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TMI Blog2009 (2) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... any. Respondent No. 1 company is engaged in business of managing and running hotels. They have hotel in the name and style of ITC Kakatiya Sheraton , which is being run by the ITC Hotels Ltd., which is another company incorporated under the Companies Act. The said hotel is registered under the provisions of the Shops Act. The appellant is the Union of employees and workers of the said hotel. Assistant Labour Officer, respondent No. 4 herein, visited the hotel at the instance of the appellant Union on 31.5.2001 and as required by him, the respondent Nos. 1 2 furnished information regarding the employees, who had left the service of the hotel during last 2-3 years, as also the amounts paid to them towards full and final settlement of the dues. The respondent company, by letter dated 6.8.2001, also furnished the receipts signed by the employees who had left the hotel in token of the amounts received by them. It seems that, thereafter, there was lot of correspondence between the respondent No. 1 company and respondent No. 4 Assistant Labour Officer on the issue, whereby, the Assistant Labour Officer was insisting upon the respondent Company to furnish the final settlement statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislative history thereof. 6. The Andhra Pradesh Shops and Establishments Act (Act No. 15 of 1966) (hereinafter referred to as `the 1966 Act') came on the anvil in the year 1966. Section 40 of the 1966 Act provided for conditions for terminating the service of an employee, as also the payment of gratuity to him. This provision came to be amended in the year 1976 by reason of Act No. 53 of 1976, however, the said Act was repealed by the present Act of 1988. The present Act of 1988 provides for conditions of terminating the services of an employee and payment of service compensation for termination, retirement, resignation etc. In short, Section 40 of the 1966 Act and Section 47 of the 1988 Act are pari-materia Sections. It will be better to compare the unamended Section 40, that existed from 1966 till its amendment in 1976, secondly, the amended Section 40 of the 1966 Act as amended by Act No. 53 of 1976 and Section 47 of the present 1988 Act, more particularly, sub-Sections 3, 4 and 5 thereof, as they stood on the date of petition. The following tables would succinctly bring out the qualitative changes made in the texture of the said Section. At the same time, they wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n employee who has completed the age of sixty years or who is physically or mentally unfit having been declared by a medical certificate, or who wants to retire on medical grounds or to resign his services, may give up his employment after giving to his employer, notice of at least one month in the case of an employee of sixty years of age, and fifteen days in any other case; and every such employee and the dependant of an employee who dies while in service, shall be entitled to receive a gratuity as provided in sub-Section (1). He shall be entitled to receive the wages from the date of giving up the employment until the date on which the gratuity so payable is actually paid subject to a maximum of wages for two months amounting to fifteen days' average wages for each year of continuous employment calculated in the manner provided in the explanation to sub-Section (1). He shall be entitled to receive the wages from the date of giving up the employment until the date on which the gratuity so payable is actually paid subject to a maximum of wages for two months. Section 47(3), (4) and (5) of A.P. Shops and Establishments Act, 1988:- Conditions for terminating the service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n so payable is actually paid. 5 The payment of service compensation under this Section shall not apply in cases where the employee is entitled to gratuity under the payment of Gratuity Act, 1972 and gratuity has been paid accordingly consequent on the termination or cessation of service. At this juncture, it will be necessary to see definitions in the amended Act. Section 2 gives definitions in the Act. 2(5): `Commercial establishment' means an establishment which carries on any trade business, profession or any work in connection with or incidental or ancillary to any such trade business or profession or which is a commercial or trading or banking or insurance establishment and includes an establishment under the management and control of a co-operative society, an establishment of a factory or an industrial undertaking which falls outside the scope of the Factories Act, 1948 (Central Act 63 of 1948), and such other establishment as the Government may, by notification, declare to be a commercial establishment for the purposes of this Act but does not include a shop'. 2(8) `employee' means a person wholly or principally employed in and in connection with an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of the preceding twelve months; (c) such other establishments or class of establishments in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government, may, by notification, specify in this behalf. 3A. A shop or establishment to which this Act has become applicable shall continue to be governed by this Act, notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten. 4. Payment of gratuity:- (1) 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. provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement. xxx xxx xxx (2) 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 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages. It was urged that the provisions of Sections 47(3) and 47(4) were applicable only to those employees, who were not governed by the Payment of Gratuity Act. It was pointed out that the provisions of Payment of Gratuity Act were applicable only to those employees, who had completed minimum of 5 years of service, while the provisions of the impugned sub-Sections (3) and (4) of the Shops Act would be applicable to the employees, who had served even less than 5 years. According to State, this was a reasonable classification, having a nexus with the purpose for which the provisions were brought into existence. It was stated further that considering objects and reasons of the Shops Act, it was apparent that there was no conflict between the Payment of Gratuity Act and the Shops Act. It was also urged that since the number of employees in a shop, governed by the Shops Act could be limited to one or two persons and their services also might not continue for a long period, therefore, in order to help such employees, a special provision was made considering such employees as a separate class. Section 47(4) was sought to be saved on the logic that it was