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TMI Blog1968 (9) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to. as D.C.M.; Swatantra Bharat Mills--which will be referred to as S.B.M.; Birla Cotton Mills-which will be referred to as B.C.M. and Ajudhia Textile Mills-which will be referred to as A.T.M. The D.C.M. and S.B.M. are under one management. On March 4, 1958, the Chief Commissioner of Delhi made a reference under ss. 10(1)(d) and 12(5) of the Industrial Disputes Act, 1947, relating to four matters in dispute, first of which is as follows: Whether a gratuity for retirement benefit scheme should be introduced for all workmen on the following lines and what directions are necessary in this respect ? 1. for service less than 5 years---Nil. 2. for service between 5-10 years--15 days' wages for every year of service. 3. for service between 10- 15 years--21 days' wages for every year of service. 4. for service over 15 years one month's wages for every year of service. The reference related to workmen only and did not apply to the clerical staff or mistries. There are two workmens' Unions in the Delhi region--the Kapra Mazdoor Ekta Union hereinafter called 'Ekta Union', and the other, the Textile Mazdoor Union. The Ekta Union made a claim pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 875/- 15 years .... ₹ 950/- 16 years .... ₹ 1,050/- 17 years .... ₹ 1,150/- 18 years .... Rs.. 1,250/- 19 years .... ₹ 1,350/- 20 years .... ₹ 1'500/- The scale of gratuity, it is clear, is independent of the individual wage scale of the workman. In the B.C.M. and A.T.M. units there are no such schemes. Till the year 1958 there were no standardised wages in the textile industry. According to the Report of the Central Wage Board for the Cotton Textile Industry which was published on November 22, 1959, there were in India 39 regions in which the textile industry was located. The basic monthly wages of the workmen in the year 1958 varied between ₹ 18/- in Patna and ₹ 30/- in various centers like Bombay, Indore, Madras, Coimbatore, Madurai, Bhiwani, Hissar, Ludhiana, Cannanore and certain regions in Rajasthan and Delhi. The Wage Board recommended in Paragraph-106 of its Report: The Board has come to the conclusion that an increase at the average rate of ₹ 8 per month per worker shall be given to all workers in mills of category I from 1st January 1960, and a further flat increase of ₹ 2 per mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt and recently again in Wenger Co. and others v. Their Workmen(2), and Indian Hume Pipe Company Ltd. v. Their Workmen([1959] II L.L.J. 830). It is held in these cases that although provident fund and gratuity are benefits available at retirement they are not the same ,and one can exist with the other , no serious argument was advanced that the existence of these additional benefits disentitled the workmen to obtain benefits under a gratuity scheme if the employer is able to meet the additional burden. But on behalf of all the employers it was, urged that ([1965] 1 L.L.J. 453) in determining the quantum of gratuity, basic wage alone could be taken into account and not the consolidated wage; and ([1963] II L.L.J. 403 ) it was necessary for the Tribunal to fix when introducing a gratuity scheme the age of superannuation. On behalf of the D.C.M., S.B.M. and B.C.M. it was urged in addition, that a uniform scheme applicable to the entire industry on the region-cumindustry basis should have been adopted and not a scheme or schemes applicable to individual units. On behalf of the A.T.M. it was urged that its financial condition is not and has never been stable and the burden of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Fund Trust. (ii) Provided further that the maximum payment to be made shall not exceed the equivalent of 15 months wages. (iii) Provided further that gratuity under this scheme will not be payable to any employee who has already received gratuity under the preexisting scheme of the Employees' Benefit Fund Trust. 2. On voluntary retirement or resignation after 15 years' service--15 days' wages for each completed year of service. Provided that the maximum payment to be made shall not exceed the equivalent of 15 months' wages. 3. On termination of service on any ground whatsoever except on the ground of misconduct As in clauses 1 (a) and 1 (b) above. Provided that the maximum payment to be made shall not exceed the equivalent of 15 months' wages. 4. Definitions: (a) 'Wages' The term wages in the scheme will mean the average of the basic wage plus the dearness allowance drawn during the 12 months next preceding death, incapacitation, voluntary retirements, resignation or termination of service and will not include overtime wages. (b) Basic wages The term basic wage will have the meaning as defined in paragraph 110 of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Medical Authorities out of a panel to be jointly drawn up by the parties. 