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PETITIONER: WORKMEN OF METRO THEATRE LTD., BOMBAY

       Vs.

RESPONDENT: METRO THEATRE LTD., BOMBAY

DATE OF JUDGMENT31/07/1981

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. VARADARAJAN, A. (J)

CITATION:  1981 AIR 1685            1981 SCC  (3) 596  1981 SCALE  (3)1125

ACT:      Labour  legislation-Retrospectivity   of   the   award- Discretion to make the Award with retrospective effect vests with the  Tribunal under  section 17A(4)  of the  Industrial Disputes Act,  1947-Linkage of  dearness allowance with some rational principle  Cost of  living index and consumer price index principle  or on the normal principle of industry-cum- region should  be uniform  and desirable in one and the same industry-Payment  of   Gratuity  Act,   section   4(5)-Award includes any  Award that  would be  made by  an  adjudicator wherein better  terms of  gratuity could  be granted  to the employees if the facts and circumstances warrant such grant.

HEADNOTE:      The wages  and gratuity of the workers of Metro Theatre were governed by an earlier award in Reference No. 1 of 1968 published in  3-7-1969 which  was effective  from  1-1-1967, while dearness  allowance  was  governed  by  the  award  in Reference No.  440 of  1970 effective  from  1-1-1970.  Both these awards  were  duly  terminated  by  notice  and  fresh demands for  revision of  wage scales,  dearness  allowance, etc. effective  from 1-1-1974  were submitted by the workers Union to  the Management  on 15-4-1974. A reference (IT) No. 248 of 1975 was made on 10-7-1975 to the Industrial Tribunal which by  its award  dated September  22, 1977  published in Maharashtra Government  Gazette on  November 3, 1977 granted the revision  in wage  scales and  dearness  allowance  with effect from  1-1-1977. While  granting special leave against the impugned  award the  Court confined  the appeal to three points, namely:  (i)  retrospectivity  of  the  award:  (ii) linkage of dearness allowance to some rational principle and (iii)  construction  of  section  4(5)  of  the  Payment  of Gratuity Act, 1971.      Allowing the  appeal in  part on  the point of gratuity and remanding  to the Tribunal on the question of linkage of dearness allowance, the Court. ^      HELD:  1.   Under  section  17A(4)  of  the  Industrial Disputes Act,  1947 it  is a  matter of  discretion for  the Tribunal to  decide having  regard to  the circumstances  of each case  from  which  date  its  award  should  come  into operation and  no general  rule can  be laid  down as to the

