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PETITIONER: THE GARMENT CLEANING WORKS

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 03/03/1961

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

CITATION:  1962 AIR  673            1962 SCR  Supl. (1) 711  CITATOR INFO :  R          1964 SC 864  (25)  R          1966 SC 305  (41)  R          1966 SC 732  (2)  NF         1967 SC1286  (12)  RF         1969 SC 182  (12)  R          1970 SC 919  (14,18,34,35,36)  E          1970 SC1421  (13,14,15)

ACT: Industrial   Dispute-Gratuity-Scheme  framed  by   Tribunal- Validity-The Industrial Disputes Act, 1947 (14 of 1947).  S. -12(5).

HEADNOTE: The  Industrial Tribunal, on a reference under S. 12 Of  the Industrial Disputes Act, 1947, framed a gratuity scheme  for the appellant company.  The company challenged the  validity of  some  of the provisions of the scheme  on  the  grounds, inter  alia, (1) that the scheme was framed on the basis  of the  units, while it should have been done on  industry-cum- region basis, (2) that the scheme provided for the award  of gratuity on the retirement or resignation of a workmen after ten  years’ service instead of fixing the period as  fifteen years, and (3) that cl. (ii)(b) of the scheme which provided that if a workman was dismissed or discharged for misconduct causing financial loss to the works, gratuity to the  extent of the loss should not be paid to the workman concerned, was erroneous,  because, on principle, misconduct put a blot  on the character/of his service and that disqualified him  from any claim of gratuity. Held:(1)  that  industry-cum-region basis is  not  the  only basis  on  which a gratuity scheme could be framed  and  one framed on the basis of the units cannot be challenged as in- valid. The  Bharatkhand  Textile  Manufacturing  Co.  Ltd.  v.  The Textile Labour Association, Ahmedabad, [1960] 3 S.C.R.  329, explained. (2)  that  the clause in the scheme prescribing  ten  years’ minimum  service to enable an employee to claim gratuity  is valid. The  Express Newspapers (P.) Ltd. v. Union of India,  [1959] S.C.R. 12, explained.

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(3)  that  gratuity is not paid to an employee  gratuitously or  merely as a matter of boon, but is paid to him  for  the service  rendered  by him to the employer;  consequently  he should not be wholly deprived of the benefit thus earned  by long and meritorious service even though at the end of  such service he might have been found guilty of misconduct  which entailed  his  dismissal.  Accordingly, cl. (ii)(b)  of  the scheme is a valid provision.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No 621 of 1960. Appeal.  by special leave from the Award dated  January  15, 1960,  of  the  Industrial Tribunal,  Bombay,  in  Reference (I.T.) No. 94 of 1959, 712 B.   Sen and I. N. Shroff, for the appellant. C.   L. Dhudia and K. L. Hathi, for the respondent. 1961.  April 3. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-Two demands made by the  respondents, the workmen  of  the  appellant company,  the  Garment  Cleaning Works, Bombay, were referred for industrial adjudication  to the  industrial  tribunal under s. 12(5) of  the  Industrial Disputes Act, XIV of 1947.  These demands were for  gratuity and provident fund respectively.  The tribunal has framed  a gratuity  scheme and has passed an order that the  appellant should  draw up a scheme of provident fund on the  lines  of the  model  provident fund scheme drawn  by  the  Government under  the  Employees’  Provident Funds Act,  1952  (XIX  of 1952),  with  a rate of contribution of 6 1/4 per  cent.  of total  wages.  Both the gratuity scheme as drawn up and  the directions  as to the drawing up of a provident fund  scheme are challenged by the appellant by its present appeal  which it has brought to this Court by special leave. In  regard  to the direction as to the gratuity  scheme  the argument  which has been urged before us by Mr. Sen is  that the  problem  of  starting such a scheme  should  have  been considered    on    an   industry-cum-region    basis    and considerations  relevant to the said basis should have  been taken  into  account.  In support of this  argument  he  has relied  upon  a judgment of this Court  in  The  Bharatkhand Textile  Mfg.   Co.  Ltd.  &  Ors.  v.  The  Textile  Labour Association,  Ahmedabad  (1).  In that case  the  industrial court  had no doubt dealt with a claim for gratuity made  by the workmen on the industry-cum-region basis, and an  attack against  the  validity  of the said  approach  made  by  the employer in regard to the scheme was repelled by this Court. It  would,  however,  be noticed that all  that  this  Court decided  in that case was that it was erroneous  to  contend that a gratuity scheme could never be based on industry-cum- region  basis,  and in support of  this  conclusion  several considerations were set forth in the (1)  [1960]3 S.C.R. 329. 713 judgment.  It is clear that it is one thing to hold that the gratuity scheme can in a proper case be framed on  industry- cum-region   basis,   and   another  thing   to   say   that industry-cum-region  basis  is  the  only  basis  on   which gratuity scheme can be framed.  In fact, in a large majority of  cases gratuity schemes are drafted on the basis  of  the units  and  it has never been suggested or  held  that  such schemes are not permissible.  Therefore the decision in  the case  of the Bharatkhand Textile Mfg.  Co. Ltd.(’) does  not support the proposition for which Mr. Sen contends.