10. Nomination (a) Each employee shall, within six months from the date of the publication of this award, make a nomination conferring the right to receive the amount of gratuity that may be due to him in the event of his death, before payment has been made. (b) A nomination made under sub-clause (a) above may, at any time, be modified by the employee after giving a written notice of his intention of doing so. if the nominee pre- deceases the employee, the interest of the nominee shall revert to the employee who may make a fresh nomination in respect of such interest. ANNEXURE 'B' Gratuity scheme applicable to the Birla Cotton Spg. Wvg. Mills and the Ajudhia Textile Mills. Gratuity will be payable to the employees concerned in this reference, on the scale and subject to the conditions laid down below:- 1. On the death o/an employee while in the service of the Mill company or on his becoming physically or mentally incapacitated for further service: (a) After 5 years continuous service and less than 10 years service---One-fourth month's wages for each competed year of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that reference to el. 7 is erroneous: it should be .to cl. 6.) The workmen and the management of the unit submitted an application before the Tribunal on December 28, 1959, admitting that there had been an overall settlement of all the pending disputes between the management of A.T.M. and its workmen represented by the two Unions, and requested that an interim award be made in terms of the agreement insofar as the dispute related to the A.T.M. No order was passed by the Tribunal on that application. On June 4, 1962, the Manager of the A.T.M. applied to the Tribunal that an interim award be pronounced in terms of the agreement. The workmen had apparently changed their attitude by that time and filed a written statement and requested that the ,prayer contained in paragraph 3 of the application be rejected as impermissible in law . The Tribunal made an order on November 26, 1962, and observed: ......the only interpretation that can be given to clause 11(4) of the settlement read with clause 7 is, that the workers of the Ajudhia Textile Mills had bound themselves not to claim any benefits that might be granted by the Tribunal in the award on the present reference, if it turns o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a net profit of ₹ 4.71 lakhs. The Tribunal observed that by 1961-62 all previous losses of the Unit were wiped out and that even during the year 1962-63 in which there was labour unrest the gross profits were substantial and taking into consideration the reserves built by the Company the picture was not disheartening and from the great progress that had been made since 1959-60 there was every reason to think that the Mill had achieved stability and reasonable prosperity and that it had an assured future , and the Company was in a position to meet the burden of a modest gratuity scheme. We see no reason to disagree with the finding recorded by the Tribunal on this question. On behalf of the D.C.M., S.B.M., and B.C.M. it was urged that normally gratuity schemes are framed on the region- cum-dustry principle, i.e., a uniform scheme applicable to all Units in an industry in a region is framed, and no ground for departure from that rule was made out. It was urged that this Court has accepted invariably the region-cum-industry principle in fixing the rates at which gratuity should be p.aid. In our judgment no such rule has been enunciated by this Court. In Bharatkhand Textil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Tribunal in the award under appeal observed: There are ..... certain peculiar features in the textile industry in this region which militate against an indnstry-cum- region approach. Apart from the fact that one of the four units, namely, the Ajudhia Textile 'Mills is a much weaker unit than the rest and has passed through a chequered career during its existence, it has to be borne in mind that two of the units namely D.C.M. and S.B.M. which axe sister concerns, already have some sort of a gratuity scheme providing for two important retiral benefits, namely, death and physical disablement on a scale which is independent of wage variations and is not unsubstantial at least for categories in the lower levels. The Tribunal further observed: if a common scheme is framed for the entire textile industry at Delhi i.e. for all the four units the quantum of benefits under that scheme will naturally have to be much lower in consideration of the financial condition of the Ajudhia Textile Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled upon to adjudicate on the question of fixation of gratuity: there is no .reference either expressly or by implication to the fixation of the age of superannuation and in the absence of any reference relating to the fixation of the age of superannuation, the Tribunal was not competent to fix the age of superannuation. A gratuity scheme may, in our judgment, be implemented even without fixing the age of superannuation. The gratuity scheme in operation in the D.C.M. and S.B.M. has been effectively in operation without any age of superannuation for the workmen in the two units. An enquiry into the question of fixing the age of superannuation did not arise out of the terms of reference. No such claim was made by workmen and' even in the written statement filed by the employers no direct reference was made to the fixation of the age of superannuation, nor was there any plea that before framing a gratuity scheme the Tribunal should provide for the age of superannuation. We agree with the Tribunal that fixation of the age of superannuation was not incidental to the ,framing of the gratuity scheme 'and it was neither necessary nor desirable that it should be fixed. