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PETITIONER: THE BHARATKHAND TEXTILE MFG.  CO.  LTD.& OTHERS

       Vs.

RESPONDENT: THE TEXTILE LABOUR ASSOCIATION,AHMEDABAD.

DATE OF JUDGMENT: 17/03/1960

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. WANCHOO, K.N.

CITATION:  1960 AIR  833            1960 SCR  (3) 329  CITATOR INFO :  RF         1962 SC 673  (2)  R          1963 SC 495  (5)  C          1963 SC1721  (4,5)  RF         1964 SC 864  (25)  E          1966 SC1253  (6)  R          1970 SC 919  (14,26,28)  RF         1972 SC 343  (22)  R          1980 SC  31  (19,22)

ACT: Industrial  Dispute--Claim  of  gratuity   by   workmen   in textile  industry--Framing  of  scheme  in  modification  of Previous  award  Validity--Gratuity,  if in  the  nature  of profit  bonus--Applicability of Full Bench formula--Duty  of Industrial  Court--Bombay  Industrial  Relations  Act,  1946 (Bom.  XI of 1947), s. 116A--Employees Provident Funds  Act, 1952 (XIX of 1952), s. 17.

HEADNOTE:  This  was an appeal by certain textile mills  of  Ahmedabad against  a  scheme for gratuity awarded  by  the  Industrial Court.   The  Labour  Association, the  respondent,  gave  a notice  of  change under s. 42(2) of the  Bombay  Industrial Relations Act, 1946 (Bom.  XI of 1947), intimating the  Mill Owners’  Association that they wanted a scheme for  gratuity and  mentioned four categories of termination of service  in the  annexure.  This demand was refused and so  referred  to the  Industrial Court under s. 73A of the Act.  Pending  the reference  the Employees’ Provident Funds Act, 1952  (19  of 1952),  came into operation and the Industrial Court, on  an objection by the Mill Owners’ Association, held that it  was inadvisable  to proceed with the reference and that a  fresh application  should be made, if necessary, after the  scheme envisaged  by  the  Act  is  introduced  and  rejected   the respondent’s  demand.  Thereafter a fresh notice  of  change was   given  by  the  respondent  and  there  were   certain references to the Industrial Court in respect of the demand. The parties came to an agreement to refer all their disputes to  arbitration,  the  references  were  withdrawn  and  the disputes were referred to the Board of Arbitrators.   Before the  Board the Mill Owners’ Association took  the  objection that so long as the award of the Industrial Court dismissing

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the  earlier  reference subsisted, the  claim  for  gratuity could not be considered by it.  That objection was upheld by the Board and it made no provision for gratuity.   Thereupon the  respondent  applied for the modification of  the  award under  s. 116A of the Act, and the Industrial Court  by  its award,  which is the subject matter of the  present  appeal, framed  a  scheme  for gratuity  on  an  industry-cum-region basis: Held, that the decision of the Industrial Court was  correct and must be upheld. Regard being had to the true nature of its earlier award and the scope of the application for its modification, it  could not  be  said that the respondent was seeking to  alter  the framework or change any of the principles of that award  and the application under s.  116A of the Act must be held to be competent. 330 A scheme for gratuity is by its nature an integrated  scheme and  covers  all  classes of termination  of  service  where gratuity benefit can be legitimately claimed and the refusal of  the Industrial Court in the earlier award amounted to  a refusal to frame any scheme at all. The  statutory  provident  fund created  by  the  Employees’ Provident   Funds  Act,  1952,  could  be  no  bar  to   the respondent’s claim for a gratuity scheme although there  can be no doubt that in awarding such a scheme Industrial Courts must make due allowance for it.  Provisions of s. 17 of  the said Act clearly indicate that the statutory benefits  under the Act are the minimum to which the employees are  entitled and  that they are no bar to additional benefits claimed  by the employees. Indian Hume Pipe Co. Ltd. v. Their Workmen, [1960] 2  S.C.R. 32, referred to. It  was not correct to say that the claim for  gratuity  was essentially  similar  to a claim for profit bonus  and  must always be considered on unitwise basis. The  benefit  of  gratuity is in the  nature  of  a  retiral benefit   and  before  framing  such  a  scheme   industrial adjudication has to, take into account such relevant factors as  the  financial condition of the  employer,  his  profit- making capacity, the profits earned by him in the past,  the extent  of his reserves and the chances of his  replenishing them as well as the claims for capital invested by him,  and in evolving a long term scheme a long view of the employer’s financial condition should be taken and on that basis  alone the feasibility of a scheme and the extent of the benefit to be given should be determined. Arthur  Butler  & Co. (Muzaffarpur) Ltd. and  Arthur  Butler Workers  Union, (1952) 11 L.L.J. 29 and Boots Pure Drug  CO. (India) Ltd. v. Their Workmen, (1956) 1 L.L.J. 293, referred to. Even assuming that gratuity is no part of deferred wage,  it would  not  be  reasonable  to  assimilate  the  scheme  for gratuity to that of profit bonus or to apply the  principles of the Full Bench formula applicable to the latter.  A claim for  gratuity is strictly not a claim to receive a share  of the profits at all. Express  Newspapers  (Private) Ltd. v. The Union  of  India, [1959]  S.C.R. 12 and Indian Oxygen and Acetylene  Co.  Ltd. Employees’  Union v. Indian Oxygen and Acetylene  Co.  Ltd., (1956) 1 L.L.J. 435, referred to. It  was  not correct to say that an industry-wise  basis  is wholly  inappropriate in dealing with gratuity or  that  the Industrial  Court  was  in error  in  adopting  that  basis. Although  some hardship to the weaker units in the  industry

