doctor) and medicines are prescribed               by  him, the cost of such prescription  should               be borne by the company;               2.    In  the event of a workman falling  sick               at his residence and the illness is other than               a venereal disease, leprosy, smallpox, typhoid               or cholera, he should be paid the cost of  the               medicines prescribed;               3.    Bills  or  cash vouchers  pertaining  to               such  prescription  should  be  produced   for               counter  signature  of  the  company’s  doctor               before payment is authorised;               4.    Disease  of a serious  nature  requiring               hospitalisation    will    be    subject    to               consideration by the company;               5.    At  the time of employment  the  company               will  be  entitled  to  get  the   prospective               employees examined by the company’s doctor and               their  employment  will be  subject  to  being               found medically fit;               6.    All company employees who are  presently               employed  or those employed in future will  be               medically               (1)  C.A.  Nos. 856. 1475 and  2119  of  1968,               decided on December 10, 1968.                940               examined  by the company’s doctor once a  year               or   at   such  other   periodical   intervals               determined  by the company but the results  of               such   medical   examinations  will   not   be               prejudicial to the workmen’s employment;               7.    In  case  a workman is  found  medically               unfit to continue in service, the company will               decide  his  case  in  consultation  with  the               union’s secretary; and               8.    This  scheme will come to an end as  and               when the Employees’ State Insurance Scheme  is               extended to the employees concerned. The  question  of laying down any ceiling need not  be  con- sidered as the company, we are told, is agreeable to  extend this scheme in this region. The  third item in respect of which the  company  challenges the  award  is  the revision made by  the  Tribunal  of  the existing  gratuity  scheme.  The workmen’s  demand  in  this

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respect  was  :  (1) that the maximum limit  of  15  months’ salary should be enhanced to 20 months’ salary, and (2) that the provision in the existing scheme that no gratuity  would be  payable  to  a  workman  dismissed  on  the  ground   of misconduct should be substituted by a provision that even in such cases gratuity should be payable but the company  would be  entitled to deduct from such gratuity amount the  amount of financial loss, if any, resulting from such misconduct. The  Tribunal’s view was that these demands were  reasonable and  accordingly made modifications in the existing  scheme. At  first, Mr. Gokhale objected to this part of  the  award. first ly  on the ground that the Tribunal ought not to  have allowed gratuity even in cases of dismissal for  misconduct, and  secondly, that the qualifying period in the  case  of termination  of  service by the company otherwise  than  for misconduct  should  be 10 years and not the  graded  periods from  5  to 15 years as provided in the  award.   On  second thoughts  he  did  not  press  the  second  objection.   and therefore,  nothing  need be said about  it.   He,  however, contended  that if gratuity even in cases of  dismissal  for misconduct is to be made payable, a provision should be made that it would be forfeited if the misconduct is a gross  one involving violence, riotous behaviour etc. and for the  rest of  the cases, the qualifying period should be 15  years  of continuous service. These  objections involve a principle, and  therefore,  need serious consideration.  The principle invoked by Mr. Gokhale is,  firstly,  that since gratuity is paid as a  reward  for long  and meritorious service it would be inconsistent  with that  principle to award gratuity in cases of dismissal  for misconduct,  for. such cases cannot be treated as  cases  of meritorious service, and                             941 secondly, the provision in such cases for deduction only  of financial  loss resulting from misconduct committed  by  the workman is neither proper nor consistent with the  principle on which gratuity is made payable by an employer.  A workman may be guilty of gross misconduct, such as riotous behaviour or  assault on a member of the staff.  Such  misconduct  may not  result  in  any  financial loss  to  the  company,  and therefore,  the workman would be paid full gratuity  amount. The  contention was that it would be a serious anomaly  that while a workman, who has caused some damage to the company’s property  and is dismissed on the ground that he was  guilty of misconduct would have the gratuity amount payable to  him reduced to the extent of that damage, another workman,  who, for  instance,  assaults and causes injury, even  a  serious injury,  to  another  employee would, though  liable  to  be dismissed,  be entitled to the full gratuity merely  because the  misconduct  of  which he is guilty,  though  graver  in nature, does not result in pecuniary loss to the company. In support of his contention, Mr. Gokhale leaned heavily  on two  recent  decisions of this Court in  Calcutta  Insurance Co. Ltd. v.    