# M. SIKRI, J. M. SHELAT AND v. BHARGAYA, JJ.J

- **Citation:** [1969] 1 S.C.R. 156
- **Court:** Supreme Court of India
- **Decided:** 1968-04-30
- **Case number:** Civil Appeal No. 1934 of 1967
- **Bench:** S. M. Sikri, J. M. Shelat, V. Bhargaya
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-sikri-j-m-shelat-and-v-bhargaya-jj-j-4358
- **Pages:** 10

## Headnote

l.ndustrial
Dispute-Minimum
Wag<-J'rinciple
for
fixaJwn ofRevuwn of scale of wages fixed by rhe previous award by linking up with
cost of living index-I/ double advantage to
workmen-Retrospective
operu11011 of award-Whether valid-What is '-'asonab/e qualifying period
for gratuity.
There were industrial disputes between the appellant and its workmen,
the respaadcnts, which were the subject-matter of awards.
The last of
such awards fixed revised wage scales taking into consideration the cost
of li\iog index then prevailing.
It also provided for annual
increments
but rejected the workmen's demand to link up the wage scales with the
index of cost of living.
After the respondents had received two annual
increments un.dcr that award. they served a notice on the appellant calling
for revision of the scale of \\·ages and of the gratuity scheme.
The dis.
·pule was referred to the Industrial Tribunal and the Tribunal passed an
.award.
The award retained the scales fixed in the previous award and
treating them as based on the cost of living index prevailing on the date
.of that award. directed that the waRes should be linked up with the cost
of living index. The award also directed that effect should be given to it
retrospectively from approximately the date of demand hy .the respondents.
As regards gratuity, the Tribunal reduced the existing qualifying period
.of 10 years :o 8 years in cases where a workman died, resigned or retired;
.and deleted completely the ex.isting qualifying period of 4 years in case
·where the services of the workman were terminated by the appellant.
A
8
c
D
E
Jn appeal to this Court, it was contended that : (I) The award as
regards wages should be <ct aside, because, (a)
the Tribunal took
a
wrong view as to what \\'ould const~:ute minimum wages, (b) it ignored
the financial capacity of the appellant. (c) the linking up of the waRe
scales with the eost of living index was wrong, (d) the Tribunal failed
F
to take into consideradon the principle of region-cum-industry. ( e) the
respondents would get double advantage during the same period, namely,
increments and a raise in the wage scales, and (f) retrospective operation.
should not have been given to the award; and (2) 1bc changes made in
Ule gratuity scheme were illegal.
HELD : (I) There was no reason to interfere with the minimum
wage rate fixed by the Tribunal. (163 A-Bl
G
(a) The policy of the Minimum Wages Act, 1948. was to prevent
employment of sweated labour in the general interesl and so the minimum
wa~ must ensure not merely the physical needs o.f the ~orker but must
ensure in addition to his sustenance and that of his family, the preservation of his efficiency as a workman by providing for some measure of
education medical requirement~ and amenities.
In the present cac;e, (i)
the Trib~nal retained the scale.~ fixed by the previous award and only
provided for automatic rise or fall therein with the correspondin.(!: chan~
in the index of cost of Iivin~ and (ii) the Tribunal observed that
the
appellant had to pay the minimum wages irrespective of its ability to
H
HYDRO (ENGINEERS) V. WORKMEN (She/at, !.)
157
A
bear the add;tional burden.
Therefore, what the Tribunal fixed was consolidated minimum wages and not fair wages. [161 G-H; 162 B-FJ
B
c
D
E
F
.G
H
(b) In prescribing such a minimum wage rate the capacity of the
employer need not be considered as the State assumes that every employer
must pay the minimum wages before he employs labour. [162 D-E]
Bijay Cotton Mills Ltd. v. State of Ajmer.
[1955] 1 S.C.R.
752,
Express Newspapers (Pvt.) Ltd. v. Union of llldia [1959] S.C.R. 12 and
Unichovi v. State of Kera/a, [1962] 1 S.C.R. 946, followed.
,
( c) The idea of fixing minimum wages in the light of the cost of !iv'
ing: at a particular juncture of time and of neutralising the prevailing-high
prices of essential commodities by linking up scales of minimum wages
with the cost of living index is not alien to the. concept of minimum
wages. · It oould not be co

## Text

156
HYDRO (ENGINEERS) PVT. LTD.
