# REMINGTON RAND OF INDIA LTD v. THE WORKMEN

- **Citation:** [1970] 2 S.C.R. 935
- **Court:** Supreme Court of India
- **Decided:** 1969-10-17
- **Case number:** Civil A11peal No. 1551 of 1966
- **Bench:** J.M. Shelat, C. A. Vaidialingam, I. D. Dua
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/remington-rand-of-india-ltd-v-the-workmen-4887
- **Pages:** 15

## Headnote

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Industrial Dispute-Medical benefit-Company's Scheme for Calcutta
employees whether applicable to Madras
region-Gratuity-Qualifying
period for workmen guilty of misconduct-Whether gratuity
should be
payable to workmen gu:lty of violence, riotous behaviour etc.
An industrial dispute between the appellant company and its workmen
relating inter alia, to bonus, medical benefits and gratuity was referred by
the Staie Government of Madras on April 6, 1965 to the Industrial Tribunal for adjudication. The Tribunal awarded bonus at 20% of the consolidated wages as provided in the Payment of Bonus Act, 1965. As to medical benefits the Tribunal directed that the company should pay the cost
of medicines prescribed by the company's
doctt>r and the full cost of
hospitalisation when it was recommended by the company's doctor. The
Tribunal modified the company's gratuity scheme in accordance with the
workmen's demands. The company appealed to this Court against the
award. The question of bonus had to be considered in the light of this
Court's decision in la/an Trading Co~pany's case.
On th~ question of
nedical benefits the Court bad to consider whether the company's scheme
lfo:r its Calcutta employees could be extended to Madras
Region.
In re~
gard to gratuity the main questions for consideration were as to the quali~
fying period for payment of gratuity to workmen who were guilty of
misconduct, and whether gratuity should be payable to workmen whose
misconduct consisted of violence, riotous behaviour etc.
HELD: (i) In view of this Court's decision in Jcilan Trading Company's case the Payment of Bonus Act, 1965 was not applicable in respect
of the year in question and the bonus payable had to be calculated in
accordance with the Full Bench Formulr. The award to that extent there-
'fore had to be set aside and remanded to the Tribunal for determining
the bonus in accordance with the said Formula. [937 EJ
la/an Trading Co. v. Mill Mazdoor Union, [1967] I S.C.R. 15, referred
to.
(ii) In the appellant company's earlier cases relating to its Bangalore,
Hyderabad and Kerala· Branches. this Court had. ·held that the company's
Calcutta scheme relatmg to medical benefit for its workmen was fair and
reasonable and had made the said scheme applicable to these areas also.
No substantial difference had been shown between these areas and the
Madras region affecting the ques!ion of medical benefit.
There was thus
no legitim~te reason why the Calcutta scheme should not be applied to the
workmen in the present case. [The Court framed an eight point scheme
for medical benefit based oq the Calcutta scheme]. [939 A-940 CJ
Remington Rand of India v. The Workmen, CA. Nos. 856/68 etc. dt.
10-12-1968, applied.
·
(iii) Once the principle that gratuity is paid. to ensure good conduct
throughout the penod that the workman serves hIS employer as laid down
'936
SUPREME COURT REPORTS
[1970] 2 S.C,R.
in Calcutta IT1&1UM£e Co. smno dislioctiM iil tU -matlor fll the qualifying
period between cases of resignation and retirement on the one hand and
dismissal for misconduct on the other becomes logically necessary. Such
a distinction cannot legitill)alely he assailed as unreasonable. Similarly
if the object underlying tho scheme of gratuity is to secure industrial
harmony and satisfaction among w1>rlailen it is impossible to equate cases
of death, physical inr•pacity, retirement and resignation with cases of
termination of service incurred on account of misconduct. Besides. a
longer qualifying period in the latter cases would ensure restraint against
wilful use of violence and force, neglect etc. [94~ E]
As laid down in Delhi Cloth .f< General Mllls case dmt acts ami>unting
to misconduct as defined in the standing orders, when they are made, or
the model standing orders, where they are applicable differ in degree of
gravity, nature and th~r impact on the discipline and the working of the
concern, and that though grave in their nature all of them may not result
in lo