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may not be avoided, there were several factors in its favour both from the point of view of employers and employees. Since  in the present state of economic development  in  the country the propriety of the adoption of an all-India  basis for  a scheme of gratuity may be open to doubt no  exception can  on principle be taken to the industry-cum-region  basis adopted in the instant case. 331 Express  Newspapers  (Private) Ltd. v. The Union  of  India, [1959] S.C.R. 12, applied.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1 of 1959. Appeal  by special leave from the award dated September  16, 1957, of the Industrial Court, Bombay, in Misc.  Application (IC) No. 20 of 1957. M. C. Setalvad, Attorney-General for India, I. M.  Nanavati, S.  N.  Andley, J. B. Dadachanji, Rameshwar Nath and  P.  L. Vohra, for the appellants. C.   K.  Daphtary,  Solicitor-General  of India,  B.  R.  L. Iyengar   and K. L. Hathi, for the respondent. C.   K. Daphtary, Solicitor-General of India, H. J.  Umrigar and R. H. Dhebar, for the Intervener. 1960.  March 17.  The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This appeal by special leave is  directed against the award passed by the Industrial Court, Bombay, by which a scheme for gratuity has been framed in favour of the workmen  represented  by  the  respondent,  Textile   Labour Association,  Ahmedabad,  who are employed  by  the  textile mills  in  Ahmedabad including the  twenty  appellant  mills before us.  In order to appreciate the points of law  raised by the appellants in the present appeal we ought to state at the outset the material facts leading to the present dispute in  which the impugned scheme for gratuity has been  framed. On June 13, 1950, the respondent gave notice under s.  42(2) of  the Bombay Industrial Relations Act, 1946 (Bom.   XI  of 1947)  (hereinafter called the Act), intimating to the  Mill Owners’  Association  at Ahmedabad (hereinafter  called  the Association)  that it desired a change as specified  in  the annexure to the communication.  The annexure showed that the respondent  wanted  a change in that a scheme  for  gratuity should  be  framed  wherever services  of  an  employee  are terminated  by the mills on grounds of old-age,  invalidity, ’incapacity  or natural death.  It was further claimed  that the  payment of gratuity in the said cases should be at  the rate of one month’s wages (including dearness allowance) per every year of service.  Some incidental demands  were   also specified in the annexure.  The 332 demand thus made was not accepted by the Association, and so it  was  referred  to the  Industrial  Court.   Pending  the reference  the Employees’ Provident Funds Act, 1952  (19  of 1952),  came  into operation on March 4, 1952,  and  it  was urged   before  the  Industrial  Court  on  behalf  of   the Association  that  since the statutory scheme  of  provident fund would soon become compulsory it would not be  advisable to adjudicate upon the respondent’s claim for the  specified items of gratuity at that stage.  This argument was accepted by the Industrial Court; it held that when the scheme  envi- saged  by the new Act is introduced it would be possible  to see from what date it would be operative, and that, if after the  introduction  of  the said scheme it be  found  that  a sufficient  margin  is left, it would then be  open  to  the

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respondent  and the Association to make a fresh  application for  the institution of a gratuity fund either for  all  the employees or for the benefit of such of them as will have to retire  within  the next few years.  It was on  this  ground that the demand made by the respondent was rejected on April 18, 1952. It  appears that the prescribed scheme under  the  Provident Funds  Act came into operation on October 1, 1952.  In  June 1955,  a fresh notice of change was given by the  respondent to  all the mills in respect of the demand for gratuity  and the  said  demand  became  the  subject-matter  of   certain references to the Industrial Court at Bombay under s. 73A of the  Act.  At that time the association and  the  respondent had entered into an agreement to refer all their disputes to arbitration,  and in accordance with the spirit of the  said agreement the references pending before the Industrial Court in  respect of gratuity were withdrawn and referred  to  the Board  of  Arbitrators.  Before the Board it  was,  however, urged  by the Association that, so long as the award  passed by  the  Industrial  Court  on  the  earlier  reference  was subsisting and in operation, a claim for gratuity which  was the subject-matter of the said reference and award could not be  properly  or  validly considered  by  the  Board.   This objection  was  upheld  by  the Board, and  so  it  made  no provision  for  gratuity.   The decision  of  the  Board  of Arbitrators  in the said proceedings was published  on  July 25, 1957. 333 After the said decision was made and before it was published the respondent made the present application for modification of  the  earlier award under s. 116A of the Act on  July  6, 1957.  In this application the respondent alleged that there was  sufficient  justification for  modifying  the  previous award and for introducing a scheme of gratuity as claimed by it.   In this application a demand for gratuity was made  on the following lines:- (1)  In the case of           One month’s basic wages and      death while in           average Dearness Allow-      service or becom-        ance per completed year of      ing physically or        service.      mentally unfit for      further service : (2)  On voluntary re-          After 10 continuous years of      tirement or re-           service in the company      signation of an           same as in (1)     employee : (3)  On termination            For less than 10 but more of service by the              than 7 years at 3/4 rate of company:                       (1), For less than 7 years                                but 5 years or more than 5                                years at the 1/2 rate of (1)                                For more than 10 years’                                continuous service as in                                 (1) above. It  appears  that  in the application  thus  made  a  typing mistake had crept in which failed to type properly the third category  of  cases.  The respondent applied on  August  21, 1657, for amendment of the said typing mistake and the  said amendment  was naturally allowed.  It is the demand made  by this  application that is the subject-matter of the  present proceedings under s. 116A of the Act. In  the present proceedings the Association did not  file  a written  statement and in fact withdrew leaving it  open  to each  mill to file a separate written statement of its  own. It  appears that there was a difference of  opinion  amongst