'V.
TIIE WORKMEN
April 30, 1968
(S. M. SIKRI, J. M. SHELAT AND V. BHARGAYA, JJ.J
l.ndustrial
Dispute-Minimum
Wag<-J'rinciple
for
fixaJwn ofRevuwn of scale of wages fixed by rhe previous award by linking up with
cost of living index-I/ double advantage to
workmen-Retrospective
operu11011 of award-Whether valid-What is '-'asonab/e qualifying period
for gratuity.
There were industrial disputes between the appellant and its workmen,
the respaadcnts, which were the subject-matter of awards.
The last of
such awards fixed revised wage scales taking into consideration the cost
of li\iog index then prevailing.
It also provided for annual
increments
but rejected the workmen's demand to link up the wage scales with the
index of cost of living.
After the respondents had received two annual
increments un.dcr that award. they served a notice on the appellant calling
for revision of the scale of \\·ages and of the gratuity scheme.
The dis.
·pule was referred to the Industrial Tribunal and the Tribunal passed an
.award.
The award retained the scales fixed in the previous award and
treating them as based on the cost of living index prevailing on the date
.of that award. directed that the waRes should be linked up with the cost
of living index. The award also directed that effect should be given to it
retrospectively from approximately the date of demand hy .the respondents.
As regards gratuity, the Tribunal reduced the existing qualifying period
.of 10 years :o 8 years in cases where a workman died, resigned or retired;
.and deleted completely the ex.isting qualifying period of 4 years in case
·where the services of the workman were terminated by the appellant.
A
8
c
D
E
Jn appeal to this Court, it was contended that : (I) The award as
regards wages should be <ct aside, because, (a)
the Tribunal took
a
wrong view as to what \\'ould const~:ute minimum wages, (b) it ignored
the financial capacity of the appellant. (c) the linking up of the waRe
scales with the eost of living index was wrong, (d) the Tribunal failed
F
to take into consideradon the principle of region-cum-industry. ( e) the
respondents would get double advantage during the same period, namely,
increments and a raise in the wage scales, and (f) retrospective operation.
should not have been given to the award; and (2) 1bc changes made in
Ule gratuity scheme were illegal.
HELD : (I) There was no reason to interfere with the minimum
wage rate fixed by the Tribunal. (163 A-Bl
G
(a) The policy of the Minimum Wages Act, 1948. was to prevent
employment of sweated labour in the general interesl and so the minimum
wa~ must ensure not merely the physical needs o.f the ~orker but must
ensure in addition to his sustenance and that of his family, the preservation of his efficiency as a workman by providing for some measure of
education medical requirement~ and amenities.
In the present cac;e, (i)
the Trib~nal retained the scale.~ fixed by the previous award and only
provided for automatic rise or fall therein with the correspondin.(!: chan~
in the index of cost of Iivin~ and (ii) the Tribunal observed that
the
appellant had to pay the minimum wages irrespective of its ability to
H
HYDRO (ENGINEERS) V. WORKMEN (She/at, !.)
157
A
bear the add;tional burden.
Therefore, what the Tribunal fixed was consolidated minimum wages and not fair wages. [161 G-H; 162 B-FJ
B
c
D
E
F
.G
H
(b) In prescribing such a minimum wage rate the capacity of the
employer need not be considered as the State assumes that every employer
must pay the minimum wages before he employs labour. [162 D-E]
Bijay Cotton Mills Ltd. v. State of Ajmer.
[1955] 1 S.C.R.
752,
Express Newspapers (Pvt.) Ltd. v. Union of llldia [1959] S.C.R. 12 and
Unichovi v. State of Kera/a, [1962] 1 S.C.R. 946, followed.
,
( c) The idea of fixing minimum wages in the light of the cost of !iv'
ing: at a particular juncture of time and of neutralising the prevailing-high
prices of essential commodities by linking up scales of minimum wages
with the cost of living index is not alien to the. concept of minimum
wages. · It oould not be contended that the Tribunal erred in linking up
the wage scales with ithe living cost, because, had it not been done, the
Wage scales would have become unrealistic, as the cost of living index
had gone very much higher up since the Tribunal give its last award and
was threatening to go up further. [161 D-F; 162 H; 163 A-BJ
(d) The capacity of the employer ·and the wage scales prevailing in
comparable industries in the region, are relevant factors while fixing fair
wages, but not when fixing minimum wages. [162 F-H]
Novex Dry Cleaners v. Workm•n, [1962] 1 L.L.J. 271 and Airline•
Hotel v. Workmen, [1964] 1 L.L.J. 415, explained.