Their  Workmen(1)  and  The  Delhi  Cloth   & General  Mills Company Ltd. v. The Workmen(2).   Relying  on these  decisions, he urged, that in cases of  dismissal  for misconduct,   the  qualifying  period  should  not   be   as prescribed  by  the  Tribunal  but  must  be  15  years   of continuous  service.   Mr. Ramamurthi, on  the  other  hand, contended that the principle that gratuity is a reward  for long   and  meritorious  service  and  that  for  a   single misconduct  after such service, such misconduct  should  not result  in deprivation of gratuity except to the  extent  of the  actual  monetary loss caused to the employer  has  been long  accepted in industrial adjudication and should not  be

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abandoned,  and  that  the two decisions relied  on  by  Mr. Gokhale  should  not be construed as having  the  cumulative result of enhancing the qualifying period and also depriving gratuity  in cases of dismissal for misconduct.   The  first decision,  according  to him, lays down an increase  in  the qualifying period from 10 years, which generally used to  be the period for earning gratuity, to 15 years, and the second lays  down  Certain  exceptions to the  accepted  rule  that deduction  of  monetary loss resulting from  misconduct  was sufficient.   He  argued that neither of the  two  decisions lays  down  that both the consequences must follow  where  a workman is dismissed for misconduct, even if such misconduct has not resulted in any monetary loss to the employer. In view of these contentions it becomes necessary for us  to examine the earlier decisions cited before us before we come to (1) [1967] 2 S.C.R. 596. (2) [1969] 2 S.C.R. 307. 942 the  cases of Calcutta Insurance Co. Ltd.(1) and  the  Delhi Cloth & General Mills Co. Ltd.(2). The question as, to whether gratuity should be, payable even though  the  concerned workman is dismissed  for  misconduct appears  to  have  been raised for the  first  time  is  The Garment  Cleaning  Works v. Its Workmen(3).   The  objection there raised related to cl. 4 of the gratuity scheme: framed by  the  Tribuml which provided that even if a  workman  was dismissed or discharged for misconduct, gratuity would still be  payable  except that if such a  misconduct  resulted  in financial  loss,  to-  the works, gratuity  should  be  paid after,  deducting  such  loss.   The  contention  urged   by counsel,  but  which failed,, was that such  a  clause  was, inconsistent  with the principle on, which  gratuity  claims were based, namely, that they were in the nature of  retiral benefit   based’   on.  long   and   meritorious,   service. Therefore,  if  a workman was guilty of misconduct  and  was dismissed or discharged, it would be a blot on his long  and meritorious service and in such a case it would not be  open to  him to claim gratuity.  This was a general argument  and was  repelled as such is clear from what the Court  said  at page 715 of the Report :               "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.  Grautuity is not paid to  the               employee gratuitously 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 neceasarily be denied  to  him               whatever  may be, the nature of misconuct  for               his dismissal-Therefore we do, not. think that               it would be possible to accede to the  general               argument that in all cases where the &mice  of               an  employee  is  terminated  for   misconduct               gratuity should riot be paid to him." The  words  "why  it should necessarily  be  denied  to  him whatever  may be the nature of misconduct occurring  in  the earlier part of the passage and the words "general  argument that  in  all  cases where the service  of  an  employee  is terminated  for misconduct gratuity should not be paid"  and

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the  reference  by  the  Court to  certain  awards  made  by tribunals  where  simple misconduct was  distinguished  from grave misconduct and forfeiture of gratuity (1)[1967] 2 S.C.R. 596.           (2) [1969] 2 S.C.R. 307. (3)  [1962] 2 S.C.R. 711. 943 was  provided  for the letter occurring after  this  passage clearly show  firstly that the Court was dealing with  and  repelled the general proposition that without any distinction between simple  and gross misconduct there should be  forfeiture  in all cases of dismissal for misconduct of whatsoever  nature, and  secondly,  that though the Court  approved  the  scheme which provided that gratuity should be paid after  deducting financial loss resulting from the workman’s misconduct,  the Court did not lay down any principle that gratuity should be paid  in cases of grave misconduct involving  even  violence which  though it may not result in financial damage may  yet be more serious than the one which results in monetary loss. The  decision thus is not an authority for  the  proposition that  even if a workman were guilty of misconduct,  such  as riotous  behaviour  or an assault on another  employee,  in- dustrial adjudication should not countenance a provision for forfeiture of gratuity in such cases merely because it  does not  result in monetary loss or that such a provision  would be  inconsistent with the principle that gratuity is  not  a boon  or  a gratuitous payment but one which is  earned  for long and meritorious service. In  Motipur  Zamindari (P) Ltd. vs.   