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date from  which the  Tribunal should  bring its  award into force and  the Supreme  Court shall  not interfere  with the Tribunal’s order in that behalf unless substantial ground is made out  showing unreasonable  exercise or its part. In the instant case,  in the  absence of any material placed before the Tribunal  or even  before the  Supreme Court  by  either party as  to whether  the profits  earned by the Company for the years  1974, 1975  and 1976  had been  disbursed or were still available  with the  Company at the time of making the award,  a  factor  relevant  on  the  question  of  granting retrospectivity and  also in view of decreasing trend in the profits made  by the  Company during  the said  three years, according to  the Exhibit  U-5 marked by the appellant Union itself, presumably the Tribunal felt that it would be proper to give  the revision  in wage scales and dearness allowance only from 1-1-1977 onwards and not to give any retrsopective effect. [167 E-H, 168 A-C] 165      Wenger and  Co. and  others v.  Their Workmen,  1963 II L.L.J. 403: Bengal Chemical and Pharmaceutical Works Ltd. v. Its Workmen  and  Another,  1969  I  L.L.J.  751  and  Hydro (Engineers) (Pvt.) Ltd. v. Their Workmen, 1969 I L.L.J. 713, followed.      2. On  the question  of linkage  of dearness  allowance with some rational principle, uniformity is highly desirable in one  and the  same industry.  The very  same adjudicator, Shri B.B.  Tambe, yet  in other Reference (VA) No. 1 of 1979 dated  June   27,  1980  had  awarded  payment  of  dearness allowance linked  with the  cost living  index, while in the instant  case,   fixed  dearness  allowance  on  the  normal principle of industry-cum-region. [168 C, G-H, 169 A]      3:1. On  true  construction  of  section  4(5)  of  the Payment of Gratuity Act, the expression "award" occurring in the said  provision does  not mean and cannot be confined to "existing award"  but includes  any award that would be made by an  adjudicator wherein better terms of gratuity could be granted to  the employees  if the  facts  and  circumstances warrant such  grant. In the first place, there is nothing in the provision which limits the expression "award". Secondly, it cannot  be and  was not  that under the above provision a gratuity  scheme   obtaining  under  existing  agreement  or contract could  be improved  upon by  a fresh  agreement  or fresh contract  between the employer and the employee and if that be  so, there  is no  reason why the expression "award" should be  construed as  referring to  an existing award and not to  include a  fresh  award  that  may  be  made  by  an adjudicator or  an Industrial  Court improving  in favour of the employees  the scheme  obtained under  the  Act  or  the existing award.  Thirdly, the very fact that under the above provision better  terms of  gratuity could be obtained by an employee by  an agreement  or  contract  with  the  employer notwithstanding the  scheme of  gratuity obtaining under the Act clearly suggests that no standardisation of the gratuity scheme  contemplated   by  the   Act  was  intended  by  the Legislature. [171 D-H, 172 A]      3:2. It is true that the Payment of Gratuity Act enacts a complete  Code containing  detailed provision covering all essential features of the scheme for payment. But it is also clear that  scheme envisaged  by the  enactment secures  the minimum  for  the  employees  in  that  behalf  and  express provisions are  found in the Act under which better terms of gratuity if  already existing  are not  merely preserved but better terms  could be  conferred on the employee in future. [172 A-C]      State of  Punjab v.  Labour Court  Jullundur  and  Ors.

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[1980] 1 S.C.R. 953, followed.      Alembic Chemical  Works Company  Ltd. v.  Its  Workmen, [1961] 1 L.L.J. 328, explained.      3:3. The phrase "under any award, agreement or contract with employer"  occuring in  section 4(5)  of the Payment of Gratuity Act  is intended  to cover future awards agreements or contracts  with the  employer since existing better terms of gratuity  are intended  to be  protected by issuance of a notification under section 5 of the Act. [173 B-C] 166      [To maintain  uniformity and  to be  in conformity with the Award made by the same adjudicator in Reference (VA) No. 5 of 1970 M/s. Alankar and 39 others v. The Workmen employed under them,  the Court  directed that the gratuity scheme as set out  in paragraph 140 of that award be applicable to the workmen of Metro Cinema with effect from 1-1-1970.]

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1558 (L) of 1978.      Appeal by  special leave  from the  Award dated the 4th August, 1977  of the Industrial Tribunal Maharashtra, Bombay in Reference (IT) No. 248 of 1975 published in M.O.G. Part I (L) dated 3rd November, 1977.      C.L. Dudhia,  K.L. Hathi  and Mrs.  Hemantika Wahi, for the Appellant.      G.B. Pai, Manik A. Gagrat, G. Subramaniam, S.S. Shroff, D.P. Mohanty and T.R. Das, for the Respondents.      The Judgment of the Court was delivered by      TULZAPURKAR.  J.   This  appeal  by  special  leave  is directed  against  the  award  of  the  Industrial  Tribunal Maharashtra, Bombay,  dated September 22, 1977, in Reference (I.T.) No. 248 of 1975 in the industrial dispute between the respondent and  the workmen  employed by it and published in Maharashtra Government  Gazette on  November 3, 1977. Though the demands  made by the workers’ Union and the adjudication thereon by  the Tribunal  related to  items like wage scale, dearness allowance,  extra show allowance, gratuity, service conditions of non-permanent staff and retrospectivity, while granting special  leave this  Court confined  the appeal  to three points, namely, (i) retrospectivity of the award, (ii) linkage of dearness allowance to some rational principle and (iii) construction  of s.  4 (5)  of the Payment of Gratuity Act, 1972,  and leave was expressly refused in regard to the other grounds  mentioned in  the special leave petition. We, therefore, proceed  to deal  with the aforesaid three points on which  arguments were  advanced before  us by  counsel on either side.      It may  be stated  that prior to the impugned award the wages and  gratuity of  the workers  were  governed  by  the earlier award  in Reference  No.  1  of  1968  published  on 3.7.1969 which  was effective  from 1.1.1967  while dearness allowance was  governed by the award in Reference No. 440 of 1970 effective from 1.1.1970 Both these 167 awards were  duly terminated by notice and fresh demands for revision of  wage scales, dearness allowance, etc. effective from 1.1.1974  were submitted by the Union to the Management on 15.4.1974.  The Reference  to the  Tribunal was  made  on 10.7.1975 and by the impugned award the Tribunal granted the revision in  wage scales  and dearness allowance with effect from 1.1.1977.  Counsel for  the appellant  Union  contended that the  Tribunal erred  in not  granting the revision with