(e) What the present award directs is to pay the workmen, from
approximately the date of demand, the wage scales calculated in accor•
dance with the rise in the in.dex of Jiving cost which had taken place since
the last award. The increments earned were on the footing of the index
figure taken into consideration while passing the previous award_ There·
fore, there is no question of the workmen getting any double advanta~e.
1163 C-DJ
(f) It was within the Tribunal's discretion to decide, from which date
its award should come into operation. Therefore, when no ground
Was
made out to show that the discretion was unreasonably exercised.
the
mere fact that it has retrospectively enforced its award from about the
date of demand by the workmen, is not a ground for interference with tlie
award. [163 E-F, HJ
Hindustan Times v. Their Workmen, [1964] 1 S.C.R. 234, Jlzagrckhand
Co//ierie. (Pvt) Ltd. v. C.G.l.T. Dhanbad, [1960]
2 L.LJ.
71
and
United Collieries v. Workmen, [1961] 2 L.L.J. 75 referred to.
( 2) (a) Since the justificati0n fdr gratuity is a long and meritoriou• •i
service, schemes of gratuity framed by the Tribunal and approved by
thi• Court have always provided some qualifying period.
Though there
is no hard and fast rule, the general trend as seen from a long series
of decisions is in favour of 10 years of qualifying service.
The Trihunal
was therefore, not right in reducing the period from 10 years to 8 years
without and substantial reason. [164 C-D, F--G]
·
Jndlan Oxygen and· Acetv/ene Co. Ltd, Employees Union v.
Indian
Oxygen and Acety/.ene Co, [1956] 1 L.L.J. 435, Exvress Newsvavers (P)
Ltd. v. Union of India, [1959) S.C.R. 12. Garment Cleaning Work.< v. Its
Workmen, [1961] 1 L.L.J. 513, British Paints \".
Workmen,
[1966] 2
S.C.R. 523 and Calcutta Insurance Co. v. Their Workmen, [1967] 2 L.LJ,
1, referred to.
158
SUPREME COURT REPORTS
(1969) J S.C.R
.<h) Also. as regards the deletion of the 4 years minimum qualifying
A
period
\Vht.:1~ .the appellant tcrm1natc5 a \vorkman's service, the 1·ribunal
had no leg1t1matc grounds for making the alteration in the
existing
scheme. [164 HJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1934 of
1967.
Appeal by special leave from the Award dated September 15,
B
1967 of the Industrial Tribunal, Maharashtra, Bombay in reference (IT) No. 54 of 1967.
I. N. Shroff, for the appellant.
Narayan B. Shetya and K. Rajendra Chaudhury, for Ih.e res·
pondents.
c
The Judgment of the Court was delivered by
Shelat, J.-111e appellarll company is a private limited company of which the authorised capital is Rs. 1 lac and the subscribed capital Rs. 50,000.
Its business is to manufaciure milk
cans. According to the Company, it has not been able to maintain, much less, increase, its production owing to the
control
orders restricting the import of raw materials required for
its
manufacturing process.
The Company was started in 1942 but
except for a fow years when it made some profits, it has had to
suffer losses during the rest of the years, the total loss suffered
up to
1964-65 hein~ Rs. l ,66,912.
The Company is
a small
unit having on its roll 53 workmen.
·
In 1958, a reference was made under s.
lO(l)(d) of thi:
Industrial Disputes Act, 1947 in respect of the demands made
by its employees for increase in the wage scales. The reference
ended in a se:tlement dated May 27, 1959 whcreunder a slight
increase in the wage scales was made.
It also provided for an
ad hoc increase in the wages of those getting Rs. 2.44 or more
per day.
The revised wages were to come into force retrospec·
lively from October 1, 1958.
In 1961, another reference was
made which also resulted in a settlement da!ed September
11,
1961.
Under that settlement, the workmen were classified into
four categories and consolidated wage scales for each. of the categories with a provision for increments were agreed upon. Since
these were consolidated wage scale.s, the demand for
dearness
allowance was not pressed. ·An award was made in tern1s of the
said settlement with retrospective effect from April 1. 1961. In
t 964, the Union once again demanded revision of wa~e scales.
