http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: GENERAL MANAGER, E.I.D. PARRY (INDIA) LTD.

       Vs.

RESPONDENT: PRESIDING OFFICER, 2ND ADDL. LABOUR COURTMADRAS AND ORS.

DATE OF JUDGMENT02/05/1991

BENCH: MISRA, RANGNATH (CJ) BENCH: MISRA, RANGNATH (CJ) AHMADI, A.M. (J) SAHAI, R.M. (J)

CITATION:  1991 AIR 1544            1991 SCR  (2) 637  1991 SCC  Supl.  (1) 326 JT 1991 (2)   588  1991 SCALE  (1)844

ACT:      Industrial  Disputes Act, 1947: Sections  9-A,  33-C(2) Payment of Gratuity Act, 1972.      Labour Law--Company--General Office Order No. 26  dated 1.12.1943--Provision for ’Retiring Allowance’ (Pension)  and gratuity--Memorandum  of  settlement  between   Company  and workmen--Employees given option under the settlement  either for Gratuity  or Retiring allowance--Enforcement of Gratuity Act,  1972--Workers’ claim for retiring allowance  (Pension) in addition to gratuity--Held settlement had not substituted gratuity  for  pension--Employees held entitled  to  pension notwithstanding the settlement.

HEADNOTE:      The General Office Order No. 26 dated 1.12.1943 of  the Appellant-Company  provided  that employees with  30  years’ service  or  more  would be eligible  to  receive  "Retiring Allowance"  (pension).  The said office order also  provided that  all  permanent  employees who were  in  the  Company’s service  prior  to  1.1.1947  and who  do  not  qualify  for retiring  allowance  on  retirement, will  be  eligible  for gratuity  on finally leaving the Company’s  service  subject to  the  prescribed conditions being fulfiled.   In  1956  a memorandum  of  settlement  was signed  by  the  appellant- company  and the Employees’ Union under which the  employees in service prior to 1.1.47 were required to opt at the  time of  leaving  service either for gratuity or in lieu  of  the gratuity  the  retiring  allowance.   Later the  Payment   of Gratuity  Act  1972  came into force  and  the  payment  of gratuity  became statuory.  The employer and the  Employees’ Union  jointly applied to the Government for exemption  from the provisions the statue which was refused.      Some  of  the  retiring  employees  of  company   filed applications   under  Section  33-C(2)  of  the   Industrial Disputes Act, 1947 before the Labour Court claiming  pension by  alleging  that payability of pension was a  condtion  of service  and  the  employer  had  stopped  it  without   any Justification.   The Labour Court allowed the  applications. Against the-                                                     638

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

order  of the Labour Court the employer preferred  six  writ petitions.  In the meantime the same dispute was referred to the  Industrial  Tribunal  and  by  an  award  the  Tribunal answered   the   reference  against  the   employees.    The Employees’  Union  challenged the award by  filling  a  writ petition  in  the High Court.  All the writ  petitions  were heard  by  a  learned single judge of  the  High  Court  who allowed  the  writ petitions of the management  against  the order  of the Labour Court and dismissed the  writ  petition preferred  by the Labour Union challenging the award of  the Tribunal.   Writ  appeals were carried  against  the  single Judges’  decision.   The Appellate Bench of the  High  Court held  that gratuity provided under the settlement was not  a substitute of pension and the claim of pension was available to  employees  notwithstanding the  settlement.  Hence  this appeal by the employer-company.      Dismissing the appeals, this Court,      HELD: The 1956 settlement between the parties does  not provide  for payment of pension except to pre-1947  employees and  making the benefit liable to exercise of  option  under clause   6(d)  of  the  settlement.   The  retiral   benefit (pension) was payable to all qualfied employees as a  matter of practice.  If under the settlement that was not done away with, the benefit arising out of General Office order No. 26 would still be available and gratuity contemplated under the settlement would not be a substitute of the retiral  benefit of pension.  The Appellate Bench of the High Court was right in  holding  that the entitlement to pension  had  not  been substituted  by the settlement of 1956 and,  therefore,  the claim  to pension subject to qualification  being  satisfied was   available   to  be  maintained   notwithstanding   the settlement  of  1956.   The High Court rigtly  came  to  the conclusion that the Labour Court had justifiably worked  out the dues and the claim petition under section 33-C(2) of the 1947 Act. [641C-D, 642C-D]

