# DELHI CLOTH &: GENERAL MII,Ls CO., LTD v. WORKMEN AND ORS. ETC

- **Citation:** [1969] 2 S.C.R. 307
- **Court:** Supreme Court of India
- **Decided:** 1968-09-27
- **Case number:** Civil Appeal Nos. 2168, 2569, of 1966
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/delhi-cloth-general-mii-ls-co-ltd-v-workmen-and-ors-etc-4500
- **Pages:** 36

## Headnote

Industrial Dispute-Gratuity Scheme-When region...,um-industry principle is applicable-Whether gratuiry should be related to basic wage or
consolidated wage-Whether conditions prevailing in the industry in the
whole country could be taken into consideration-Whether age of superannuation should also be fixed-When misconduct of workmen does not
affect gratuity-When payable to badli workmen-Date of operation of
award-Considerations for fixing-'Average of basic wage', meaning of.
In the Delhi region there are four textile units, namely, the D.C.M.,
the S.B.M., the B.C.M., and the A.T.M. The D.C.M. and the S.B.M. are
under one management. Since 1940 they had also a common retirement
benefit scheme with a scale of gratuity. The workmen in all the units
were receiving basic wages plus dearness allowance. On March 4, 1958,
an industrial dispute between the four units and their workmen was referred to the Industrial Tribunal and one of the matters in dispute related
to gratuity. The Tribunal in its award framed two schemes relating to
the payment of gratuity, one relating to D.C.M. and S.B.M., and the
other, to B.C.M. and A.T.M.
They were made operative from January 1,
1964.
Both employers and employees appealed to this Court.
On the
questions : ( 1) Whether in view df a settlement between the management
of A.T.M. and its workmen it was open to the Tribunal to ignore the
settlement and impose the scheme on the management; (2) Whether in
view of the unstable financial condition of A.T.M. the burden of payment of gratuity on A.T.M.
was excessive;
(3)
Whether a uniform
scheme applicable to the entire industry on the region-cum-industry basis
should have been adopted instead of schemes
applicable to individual
units; (4) Whether in determining the quantum of gratuity, basic wage
alone should be taken into account and not the consolidated wage including dearness allowance; (5) Whether in deciding this question, an overall
view of similar and uniform conditions in the industry in different centres
in the country, could be taken into consideration; (6) Whether it was not
necessary for the Tribunal to fix the age of superannuation when introducing a gratuity scheme; (7) Whether gratuity should have been awarded even in cases of dismissal for misconduct;
(8) Whether provision
should have been made for payment of gratuity to badli workmen irrespective of the number of days for which they worked in a yea'r; (9)
Whether the schemes should have been made operative from the date of
reference; and ( 10) What is the scope of the expression 'average of the
basic wage'.
HELD : (I) The settlement between the workmen and management
of A.T.M. did not bar the jurisdiction of the Tribunal to make the
Scheme of gratuity applicable to A.T.M. [340 Fl
H
Under the settlement all that was agreed to was, that an award should
be made and .if it be found that A.T.M. acquired financial stability then
•_,.,
it would be liable to pay the gratuity to its workme11. It was not agreed
that the proceedings before the Tribunal should be dropped and that it
308
SUPREME COURT RllPORTS
[1969] 2 S.C..R.
was only after A.T.M. became financially stable that a fresh claim should
be made by the workmen. [3 20 D-Fl
. (2) The trading accounts. ?f A.T.M. showed that since 1~59-60 the
Mills had achieved some stab1hty, and that by 1961-62 all preV!ous losses
were wiped out. Therefore, though it was a much weaker unit than the
others, it was financially stable from the date on which the scheme became operative. [321 A-C]
(3) A unit-wise approach in framing the gratuity scheme 'for the four
units was appropriate in the present case. [323 B--C; 340 D-E]
No inflexible rule has been laid down by this Court that gratuity
schemes should be framed only on the region-cum-industry principle. In
the present case, if a common scheme was framed for the entire industry
in Delhi for all four units, in view of the financial condition of A.T.M.,
the benefits under such a scheme would be not only low, but

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DELHI CLOTH &: GENERAL MII,Ls CO., LTD.
v.
WORKMEN AND ORS. ETC.