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effect from  1.1.1974 as  demanded and  at any rate the same should have  been granted  from 10.7.1975  being the date of Reference, especially  when the Tribunal found the financial capacity of  the respondent  very sound and admittedly there had been  a steep  rise in  the cost  of  living  index.  He pointed out  that  the  Tribunal  while  refusing  to  grant retrospective effect  had erroneously  observed  that  there will be  "too much  financial burden  on  the  company"  as, according to him, such additional burden could not have been more than Rs. 1,00,000/- or Rs. 1,20,000/- a year during the three  years   1974,  1975  and  1976.  In  support  of  his contention counsel  referred  to  three  decisions  of  this Court, namely,  Wenger and  Co. and others v. Their Workmen, Bengal  Chemical  and  Pharmaceutical  Works,  Ltd.  v.  Its Workmen and  another and  Hydro (Engineers)  (Pvt.) Ltd.  v. Their workman.      It is difficult to accept this contention and interfere with the  discretion exercised by the Tribunal in the matter which can  be  done  only  if  it  is  shown  to  have  been unreasonably exercised.  Under s.  17A(4) of  the Industrial Disputes Act,  1947 it  is a  matter of  discretion for  the Tribunal to  decide having  regard to  the circumstances  of each case  from  which  date  its  award  should  come  into operation and  no general  rule can  be laid  down as to the date from  which the  Tribunal should  bring its  award into force and this Court shall not interfere with the Tribunal’s order in  that behalf  unless substantial ground is made out showing unreasonable  exercise on  its part.  Even the three decisions cited  by  the  counsel  clearly  brings  out  the aforesaid position  in law.  The Tribunal  was deciding  the Reference in  August 1977  and though  the additional burden may not have been more than Rs. 1,00,000/- or Rs. 1,20,000/- per year  for  the  three  years  1974,  1975  and  1976  if retrospective effect  was given to the revision, no material was placed before the Tribunal by either party as to whether the profits  earned by  the Company for the said three years had been  disbursed or were still available with the company at 168 the time  of making  the  award-a  factor  relevant  on  the question of  granting retrospectivity.  Even  before  us  no light could  be thrown  on the  point by  counsel on  either side. Further  there was  on record  a statement showing the financial position of the company for the years 1968 to 1975 (year ending  being 31st  August) produced  by the appellant Union itself at Ex. U5 which clearly showed that the profits of the company before taxation and depreciation had dwindled consistently for the years 1973, 74 and 75, such profits for each of  the said  three years  being  Rs.  6,80,912/-,  Rs. 6,51,181/- and  Rs. 5,70,884/-. Presumably it was in view of such decreasing  trend in  the profits  made by  the company during the  three years that the Tribunal felt that it would be proper  to give  the revision in wage scales and dearness allowance only  from 1.1.1977  onwards and  not to  give any retrospective effect.  It cannot be said that the discretion has been unreasonably exercised by the Tribunal.      Coming to  the second  point  of  linkage  of  dearness allowance  with   some  rational   principle   the   Union’s contention before  the Tribunal was, and the same contention has been  reiterated by  the counsel  for the  Union in  the appeal-that the dearness allowance should be linked with the cost of  living index  and Consumers’ Price Index Number. It was pointed  out that  the Bombay  Working Class  Consumers’ Price Index  was 800  in 1970 (when the earlier award in the matter of  D.A. was  given), that  it had  gone upto 1372 in