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Mr.  Sen has then criticised some of the provisions  in  the gratuity  scheme.   Clause (ii) (a) of the  gratuity  scheme provides  that  on retirement or resignation  of  a  workman after  ten years’ service ten day’s consolidated  wages  for each year’s service should be awarded as gratuity.  Mr.  Sen quarrels  with this provision.He contends that  no  gratuity should  be  admissible under this clause  until  and  unless fifteen years’ service has been put in by the employee.   In support of this argument Mr. Sen has referred us to  certain observations  made by this Court in the case of The  Express Newspapers  (Private)  Ltd. & Anr. v. The Union of  India  & Ors.  (2). In that case the provisions of s. 5 (1)(a)  (iii) of  the  Working  Journalists (Conditions  of  Service)  and Miscellaneous Provisions Act, 1955 (45 of 1955), was  struck down  on  the  ground  that  its  provisions  violated   the fundamental right guaranteed by Art. 19(l)(g) The conclusion of  this Court was that the provision for gratuity  made  by the  said clause to an employee who had put in three  years’ service   imposes   an  unreasonable  restriction   on   the employer’s  right  to  carry on business  and  is  therefore liable to be struck down as unconstitutional.  Dealing  with that  provision this Court incidentally observed that  where the employee has been in continuous service of the  employer for a period of more than fifteen years he would be entitled to  gratuity  on his resigning his post.  Mr.  Sen  contends that this observation indicates that an employee who resigns his post cannot be entitled to any gratuity (1) [1960] 3 S.C.R. 329.        (2) [1959] S.C.R. 12, 154. 90 714 unless  he  has  put  in fifteen  years’  service.   In  our opinion,  the observation on which this argument is    based was not intended to lay down a rule of universal application in  regard  to all gratuity schemes, and so     it cannot be made the basis of an attack against a gratuity scheme  where instead of fifteen years’ service 10 years’ minimum  service is prescribed to enable an employee to claim gratuity at the rate  determined  if he resigns after  ten  years,  service. Therefore, we do not think that the provision of cl. (ii)(a) can be successfully challenged as being unreasonable. Clause  (iv)  is  then challenged by Mr.  Sen.  This  clause provides  that if a workman is dismissed or  discharged  for misconduct  causing financial loss to the works gratuity  to the  extent  of the loss should not be paid to  the  workman concerned.    Mr.   Sen  contends  that   this   clause   is inconsistent  with the principles on which  gratuity  claims are  generally  based.  Gratuity which is in the  nature  of retrial  benefit is based on long and  meritorious  service, and  the argument is that if the service of an  employee  is terminated on the ground of misconduct it would not be  open to  him  on principle to claim gratuity  because  misconduct puts  a  blot  on  the character of  his  service  and  that disqualifies  him  from  any claim  of  gratuity.   In  this connection   he  has  referred  us  to  the  definition   of ’retrenchment’  contained  in s. 2 (oo)  of  the  Industrial Disputes  Act.  Retrenchment, according to  the  definition, means,  inter alia, the termination by the employer  of  the service  of a workman for any reason  whatsoever,  otherwise than  as  a  punishment inflicted  by  way  of  disciplinary action.  Mr. Sen suggests that the retrenchment benefit  and gratuity  are  payments made to the employee for  a  similar purpose, and if dismissal of an employee for misconduct does not  entitle  him  to a claim for  retrenchment  benefit  so should gratuity be denied to him in case he is dismissed for misconduct.  A similar argument is based on the rules framed