September 27, 1968
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]
Industrial Dispute-Gratuity Scheme-When region...,um-industry principle is applicable-Whether gratuiry should be related to basic wage or
consolidated wage-Whether conditions prevailing in the industry in the
whole country could be taken into consideration-Whether age of superannuation should also be fixed-When misconduct of workmen does not
affect gratuity-When payable to badli workmen-Date of operation of
award-Considerations for fixing-'Average of basic wage', meaning of.
In the Delhi region there are four textile units, namely, the D.C.M.,
the S.B.M., the B.C.M., and the A.T.M. The D.C.M. and the S.B.M. are
under one management. Since 1940 they had also a common retirement
benefit scheme with a scale of gratuity. The workmen in all the units
were receiving basic wages plus dearness allowance. On March 4, 1958,
an industrial dispute between the four units and their workmen was referred to the Industrial Tribunal and one of the matters in dispute related
to gratuity. The Tribunal in its award framed two schemes relating to
the payment of gratuity, one relating to D.C.M. and S.B.M., and the
other, to B.C.M. and A.T.M.
They were made operative from January 1,
1964.
Both employers and employees appealed to this Court.
On the
questions : ( 1) Whether in view df a settlement between the management
of A.T.M. and its workmen it was open to the Tribunal to ignore the
settlement and impose the scheme on the management; (2) Whether in
view of the unstable financial condition of A.T.M. the burden of payment of gratuity on A.T.M.
was excessive;
(3)
Whether a uniform
scheme applicable to the entire industry on the region-cum-industry basis
should have been adopted instead of schemes
applicable to individual
units; (4) Whether in determining the quantum of gratuity, basic wage
alone should be taken into account and not the consolidated wage including dearness allowance; (5) Whether in deciding this question, an overall
view of similar and uniform conditions in the industry in different centres
in the country, could be taken into consideration; (6) Whether it was not
necessary for the Tribunal to fix the age of superannuation when introducing a gratuity scheme; (7) Whether gratuity should have been awarded even in cases of dismissal for misconduct;
(8) Whether provision
should have been made for payment of gratuity to badli workmen irrespective of the number of days for which they worked in a yea'r; (9)
Whether the schemes should have been made operative from the date of
reference; and ( 10) What is the scope of the expression 'average of the
basic wage'.
HELD : (I) The settlement between the workmen and management
of A.T.M. did not bar the jurisdiction of the Tribunal to make the
Scheme of gratuity applicable to A.T.M. [340 Fl
H
Under the settlement all that was agreed to was, that an award should
be made and .if it be found that A.T.M. acquired financial stability then
•_,.,
it would be liable to pay the gratuity to its workme11. It was not agreed
that the proceedings before the Tribunal should be dropped and that it
308
SUPREME COURT RllPORTS
[1969] 2 S.C..R.
was only after A.T.M. became financially stable that a fresh claim should
be made by the workmen. [3 20 D-Fl
. (2) The trading accounts. ?f A.T.M. showed that since 1~59-60 the
Mills had achieved some stab1hty, and that by 1961-62 all preV!ous losses
were wiped out. Therefore, though it was a much weaker unit than the
others, it was financially stable from the date on which the scheme became operative. [321 A-C]
(3) A unit-wise approach in framing the gratuity scheme 'for the four
units was appropriate in the present case. [323 B--C; 340 D-E]
No inflexible rule has been laid down by this Court that gratuity
schemes should be framed only on the region-cum-industry principle. In
the present case, if a common scheme was framed for the entire industry
in Delhi for all four units, in view of the financial condition of A.T.M.,
the benefits under such a scheme would be not only low, but would be
lower than the existing benefits available to workmen in the D.C.M. and
S.B.M. Units. [321 C-D, H; 322 E--F, HJ
Garment Cleaning Works v. Its Workmen, [1962] 1 S.C.R. 711 :
[1961] 1 L.L.J. 513 and Burhanpur Tapti Mills Ltd. v. Burhanpur Tapli
Mills Mazdoor Sangh, [1965] 1 L.L.J. 453, followed.
A
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Bharatkhand Textile Mfg. Co. v. Textile Labour Association [1960] 3
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S.C.R 329, explained.
( 4) The Tribunal was in error in · relating the gratuity awardable to
the workmen to the consolidated wage
instead
of the
basic
wage.
[340 G]
(a) In determining the scope of an industrial reference words used,
eithe·r in the claim or in the order of reference, should not necessarily be
given the meaning they have under the Industrial Disputes Act.