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1977 and  that, therefore,  dearness allowance  on Index No. 999-1,000 should be fixed on 4 weekly basis with a variation for  every  ten  points  rise  or  fall.  But  the  Tribunal negatived the contention and fixed the dearness allowance on the normal  principle of industry-cum-region and only reason for not linking it to the cost of living index was that such linkage did  not  obtain  in  any  concern  falling  in  the category of  Cinema Exhibiting  Industry which  could not be compared with  manufacturing industries  like textile  where such linkage  operated.  Counsel  for  the  appellant  Union pointed out  that the  same adjudicator (Shri B.B. Tambe) as Sole Arbitrator  in Reference  (VA) No.  1 of  1979  in  the industrial dispute  between M/s Alankar Theatre and 38 other theatres of Bombay (cinemas falling in classes A-1, A, B and C) and  the workmen employed under them had made an award on June 27,  1980 (published  in Maharashtra Government Gazette on October  9, 1980)  wherein dearness  allowance  has  been linked with  the rise  in the  cost of  living index and the Consumers’ Price  Index Number.  The result has been that in Cinema Exhibiting Industry all the other 39 theatres will be paying to  their workers  dearness allowance linked with the cost of living index while 169 in the  case of  workmen of  Metro Theatre  these will be no such linkage  which would  be contrary  to normal uniformity which is  always desirable  in one and the same industry. We find considerable  force in this contention urged by counsel for the  appellant Union. On the other hand, counsel for the Company pointed  out that  the aforesaid award of Shri Tambe in Reference(VA)No.  1 of  1979 dated June 27, 1980 is under challenge before  the Bombay High Court in Writ Petition No. 79 of 1981 at the instance of the management and as such the question whether dearness allowance in the Cinema Exhibiting Industry should  be linked  with the cost of living index is still pending consideration before the High Court. Moreover, he urged  that there  are certain  peculiar features  of the Cinema Exhibiting  Industry by  reason of  which it would be inappropriate to  link the  dearness  allowance  payable  to worker in  that industry  with the cost of living index. For instance,  he   pointed  out,   that  unlike   manufacturing concerns. there is little scope for enhancing the profits in Cinema Exhibiting  Industry inasmuch as the principal source of income  being box-office collection the same is connected with  and  limited  by  the  seating  accommodation  in  any theatre. However,  notwithstanding this  limiting factor the same adjudicator  has granted  the linkage  in  case  of  39 cinema houses  in Bombay which shows that other factors must have weighed  with him  as outweighing this limiting factor. We are clearly of the opinion that uniformity on this aspect is highly  desirable in  one and the same industry. The main reason for  the refusal  to grant such linkage (i.e. linking the D-A.  with the  cost of living index) having disappeared the question  will have  to be  considered afresh. We do not think that  adequate and sufficient material is available on the record  of this  case before  us to  decide  this  issue satisfactorily. Further  it would not be advisable to direct the parties  before us  to intervene  in the  matter pending before the  High Court,  for, material which may be peculiar to Metro  Cinema may  have to  be  produced  and  considered before the  issue is properly decided. We, therefore, remand this issue  back to  the Industrial Tribunal for disposal in accordance with  law with  a  direction  that  the  Tribunal should give  opportunity to  both  the  parties  to  produce additional material and after hearing them should decide the same afresh.  It will be open to the management to raise all