Workmen(1)  the only question  considered was whether the award was justified  in providing  forfeiture  of  gratuity  in  a  case  where  the misconduct  involved moral turpitude.  The  Court  following Garment  Cleaning  Works  ( 2 )  directed  that  instead  of forfeiture,  the  clause  should provide  deduction  of  the amount of monetary loss, if any, caused by such  misconduct. It is clear that no one canvassed the question as to whether a  provision  in  a gratuity scheme that  a  workman  should forfeit  gratuity in the event of his committing  misconduct involving violence or riotous behaviour within or around the works  premises would be justified or not.  Nor was it  con- sidered  whether  it  would  be  anomalous  to  provide  for exaction  of  compensation from gratuity amount in  case  of misconduct  involving moral turpitude while not  making  any provi sion  against misconduct, such as the use of  violence or  force, which though not resulting in monetary loss,  yet is  unquestionably  of  a  graver  nature.   The case   of Employees  v.  Reserve  Bank of India(3) was  again  a  case wherethere  was  a  general clause in  the  gratuity  scheme providing  forfeiture in cases of dismissal  for  misconduct whatsoever and where in view of the decision  in  Garment Cleaning  Works  (2 )" the Bank conceded  to:substitute  the rule  by  providing deduction from gratuity  the  amount  of monetary  loss  occasioned  by  the  misconduct  for   which dismissal  is  ordered.  Thus, in none of the  cases  cited before  us  the question as to; what should be  the  minimum qualifying period in cases of dismissal (1) [1965] 2 L.L.J. 139.    (2)[1962].2 S.CR.,711. (3)  [1966] 1 S.C.R. 25, at 58. 944 for  misconduct and the question as to whether  a  provision for  forfeiture of gratuity in the event of  such  dismissal having  been ordered for misconduct involving violence  were either  canvassed  or considered.  On the other hand,  in  a recent decision between this very company and its workmen in Bangalore  region  (Remington Rand of India  Ltd.  v.  Their

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Workmen)(1),  the  gratuity  scheme  made  by  the  Tribunal provided for a qualifying period in cases of termination  of service  otherwise  than for misconduct, but  no  qualifying period  was provided for cases where termination of  service was  by  way  of  punishment  for  misconduct.   This  Court accepted the objection of the company on the ground of  this omission  and laid down the qualifying period of  15  years’ service in such cases.  In this decision the Court  followed the earlier decision in Calcutta Insurance Co.(2) In another such  case  (Remington Rand of India  vs.   The  Workmen(3), where  the dispute concerned the workmen of the  company  in Kerala   region  15  years  service  was  provided  as   the qualifying period in cases of dismissal for misconduct. In  the  case of Calcutta Insurance Co.(2) on  a  contention having  been raised that the qualifying period  for  earning gratuity in cases of retirement and resignation should be 15 years’  service  and that no gratuity should be  payable  in cases  of dismissal for misconduct, the Court  examined  the earlier  decisions  commencing  from  the  Indian  Oxygen  & Acetylene  Co.  Ltd.(4)  to the  case  of  Garment  Cleaning Works(5)   ’and   registered  its   demurrer   against   the observation  made  in the latter case that as  gratuity  was earned  by an employee for long and meritorious service,  it should  consequently be available to him even though at  the end  of  such  service  he may have  been  found  guilty  of misconduct  entailing his dismissal.  In so doing the  Court at page 608 of the Report remarked :               "In  principle, it is difficult to  concur  in               the above opinion.  Gratuity cannot be put  on               the same level as wages.  We are inclined  to               think  that it 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               (1) [19681 1 L.L.J. 542.           (2)  [1967]               2 S.C.R. 596.               (3) [1968] 1 S.C.R. 164, at 168.   (4)  (1956]               1 L.L.J. 435.               (5) [1962] 2 S.C.R. 711.                                    945               the  loss  caused and making a  provision  for               withholding  payment  of gratuity  where  such               loss  caused to the employer does not seem  to               aid  to the harmonious employment of  laborers               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." Continuity, in other words, must govern both the service and its,  character  of  meritoriousness.   The  Court   further observed that a mere provision in a gratuity scheme enabling an  employer to, deduct from the gratuity amount the  actual loss caused as a. result of misconduct for which the workmen incurs  the  punishment  of dismissal  or  discharge  cannot subserve  industrial peace and harmony, firstly, because  an