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the  constituents of the Association.   Accordingly  written statements were filed on 43 334 behalf of the 65 constituent mills and the large majority of the   said  written  statements  raised   some   preliminary objections against the competence of the present proceedings and disputed the respondent’s claim for gratuity also on the merits.    The  industrial  Court  has  overruled  all   the preliminary  objections  and on the merits it has  framed  a scheme  for  gratuity on   industry-cum-region  basis.   The award  framing the said scheme was pronounced  on  September 16,  1957.  It is against this award that 21 out of  the  65 mills have come to this Court by special leave.  One of  the appellant  mills has subsequently withdrawn from the  appeal with  the result that out of 65 mills 45 mills do  not  feel aggrieved by the award but 20 mills do; and the  contentions raised by them fall to be considered in the present appeal. Before  dealing with the merits of the points raised by  the appellants it would be relevant to refer very briefly to the relevant provisions of the Act.  The Act has been passed  by the  Bombay  Legislature because it thought that  "  it  was expedient to provide for. the regulation of the relations of employers  and employees in certain matters, to  consolidate and  amend the law relating to the settlement of  industrial disputes  and to provide for certain other purposes ".  With this  object the Act has made elaborate provisions  for  the regulation  of industrial relationships and for  the  speedy disposal of industrial disputes.  An " industrial dispute  " under  s. 3, sub-s. (17), means "any dispute  or  difference between  an employer and employer, or between employers  and employees,  or between employees and employees and which  is connected  with  any industrial matter ". The  expression  " industrial matter   has  been inclusively defined in a  very wide sense.    Approved  Union " in s. 3(2) means " a  union on the    approved list " " primary union " under s.   3(28) means  "a union for the time being registered as  a  primary union under the Act registered union " under s. 3(30)  means " a union registered under the Act ", while " representative union  "under  s. 3(33) means " a union for the  time  being registered  as  a  representative  union  under  the  Act.". Section 3(39) defines " wages " as meaning " remuneration of all 335 kinds  capable  of  being expressed in terms  of  money  and payable to an employee in respect of his employment or  work done  in  such  employment, and includes,  inter  alia,  any gratuity  payable  on discharge ". Section 42,  sub-s.  (2), provides that an employee desiring a change in respect of an industrial  matter not specified in Schedule I or  II  shall give  notice in the prescribed form to the employer  through the  representative of employees but shall forward a copy of the  same to the Chief Conciliator, the Conciliator  of  the industry  concerned for the local area, the  Registrar,  the Labour Officer, and such other person as may be  prescribed. Section 66(1) provides, inter alia, that if an employer  and a  representative union or aNy other registered union  which is  the  representative  of  the  employees  by  a   written agreement  agree to submit any present or future  industrial dispute or class of such disputes to the arbitration of  any person,  whether such arbitrator is named in such  agreement or not, such agreement shall be called submission.  We  have already noticed that the Association and the respondent  had entered  into  a submission in respect of  several  disputes which  were referred to the Board of  Arbitrators.   Section

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73A is important for our purpose; it deals with reference to arbitration  by unions, and provides that "  notwithstanding anything contained in this Act, a registered union which  is a representative of employees, and which is also an approved union,  may refer any industrial dispute for arbitration  to the industrial court subject to the proviso prescribed under it."  It is under s. 73A that the reference was made on  the earlier  occasion to adjudicate upon the respondent’s  claim for a gratuity as specified in its notice of change. That  takes us to ss. 116 and 116A.  Section  116  provides, inter  alia, for the period during which an award  would  be binding Section 116(1) lays down in regard to an award  that it shall cease to have effect on the date specified therein, and  if  no  such date is specified, on the  expiry  of  the period  of  two  months from the date  on  which  notice  in writing  to  terminate  such  an  award  is  given  in   the prescribed manner by any of the parties thereto to the other party, provided 336 that no such notice shall be given till the expiry of  three months after the award comes into operation; in other words, the  award  cannot be terminated at least for  three  months after  it  has  come into operation; thereafter  it  may  be terminated as prescribed by s. 116(1).  With the rest of the provisions  of  s. 116 we are not concerned in  the  present appeal.   SeCtion 116A(1) prescribes, inter alia,  that  any party who under the provisions of s. 116 is entitled to give notice  of  termination of an award may, instead  of  giving such notice, apply after the expiry of the period  specified in  sub-s. (2) to the industrial court making the award  for its  modification.  It is unnecessary to set out  the  other provisions of s. 116A.  The award under appeal has been made by  the  industrial  court on the application  made  by  the respondent under s. 11 6A. The  first  contention  raised  before  us  by  the  learned Attorney-General  on  behalf of the appellant  is  that  the application for modification made by the respondent under s. 116A  is incompetent, because what the respondent  seeks  is not   any  modification  of  the  earlier  award  which   is permissible under s. 116A, but a reversal and a revision  of the  said  award  which is not permissible  under  the  said section.   The expression " modification of the award "  may include alteration in the details of the award or any  other subsidiary  incidental matters.  In this connection it  must be borne in mind that there is a radical difference  between the meaning of the word " change " as distinguished from the meaning of the word " modification ". Section 116(2)  allows for  a change or modification of the  registered  agreement, settlement  or  award in terms of the  agreement,  and  that clearly  brings out the difference between the two  concepts of  " change " and " modification ". In cases falling  under s.  116(2)  the  agreements or  settlements  can  be  wholly revoked  and  fresh  ones  substituted  in  their  place  by consent, or by consent they may be modified in subsidiary or incidental details.  Where the Legislature wanted to provide for  change it has expressly done so in s. 116(2)  by  using both the words " changed " or " modified 337 Section  116A, however, is confined only to modification  of the award and not its change. The  same  argument  is  placed  in  another  form.   It  is contended  that it was not the intention of the  Legislature to permit the proceedings under s. 116A for change of policy underlying  the  Award or its essential framework.   Such  a result  can be achieved only by terminating the award  under