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese four units should be made liable to pay gratuity computed on the consolidated wage i.e., basic wage plus the dearness allowance. The Tribunal was apparently of the view that in determining the question the definition of the word wages. in the industrial Disputes Act, 1947, would come to the aid of work-men. The expression wages as defined in s. 2(rr) of the Industrial Disputes Act means all remuneration, capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment or of work done in such employment and includes among other things, such allowances (including dearness allowance) as the workman is for the time being entitled to. But we are unable to hold that in determining the scope of an industrial reference, words used either in the claim advanced or in the order of reference made by the Government under s. 10 of the Industrial Disputes Act must of necessity have the meaning they have under the Industrial Disputes Act. Merely because the expression wages includes dearness allowance within the meaning of the Industrial Disputes Act, the Tribunal is not oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en granted to them by the employer voluntarily would not secure industrial peace. But on that account the Tribunal was not justified in introducing a fundamental change in the concept of a benefit granted to the workmen in the textile industry all over the country by numerous schemes., The appropriate remedy is to introduce reservations protecting benefits already acquired and to frame a scheme consistent with the normal pattern prevailing in the industry. We consider it fight to observe that in adjudication of industrial disputes settled legal principles have little play: the awards made by industrial tribunals are often the result of ad hoc determination of disputed questions, and each determination forms a precedent for determination of other disputes. An attempt to search for principle from the law built up on those precedents is a futile exercise. To the Courts accustomed to apply settled principles to facts determined by the application of the judicial process, an essay into the unsurveyed expanses of the law of industrial relations with neither a compass nor a guide, but only the pillars of precedents is a disheartening experience. The Constitution has however invested th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have in course of time acquired a right to gratuity on determination of employment provided the employer can afford having regard to his financial condition, to pay it. There is undoubtedly no statutory direction for payment of gratuity as it is in respect of provident fund and retrenchment compensation. The conditions for the grant of gratuity are, as observed in Bharatkhand Textile Mfg. Co. Ltd.'s case([1960] 3 S.C.R. 329), (i) financial capacity of the employer; (ii) his profit making capacity; (iii) the profits earned by him in the past; (iv) the extent of his reserves; (v) the chances of his replenishing them; and (vi) the claim for capital invested by him. But these are not exhaustive and there may be other material considerations which may have to be borne in mind in determining the terms and conditions of the gratuity scheme. Existence of other retiring benefits such as provident fund and retrenchment compensation or other benefits do not destroy the claim to gratuity: its quantum may however have to be adjusted in the light of the other benefits. We may repeat that in matters relating to the grant of gratuity and even generally in the settlement of disputes arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) it was contended on behalf of the employer that the Tribunal was not justified in awarding gratuity on the basis of consolidated wages and should have awarded it on the basic wages alone. In dealing with that plea this Court Observed that the Tribunal was on the facts of the case justified in proceeding in that way. It is not easy to extract any principle.from these cases; as precedents they are conflicting. If the matter rested there, we could not interfere with the conclusion of the Tribunal, but the Tribunal has failed to take into account the prevailing pattern in the textile industry all over the country. The textile industry is spread over the entire country, in pockets some large other small. There are large and concentrated pockets in certain regions and smaller pockets in other regions. Except in two or three of the smaller States, textile units are to be found all over the country. It is a country-wide industry and in that industry, except in one case to be presently noticed, gratuity has never been granted on the basis of consolidated wages. Out of 39 centres in which the textile industry is located there is no centre in which gratuity. payable to workmen in the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical staff as well as for clerks are also in terms of basic wages. They accordingly related gratuity with the average basic wage earned by the workman during the twelve months preceding death, disability, retirement, resignation or termination of service. The scheme in the Bombay region was adopted in the dispute between the Textile Labour Association and the