Therefore, merely because the expression "wages'' in the Act includes dearness
allowance, the Tribunal could not base the
gratuity scheme on consolidatecl wages. [325 D-F]
(b) An industrial tribunal cannot adjudicate on disputes not referred;
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but when called upon to adjudicate whether a certam scheme, on the
te·rms indicated in the reference should be framed, such basic guidance
F
does not limit its jurisdiction. The Tribunal, in this case, was in error in
thinking that iri determining the rate di gratuity it was limited to the
number of days of service in the order of reference as the applicable multiple. On that assumption, since the gratuity would be toe> low if only
basic wage was chosen, it was not justified in choosing consolidated wage.
The proper procedure would have been to choose only the basic wage
and fix upon a larger number of days of service as the appropriate
multiple. [327 E--H]
G
(c) The decisions of this Court in Mey and Baker (India) Ltd. v. their
Workmen, [19'61] II L.L.J. 94 (S.C.), British India Corporation ''· Its
Workmen, [1965] II L.L.J. 556 (S.C.), British Paints (India) Ltd. v. Its
Workmen, [1966] 1 L.L.J. 407 (S.C.), Hindustan Antibiotics Ltd.
v.
Their Workmen, [1967] 1 L.L.J. 114 (S.C.) and
Remington Rand of
India v. The Workmen, [1968] 1 L.L.J. 542 (S.C.) are conflicting and
no principle can be extracted as to whether basic wage or consolidated
H
wage should be considered for purposes of gratuity.
Ordinarily, in those
circumstances, this Court would not have interfered with the conclusion
of the Tribunal choosing consolidated wage; but, the Tribunal bad fail~
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DELHI CLOTH MILLS V. WORKMEN
309
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to take into account the prevailing pattern in the textile industry all
over the country.
It is country-wide industry and in
that industry,
gratuity has never been granted on the basis of
consoliaated
wages.
[329 C-F; 330 A)
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(d) The primary object of industrial adjudication is to adjust the relations between employers and employees with the object of promoting industrial peace. If the basic wage alone is taken for purposes of gratuity,
it would produce in the present case, a scheme which deprives the workmen of the D.C.M. and S.B.M. of benefits which had been granted to
them under the voluntary scheme introduced by the management of
those two units
and disturb industrial
peac<>
therein. But on
that
account, the Tribunal was not justified in introducing a fundamental
change in the concept of gratuity granted by numerous schemes in the
textile industry all over the country. The appropriate remedy is to frame
a scheme consistent with the normal pattern prevailing in the industry and
introduces reservations protecting benefits already acquired. [326 C-F]
(e) In the report of the Central Wage Board for .the cotton textile
industry, also, gratuity was directed to be given on the basis of wages
excluding dearness allowance. [330 G)
(f) In D.C.M. Chemical Works v. Its Workmen, [19'62] 1 L.L.J. 388
(S.C.) this Court affirmed the award relating gratuity
to consolidated
wages. Though the unit also belonged to D.C.M. it is a unit entirely independent of the textile unit.
So, it cannot be regarded as an effective or
persuasive precedent justifying variation from the
normal
pattern of
gratuity schemes in operation in the textile industry all over the country.
[331 H; 332 A-B, D-El
(5) If all over the country, in textile centres, payment of gratuity is
related to the basic wage and not to the consolidated wage any innovation
in Delhi region alone is likely to give rise to serious industrial disputes in
other centres in the country.
J.lf maintenance pf industrial peace is a governing principle of industrial adjudication, it vfould be wise to maintain a
reasonable degree of uniformity in the diverse units all over the country
and not to make a fundamental departure from the prevailing pattern. If
the basic wage is low in all other ~ntres, and if it does not play an important part, there is no reason why it should play, only in the Delhi
region, a decisive part so as to make a vital departure from schemes in
operation in other centres in the country. The acceptance of the award
di the Tribunal in the present case is likely to create conditions of great
instability in other parts of the country in the textile industry. Therefore, the Tribunal's award granting gratuity on the basis of consolidated
wage could not be upheld. [332 G-H; 333 A-El
( 6) It is not necessary, for a gratuity scheme to be effective, that
there should be fixation of the age of superannuation. [323 C-D)
Burhanpur Tapti Mills Case, [1965) l LL.J. 453, referred to.
Further, on the terms of the reference the plea of the employers to fix
the age of superannuation was beyond the scope of the reference, nor
was such fixation incidental to the framing of the scheme.