JUDGMENT:      CIVIL  APPELLATE JURISDICTION: Civil Appeal Nos.  1450- 1458 of 1990.      From  the Judgment and Order dated 21.11.1988  of  the Madras High Court in W.A. Nos. 864 to 870 of 1988 and  W.P. Nos. 1600 and 1601 of 1986.      Narayanswamy, N. Balasubramaniam and A.T.M. Sampath for the Appellant.      M. Ramamurthy, Mrs. C. Ramamurthy, M.A. Krishnamoorthy,                                                   639 for the Respondents.      R.C. Paul appeared in person.      The Judgment of the Court was delivered by      RANGANATH  MISRA.  CJ.  These are  appeals  by  special leave  and  are directed against a common  judgment  of  the Madras High Court delivered in a group of writ appeals and a writ petition.      E.I.D.  Parry (India) Ltd. (hereinafter referred to  as ‘the  employer’) has one of its units located at Ranipet  in Tamil  Nadu State where sanitary-ware, super  phosphate  and insecticides   are  manufactured.   Some  of  its   retiring employees  filed applications under section 33-C(2)  of  the Industrial Disputes Act, 1947 (‘1947 Act’ for short)  before the Labour Court at Madras claiming pension by alleging that payability  of  pension was a condition of service  and  the employer  had  stopped  it  without  any  justification  and without  giving  notice under section 9-A of the  1947  Act.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

The  President Officer of the 2nd Additional  Labour  Court, Madras, allowed the same by his order dated 30th May,  1983, after  computing  the amounts.  The employer  preferred  six writ  petitions.  In the meantime the same dispute had  been referred  to  the Industrial Tribunal and  it  answered  the reference   against  the  employees  by  award  dated   13th February,  1985.   The award was assailed  before  the  High Court  by the Union by filing of the seventh writ  petition. All the seven writ petitions were heard by a learned  Single Judge  who  allowed  the writ petitions  of  the  management against the order of the Labour Court and dismissed the writ petition preferred by the labour union challenging the award of  the  Industrial  Tribunal.  Writ  appeals  were  carried against the Single Judge’s decision.      The  main controversy before the Division Bench was  as to  whether  pension, or as is referred to by  the  parties, "retiring  allowance"  was payable to the  employees.   This dispute  has  a  historical backdrop to  which  we  may  now advert.   Under  General  Office  Order  No.  26  dated  Ist December, 1943 "retiring allowances" were provided for.  The Office  Order  provided that normally  only  employees  with thirty  years’ service or more would be eligible to  receive "Retiring Allowance".  The Board reserved the right to alter the  scale of "retiring allowance".  either generally or  in respect  of  individual employees and had the  authority  to sanction   ‘retiring  allowance’  when  first  granted   and subsequent payment became a routine matter subject to annual review.                                                    640      Gratuities were also provided under the Office Order by saying that all permanent employees (other than workers  who qualify  for  gratuities as per Factory  Certified  Standing Order)  who were in the Company’s service prior to  1.1.1947 and who do not qualify for Retiring Allowance on retirement, will  be  eligible  for  gratuity  on  finally  leaving  the Company’s service subject to one or other of the  prescribed conditions  being fulfilled.  In all four alternatives  were provided.  Clause (4) indicated that employees recruited  on or after 1.1.1947 would not be entitled  to any gratuity.      There  was  a  Memorandum  of  Settlement  between  the parties which may be referred to as the settlement of  1956. Clause (6) thereof related to gratuity and provided:          "Gratuity shall in future be payable by the company          in accordance with the following rules:          (a)(i)  Where,  irrespective of the length  of  his          past  service, an employee dies in service,  or  is          retired on a medical certificate acceptable to  the          company,  or is retired by the company on  reaching          the age of superannuation, he shall be entitled  to          gratuity  calculated  at the rate  of  one  month’s          basic  salary for each completed year  of  service,          and  pro rata for any partly completed year of  his          service  ,subject to a maximum of 15 months’  basic          salary  if  his  service is  less  than  30  years,          together with half of one month’s basic salary  for          each  completed  year of service in  excess  of  30          years and pro rata for any partly completed year of          service in excess of 30 years...............          (d) Employees in service prior to Ist January, 1947          may  opt,  at the time of leaving  service,  either          for:               (i)  Gratuity  calculated in  accordance  with          these  rules  or  in accordance  with  the  current          provisions   of  General  Office  Order   No.   26,          whichever he prefers, or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