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employer  even without such a. provision has under  the  law the right of action for claiming damages, a right not  taken away by industrial law, and secondly,. because a  misconduct resulting  in  dismissal  may  be  such  as  may   undermine discipline  in  the  workmen,  in which  case  it  would  be extremely  difficult  to  assess  the  financial  loss.   As regards the qualifying period, the Court laid down 10  years service   in  cases,  of  resignation  or   retirement   and "following the principles laid down in the former  decisions of this Court" provided 15 years’ service for qualifying for gratuity in cases of dismissal for mis-conduct. In  the case of Delhi Cloth & General Mills Co. Ltd. (1)  an objection  was raised on behalf of the workmen to cl.  3  of the  gratuity  scheme framed by the Tribunal.   That  clause provided as follows :               "On  termination  of  service  on  any  ground               whatsoever except on the ground of  misconduct               as in cl. 1 (a) and 1 (b) above."               Cl.  1 (a) and 1 (b) provided for  payment  of               gratuity  in  the  eventof  the  death  of  an               employee  while  in service or  on  his  being               physically  and  mentally  incapacitated   for               further  service and’ laid down the rates  and               the qualifying periods as follows :               (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  effect  of  cl.  3, therefore,  was  that  in  case  of termination of service an employee would be entitled to  get gratuity at the above (1)  C.A.  Nos.2168,  2569 of 1966 and 76, 123  and  560  of 1967, decided on September 27, 1968. 946 rates  if he had put in service for the  aforesaid  periods, but  would  forfeit  it if the termination was  due  to  any misonduct  committed  by him.  The objection was  that  this provision  was inconsistent with the decisions so far  given by  this Court, that according to those decisions  the  only provision  permissible  to  the Tribunal was  to  enable  Ox employer  to  deduct  actual  monetary  loss  arising   from misconduct,  and that therefore, the mere fact that a  work- man’s  service was terminated for misconduct was  no  ground for depriving him altogether of gratuity earned by him as a result of his long and meritorious service, until the  date, when he commits such misconduct.  In examining, the validity of this contention the Court analysed the previous decisions and  pointed  out  that none of them  laid  down  a  general principle,  that an industrial tribunal cannot  _justifiably provide  that an employer need not be made to  pay  gratuity even where, the workman had incurred termination of  service on  account of his having committed misconduct,  not  merely technical but of a grave character.  The Court observed that in  some decisions this Court, no doubt, had held  that  the fact  that dismissal of a workman on account of  his  having committed misconduct need not entail forfeiture and that  it would  be  sufficient  to  forfeit  partially  the  gratuity payable to him to the extent of monetary loss caused to  the employer.  But then no decision had laid down as a principle that  a provision for such forfeiture cannot  be  justified, however  grave  the misconduct may be, provided it  had  not caused  monetary loss.  The Court noticed that the trend  in the  earlier  decisions was to deny gratuity  in  all  cases

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where  the, workman’s service was terminated for  misconduct but  that  in  later  years in cases  such  as  the  Garment Cleaning Works(1) "a less rigid approach" was adopted.   The Court then observed:               "A   bare  perusal  of  the  Schedule   (Model               Standing  Orders)  shows that  the  expression               "misconduct’  covers  a large  area  of  human               conduct.   On  the one hand arc  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               (1)   [1962] 2 S.C.R. 711.               947               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  mis-               conduct  would  or would not  involve  to  the               employer loss capable of being compensated  in               terms  of  money  was made.   It  was  broadly               stated  in  the cases 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 of this Court,  e.g.,               Wenger  & Co. v. Its Workmen  [1963(2)  L.L.J.               388],  Remington  Rand of  India  Ltd.’s  case               [1968(1) L.L.J. 542] and Motipur Zamindari (P)               Ltd.’s case [1965(2) L.L.J. 139] 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