[323
H;
324 Cl
(7) The object of providing a gratuity scheme is to provide a retiring
benefit to workmen who have rendered long and unblemished service to
the employer and thereby contributed to the prosperity of the employer .
It is therefore not correct to say that no misconduct, however grave, may
not be visited with forfeiture of gratuity. Misconduct. could be
(a)
310
SUPREME . COURT REPORTS
(1969] 2 S.C.R.
technical misconduct which leaves no trail of indiscipline; ( b) misconduct
A
resulting in damage to the employers' property which may be compensated by forfeiture of gratuity or part thereof; and ( c) serious misconduct
such as acts of violence against the management or other employees or
riotous or disorderly behaviour in o:r near the place di employment which,
though not directly causing damage, is conducive to grave indiscipline.
The first should involve no foreiture, the second may involve forfeiture of
an amount equal to the loss directly suffered by the employer in consequence of the misconduct, and the third will entail forfeiture of gratuity
B
due to the workmen. [324 F-G; 336 D----F; 341 A-Bl
Garment Cleaning
Works v. /Is
Workmen,
[1962] 1 S.C.R. 711;
(1961) I L.L.J. 513, Wenger & Co. v. Its Workmen, [1963] II L.L.J.
403 (S.C.), Motipur Zamindari (P) Ltd. v. Their Workmen, [1965] II
L.L.J. 139 (S.C.) Calcutta Insurance Co. v. Their Workmen, [1967] II
L.L.J. 1 (S.C.), and Remington Rand of India v. The Workmen, [1968]
I L.L.J. 542 (S.C.). referred to.
C
(8) The award does not require to be modified with regard to badli
workmen.
If gratuity is to be paid for service rendered then there are no grounds
for holding that a hadli workman must be deemed to have rendered service giving rise to a claim of gratuity, merely because, for maintaining his
name on the record of the badli workmen, he is required to
attend the
mills. [338 A-Bl
(9) The award needs no modification with regard to the date of commencement of the schemes.
·
The liability of A.T.M. to pay gratuity arose a!fter it acquired suffici"
ent financial stability and the unit acquired financial stability only from
January 1, 1964. If in respect of the A.T.M. which had no
scheme.
!!fatuity becomes operative from January 1, 1964, there is no reason why
1n respect of B.C.M. any different rule should be provided for.
As regards D.C.M. and S.B.M. there was already a more advantageous gratuity
scheme in operation and the workmen in those two units were not prejudiced by directing the scheme applicable to them, to commence from
January 1, 1964. If effect was given to the schemes before January 1,
1964, it may rake up cases in which workmen have left the establishment
many years age> and it would not be conducive to industrial pe;ice to
allow such questions to be raised after a long delay. In the absence of
any principle, the matter must be decided on considerations e>f expediency.
[338 G-H; 339 A-DJ
( 10) The expression 'average of the basic wage' means wage earned
by a workman during a month, divided by the number of days for which
he had worked, and multiplied by 26 in order to arrive at the monthly
wage for the computation of gratuity payable. [333 C-D]
[Appropriate directions modifying the schemes were accordingly given.]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2168,
2569, of 1966, 76, 123 and 560 of 1967.
Appeals by special leave from the Award dated June 30, 1966
of the Industrial Tribunal, Delhi in I.D. No. 70 of 1958.
S. T. D.esai, Rameshwar Nath and Mahinder Narain, for the
appellant (in C.A. No. 2168 of 1966) and respondents Nos. 1
and 2 (in C.As. Nos. 123 and 560 of 1967).
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DELHI CLOTH MILLS V. WORKMEN (Shah, J.)
31 l
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H. R. Gokhale, A. K. Sen, R. P. Kapur and I. N. Shroff, for
the appellant (in C.A. No. 256.9 of 1966) and respondent no. 3
(in C.As. Nos. 123 and 560 of 1967).
B. Sen, I. D. Gupta, M. N. Shroff for I. N. Shroff, for the
appellant (in C.A. No. 76 of 1967).
IB
M. K. Ramamurthi, Madan Mohan, Shyamala Pappu and
c
Vineet Kumar, for the appellant (in C.A. No. 123 of 1967), respondents Nos. 1 (a) and 4(a) (in C.A. No. 2168 of 1966), respondent No. 1 (in C.A. No. 2569 of 1966), respondent No. 1
(in C.A. No. 76 of 1967) and respondent No. 5 (in C.A. No.
560 of 1967).