nothing, but a concept of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adictions that the Shops Act was applicable to the administrative offices of the factories and the employees working therein. While the employee working in the factory would be eligible for gratuity only after rendering five continuous years of meritorious service, the employees working in the administrative office adjacent to the said factory, would, however, be eligible for service compensation under Section 47(3) by merely rendering one year's service. The High Court then held that the service compensation was nothing, but a gratuity. Considering the meaning of the word gratuity , the High Court found that the service compensation was nothing, but the gratuity, which was payable to the employee as a gift or reward for rendering long and continuous service. It also found that a mere service of one year or so could not be viewed as a long and continuous service, so as to entitle the employee to earn the service compensation or in other words, the gratuity . The High Court took into consideration the provisions of the Gratuity Act and found that the minimum period of service therein was five years, as also for the Government servants of the State, the minimum qualifying peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, were not entitled to get any benefits under the impugned provisions. Thus, the High Court specifically found the two provisions, viz., 47(3) and 47(4) to be unreasonable. These provisions and more particularly, Section 47(4) was found to be contrary to the basic principles of service jurisprudence. The High Court ultimately allowed the Writ Petition. It is this judgment, which has fallen for our consideration in the present appeal. 11. The Learned Counsel for the appellant firstly pointed out that impugned Sections 47(3) and 47(4) are constitutionally valid and suffer from no infirmity. He secondly urged that as has been done by the High Court, the legislation cannot be struck down on the ground of mere hardship. His third contention was that the High Court had resorted to the comparisons between two legislations by two different legislatures while deciding upon the constitutionality of the aforementioned provisions, which was not permissible. The Learned Counsel fourthly urged that merely because the lesser period for the purpose of grant of service compensation was provided, it did not impinge upon constitutionality and it was perfectly permissible for the legislature to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so in Bakshish Singh Vs. Darshan Engineering Works Ors. (cited supra) that the High Court had properly tested the impugned provisions and showed as to how the fundamental rights of the respondent Nos. 1 2 under Article 14 and 19(1)(g) were violated. The Learned Senior Counsel pointed out that the finding of the High Court was that there was no evidence placed before it regarding the material placed before the President for obtaining the consent. Lastly, the Learned Senior Counsel pointed out that after decision in case of Suryapet Market Cooperative Society Vs. Munsif Magistrate, Suryapet and Ors. (cited supra) by the Division Bench of the High Court, striking down Section 47(3) of the Shops Act, mere cosmetic changes were brought about in the fresh legislation, which was impermissible for the legislature. 13. We shall collectively consider the arguments. The High Court has quoted from the judgment of this Court in Express Newspapers Vs. Union of India (cited supra), more particularly, from paragraph 205, which is the final verdict of this Court in that case, but before that also, in paragraph 198, it is observed:- 198. When we come, however, to the provision in regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny law imposing in the interest of the general public, reasonable restrictions on the exercise of the said rights. Wherever a statute is challenged as violative of the fundamental rights, its real effect or operation on the fundamental rights is of primary importance. It is the duty of the Court to be watchful to protect the constitutional rights of a citizen as against any encroachment gradually or stealthily thereon. When a law has imposed restrictions on the fundamental rights, what the Court has to examine is the substance of the legislation without being beguiled by the mere appearance of the legislation. The legislature cannot disobey the constitutional mandate by employing an indirect method. The Court must consider not merely the purpose of the law, but also the means how it is sought to be secured or how it is to be administered. The object of the legislation is not conclusive as to the validity of the legislation............ The Court must lift the veil of the form and appearance to discover the true character and the nature of the legislation and every endeavour should be made to have the efficacy of fundamental right maintained and the legislature is not invested with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on can be held to be reasonable. It is undoubtedly an unreasonable inroad on the fundamental right of the respondent (petitioner before the High Court) under Article 19(1)(g) of the Constitution of India. 14. As if this is not sufficient, we find from the definitions of Commercial Establishment and Establishment under the Shops Act that there are always two sets of employees in an establishment, being administrative or clerical and technical employees. While the factory owner would be required to pay the gratuity to the employee working in the factory only on his completing five years of continuous service, in case of the employee working on the administrative or clerical side of the factory or in the office, which may be in the same premises where the factory is situated, merely one year of service or even lesser than that, would be sufficient and the factory owners would have to pay the gratuity or the service compensation, as the case may be, to such person. Thus, the provision is clearly discriminatory and unreasonable. One look at the definition of Commercial Establishment would convince that the inclusion of an establishment of a factory or an industrial undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that the concept of gratuity had undergone metamorphosis over the years. This Court further recognized that though gratuity meant payment, gift or a boon made by the employer to employee in industrial adjudication, it was considered as a reward for long and meritorious service and the payment of gratuity depended upon duration and the quality of service rendered by the employee. The Court further observed that at a later stage in the industrial jurisprudence, the gratuity came to be recognized as a retiral benefit in consideration of the service rendered and the employees could raise an industrial