Ahmedabad Mill Owners Association. The award is reported in the Textile Labour Association, Ahmedabad v. Ahmedabad Millowners' Association( [1958] I L.LJ. 349). The question whether gratuity should be fixed on the basis ,of consolidated wages was apparently not mooted, but it was accepted on both the sides that gratuity should be related to basic wages. An appeal against that decision in the Ahmedabad Millowners' Association case( [1958] I L.LJ. 349) was brought before this Court in Bharatkhand Textile Manufacturing Co. Ltd.'s case([1960] 3 S.C.R. 329), but no objection was raised to the award relating gratuity to basic wages. In the report of the Central Wage Board for the Cotton Textile Industry, 1959, in paragraph-110 gratuity was directed to be given on the basis. of wages plus the increases given und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground also the retention of the dearness allowance under the old scheme must be refused. Counsel for the workmen relied upon an award made by the Industrial Tribunal in the Chemical Unit belonging to the D.C.M. which is published in D.C.M. Chemical Works v. Its Workmen([1962] 1L.L.J. 388). In that case gratuity was related to consolidated wages. The unit though belonging to the D.C.M. is entirely independent of the textile unit. The Company was treating that unit as separate from the textile unit and distinct for the purpose of recruitment of lab.our, sales and conditions of service for the workmen employed therein. The Chemical Unit had separate muster-rolls for its employees and transfers from one unit to. the other, even where such transfers were possible, considering the utterly different kinds of businesses carried on in the different units, usually took place with the consent of the employee concerned. In upholding the gratuity scheme which was based on the consolidated wages, this Court observed: As to the burden of the scheme, we do not think that, looking at it from a practical point of view and taking into account the fact that there are about 800 workmen in all in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the existing benefits which are available under the schemes framed by the D.C.M. and S.B.M. insofar as those two units are. concerned. Mr. Ramamurthi for the workmen also. contended that in the matter of relating gratuity to wages--consolidated or basic--the principle of region-cum-industry should be applied and an overall view of similar and uniform conditions in the industry' in different centres should not be adopted. It was also urged that the basic wage is very low and the class of wage to which gratuity was related played a very important part in the determination of gratuity. The basic wage is however low in all the centres and if it does not play an important part in other centres, we see no reason why it should play only in the Delhi region a decisive part so as to make a vital departure from the scheme in operation in the other centres in the country. We are strongly impressed by the circumstance that acceptance of the award of the Tribunal in the present case is likely to create conditions of great instability all over the country in the textile industry. In that view, we decline to uphold the order of the Tribunal fixing gratuity on the basis of consolidate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nduct of the employee. A similar view was expressed in Remington Rand of India Ltd.'s case ([1968] I L.L.J. 542). In Calcutta Insurance Company Ltd. 's case([1967] II L.L.J. 1) however protest was raised against acceptance of this rule without qualification. Mitter, J., observed at p. 9 that it was difficult to concur in principle with the opinion expressed in the Garment Cleaning Works case([1962] 1 S.C.R. 711). Mitter, J., observed: We are inclined to think that it (gratuity) is paid to a workman to ensure good conduct throughout the period he serves the employer. 'Long and meritorious service must mean long and unbroken period of service meritorious to the end. As the period of service must be unbroken, so must the continuity of meritorious service be a condition for entitling the workman to gratuity. If a workman commits such misconduct as causes financial loss to his employer, the employer would, under the general law, have a right of action against the employee for the loss caused, and making a provision for withholding payment of .gratuity where such loss was caused to the employer does not seem to aid to the harmonious employment of labourers or workmen. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are riotous or disorderly behaviour during working hours at the establishment or any act subversive of discipline, wilful insubordination or disobedience. Misconduct falling under several of these latter heads of misconduct may involve no direct loss or damage to the employer, but would render the functioning of the establishment impossible or extremely hazardous. For instance, assault on the Manager of an establishment may not directly involve the employer in any loss or damage which could be equated in terms of money, but it would render the working of the establishment impossible. One may also envisage several acts of misconduct not directly involving the establishment in any loss, but which are destructive of discipline and cannot be tolerated. In none of the