V. C. Parashar and 0. P. Sharma, for the appellant (in C.A.
No. 560 of 1967) respondents Nos. l(b) and 4(b) (in C.A. No.
2168 of 1966) respondent No. 2 (in C.A. No. 2569 of 1968)
and respondent No. 2 (in C.A. No. 76 of 1967).
The Judgment of the Court was delivered by
D
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Shah, J. These appeals arise out of an award made by the
Industrial Tribunal, Delhi, in I.D. Reference No. 70 of 1958.
The first three appeals are filed by the employers, and the last two
by the employees. By its award the Industrial Tribunal (Delhi,
has framed two schemes relating to payment of gratuity to the
workmen employed in four textile units in the Delhi region. The
E
employers and the workmen are dissatisfied with the schemes and
they have filed these appeals challenging certain provisions of the
schemes.
In the Delhi region there are four textile units; the Delhi Cloth
Mills-which will be referred to as D.C.M.; Swatantra Bharat
Mills-which will be referred to as S.B.M.; Bir!a Cotton MillsF
which will be referred to as B.C.M. and Ajudhia Textile Millswhich 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
G
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matters in dispute, first of which is as follows :
"Whether a gratuity for retirement benefit scheme
should be introduced for al! 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 5-1 O years-15 days' wages for
every year of service.
3. for service between 10-15 years--21 days' wages for
every year of service.
312
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SUPREME COURT REPORTS
(1969) 2 S.C.R.
4. for service over 15 years---0ne month's wages for
A
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 principally for fixation of gratuity in addition to the
benefit of provident fund admissible to the workmen under the
Employees Provident Fund Act, to be computed on the consolida.ted wages inclusive of dearness allowance.
The Ekta Union
submitted by its statement of claim that a gratuity scheme based
on the region-cum-industry principle i.e. a uniform scheme applicable to all the four units be framed.
The Textile Mazdocr
Union also supported the claim for the framing of a gratuity
scheme on the basis of the consolidated wages of workmen but
claimed that the scheme should be unit-wise.
At the trial, it
appears that both the Unions pressed for a unit-wise scheme of
gratuity.
The Tribunal entered upon the reference in respect of the fixa ..
tion of gratuity scheme in February 1964 and made an award on
June 30, 1966, operative from January 1, 1964. The award was
published on August 4, 1966. By the award two schemes were
framed---0ne relating to the D.C.M. and S.B.M., and another
relating to the B.C.M. and A.T.M.
Under the second scheme
the digit by which the number of completed year of service was to
be multiplied in determining the total gratuity was smaller than
the digit applicable in the case of the D.C.M. and the S.B.M. The
distinction was made between the two sets of units, because the
D.C.M. and S.B.M. were, in the view of the Tribunal, more prosperous units than the D.C.M. and A.T.M. The A.T.M., it was
found, was a newcomer in the field of textile manufacture, and
had for many years been in financial difficulties.
The D.C.M. employs more than 8,000 workmen in its textile
unit; the S.B.M. has on its roll 5,000 workmen; the B.C.M. has
6,271 workmen and the A.T.M. has
1,500 workmen. The
D.C.M. and S.B.M. have a common retirement benefit scheme
in operation since the year 1940.
Under the
scheme gratuity
payable to workmen is determined by the length of service before
retirement.
The scheme of gratuity in operation. in the D.C.M.
and S.B.M. is as that,
"In case of retirement from service of the Mills as
a result of physical disability, due to over-age or on
account of death after a minimum of seven years'.
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DELHI CLOTH MILLS V. WORKMEN (Shah, J.)
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service in the concern : ·
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7 years
8 years ·
9 years
10 years
11 years
12 years
13 years
14 years
15 years
16 years
17 years
18 years
19 years
. 20 years
Rs.
350/-
Rs.
425/-
Rs.
500/-
Rs.
575/-
Rs.
650/-
Rs.
725/-
Rs.
800/-
Rs.
875/-
Rs.
950/-
Rs. 1,050/-
Rs. 1,150/-
Rs. 1,250/-
Rs. 1,350/-
Rs. 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 Rs. 18/- in Patna and
Rs. 30/- in various centres like Bombay, Indore, Madras, Coiinbatore, 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 Rs. 8 per month per
worker shall be given to all workers in mills of category I from 1st January 1960, and a further fiat increase of Rs. 2 per month per worker shall be given
to them. from 1st January 1962. Likewise an increltse
at the average rate of Rs. 6 per month per worker shall
be given to all the workers in mills of category II from
1st January 1960, and a further flat increase of Rs. 2
per month per worker shall be given to them from 1st
January 1962. These increases are subject to the condition that the said sums of Rs. 8 and Rs. 6 shall ensure
not less than Rs. 7 and Rs. 5 respectively to the lowest
paid, and that the increase of Rs. 2 from 1st January
1962 shall be fiat for all."