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s.  116(1) and raising an industrial dispute as provided  by the  Act.  In support of this contention reliance  has  been placed on the observations made by Mukherjea, J., as he then was,  in the case of Be: Delhi Laws Act, 1912(1)  where  the learned   judge  stated  that  "  the  word   ’modification’ occurring  in  s. 7 of the Delhi Laws Act did  not  mean  or involve any change of policy but was confined to  alteration of such a character which keeps the policy of the Act intact and  introduces  such changes as are  appropriate  to  local conditions  of  which the executive government is  made  the judge ". In the same case Bose, J. observed that "the  power to  restrict  and modify does not import the power  to  make essential changes ". On  the  other  hand,  the  learned  Solicitor-General   has contended that the context in which the word ‘ modification’ has  been used in s. 116A does not justify tne  adoption  of the  limited  meaning of the word " modify " for  which  the appellants  contend.  The policy of the Act and  the  reason why  s.  116A  has  been  enacted  show  that  the  word   " modification  "  has been used in a sense  larger  than  its ordinary   meaning.   The  Legislature  realised  that   the procedure prescribed by s. 116, sub-s. (1), for  terminating the award which necessitates the other subsequent steps  was apt  to be dilatory and involved and so it has purported  to provide  for an effective alternative speedy remedy for  the change  of  the  award under s. 116A.  In  support  of  this argument reliance has been placed on the meaning assigned to the  word " modified " in " Words and Phrases " where it  is stated that " though one of the primary meanings of the word ‘  modify’  is no doubt ‘ to limit’ or ‘ restrict  ’it  also means  ’to  vary’, and there is authority that it  may  even mean ’to extend’ or ’enlarge "’ (2). (1)  [1955] 2 S.C.R. 747, 1006. (2)  " Words and Phrases" by Roland Burrows, Vol. 3. P. 399. 338 It is common ground that the modification permissible  under s. 116A does not mean that the provisions of the award  must always   be  reduced;  it  may  mean  even  increasing   the provisions,  and so it is urged by the respondent  that  the word "modification" should receive a wider denotation in the context  of  s. 116A.  This construction no  doubt  receives some support from the provision of s. 116A that a party  may apply  for the modification of the award instead  of  giving notice  for its termination; and the latter clause tends  to show  that the procedure prescribed by s. 116A is an  alter- native   to  the  procedure  prescribed  by  s.  116.    The industrial  court  was apparently inclined to  put  a  wider denotation on the word " modification " used in s. 116A. We  do  not  think it is necessary  to  decide  this  larger question  of  the construction of s. 116A  because,  in  our opinion, in the present case, even if the limited and narrow construction suggested by the appellant is put on the word " modification ", the respondent’s application cannot be  said to be outside the purview of the said section.  There is  no doubt that the claim for gratuity made by the respondent  in the earlier proceedings has been rejected by the industrial. court and that is an award; but, whether or not the  present application  seeks  for  a modification of  the  said  award within  the  meaning  of s. 116A would depend  on  what  the industrial court had decided on the earlier occasion.  It is clear  that the industrial court did not then  consider  the merits  of  the claim at all.  It upheld  the  Association’s contention  that the matter should not be decided  then  but may  be  considered  later  in view of  the  fact  that  the Employees’  Provident Funds Act had already been passed  and