The dispute was referred to the Industrial Tribunal which made
what has been referred to as the Bilgrami award. The Tribunal
retained the same categories and the only modification it made
was to increase the wage scales previously fixed, taking into consideration the rise in the index of cost of living in the meantime
D
E
F
G
H
•
HYDRO (ENGINEERS) v. WORKMEN (Shela!, J.)
1,59
A
from 450 to 538. The said award fixed the wage scales as
follows :
B
c
D
E
F
G
H
Unskilled
Semi Skilled
Skilled Il
Skilled I
-Rs. 4·15-0.10-Rs. 5.15.
-·Rs. 4.75-0,15-Rs. 6.25.
--Rs. 5.50-0.25-Rs. 8.00.
-Rs. 6.50-0.30-Rs. 9.50.
Apprentices
-Rs. 3.25-3.75-Rs. 4.25.
The award provided that the increments in the revised scales were
·to be annual and were to start from April 1, 1965. The award
was made effective from November 9, 1964 which was the date
of the reference.
It, however, rejected the Union's demand to
link up the wage scales with the index of cost of, living. By
April 1, 1967, therefore, the workmen had received two annual
increments and consequently the wages paid to the first four
categories were Rs. 4.35, 5.05, 6.00 and 7.10 per day respectively.
It is thus clear that the Bilgrami award took the scales
previously fixed as its basis when the cost of living index stood
at 450 and increased them taking into consideration the fact that
the said figure had gone up by about 94, that is, by raising it by
1 n.p. for every point.
'
On June 17, 1967, the Union served a notice of demand
which called for (a) revised scale of wages with effect from July
1, 1966; (b) for certain adjustments; (c) for linking up the
scales with the cost of living index; ( d) revision in the existing
gratuity scheme; and (e) for bonus for the year 1964-65. We
are not concerned in this appeal with the last demand as the impugned award does not deal with that demand. The demand for
revision of wage scales was based on the fact that the Bilgrami
award had fixed the wage scales on the footing of the cost of
living index being then 538 while that figure had shot up since
then to 675 and that if the rise were to be neutralised as it was
done by the Bilgrami award, the scale of unskilled workmen would
come to Rs. 5.30 per day.
So far as the gratuity scheme was
concerned, the demand required that the qualifying period for
the retrial gratuity should be reduced from ten to eight years
and the qualifying period in case of termination of service by the
employer· should be done away with. The Company resisted the
demand and the conciliation proceeding having failed, the State
Government referred the dispute to the Tribunal.
·
The Tribunal took note while considering the demand for
revision of scales and their linking up with the index of cost of
living of the fact (a) that the Bilgrami award itself had sought
to neutralise the rise in the living cost by raising the scales in
proportion to the rise in the cost of living by then; and (b) that
though that award was made in 1964, the wage scales thereunder
160
SUPREME COURT REPORTS
(1969] I S.C.R.
fixed had already become unreal in the sense that the index had
gone up to 675 by the time the Union filed its statement of claim,
that is, March 25, 1967 and had reached the figure of 7 JO in
July 1967 when the award was made. In these circumstances,
the Tribunal thought that the Union had made out a case for
revision, that it was necessary to make the wage scales realistic
and therefore to link them up with cost of living index though the
Bilgrami award had declined to do so.
What the Tribunal did,
therefore, was to retain the scales fixed by Mr.
Bilgrami
and
treating them on the basis of 538 index of Jiving cost, directed
that they should be linked up with the index so that the scala;
would automatically go up as the index rose or fell.
The award
also directed that effect should be given to it as from
July I,
1966, the notice of demand having been served on June 17,
1966.
The gratuity scheme framed in 1961 prov'ded that ten
days' wages for every year of service should be paid as gratuity
in case of death, retirement or resignation, provided the workmen had put in the minimum period of ten years of service. For
the workmen whose services would be terminated by the employer, the qualifying period was four years of service. The Tribunal revised the scheme in two particulars; (a) it reduced the
period from ten to eight years in case where the workmen has
died or resigned or retired; and (b) it deleted the qualifying period
of four years altogether where his service has been terminated by
the employer. The Tribunal considered the financial position of
the Company and came to the conclusion that though it
had
been making losses, it was of a fairly long standing, that the losses
incurred in the past years were a temporary phase, that the Conr
pany's future was not bleak and, though no• prosperous, it was
in a satisfactory financial position.