Category I included the Delhi region. Since January I, 1962,
the basic minimum wage in the Delhi region is, therefore Rs. 40/-
L3 Sup. CJ/69-3
314
SUPREME COURT REPORTS
[1969] 2 S.C.R.
according to the · recommendations of the Wage Board. In
Bombay City and Island (including Kurla), the basic wage,
according to the Report of the Wage Board, was also Rs. 30/-
and by the addition of Rs. 10 the basic wage of a workman came
to Rs. 40 /-. The workmen in other important textile centres
also get the same rates.
The Tribunal was of the view that the average basic wage of
the workmen is Rs. 60/- since the implementation of the Wage
Board in the Delhi region.
No argument was advanced before
this Court challenging the correctness of that assumption, by the
employers or the workmen.
It was also common ground that
practically uniform basic wage levels prevail in ail the large textile centres like Bombay, Alunedabad, Coimbatore and Indore.
Besides the basic wage the workmen receive dearness allowance under diverse awards made by the Industrial Tribunals
which "seek to neutralize the cost of living index." There is also
a provident fund scheme under the Employees Provident Fund
Act, 1962, whereunder 8-1/3 % of the basic wage and the dearnear allowance and the retaining allowance for the time being in
force is contributed by the employee. Besides,' there is a right to
retrenchment compensation under the Industrial Disputes Act,
1947 (s. 25 FFF) and the Employees Insurance Scheme. In
view of the observations of this Court in Burhanpur Tapti Mills
Ltd. v. Burhanpur Tapti Mills Mazdoor Sangh(1 ), that "It is no
longer open to doubt that a scheme of gratuity can be introduced
in concerns where there already exist other schemes such as provident fund or retrenchment compensation. This has been ruled in
a number of cases of this Court and recently again in Wenger &
Co. and others v. Their Workmen( 2 ), and ln.dian Hume Pipe Company Ltd. v. Their Workmen('). 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-(1) in
determining the quantum of gratuity, basic wage alone could be
taken into account and not the consolidated wage; and (2) 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.
(I) [1965) I L.L.J. 453.
(2)[!963] II L.L.J. 403 ..
(3) [1959] II L.L.J. 830.
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DELHI CLOTH MILLS V. WORKMEN (Shah, J.)
315
A
it was urged that its financial condition is not and has never been
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stable and the burden of payment of gratuity to workmen dying
or disabled or on voluntary retirement from service or when their
employment is terminated is excessive and the Unit was unable,
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to bear that burden. It was also urged on behalf of the A.T.M.
that in view of a settlement which was reached between the
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management and workmen it was not open to the Tribunal to
ignore the settlement and to impose a scheme for payment of
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gratuity in favour of the workmen .in this reference .
While broadly supporting the award of the Tribunal the workmen claim certain modifications.
They claim that a shorter
period of qualifying service for workmen voluntarily retiring should
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be provided, and gratuity should be worked out by the application
of a larger multiple of days for each completed year of service;
that the ceiling of gratuity should be related to a larger number of
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months' wages; that gratuity should be awarded for dismissal even
for misconduct; that provision should be made for payment of gratuity to Badli workmen irrespective of the number of days for
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which they work in a year; that the expression "average of the
basic wage" should be appropriately clarified to avoid disputes in
the implementation of the gratuity scheme, and that the award
should be made operative not from.January 1, 1964, but from the
date of the reference to the Tribunal.
The two schemes which have been framed may be set out:
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ANNEXURE 'A'
"Gratuity scheme applicable to the Delhi Cloth Mills
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and the Swatantra Bharat Mills .
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Gratuity will be payable to the employees concerned, in this reference, on the scale and subject to the
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conditions laid down below :
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1. On the death of an employee while in the service
of the mill company or on his becoming physica!ly or
mentally incapacitated for further service :
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(a) After 5 years continuous service and less than
10 years' service-12 days' wages for each completed
year of service .
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(b) After continuous service of 10 years-15 days'
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wages for each completed year of service .
The gratuity will be paid in each case under
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clauses l(a) and l(b) to the employee, his heirs or
executors, or nominee as the case may be.