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the  statutory scheme for provident funds was about to  come into force.  It was on this ground alone that the industrial court rejected the claim as it was then made but it took the precaution  of expressly adding that after the  introduction of  the provident funds scheme it would be open to the  res- pondent  or the Association to make a fresh application  for the institution of a gratuity fund as it may deem  expedient to  claim.   It  would not be  unreasonable,  we  think,  to assume, that when liberty was thus reserved 339 to  the parties to make a fresh application  the  industrial court  had  presumably s. 116A in mind.  In  substance,  the effect of the order then passed was that the application was regarded  as  premature  and liberty  was  reserved  to  the parties to renew the application if the statutory scheme was thought  to be insufficient or unsatisfactory by  either  of them.   In  such a case, if the respondent  applies  to  the industrial  court  for  modification  of  its  award  it  is difficult  to accept the argument that the respondent  seeks to  alter  the  framework  of the award  or  to  change  any principle  decided in the award.  The true position is  that by  the  present application the respondent  is  asking  the court  to consider the demand now that the scheme  has  come into force and is, according to the respondent, insufficient to meet the workmen’s grievance.  What the industrial  court then  promised to consider after the scheme came into  force is brought before it for its decision again.  That being the true  nature of the award and the true scope of  the  prayer made  by  the respondent in its present  application  it  is difficult to hold that the application is incompetent under s. 116A. The next argument which is pressed before us by the  learned Attorney-General  is- that the application for  modification is  incompetent  in  regard to matters not  covered  in  the earlier  proceeding.  We have already referred to the  items covered  in the earlier proceedings as well as  those  which are  the subject matter of the present application.   It  is true  that the notice served by the respondent prior to  the earlier  reference  specifically  set  out  the  claim   for gratuity  in  four  categories of cases  of  termination  of services   of   the  employees,  whereas  in   the   present proceedings   some  other  categories  are  included.    The objection  raised  against  the competence  of  the  present application  purports to treat the earlier notice in a  very technical way and confines the subsequent proceedings  taken before  the  industrial court to the  said  four  categories only.   The  argument is that the cases  of  termination  of services  which  were not specified in  the  earlier  notice cannot now be brought before the industrial court tinder the guise of the modification of the award. 340 If  the  modification of the award can be claimed  under  s. 116A  it  must be claimed only in regard to  the  said  four categories and no more.  This argument has been rejected  by the industrial court, and it has been held that in substance the  earlier  notice should be construed as  constituting  a claim  for the scheme of gratuity in general.  The  validity of  this  conclusion has been seriously  challenged  by  the appellant. There  is  no doubt that disputes in  regard  to  industrial matters not covered by an award do not fall within the scope of  s. 116 of the Act; and so if the claim for  gratuity  in regard to categories not specified in the earlier notice  is deemed  to  be  outside the said  notice  and  the  relevant reference  proceedings,  could the respondent  have  made  a

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claim  in  that behalf and ask for  industrial  adjudication without  terminating the award?  It is difficult  to  answer this  question in the affirmative.  It is well-known that  a scheme  for gratuity is an integrated scheme and  it  covers all  classes  of termination of service  in  which  gratuity benefit  can be legitimately claimed.  Therefore,  when  the industrial  court  refused to’ frame a  gratuity  scheme  in regard  to  the  four categories brought before  it  on  the earlier  occasion,  in substance its refusal amounted  to  a rejection of any scheme for gratuity at all; otherwise it is very difficult to assume that having rejected the claim  for gratuity  in  respect of the said four categories  it  would still  have  entertained a claim for gratuity on  behalf  of other  categories not included therein.  That is why we  are inclined  to think that though in form the rejection of  the demand for gratuity on the earlier occasion was in regard to the  four categories specified in the notice, in  effect  it was  rejection in regard to the claim for a gratuity  scheme itself. It  cannot be disputed that if the earlier demand  had  been for a gratuity scheme pure and simple and no categories  had been   specified   in  connection  therewith   the   present application for the modification of the award coupled with a claim for a gratuity scheme in respect of all the categories specified in the application would be within the purview  of s.  116 of the Act.  That in substance is what has  happened in this case 341 according  to  the finding of the industrial court  on  this point,  and  having regard to the unusual  circumstances  of this case we see no reason to interfere with it. Then it is urged that the industrial court has erred in  law in  framing  a  gratuity scheme even  though  the  statutory scheme under the Employees’ Provident Funds Act has been  in operation since 1952.  The provident fund guaranteed by  the statute   under  the    statutory  scheme  is  one   kind of retirement benefit and since this retirement benefit is  now available  to the workmen it was not open to the  industrial court to provide an additional gratuity scheme; that in sub- stance   is  the  contention.   This  contention  has   been frequently raised before the industrial courts and has  been generally rejected.  The Employees’ Provident Funds Act  has no doubt been passed for the institution of provident  funds for  employees covered by it; and the statutory  scheme  for provident funds is intended to afford to the employees  some sort of a retirement benefit; but it cannot be ignored  that what the statute has prescribed in the scheme is the minimum to  which, according to the Legislature, the  employees  are entitled;  and so in all cases where the  industrial  courts are  satisfied  that  a larger and  higher  benefit  can  be afforded to the employees no bar can be pleaded by virtue of the Provident Funds Act. it is true that after the Act  came into force, the industrial courts would undoubtedly have  to bear  in mind the benefit of the statutory scheme  to  which the employees may be entitled; and it is only after  bearing that factor in mind and making due allowance for it that any additional  scheme  for gratuity can and must be  framed  by them; but it is not open to an employer to contend that  the Act excludes the jurisdiction of industrial courts to  frame an additional scheme. In this connection it may be pertinent to point out that  s. 17  of  the  Employees’ Provident  Funds  Act  empowers  the appropriate  government to exempt from the operation of  all or  any  of  the  provisions  of  the  statutory  scheme  to establishments  as specified in s. 17(1)(a) and (b).   Under