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             Court  in  Wenger  & Co.’s  case  and  Motipur               Zamindari  (P)  Ltd.’s case  applies  only  to               those  cases where there has be-en by  actions               wailful  or negligent any loss  occasioned  to               the  property of the employer and the  miscon-               duct does not involve acts of violence against               the management or other employees, or  riotous               or  disorderly 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  con-               duct    destructive    of    maintenance    of               discipline." In  this  view, the Court modified cl. 3 of  the  scheme  by adding  an explanation, the effect of which was that  though the  employer could not deprive the workman of the  gratuity in  all  cases  of  misconduct, he  could  do  so  where  it consisted of acts involving violence against the  management or other ’employees or riotous 5Sup.Cl/70-15 948 or  disorderly behaviour in or near the place of  employment and also gave right to the employer to deduct from  gratuity such  amount  of  loss as is  occasioned  by  the  workman’s misconduct.  We may mention that the Court did not alter the qualifying period in cases of misconduct since no  objection appears to have been raised on that ground. As  against  the contention that a provision  in  accordance with these two decisions should be introduced in the  scheme under  examination,  Mr. Ramamurthi submitted that  the  two decisions  should  not  be construed as if  they  laid  down principles which should have the cumulative effect, firstly, as to the qualifying period, and secondly, as to deprivation of gratuity in cases specified in the Delhi Cloth &  General Mills  case(1).  It is true that this decision does not  lay down  that  the  qualifying period in  cases  of  misconduct should  be  15  years  as was  held  in  Calcutta  Insurance Company(2).  But, as aforesaid, that was because that  ques- tion  was  not raised, while in the Calcutta  Insurance  Co. case(2) it was expressly raised and the Court laid down that in  such  cases  it  would be proper  to  provide  15  years continuous service as a criterion. Once the principle that gratuity is paid to ensure good con- duct  throughout  the  period that the  workman  serves  his employer  is  accepted as laid down  in  Calcutta  Insurance Co.(2)  some  distinction in the matter  of  the  qualifying period  between cases of resignation and retirement  on  the one  hand and dismissal for misconduct on the other  becomes logically necessary.  Such a distinction cannot legitimately be  assailed  as  unreasonable.  Similarly,  if  the  object underlying  schemes  of  gratuity is  to  secure  industrial harmony  and satisfaction among workmen it is impossible  to equate  cases of death, physical incapacity, retirement  and resignation with cases of termination of service incurred on account of misconduct.  Besides, a longer qualifying  period in  the latter cases would ensure restraint against  wailful use of violence and force neglect etc.  No serious  argument was   advanced  that  such  a  distinction  would   not   be reasonable.  The objection was against the insertion of both and not against the merit of such distinction. As  regards the clause as to misconduct, it is not  possible to  disagree  with the proposition laid down  in  the  Delhi Cloth  &  General  Mills case(-)  that acts  amounting  to misconduct as defined in the standing orders, where they are

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made,   or  the  model  standing  orders,  where  they   are applicable, differ in degree of (1)  11969] 2 S.C.R. 307. (2)  (19671 2 S.C.R. 596. 949 gravity, nature and their impact on the discipline and   the working  of  the  concern, and that though  grave  in  their nature  and  results,  all of them may not  result  in  loss capable of being calculated in terms of money.  Amongst them there  would  be some which would forthwith  disentitle  the workman  from  retaining his employment and  justifying  his dismissal.   For  the  reasons given in the  Delhi  Cloth  & General Mills’ case(1) with which we, with respect,  concur, we  must  agree  with counsel for the  company  that  it  is necessary to modify the scheme and to add in cl. 5 thereof a proviso  that in cases where there has been  termination  of service  on  account of an employee found guilty of  act  or acts  involving  violence against the  management  or  other employees or riotous or disorderly behaviour in or near  the company’s premises, the company would be entitled to forfeit the  gratuity  which  would  otherwise  be  payable  to  the concerned  workman.  Cl. 5 should also be modified so as  to introduce  therein  15  years  continuous  service  as   the qualifying  period for earning gratuity in cases  where  the service  of the employee has been terminated on  account  of misconduct  and that such gratuity should be payable at  the rate prescribed in cl. 3(d) of the scheme. The  appeal  is allowed and the award is set  aside  to  the extent  aforesaid.  The gratuity scheme and the  scheme  for medical benefit, as revised by the Tribunal, are modified as stated above.  So far as the question of hours is concerned, that  question is remanded to the Tribunal to decide  it  in accordance  with  the observations  made  hereinabove.   The Tribunal will give liberty to the parties to adduce for that purpose  such  further  evidence as  they  think  necessary. There will be no order as to costs. Y.P.                             Appeal allowed. 950