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Provided that in no case will an employee, who is
in service on the date on which this $Cherne is brought
316
SUPREME COURT REPORTS
[1969] 2 S.C.R.
into operation be paid an amount less than what he
would have been entitled to under the pre-existing scheme
of the Employees' Benefit 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 pre-existing 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
l(a) and l(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 Report of
the First Central Wage Board for Cotton Textile
Industry.
( c) "Continuous service"
"Continuous
service"
means
un-interrupted
service and includes service which may be interrupted on account of sickness, authorised leave,
strike which is not illegal, lock-out or cessation
of work which is not due to any fault on the
part of the employee :
Provided that interruption in service upto
six months' duration at any one time and 18
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DELHI CLOTH MILLS V. WORKMEN (Shah, J.)
317
months' duration in the aggregate of the nature
other than those specified above shall not cause
the employee to lose the credit for previous
service in the Mills for the purpose of calculation of gratuity, but at the same time shall not
entitle him to claim benefit of gratuity for the
period of such interruption.
Service for the
purposes of gratuity will include service under
the previous management whether in the particular mill or other sister mill under the same
management. •
( d) "Resignation"
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The word "resignation" will include abandonment of service by an employee provided he submits his resignation within a period of three
months from the first day of absence without
leave.
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( e) "Length of service"
For counting "length of service", fraction of a
year exceeding six months shall count as one
full year, and six months or less shall be
ignored.
5. "Application for gratuity"
Any person eligible to claim payment of gratuity
under this scheme shall, so far as possible, send a written
application to the employer within a period of six
months from the date its payment becomes due.
6. "Payment of gratuity"
The employer shall pay the amount of gratuity to
the employee and in the event of his death before payment to the person or persons entitled to it under clause
1 above within a period of 90 days of the claim being
presented to the employer and found valid.
7. "Claims by persons who are no longer in service"-
Claims by persons who are no longer in service of
the Company on the date of the publication of this
award shall not be entertained unless the claims are preferred within six months from the date of publication of
this award.
8. "Badli service"
Gratuity shall be paid for only those years of Badli
service in which the employee has worked for not less
than 240 days.
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SUPREME COURT REPORTS
(1969) 2 S.C.R.
9. "Proof of incapacity"
In proof of physiciil or mental incapacity, it will be
necessary to produce a certificate from any one of 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 of 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
completed year of service.
(b) After continuous service of
10 years-One
third month's wages for each completed year of service.
The gratuity will be paid in each case under
clauses l(a) and l(b) to the employee,
his heirs or
executors, or nominee, as the case may be.
Provided that the maximum payment to be made
shall not exceed the equivalent of 12 months' wages.
2. On voluntary retirement or resignation after 15
years service-On the same scale as in 1 (b) above.
Provided that the maximum payment to be made
shall not exceed the equivalent of 12 months' wages.
3. On termination of service by the employer for
any reason whatsoever except on the ground of misconduct-As in clauses l(a) and l(b) above.
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DELHI CLOTH MILLS V. WORKMEN (Shah, J.)
319
Provided that the maximum payment to be made
shall not exceed the equivalent of 12 months' wages."
[Clauses 4 to 10 of Annexure 'B' are. the same as in
Annexure 'A' and need not be repeated.]
Whether against the A.T.M. the Tribunal was incompetent to
make an award framing a scheme for payment of gratuity may
first be considered. Counsel for the A.T.M. urged that there was
a settlement between the workmen and the management of the
A.T.M. in consequence of which the Tribunal was incompetent
to make an award. The facts on which reliance was placed are
these : After the dispute was refened to the Industrial Tribunal,
there were negotiations between the management of the A.T.M.
and workmen represented by the two Unions and an agreement was
reached, the terms whereof were recorded in writing.
Clauses 6
and 11 ( 4) o.f the agreement relate to the claim for gratuity :
"6. The workmen agree not to claim any further
increase in wages, basic or dearness, or make any other
demand involving financial burdens on the Company
either on their initiative or as a result of any award, till
such time as the working of the mills results in profits.
11. The parties hereto agree to jointly withdraw in
terms of this settlement, the following pending cases and
proceedings before the Courts, Tribunals and Authorities
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(4) With regard to I.D. No. 70 of 1958 the workers
agree not to claim any benefits that may be granted
under the above reference by the Hon'ble Industrial
Tribunal in case the award is given in favour of the
workmen, subject to clause 7 above."