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contentions including the contention that dearness allowance should not be linked with cost of living index but should be granted on  normal principle of industry-cum-region formula. We wish  to make it clear that in case the issue is answered by the  Tribunal in  favour of  the company,  the  appellant Union shall  not raise  any contentions  on the  quantum  of dearness allowance that has been 170 allowed by  the Tribunal  in  its  award  on  the  basis  of industry-cum-region formula,  for the  quantum aspect of the revision has  become final  by reason  of the  limited leave that was granted by this Court while admitting the appeal.      We shall next deal with the last question pertaining to the construction  of s. 4(5) of the Payment of Gratuity Act, 1972. The  question of  construction  arises  this  way.  It appears that  existing  scheme  of  gratuity  in  the  Metro Theatre Bombay  was as  per the award in Reference (IT No. 1 of 1968  and the  same had  been modified  by  an  agreement between  the   parties  in  this  Court,  which,  the  Union contended, had  become extremely  inadequate and  desired to have a  more beneficial  scheme  in  some  respect  for  its workers. Counsel for the Union urged that it was open to the Tribunal to give more benefits than were available under the scheme contemplated  by the  Act and in that behalf reliance was placed  on s.  4(5) of  the Act. Counsel for the Company contended  the  expression  ’award’  in  s.  4(5)  meant  an existing award  and as  such if  under  the  existing  award better terms  were given  to the employees these will not be affected. It  was also urged that the Act was exhaustive and was intended  to ensure  uniform payment  of gratuity to the employees throughout  the country. The Tribunal accepted the contention of  the Management  and held that it could not go beyond the  scheme contemplated  by the  Act, and, therefore directed that  the gratuity  scheme as  per  the  Act  shall prevail subject  to the  modifications arrived  at under the terms of settlement, if any, if they were more beneficial.      Counsel for the appellant Union urged before us that no standardisation of  any gratuity  scheme was contemplated by the Act  as was  clear from the express provisions contained in s.  4(5) and  s. 5  of the Act and that enactment being a beneficial piece  of legislation s. 4(5) should be construed in  favour   of  the  employees  and  that,  therefore,  the Tribunal’s view  that it could not grant anything beyond the scheme contemplated  by the Act was erroneous. In support of such construction  reliance was  placed  upon  this  Court’s decision in  Alembic Caemical  Works  Company  Ltd.  v.  Its Workmen where  a similar  provision under  the Factories Act was construed as conferring power on the Tribunal to fix the quantum 171 of leave  on a  scale more  liberal than the one provided by the Act. We find considerable force in this submission.      Section 4(1)  of the  Act provides  that  the  gratuity shall be  payable to  an employee  on the termination of his employment after  he has rendered continuous service for not less than  five years-(a)  on his  superannuation, or (b) on his retirement  or resignation,  or  (c)  on  his  death  or disablement due  to accident or disease; sub-s. (2) provides that for  every completed year of service or part thereof in excess of  six months, the employer shall pay gratuity to an employee at  the rate  of fifteen  days’ wages  based on the wages last  drawn by  the employee  and sub-s.  (3) provides that the amount of gratuity payable to an employee shall not exceed 20 months’ wages. This is the main scheme of gratuity contemplated by  the Act.  Then comes  sub-s. (5) which runs

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thus:           "5. Nothing in this section shall affect the right      of an  employee to  receive better  terms  of  gratuity      under any  award or  agreement  or  contract  with  the      employer."      The question  for consideration  is whether  expression ’award’ occurring  in the  above provision means an existing award or would include any award whatsoever to be made by an adjudicator under  the Industrial Disputes Act. In the first place there  is nothing  in the  provision which  limits the expression ’award’.  Secondly, it cannot be and was not that under the  above provision a gratuity scheme obtaining under an existing  agreement or contract could be improved upon by a fresh agreement or fresh contract between the employer and the employee  and if  that be  so there is no reason why the expression ’award’  should be  construed as  referring to an ’existing award’  and not  to include a fresh award that may be made  by an  adjudicator or an Industrial Court improving in favour  of the  employees the  scheme obtaining under the Act or the existing award. Thirdly, the very fact that under the above  provision  better  terms  of  gratuity  could  be obtained by  employee by  an agreement  or contract with the employer notwithstanding  the scheme  of gratuity  obtaining under the  Act clearly  suggests that  no standardisation of the gratuity  scheme contemplated by the Act was intended by the Legislature.  This also  becomes amply  clear  from  the provisions of  s. 5  which confer power upon the appropriate Government to  exempt establishment to which the Act applies from operation  of the  provisions of  the  Act  if  in  its opinion the  employees in such establishment, are in receipt of gratuity  benefits  not  less  favourable  than  benefits confer- 172 red under  the Act.  Therefore, on  true construction we are clearly of the view that the expression ’award’ occurring in the above provisions does not mean and cannot be confined to ’existing award’  but includes  any award that would be made by an  adjudicator wherein better terms of gratuity could be granted to  the employees  if the  facts  and  circumstances warrant such  grant. It  is true,  as has  been observed, by this Court  in State of Punjab v. Labour Court Jullundur and Ors. that the Act enacts a complete Code containing detailed provisions covering all essential features of the scheme for payment of  gratuity. But  it is  also clear that the scheme envisaged by  the enactment  secures  the  minimum  for  the employees in that behalf and express provisions are found in the Act  under which  better terms  of gratuity  if  already existing are  not merely preserved but better terms could be conferred on  the employee  in future.  In other  words, the view taken  by the  Tribunal that it could not go beyond the scheme of  gratuity  contemplated  by  the  Act  is  clearly erroneous.      The decision  of this  Court in  Alembic Chemical Works Limited (supra),  which was  under the  Factories Act,  also lends support  to such beneficent construction. In that case the Industrial  Tribunal had  fixed the  quantum  of  leave, privilege and sick, for the staff of a manufacturing concern on a  scale more  liberal than  the one  in  force  for  the operatives of  the same  concern.  In  also  made  necessary direction regarding  accumulation of such leave. The quantum of leave  so fixed  by the  Tribunal  was  larger  than  the quantum of leave prescribed under the provisions of s. 79(1) of the Factories Act. It was contended that s. 79 of the Act was exhaustive and had self contained provisions with regard to the granting of annual leave with wages to the employees,