This appeal by snccial leave
disputes the correctness of the award made by the Tribunal.
Counsel for the Company objected to the aforesaid observation regarding the Company's financial position and pointed out
that its position cannot at all be said to be satisfactory in view of
the fact that, barring onlv a few years, it had made substan'ial
losses all throughout. Taking a cue from this fact, he contended
that (I) the reason which imnelled the Bilgrami Tribunal to
refuse to link up the wage scales with the cost of living index still
held good; (2) the Tribunal took a wrong view as to what wof.!ld
constitute a minimum wage: (3) it ignored the financial capacity
of the Company; ( 4) it failed to take into considcrati.on, the
principle of region-cum-industry: and (5) there w~s no 1ushfication in reducing the qualifying period for the. retiral benc~t. of
gratuitv from ten to eil!ht vears and for deletmg the quahfymg
period in the case of termination of service bv the empl~yer. We
propose to deal with contentions I to 4 first and consider se~a
rately the changes made by the Tribunal in the existing gratuity
scheme.
A
B
c
D
E
F
G
H
A
B
c
D
E
F
G
H
HYDRO (ENGINEERS) V. WORKMEN (She/at, 1.)
161
The Minimum Wages Act, XI of 1948 does not define 'mini·
mum wage's' presumably because it would not be possible to lay
down a unifo1m minimum wage for all industries throughout the
country on account of different and varying conditions prevailing
from industry to industry and from one part of the country to
another. The legislature also throught it inexpedient to apply the
Act to all industries at a time and, therefore, it applied the Act
to certain employments only specified in the Schedule thereto
leaving it to the appropriate government to add by notification to
that effect industries in the said Schedule at suitable times and in
appropriate conditions. But s. 4 of the Act provides that the
minimum rates of wages may consist of a basic rate of wages and
a special allowance at a rate to be adjusted or a basic rate of
wages with or without the cost of living allowance and cash value
of concessions in respect of supplies of essential commodities at
concession rates where so authorised or an all inclusive rate
allowing for the basic rate, the cost of Jiving allowance and the
cash value of the concessions if any.
Sub-section (2) of s. 4
provides that the cost of living allowance and the value of the
concessions in respect of supplies of essential
commodities
at
concession rates shall be computed by the competent authority at
such intervals and in accordance with such directions as may be
specified or given by the appropriate government. It is thus clear
that the concept of minimum wage does take in the factor of the
prevailing cost of essential commodities whenever such minimum
wage is to be fixed.
The idea of fixing such wage in the light of
cost of Jiving at a particular juncture of time and of neutralising
the rising prices of essential commodities by linking up ~cales of
minimum wages with the cost of living index cannot, therefore,
be said to be alien to the concept of a minimum wage. Furthermore, in the light of spiraUing of prices in recent years, if the
wage scales are to be realistic, it may become necessary to fix
them so as to neutralise at least partly the price rise in essential
commodities. Indeed, when the Bilgrami award revised the wage
scales, it took, as aforesaid, into account the rise in the cost of
living index and neutralised that rise by approximately raising
them by 1 n.p. for every point in the rise though it declined to
join up the scales with the index of cost of living.
What the present award does is to fix the minimum wage
scales and not to fix fair wages. That is clear from the fact that
it retains the scales fixed by the earlier award and taking them on
the basis of the index figure at 538 it provides for automatic
rise or fall therein with the corresp0nding change in the index of
Jiving cost.
Presumably the Tribunal thought it necessary to
do so because by the time it came to mal):e the award th.e index
figure had already gone up to 710. If the Tribunal' were to
reftise !o !_ink • up the scales with the in~ex of cost of living. the
neutral1satton 1t sought to do would agam go out of gear makin~
162
St:PREME COt:RT REPORTS
[l 969 J l S.C.R•
once again the scales unreal and reduce them even
below
the
floor-level.
That the Tribunal fixed the consolidated minimum
wages and not fair wages is clear from the facts ( 1) that it retained the scales lixed by the previous award which had increased
them from Rs 3.20 per day .for an unskilled workman to Rs. 4.15
per day as by that time the index had gone up from 450 to 538;
and ( 2) by its observation that the Company has to pay the minimum wages irrespective of il> ability to bear the additional burden.