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s. 17(1)(b), for instance, any establishment may apply,  for exemption  if its employees are in enjoyment of benefits  in the nature of 44 342 provident fund, pension or gratuity which, in the opinion of the  appropriate  government,  are on  the  whole  not  less favourable  to  such employees than  the  benefits  provided under the Act or any scheme in relation to employees in  any other  establishment of a similar characters This  provision brings  out  two  points  very  clearly.   If  the  benefits provided  by the employer are not less favourable  than  the statutory  benefits  he  may apply  for  exemption  and  the appropriate government may grant him such exemption.  If, on the  other  hand,  the benefits conferred by  him  are  less favourable  than  the  statutory  benefits  he  may  not  be entitled  to any exemption, in which case both the  benefits would  be  available  to the  employees.   These  provisions clearly  indicate that the statutory benefits which  in  the opinion  of  the Legislature are the minimum  to  which  the employees  are  entitled, cannot create a  bar  against  the employees’.   claim  for  additional  benefits  from   their employers.  In this connection we may incidentally refer  to the  decision of this Court in the case of Indian Hume  Pipe Co.  Ltd. v. The Workmen (1) where this Court has held  that the  statutory  provision for the  payment  of  retrenchment compensation under s. 25F is no bar to a claim for gratuity. The  argument urged that the statutory retrenchment  partook the character of gratuity and thus constituted a bar for the additional  claim  for  gratuity  was  rejected.   We   must accordingly  hold  that the Industrial Court  was  right  in rejecting  the  appellants’ contention  that  the  statutory provision for provident fund under the Employees’  Provident Funds  Act  is  a bar to the present claim  for  a  gratuity scheme. The   learned  Attorney-General  has  then  challenged   the validity  of  the scheme on the ground that  the  Industrial Court was in error in dealing with the problem on  industry- wise  rather  than unit-wise basis.  He  contends  that  the claim  for gratuity is more allied to a claim for bonus  and must,  therefore, be dealt with on unit-wise basis.   It  is not  disputed that the benefit of gratuity is in the  nature of  retiral  benefit and there can be no doubt  that  before framing a scheme for gratuity industrial adjudication has to take into (1)  [1960] 2 S.C.R. 32. 343 account  several relevant facts; the financial condition  of the employer, his profit-making capacity, the profits earned by  him  in  the past, the extent of his  reserves  and  the chances  of his replenishing them as well as the claims  for capital   invested   by  him,  these  and   other   material considerations  may have to be borne in mind in  determining the terms of the gratuity scheme.  This position has  always been recognised by industrial courts (Vide: Arthur Butler  & Co. (Muzaffarpur) Ltd. And Arthur Butler Workers’ Union (1). It appears also to be well recognised that though the  grant of a claim for gratuity must depend upon the capacity of the employer  to stand the burden on a long-term basis it  would not  be  permissible to place undue emphasis either  on  the temporary  prosperity  or  the temporary  adversity  of  the employer.   In evolving a long-term scheme a long-term  view has to be taken of the employer’s financial condition and it is  on such a basis alone that the question as to whether  a scheme  should  be framed or nit must be decided, and  if  a

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scheme has to be framed the extent of the benefit should  be determined  (Vide:  Boots Pure Drug Co.  (India)  Ltd.   And Their Workmen (2)  For our present purpose it is  really not necessary to embark upon the academic question as to whether gratuity  is a part of deferred wage or not; we will  assume that  it  is  not.  Even so it would not  be  reasonable  to assimilate the character of the scheme for gratuity to  that of  a profit bonus and to seek to import the  considerations of the Full Bench formula which governs the grant of  bonus. A claim for profit bonus is based on the assumption that the employees contribute at least partially to the profits  made by  the  employer and that they are entitled to  ask  for  a share  in  the  said profits in order  to  bridge  the  gulf between  the  wages actually received by them and  a  living wage  to  which they are ultimately entitled.  A  claim  for gratuity  is a claim for retiral benefit and it is  strictly not a claim to receive a share of the profits at all; and so there   would  be  no  scope  for  importing   the   several considerations  which are relevant in determining the  claim for  profit  bonus.  That is the view taken  by  the  Labour Appellate Tribunal in Indian (1) [1952] 11 L.L.J. 29.     (2) [1956] 1 L.L.J. 293. 344 Oxygen  and Acetylene Co. Ltd.  Employees’ Union And  Indian Oxygen and, Acetylene Co. Ltd. (1) and the said decision has been cited with approval by this Court in Express Newspapers (Private) Ltd. v. The Union of India (2 ). Therefore, we are not  prepared  to  accept the argument that  the  claim  for gratuity is essentially similar to a claim for profit bonus, and like profit bonus it must always be considered on  unit- wise  basis.  Incidentally we may add that even a claim  for profit  bonus  can  and often is  settled  on  industry-wise basis. That  still  leaves  the larger question  to  be  considered whether  the industrial court was in error in  dealing  with the claim for gratuity on industry-wise basis.  It is urged- for  the  appellants that an industry-wise basis  is  wholly inappropriate  in  dealing with gratuity and it  should  not have  been  adopted  by the industrial  court.   It  may  be conceded  that  when an industry-wise basis  is  adopted  in dealing  with  a claim like gratuity often  enough  stronger units of the industry get a, benefit while the weaker  units suffer a disadvantage.  Take the case of a gratuity  scheme. If  such a scheme is based on industry-wise basis  employees working  under the stronger units do not get that amount  of benefit  of  gratuity  which  they would  have  got  if  the question  had been considered unit-wise,  whereas  employees working in weaker units get a better scheme than they  would have got if the matter had been considered unit-wise.   Such a  result is inevitable in an industrywise  approach.   This possible  mischief  can, however, be mitigated by  taking  a fair  cross-section of the industry or by working on a  rule of  averages after collecting the relevant facts of all  the constituent units of the industry.  Even so, if some of  the units of the industry are very weak they are apt to suffer a disadvantage  just as the very strong units in the  industry are likely to get an undue advantage in the process; but the question which calls for our decision is: does this possible result  mean that a scheme for gratuity should on  principle not  be framed on an industry-wise basis but must always  be framed on a unit-wise basis? There  are  several  factors  which  militate  against   the appellants’ suggestion that unit-wise basis is the only  (1) [1956] 1 L.L.J.  435. (2) [1959] S.C.R. 12 at P. 156. 345