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that it had the effect of introducing standardisation in the matter of leave and that no addition to the said leave could be made  either by  a contract  or by  an award.  This Court negatived the  said contention  on the  language of s. 79(1) itself. Additionally,  provisions of  s. 78 were relied upon which recognised  exemptions to  the leave  prescribed by s. 79(1). Section  78(1) provided  that provisions  of  Chapter VIII including  s. 79(1)  shall not operate to the prejudice of any  right to  which a  worker may be entitled "under any other law  or under  the terms  of any  award, agreement  or contract of service", and a proviso to this sub-section laid down that  when such award, agreement or contract of service provided for  longer annual  leave with  wages than provided under the 173 Chapter, the  worker shall  be entitled  only to such longer annual leave.  It was  contended that  the  expression  "any award" in s. 78(1) applied only to existing award. The Court negatived this  contention and  held that the contention was plainly inconsistent with a fair and reasonable construction of the said provision and that s. 78(1) protected not merely awards, agreements or contracts of service then existing but also those  that would  come into  existence later.  In  the instant case  also we  are clearly  of the  opinion that the phrase "under  any award,  agreement or  contract  with  the employer" occurring  in s.  4(5) is intended to cover future awards, agreements  or contracts  with  the  employer  since existing  better  terms  of  gratuity  are  intended  to  be protected by  issuance of  a notification  under s. 5 of the Act.      We may  also state  here that in the other adjudication done by  the same  adjudicator (Shri B.B. Tambe) as the Sole Arbitrator in  Reference (VA)  No. 1  of 1979  (M/s. Alankar Theatre and  38 other theatres v. The workmen employed under them) he has come to a contrary conclusion and has held that under s.  4(5) of the payment of Gratuity Act an adjudicator can  grant   better  terms  of  gratuity  and  has  actually proceeded to  grant better  terms of gratuity to the workmen employed in  all the  theatres concerned  in that Reference. (Vide para  140 of  the  Award).  Realising  this  position, counsel for  the company  before us fairly conceded that the employees in  the Metro  Cinema would  also be  entitled  to better terms  of gratuity-the  same as given to employees in other cinema  Houses. Counsel  for the  parties,  therefore, agreed before  us that  gratuity scheme  as set  out by Shri Tambe in  para 140  of his  award dt. 27-6-1980 in Reference (VA) No.  1 of  1979 should  apply to  the workmen  of Metro Cinema. We  accordingly, direct  that the gratuity scheme as set out  in paragraph  140  of  the  above  award  would  be applicable to  the workmen  of Metro Cinema with effect from 1.1.1977.      In the result the appeal is partly allowed on the point of gratuity  as indicated  above  and  on  the  question  of linkage the  appeal is remanded to the Tribunal for disposal according to  law as  directed above.  The appeal as regards retrospectivity is dismissed.      In the  circumstances the  parties will  bear their own costs. V.D.K.                         Appeal allowed in part. 174