The fact that an employer might find it difficult to carry on
his business on the basis of minimum wages is an irrelevant con·
sideration is now a well-settled principle :
(cf.
Bi jay
Collon
Mills Ltd. v. State of Ajmer('), Unichovi v. State of Kera/a(°)
and Express Newspapers (Pvt.) Ltd. v. Union of India("). While
considering the distinction between minimum and fair wages this
Court in the case of Uniclwvi v. State of Kera/a(') observed at
p. 967 that the policy of the Minimum Wages Act, 1948 was to
prevent employment of sweated labour in the general interest and
so in prescribing the minimum wage rates, the capacity the employer need not be considered as the State assumes
that every
employer must pay the
minimum
wage
before he
employs
labour. It also observed that the Act contemplates that minimum
wage rates must ensure not merely the mere physical need of the
worker which would keep him just above starvation but
must
ensure for him not only his subsistence and that of his family
but also preserve his cfliciency as a workman. It should. therefore,
provide as the Fair Wages Committee appointed by the Government recommended, not merely for the bare subsistence of his life
but for the preservation of the worker and so must provide for some
measure of education, medical requirements and ameni'.ies. This
concept of the Committee has been accepted by industrial adjudication in the country and was expressly approved of in
Expreu
Newspaper (Pvt.) Limited(').
Counsel for the Company however, cited before us the decisions in Airlines Hotel v. Workmen(') and Novex Dry Cleaners v. Workmen(") where the question of capacity and the wage scales prevailing in comparable in-
·dustries in the region were considered relevant factors.
But those
were not cases where minimum wage rates were fixed but were
·cases of fair wages where those two factors had to be taken into
account.
The Company's contention that the Tribunal failed to
take into consideration the financial capacity, the fact of the Company having made losses during the pas! years, its difficultie~ in
importing raw materials and had also failed to apply !~e rcg10nc11m-industry principle and therefore the award was vitiated, has
no merit.
We cannot also accept the contention that the Tribu-
(t l [19551 I S.C.ll. 752.
(2) J196l] I SCR. '!46.
0) [1959JS.C.R.12.
f.I) [1%4JILLJ.415.
f5) [1962) 1 L.L.J. 271.
A
B
c
D
E
p
G
H
•
HYDRO (ENGINEERS) v. WORKMEN (Shelat, J.)
163
A
nal erred in linking up the wage scales with the living cost OO,-
cause had it not been done, the wage scales would have again
gone unreal once the index had gone up as it then threatened to
do. We find, therefore, no reason to interfere with the minimum
wage rates fixed by the Tribunal.
B
c
D
E
F
A subsidiary contention ra.ised by the Company that by
reason of the Bilgraini award having provided for incremental ·
scales, the workmen under the present award will get double advantage, namely, increment and the raise in the wage scales during the same period, has also no substance. The incremental
scale was fixed in that award on the basis of the index figure
being 538.
Those scales have been retained.
The two increments that the workmen have earned in 1965 and 1966 were on
the footing of those scales which, as aforesaid, were fixed on the
basis of the index figure of 538. What the present award directs
is to pay the workmen as from July 1, 1967 the wage scales calculated in accordance with the rise in the index of living cost
which had taken place since the last award. The increments
earned having been on the footing of the index figure of
538,
there is no question of the workmen getting a double advantage.
The next objection to the award was that the Tribunal erred
in giving effect to the award retrospectively as from July 1, 196~,
that is, approximately from the date of the demand and that if
at all it wanted to give such retrospective effect, the utmost that
it could do was to enforce it from the date of the reference.
In
some cases retrospective effect, no doubt, has been ·given from
the date of the reference.
But it is a matter of discretion for
the Tribunal to decide from the circumstances of each case from
which date its award should come into operation.
No general
rule can be laid down as to the date from which a Tribunal should
bring its award in force : (see Hindusthan Times v. Their Workmen('). Presumably, the Tribunal gave effect to its award from
July 1966 as by that time the cost of living index had already
gone up considerably and not to have done so would have been
to deprive the workmen of the minimum wages commensurate
with that rise. In lhagrakhand Collieries (Private)
Ltd. v.
C.G.l.T. Dhanbad(2 ) and United Collieries v. Workmen(') the
awards were made operative from the respective dates of demands
and this Couq did not interfere with those awards on the ground
that there was thereby any breach of any recognised principle.