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basis  which should be adopted in such a case.  Equality  of competitive  conditions  is in a sense  necessary  from  the point of view of the employers themselves; that in fact  was the  claim made by the Association which suggested that  the gratuity  scheme  should be framed  on  industry-wise  basis spread over the whole of the country.  Similarly equality of benefits  such as gratuity is likely to  secure  contentment and  satisfaction  of the employees and lead  to  industrial peace and’ harmony.  If similar gratuity schemes are  framed for  all  the units of the industry migration  of  employees from  one  unit  to  another  is  inevitably  checked,   and industrial  disputes arising from unequal treatment in  that behalf are minimized.  Thus, from the point of view of  both employers  and  employees industry-wise approach is  on  the whole  desirable.   It is well-known that the  Committee  on Fair  Wages  which  had examined this  problem  in  all  its aspects  had  come  to the definite  conclusion  that  "  in determining  the capacity of an industry to pay it would  be wrong  to  take  the capacity of a particular  unit  or  the capacity of all the industries in the country.  The relevant criterion should be the capacity of a particular industry in a  specified  region",  and it recommended that  as  far  as possible  the same wages should be prescribed for all  units of  that  industry in that region.  This approach  has  been approved  by  this Court in the case of  Express  Newspapers (Private) Ltd. (1) (p. 19).  What is true about the wages is equally  true  about the gratuity scheme.   In  the  present economic  development  of our country  we  think  industrial adjudication would hesitate to adopt an all-India basis  for the decision of an industrial dispute like that of gratuity; and  so,  on  principle,  it  would  be  difficult  to  take exception to the approach adopted by the industrial court in dealing with the present dispute. In this connection it may be relevant to take notice of  the fact   that  the  wages  of  textile  employees  have   been standardised on an industry-wise basis.  Similarly, dearness allowance   has   been  fixed  on  the   same   basis,   and unsubstituted holidays have been prescribed on a like basis. The Employees’ State Insurance (1)  [1959] S.C.R. 12 at P. 156. 346 Scheme  (Act 34 of 1948) is industry-wise  and  retrenchment compensation  has been statutorily standardised on the  same basis  (Section  25F  of Act XIV of  1947).   What  is  more remarkable  is  the  fact  that  the  Association  and   the respondent had entered into an agreement regarding bonus for a  period  of  five years and the gratuity  scheme  for  the clerical  and supervisory staff between the said parties  is also  based on the same industry-wise approach by  agreement between them.  The Association and the respondent can justly claim  with  some  pride  that in the  past  most  of  their disputes  had  been  amicably settled.  It is  only  on  the present  occasion  that  owing to a  difference  of  opinion amongst   its  constituent  members  that  the   Association withdrew from the proceedings and left it to the members  to appear individually before the industrial court.  Even so 45 out  of the 65 mills have accepted the award.   Under  these circumstances  the question which we have to decide is:  Did the industrial court err in law in adopting an industry-wise basis  in  deciding the present proceedings ?  It  would  no doubt  have been open to the industrial court to  deal  with the  dispute unit-wise just as it was open to the  court  to deal with it on an industry-wise basis.  As we have  already indicated  there are several factors in favour  of  adopting the  latter  approach  though it may  be  conceded  that  by

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adopting  the said course some hardship may  conceivably  be caused  to  the  weakest  units  in  the  industry.   Having carefully  considered  this question in all its  aspects  we are,_however,  not  prepared  to hold  that  the  scheme  of gratuity under appeal should be set aside on the ground that the  industrial  court  ought to have  adopted  a  unit-wise approach.  In this connection it may not be out of place  to observe  that  the cotton textile industry  is  the  premier industry  of our country and there is a concentration  of  a large  number  of mills in Ahmedabad.  A good many  of  them have  capitalised large portions of reserves  and  documents produced in the present proceedings show that the production has  steadily increased and has found a  responsive  market. There is a gratuity scheme framed on an industry-wise  basis in operation in Bombay and a similar scheme appears to  have been extended to 347 Nadiad and Khandesh.  In fact an award for gratuity has been made  on  an  industry-wise basis even  in  respect  of  the textile  industry  at Coimbatore.  Having  regard  to  these facts  we think the industrial court was right in  observing that  " there was no justification why an important  textile centre like Ahmedabad should not have a gratuity scheme when the  needs  of the labour require it and  the  industry  can afford it ". It  is  true  that in dealing with  industrial  disputes  on industry-cum-region basis, if the region covers the whole of the  country industrial adjudication sometimes takes  resort to  the  classification  of the  constituent  units  of  the industry in question.  Industrial adjudication in regard  to the fixation of wage-structure in respect of newspapers  and banks in the country is an illustration in point.  The  need for  such a classification is not as great when  the  region happens to be limited in area, though, even in respect of  a limited  area, in a proper case industrial adjudication  may adopt the course of classification.  In the present case the industrial  court took the view that classification was  not possible  and would be inexpedient.  No  classification  was made  in dealing with the textile mills in Bombay,  and  the industrial  court  did  not  feel  called  upon  to  make  a departure  in  respect of Ahmedabad.  We do not  think  that this conclusion suffers from any infirmity. The  scheme  has been further attacked on  the  ground  that before  framing it the industrial court has  not  considered the  extent  of  the  liabilities  already  imposed  on  the industry.  It has been strenuously argued before us that  in assessing   the  extent  of  the  liabilities  the   acutual liabilities accrued as the result of the scheme has not been taken  into  account and the serious strain imposed  on  the industry  by  the imposition of excise duty  has  also  been overlooked;  on  the other hand, undue importance  has  been attached  to bonus shares and no account has been  taken  of the  industry’s  obligation  to  contribute  to  the   State Insurance Scheme.  We are not impressed by these  arguments. The  argument about the actual liability accrued  is  really the  oretical and cannot have much  practical  significance. If it is suggested that in 348 framing  a scheme of gratuity the capacity to pay should  be determined  only  if the employer can set apart a,  fund  to cover the whole of the liability theoretically accrued, then gratuity  schemes can be very rarely framed.   Such  schemes are  long-term  schemes  and  a  fund  to  cover  the  total liability  in  that behalf must inevitably be  built  up  in course of time year by year.  In regard to the excise  duty,