cases cited any detailed examination of what type of misconduct would of would not involve to the employer loss capable of being compensated in terms of money was made: it was broadly stated in the eases which have come before this Court that notwithstanding dismissal for misconduct a workman will be entitled to gratuity after deducting the loss occasioned to the employer. If the cases cited do not enunciate any broad p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )). Counsel for the employers have accepted that qualifying length of service for voluntary retirement should be reduced to 10 years. Counsel for the employers have also accepted that having regard to all the circumstances, notwithstanding the direction given by the Tribunal and the schemes prevailing in the other parts of the country in the textile industry, the maximum gratuity should not exceed 20 months' basic wages and not 15 months' as directed by the Tribunal. Further counsel for the D.C.M. and S.B.M. have agreed that in case of termination of employment on voluntary retirement one full months basic wages for each completed year of service not exceeding 20 months' wages should be granted to workmen. Counsel for the B.C.M. has agreed that gratuity at the rate of 21 days' wages for each completed year of service in case of voluntary retirement or resignation after 10 years' service may be awarded as gratuity to the workmen. Counsel for the A.T.M. has shown no disinclination to fall in line with this suggestion. Counsel for the A.T.M. has also not objected to appropriate adjustments in view of the concessions made by the management of the D.C.M., S.B.M. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made in the first week of March, 1958. The Textile Mazdoor Union then applied to be impleaded on September 15, 1958, the D.C.M. and S.B.M. moved the High Court of Punjab at Delhi and obtained an order for stay of proceedings in writ petition filed against the order of the Tribunal impleading the Textile Mazdoor Union. That writ petition was dismissed in February 1961 and the proceedings were resumed on December 12, 1962. Thereafter preliminary issues were decided and on December 3, 1963, ,an interim award relating to other disputes was made. It must, however, be noticed that there were four claims and the claim relating to gratuity was taken in hand by the Tribunal after disposal of the other claims. Neither party was dilatory in the prosecution of any claim before the Tribunal. It has also to be noticed that in the D.C.M. and S.B.M. there was in fact a gratuity scheme already in operation. The liability of the A.T.M. to pay gratuity arises after that unit acquired sufficient financial stability and it is not suggested that the unit had acquired financial stability before January 1, 1964. The is.sue remains a live issue only in respect of the B.C.M. It is true that the gratuity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration of securing a reasonable degree of uniformity in the fixation of gratuity in the textile industry, for, in our view, a departure made from the prevailing pattern in one region is likely to give rise to claims all over the country for modification of the gratuity schemes in operation, and have been accepted as fixing the basis. of gratuity schemes. If having regard to the deteriorating value of the rupee, it is thought necessary that more generous benefits should be available to the workmen by way of gratuity, the remedy lies not before the adjudicators or the Courts, but before the legislative branch of the State. In respect of the bonus, provident fund, retrenchment compensation, State Insurance Schemes as well as medical benefits, legislation has been introduced bringing a reasonable degree of certainty in the laws governing the various benefits available to the workmen and we are of the view that even in respect of gratuity a reasonably uniform scheme may be evolved by the Legislatures which could prevent resort to the adjudicators in respect of this complicated matter of dispute between the employers and the employees. It may no.t be difficult to evolve a scheme which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme. On the view we have taken of the schemes, Annexure 'A'relating to the D.C.M. and S.B..M. of the award will be modified in the following respects: In clause 1 (a) instead of 12 days' wages , the expression 20 days' wages will be substituted; In clause 1 (b) for the expression 15 days' wages , the expression 1 month's wages will be substituted; In proviso (ii) to clause 1 for the expression 15 months' wages , the expression 20 months' wages will be substituted; In clause 2 for the expression. 15 days' wages , the expression 1 months wages will be substituted; and for the expression ' 15 years service , 10 years service will be substituted; In the proviso to clause 2 for the expression 15 months' wages , the expression 20 months' wages will be substituted; In clause 3 in the proviso for the expression 15 months' wages , the expression 20 months' wages will be substituted; Clause 3 will be followed by an Explanation: Explanation.--The expression misconduct means acts involving violence against the management or other employees, or riotous or disorderly behaviour in or near the place of em ..... 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