If the Tribunal has exercised its discretion and no substantial
ground is made out to show that it was unreasonably exercised,
the mere fact that it was retrospectively enforced its award from
the date of the demand is hardly a gronnd for interfer.ence with
1he award.
(1) [1964] 1 S.C.R. 234.
(2)
[196G] 2 L.L.l. 71.
(3) [1961] 2 L.L.J. 75.
164
SUPREME COURT REPORTS
[ 1969] I S.C.R.
We now tum to the changes made by the Tribunal in the
existing gratuity scheme framed by the Savarkar Tribunal.
In
our view, there is force in the Company's contention that the
changes, namely, reduction of the qualifying period from ten to
eight years in the case of termination of service by death, retirement or resignation and deletion of the qualifying period of four
years in the case of termination of service by the employer, were
not justified.
The Tribunal in fact has not given any specific
reason which necessitated the two changes.
It is now wel! settled that gratuity is a reward for llood, efficient and faithful service rendered for a fairly substanual period
and that it is not paid to the employee gratuitously or merely as
a matter of boon but for long and meritorious service; (cf. Garment Cleaning Works v. Its Workmen(') and
Express Newspapers (Private) Limited. v. Union of India('). Since the justification for gratuity is a long and meritorious service, schemes of
gratuity framed by the tribunals and approved of by this Court
have always provided some qualifying period. In Indian Oxygen
and Acetylene Company Ltd. Employees Union v. Indian Ox}'f(en
and Acetylene Company(') and Express Newspapers (Private)
Ltd. v. Union of India(') the qualifying period for gratuity on
termination of service by resignation or retirement was fixed at
15 years.
In Garment Cleaning Works
v.
Its Workmen('),
though the Company objected to the period of ten years and contended on the analogy of the aforesaid two decisions that it should
be fi.ftcen years, this Court gave its approval to the period of
ten years in case of retirement or resignation. On the other hand,
in British Paints v. Workmen(') the period of five
years provided by the award was changed into ten years on the ground that
a fairly long minimum period for qualifying for gratuity in the
case of resi1mation or retirement was necessary to prevent the
workmen leaving one concern after another after putting in the
short minimum service for qualifying for
gratuity.
Similarly,
modification from five to ten years was made in a recent decision
of this Court in Calcutta Insurance
Co. Ltd .. v. Their Workmen('). Though no hard and fast rule can be laid down and
each case must be decided on its own circumstances, the general
trend as seen from a long series of decisions is in favour of ten
years of qualifying service. The Tribunal in the absency of any
sub~tantial reason, was, therefore, not
right in
reducing
the
period from ten to eight years.
As ·regards the deletion of four
years minimum period in cas.es where the employer terminates
the service also we do not find any legitimate ground for the
alteration of the scheme. It was, however, said that if such
a
period is provided for in a scheme, it was possible that an em-
(i')[196i]!L.L.J. 5ll. -
(2) (19591S.C.R.12.
(1) (19561 J L.l.J. 435.
(4)
(196612 S.C.R. 523.
(S) [! 967] 2 L. L.J. 1.
B
c
•
D
E
F
-
G
H
A
B
c
D
-
HYDRO (ENGINEERS) v. WORKMEN (She/at, /,)
165
111.oyer would terminate the services of a workmen even though
the employee wants to render continuous service to enable him
to earn the gratuity.
This does not appear to be a legitimate
apprehension for unless the employer is in a position to establish
misconduct justifying termination of service under a
standing
order, he cannot put an end to the service only to deprive the
workman of gratuity. On the other hand, there is the danger that
whereas in the case of retirement or resignation the workman
would have to put in ten years of service, if no minimum period
is provided for in the case of termination by the employer it
would be possible for a workmen to commit some misconduct and
earn gratuity within a shorter time than the one who after a long
period of meritorious service retires or resigns. Since doing away
with the qualifying period is likely to result in such an anomaly,
it is necessary to have some qualifying minimum period. As the
period of four years provided in the scheme is not under challenge
before us, there is no reason to interfere with it. We, therefore,
set aside the two changes made by the Tribunal in the gratuity
scheme. The scheme for gratuity will, therefore remain the same
as framed by the Savarkar award.
In the result, except for the aforesaid modifications
in the
award, we find no reason to interfere with the award. The appeal,
except to the extent aforesaid, fails and is dismissed. There will
be no order as to costs.
V.P.S.
Appeal partly allowed.