             (ii) in lieu of gratuity, a retiring allowance          calculated   in   accordance   with   the   current          provisions of General Office Order No. 26." This settlement as a fact incorporated the relevant part  of the Office Order.                                                   641      The Payment of Gratuity Act came into force with effect from   September,  1972  and  payment  of  gratuity   became statutory.  When that Act came into force, the Employer  and the Employees ’ Union jointly applied to the Government  for exemption from the provisions of the statute.  The exemption was,  however, not granted.  Payability of  gratuity  is  no longer  in dispute.  What is challenged is the claim of  the workmen to retiring allowance (pension) under Office   order No.  26.   The  stand of the employees  has  been  that  the retiring  allowance under General Office  Order No.  26  has not  been substituted by the 1956 settlement and  they  are, subject  to  being  qualified, entitled to  the  benefit  of pension  and the statutory advantage of gratuity.  It  is  a fact  that  the settlement does not provide for  payment  of pension except to pre-1947 employees and making the  benefit liable to exercise of option under clause 6(d) above.  It is not  in  dispute  that the  retiral  benefit  (pension)  was payable to all qualified employees as a matter of  practice. If  under  the settlement that was not done away  with,  the benefit  arising out of General Office Order No.   26  would still  be  available  and gratuity  contemplated  under  the settlement would not be a substitute of the retiral  benefit of pension.      The  Appellate Bench of the High Court has  found  that gratuity provided under the settlement was not a  substitute of  pension.   Mr.  Narayanaswamy,  learned  senior  counsel appearing  in  support of the appeals took  us  through  the various  documents  and placed the  matter  at  considerable length  and  with  lucidity.   He even  relied  on  what  he described as the prevailing practice between 1956 and  1972- the settlement and the Gratuity Act-when no retiral  benefit was either claimed or paid.  We have, however, not been able to  see  any defect in the reasoning of the  Division  Bench decision  of the High Court where it has ultimately come  to the  conclusion  that  the settlement  had  not  substituted gratuity  for  pension.  We find that by way of  an  interim measure  this  Court  by an order dated 5th  May,  1989  had directed the employer to pay the pension to the employees in accordance with the order of the High Court with effect from Ist May, 1989 and that from the record appears to have  been paid.      A petition had been filed in this Court on 23rd  April, 1990  by  the  employer for modification  of  the  condition indicated  in  the order granting special leave and  we  had heard  counsel for both the sides on the said petition.   We had  made  it  clear  at the hearing  of  the  petition  for modification  of the order granting special leave  that  the question  as to payability of retirement benefit  after  the 1956  settlement  would be examined.  The  total  number  of employees involved in this dispute was                                                        642 about  347.  Many of them had not only retired but had  also died  and  in respect of those who were dead it would  be  a question  of  the benefits up to the date of  death  of  the respective   employees   to   be   paid   to   their   legal representatives.    Mr.   Narayanaswamy   had   emphatically contended that what was being decided was not a claim of 347 employees  but  it had its repercussion  on  the  industrial peace between the employer and the employee at other places.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

We  would like to make it clear that we have gone  into  the question  confined  to  the claim to the  employees  of  the Ranipet  factory  and  not the  liability  of  the  employer generally,  Besides, Mr. Narayanaswamy had also told  us  at the   hearing  that  there  are  special  features  in   the arrangement in regard to employees elsewhere.      We  are satisfied that the Appellate Bench of the  High Court  was right in holding that the entitlement to  pension had  not  been substituted by the settlement  of  1956  and, therefore,  the  claim to pension subject  to  qualification being    satisfied   was   available   to   be    maintained notwithstanding  the  settlement  of 1956,  The  High  Court rightly  came  to the conclusion that the Labour  Court  had justifiably  worked  out the dues and  the  claim  petitions under  section  33-C(2)  of the 1947  Act.   We  uphold  the judgment  of the High Court and dismiss these appeals.   The employees  had  asked for award of interest on  their  dues. The  challenge of the employer was not groundless and we  do not think in the facts of these cases the employees or their legal  representatives  would be entitled to  interest.   We hope  and  trust that the employer would not  liquidate  its liability  without  delay by satisfying the  orders  of  the Labour  Court and the claims of the workmen or  their  legal representatives as and when made.      A  sum of Rs. 10,000 had been given by the employer  to Sri  Pant for the Union to contest these matters and he  has been paid the amount under this Court’s order. No order  for further courts. T.N.A.                                    Appeals dismissed.                                                        643