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the  industrial  court  has rightly  pointed  out  that  the imposition  of  a  higher duty was  the  conseqence  of  the excessive  increase in prices of mill cloth and in  fact  it was  levied  " to mop off those extra profits  ".  When  the prices fall down it is not unlikely that the excise duty may be  reduced.  In any case the obligation to pay excise  duty or  to  contribute to the insurance scheme,  though  perhaps relevant, may not have a material bearing on the framing  of the scheme of gratuity.  Then, as to the bonus shares, it is not   right  to  contend  that  the  industrial  court   has attributed  undue  importance  to them.   All  that  it  has observed  is  that  the issue of bonus  shares  by  a  large majority  of the mills in addition to good dividends  during the  war and post-war period is an index to  the  prosperity enjoyed by the cotton textile industry in Ahmedabad.  In our opinion,  no criticism can be made against  this  statement. In  this connection it may perhaps be pertinent  to  observe that the statutory ceiling placed on the agent’s  commission may in due course assist the mills to some extent in meeting their liability under the scheme. The  last argument urged against the validity of the  scheme is  based  on  the  assumption  that  in  working  out   the preliminary figures before framing the scheme the industrial court has committed an error.  What the industrial court has done is to take the information collected by the Association on  the earlier occasion, to compare it with  the  statement prepared  by  the respondent, and to make a  rough  estimate about  the  extent  of the industry’s  liability  under  the scheme.  In considering these statements it is important  to emphasise that the Association’s calculations have been made not  on  the  basis of basic pay but on  the  basis  of  pay including  dearness allowance, and that naturally  has  made considerable, additions to the 349 amounts involved.  The scheme framed is by reference to  the basic  wages.   This position is not  disputed.   The  other material  point which deserves to be mentioned is  that  the calculations   made  by  the  Association  proceed  on   the assumption  that most of the employees would seek to  retire from  employment  as  soon as they  complete  fifteen  years service.  Such an assumption seems to us to be not warranted at all.  It is common ground that employee,% generally  seek employment  in textile industry between 18 and 20 years  and the  age of superannuation is 60.  On an average  each  emp- loyee  would  work  35  to  40 years  and  so  it  would  be unrealistic  to make calculation on the basis that each  one of the employees retires as soon as he completes 15 years of service.   In the absence of better employment in  Ahmedabad it is quite likely that most of the employees would stick on to their jobs until the age of superannuation.  The  figures collated  are in respect of the years 1953, 1954  and  1955. They are collated in seven different columns, and ultimately the  percentages  of persons who retired  during  the  three respective  years  are  worked out as at  3.13%,  4.13%  and 3.84%.   The industrial court has observed that the  largest number of persons retired voluntarily on payment of gratuity because  there was an agreement between the Association  and the   respondent   whereby   the   respondent   agreed    to rationalisation  which  involved retrenchment  of  staff  on condition  that the surplus staff retrenched would be  given gratuity.  It also appears that the retired workmen included a number of employees who voluntarily resigned because  they had not completed 1,5 years of service and were not entitled to  gratuity.  It is on a consideration of all the  relevant facts that the industrial court came to the conclusion  that

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the  number  of  persons who would  have  been  entitled  to gratuity  under a normal gratuity scheme would probably  not have exceeded 2% of the labour force.  If it is assumed,  as we  think  it can be safely assumed, that on an  average  an employee  works  35 to 40 years with his employer  the  said percentage deduced by the industrial court cannot be said to be  erroneous.  Even so the scheme framed by the  industrial court has provided, inter alia, one month’s basic 45 350 wage  for  each  completed year of service  for  the  period before  the  coming into force of the  Employees’  Provident Funds  Act,  1952, and half-a-month’s basic  wage  for  each completed  year of service thereafter, subject to a  maximum of fifteen months’ basic wages to be paid to the employee or his heirs or executors or nominees as the case may be.  This provision  which  amounts  to a departure  from  the  Bombay scheme  of gratuity brings out the fact that the  provisions made  by the Employees’ Provident Funds Act have  been  duly taken  into  account  by  the  industrial  court.   We  are, therefore,   satisfied  that  the  scheme  framed   by   the industrial  court  does not suffer from any  infirmities  as alleged by the appellants. The result is the appeal fails and is dismissed with costs. Appeal dismissed.