dispute for introducing the concept of gratuity as a condition of service. The Court also went on to observe that such payment of gratuity depended on various factors like financial stability and capacity of the employer, the service conditions prevalent in the industry and the region, availability of the other retiral benefits and the standard of other service conditions. The Court very specifically observed that the quantum of gratuity was determined by the said factors. The Court then made observations that the minimum qualifying service for the entitlement to the gratuity or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or even to the lesser period, a qualifying service would, in our opinion, be absurd and was rightly rejected by the High Court. Therefore, it cannot be said that in all the circumstances, it is permissible for the legislatures to prescribe a lesser period. We can understand the period being a lesser, but not to the extent of non-existent period of one year or as the case may be, six months, as provided in Section 47(3), which would not amount to reasonable period for the entitlement to get the gratuity. Such provision is, therefore, obviously, unreasonable. The contention of the Learned Counsel for the appellant is, therefore, rejected. 17. At the same time, insofar as Section 47(4) is concerned, the provision is per se unreasonable. We have already quoted Section 40(3) of the 1966 Act in the earlier part of the judgment. We, therefore, do not reproduce the Section here. It is to be remembered that this Section was found to be unconstitutional in the earlier judgment of the Division Bench in case of Suryapet Market Cooperative Society Vs. Munsif Magistrate, Suryapet and Ors. (cited supra) and the said judgment had become final. The Section is clearly comparable to Section 47(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 and 51 to point out reasons for not being able to have complied with Section 47(3), the Section does not become a valid Section, particularly, when the identical provision was found to be unconstitutional in case of Suryapet Market Cooperative Society Vs. Munsif Magistrate, Suryapet and Ors. (cited supra), which judgment had become final. We, therefore, cannot accept that Section 47(4) is a valid piece of Legislation. This is apart from the fact that this provision is also capable of being abused or misused by an employee, who may bring out a situation to avoid accepting the payment of gratuity, so as to be able to claim later the wages of the interregnum period. 18. It was argued by the Learned Counsel for the appellant that there could not have been a comparison between the provisions of Payment of Gratuity Act and the present provisions, while deciding the constitutionality. For this purpose, the Learned Counsel relied on the law laid down by this Court in State of M.P. Vs. G.C. Mandawar reported in 1955(1) SCR 599. The following observations in that case were relied upon:- Article 14 does not authorize the striking down of a law of one State on the ground that in cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, unable to accept the submission of the Learned Counsel for the appellant that the High Court proceeded on to decide the constitutionality on the basis of a comparison. We do not, therefore, see how the aforementioned judgment in State of M.P. Vs. G.C. Mandawar reported in 1955(1) SCR 599 (cited supra) can be of any application and help to the present case. 19. A further criticism was leveled by the Learned Counsel for the appellant that the High Court had struck down the provisions only on the grounds of hardship and that was not permissible. Learned Counsel relied on a decision in Prafulla Kumar Das Ors. Vs. State of Orissa Ors. reported in 2003 (11) SCC 614 and our attention was invited to paragraph 45 thereof. Learned Counsel also relied on another decision in R.N. Goyal Vs. Ashwani Kumar Gupta Ors. reported in 2004 (11) SCC 753, particularly on the observations made in paragraph 5, as also the decision in Government of Andhra Pradesh Vs. P. Laxmi Devi reported in 2008 (4) SCC 720. Insofar as the last decision is concerned, we do not see as to how it helps the appellant, as in that decision, this Court has recognized the presumption of constitutional validity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent cadre with the Orissa Administrative Service, Class II. The argument was raised that such grant of seniority would amount to a hardship to the petitioners in the matter of seniority. The Constitution Bench of this Court thoroughly examined the provisions of Section 2 of the Amendment Act with reference to the earlier cases decided on the question and came to the conclusion that it was disinclined to temper with the settled practice, particularly, in view of the law laid down in Direct Recruit Class II Engg. Officers' Assn. Vs. State of Maharashtra reported in 1990 (2) SCC 715. It was found that the concept of the year of allotment was workable and it was within the powers of the Government to recruit the officers from variety of sources. It was also found that the seniority awarded was on the basis of a legal fiction, which had to be given its full effect. It was in that context that the observations regarding hardship were made. We are afraid, the fact- situation in the present case is entirely different and the observations made are not applicable to the present matter. We, therefore, reject the argument raised by the appellant. This is apart from the fact that the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The High Court then went on to hold that the instant case would stand on the worse footing, as factually, it would not be disputed that the employees had left the services and those who abandoned the service voluntarily, had not been heard of for a few years. It was noted by the High Court that if the provisions of Sections 47(3) 47(4) are held valid, then such persons who had voluntarily abandoned the service, would be taking the advantage of their own wrong, particularly, in relation to Section 47(4). The High Court also further observed that the union could not have taken the cause of the persons, who had abandoned their services. 23. The impugned judgment is a complete answer to the question raised regarding Article 254(2). There can be no doubt that both the Central Act and the impugned State Act operate in the same field in as much as, the service compensation is nothing, but the gratuity , though called by different name. Under such circumstances, unless it was shown that while obtaining the Presidential assent for the State Act, the conflict between the two Acts was specifically brought to the notice of the President, before obtaining the same, the State cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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