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under the Employees’ Provident Funds Act, 1952.  Rule 71  of the  Provident  Funds  Scheme  Rules  provides  for  certain deductions  from  the  account of  a  member  dismissed  for Serious and willful misconduct.  By analogy 715 it  is  urged  that this rule also shows  that  a  dismissed employee is not entitled to gratuity.  We are not  impressed by these arguments. On  principle if gratuity is earned by an employee for  long and  meritorious service it is difficult to under,stand  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 lie may have  been  found  guilty  of misconduct  which  entails his dismissal.  Gratuity  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 necessarily  be  denied  to  him whatever may be the nature of misconduct for his  dismissal. Then, as to the definition of retrenchment in the Industrial Disputes  Act,  we  are  not  satisfied  that  gratuity  and retrenchment compensation stand exactly on the same  footing in  regard  to  the effect of misconduct on  the  rights  of workmen.   The rule of the provident fund scheme  shows  not that the whole provident fund is denied to the employee even if  he  is  dismissed  but  it  merely  authorises   certain deductions to be made and then too the deductions thus  made do  not revert to the employer either.  Therefore we do  not think  that  it would be possible to accede to  the  general argument that in all cases where the service of an  employee is terminated for misconduct gratuity should not be paid  to him.   It  appears  that in  awards  which  framed  gratuity schemes  sometimes simple misconduct is  distinguished  from gross  misconduct  and a penalty of forfeiture  of  gratuity benefit is denied in the latter case but not in the  former, but  latterly industrial tribunals appear generally to  have adopted  the rule which is contained in el. (ii) (b) of  the present scheme.If the misconduct for which the service of an employee  is  terminated has caused financial  loss  to  the works, then before gratuity could be paid to the employee he is  called upon to compensate the employer for the whole  of the financial loss caused by his misconduct, and after  this compensation is paid to the employer if any balance from the gratuity claimable 716 by  the employee remains that is paid to him.  On the  whole we  are  not satisfied that the clause thus  framed  by  the Industrial Tribunal in the present case needs to be revised. The  last  contention  raised by Mr. Sen in  regard  to  the gratuity  scheme  has reference to cl. (v)  of  the  scheme. This  clause provides that for calculating years of  service the  entire  service  of the workmen should  be  taken  into account.  Mr. Sen contends that though the word "continuous" has not been used either in cl. (v) or in clauses (i),  (ii) and (iii) we should make it clear that the service  referred to  in all the said clauses referred to continuous  service. This position is not disputed by Mr. Dudhia for the  respon- dents.  We would accordingly make it clear that the  service referred  to  in  clauses  (i), (ii)  and  (iii)  refers  to continuous service. That  takes  us  to the appellant’s  grievance  against  the direction issued by the Tribunal in regard to the framing of the  provident  fund  scheme  on  the  lines  of  the  model provident  fund  scheme  drawn  by  the  Government  in  the Employees’  Provident Funds Act.  Mr. Sen contends  that  in

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issuing  this  direction  the  tribunal  has  not   properly assessed  the extent of the financial obligation  which  the scheme  would  impose  upon the appellant  and  the  limited nature of its financial capacity.  It appears that when  the appellant  produced  its balance-sheet  and  other  relevant papers  it claimed privilege under s. 21 of  the  Industrial Disputes Act.  Inevitably the Tribunal could not discuss the figures  disclosed by the said books in its award though  it must  have  examined  the said figures  carefully.   In  the result the tribunal has naturally contented itself with  the general  observation  as to the financial  position  of  the appellant.  It has observed that the question to consider in framing  the provident fund scheme is whether  the  employer has  made  good  profits, whether  its  future  is  assured, whether  it  has  capacity to build  up  adequate  reserves. Having  thus posed the question the Tribunal ha,-,  come  to the  conclusion  that  the  appellant  satisfies  all  these requirements.  Mr. Sen contends that the                             717 tribunal  did  not  take  into account  the  fact  that  the appellant  has no reserve&, and that it had  borrowed  large loans.   We do not see how that would enable  the  appellant now  to  agitate a question which is purely  a  question  of fact.  Mr. Sen realised the difficulties in his way because, since  his  client had claimed the privilege of  s.  21  the Tribunal  was fully justified in not discussing the  figures in its award.  He, therefore, faintly suggested that we  may remand the case subject to any order as to costs that we may deem  fit  to make and ask the Tribunal  to  reconsider  the matter  in  the  light of the  relevant  documents,  and  he assured  us  that he would not claim privilege under  s.  21 after  remand.  This request is plainly untenable.   If  the appellant  wanted the tribunal to consider the  figures  and state  its conclusions in the light of the said  figures  in its award it need not have claimed privilege under s. 21  at the trial.  It is now too late to suggest that the privilege be  waived and that the matter be considered afresh  by  the tribunal or by us in the appeal.  Therefore we see no reason to  interfere  with the direction given by the  Tribunal  in regard to the framing of the provident fund scheme. The result is the appeal fails and is dismissed with costs. Appeal dismissed.