(It is common ground that reference
to cl. 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
320
SUPREME COURT REPORTS
[1969] 2 S.C.R.
as impennissible 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 out to be in favour of the workmen
unless and until the working of the Mills results in profit.
The fact that the passing of an award on the demands
was envisaged under the settlement goes to show that
the demands were to be adjudicated upon in any case.
The main case will now proceed in respect of all the
mills and the effect of ·the settlement and of the application dated 28th December, 1959, and of the 5th July
1962 will be considered at the time of the final award."
But in making the final award the Tribunal did not specifically
refer to the settlement.
The terms of cl. 6 of the settlement
clearly show that if it be found that the A.T.M. had acquired
financial stability, it will be liable to pay gratuity to the workmen.
We are unable to agree with the contention of counsel for the
A.T.M. that it was intended by the parties that the adjudication
proceedings against the A.T.M. should be dropped, and after the
A.T.M. became financially stable a fresh claim should be made
by the workmen on which a reference may be made by the Government for adjudication of the claim for gratuity against the
A.T.M.
The contention by the management of the A.T.M. that
the Tribunal was incompetent to determine the gratuity payable
to the workmen of the A.T.M. must therefore fail.
The other contention raised on behalf of the A.T.M. that its
financial position was "unstable" need not detain us. The Tribunal has held that the A.T.M. was working at a loss since the year
1953,,54 an:d the losses aggregated to Rs. 6.22 lakhs in the year
1958-59, but thereafter the financial position of the Unit improved.
The tradinl( account for the period ending March 31, 1960,
showed profits amounting to Rs. 3.10 lakhs.
In 1960-61 there
was a surplus of Rs. 11.18 lakhs out of which adjusting the depreciation, development rebate reserve and reserve for bad and
doubtful debts, there was a balance of Rs. 7.10 lakhs.
In 1961-62
the net profits o.f the Unit amounted to Rs. 7.48 lakhs and the
A.T.M. distributed Rs. 52,500/- as dividend.
In 1962-63 there
was a gross profit of Rs. 4.18 lakhs and after adjusting depreciation and development rebate reserve there was a net deficit of
Rs. 30,517/-. In 1963-64 there was a gross profit of Rs. 14.29
lakhs and after adjusting depreciation, reserve for doubtful debts,
bonus to employees and development rebate reserve, there reA
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DELHI CLOTH MILLS V. WORKMEN (Shah, J.)
321
mained a net profit of Rs. 4. 71 lakhs.
The Tribunal observed
that by 1961-© 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 substantiai 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
B · 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 moclest gratuity scheme. We see no reason to disagree with
the finding recorded by the Tribunal on this question.
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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-cumindustry 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 paid. In our judgment no such
rule has been enunciated by this Court. In Bharatkhand Textile
Mfg. Co. Ltd. v.
Textile Labour Association, Ahmedabad('),
this Court in dealing with the question whether the Industrial
Court had committed an error in dealing with the claim for gratuity on industry-wise basis negatived the contention of the employers that the unit-wise basis was the orily basis which could be
adopted in fixing the rates of gratuity.
It was observed at p. 345:
"Equality of competitive conditions
is in a sense
necessary from the point of view of the employers themselves; that in fact was the claim made by the Association which suggested that the gratuity scheme should
be framed on industry-wise basis spread over the whole
of the country. Similarly equality of benefits such as
gratuity is likely to secure contentment and satisfaction of
the employees and lead to industrial peace and harmony.
If similar gratuity schemes are framed for all the units
of the industry migration- of employees from one unit to
another
is
inevitably
checked,
and
industrial
disputes arising from unequal treatment in that behalf
are minimised.
Thus, from the point of view of both
employers and employees industry-wise approach is on
the whole desirable."
It is clear that the Court rejected in that case the argument that
rates of gratuity should be determined unit-wise : the Court did
not rnle that in all cases the region-cum-industry principle should
be adopted in fixing the rates of gratuity. That was made explicit
in a later judgment of this Court : Burhanpur Tapti Mills Ltd. v.
(1) [1960] 3 S.C.R. 329.
322
SUPREME COURT REPORTS
[! 969] 2S.C.R.
Burhanpur Tapti Mills Mazdoor Sangh('). This Court observed
at p. 456:
". . . . . . it has been laid down by this Court that
there are two general methods of fixing the terms of
a gratuity scheme.