## Text

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A
REMINGTON RAND OF INDIA LTD.
v.
THE WORKMEN
October 17, 1969
935
B
[J.M. SHELAT, C. A. VAIDIALINGAM AND I. D. DUA, JJ.]
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Industrial Dispute-Medical benefit-Company's Scheme for Calcutta
employees whether applicable to Madras
region-Gratuity-Qualifying
period for workmen guilty of misconduct-Whether gratuity
should be
payable to workmen gu:lty of violence, riotous behaviour etc.
An industrial dispute between the appellant company and its workmen
relating inter alia, to bonus, medical benefits and gratuity was referred by
the Staie Government of Madras on April 6, 1965 to the Industrial Tribunal for adjudication. The Tribunal awarded bonus at 20% of the consolidated wages as provided in the Payment of Bonus Act, 1965. As to medical benefits the Tribunal directed that the company should pay the cost
of medicines prescribed by the company's
doctt>r and the full cost of
hospitalisation when it was recommended by the company's doctor. The
Tribunal modified the company's gratuity scheme in accordance with the
workmen's demands. The company appealed to this Court against the
award. The question of bonus had to be considered in the light of this
Court's decision in la/an Trading Co~pany's case.
On th~ question of
nedical benefits the Court bad to consider whether the company's scheme
lfo:r its Calcutta employees could be extended to Madras
Region.
In re~
gard to gratuity the main questions for consideration were as to the quali~
fying period for payment of gratuity to workmen who were guilty of
misconduct, and whether gratuity should be payable to workmen whose
misconduct consisted of violence, riotous behaviour etc.
HELD: (i) In view of this Court's decision in Jcilan Trading Company's case the Payment of Bonus Act, 1965 was not applicable in respect
of the year in question and the bonus payable had to be calculated in
accordance with the Full Bench Formulr. The award to that extent there-
'fore had to be set aside and remanded to the Tribunal for determining
the bonus in accordance with the said Formula. [937 EJ
la/an Trading Co. v. Mill Mazdoor Union, [1967] I S.C.R. 15, referred
to.
(ii) In the appellant company's earlier cases relating to its Bangalore,
Hyderabad and Kerala· Branches. this Court had. ·held that the company's
Calcutta scheme relatmg to medical benefit for its workmen was fair and
reasonable and had made the said scheme applicable to these areas also.
No substantial difference had been shown between these areas and the
Madras region affecting the ques!ion of medical benefit.
There was thus
no legitim~te reason why the Calcutta scheme should not be applied to the
workmen in the present case. [The Court framed an eight point scheme
for medical benefit based oq the Calcutta scheme]. [939 A-940 CJ
Remington Rand of India v. The Workmen, CA. Nos. 856/68 etc. dt.
10-12-1968, applied.
·
(iii) Once the principle that gratuity is paid. to ensure good conduct
throughout the penod that the workman serves hIS employer as laid down
'936
SUPREME COURT REPORTS
[1970] 2 S.C,R.
in Calcutta IT1&1UM£e Co. smno dislioctiM iil tU -matlor fll the qualifying
period between cases of resignation and retirement on the one hand and
dismissal for misconduct on the other becomes logically necessary. Such
a distinction cannot legitill)alely he assailed as unreasonable. Similarly
if the object underlying tho scheme of gratuity is to secure industrial
harmony and satisfaction among w1>rlailen it is impossible to equate cases
of death, physical inr•pacity, retirement and resignation with cases of
termination of service incurred on account of misconduct. Besides. a
longer qualifying period in the latter cases would ensure restraint against
wilful use of violence and force, neglect etc. [94~ E]
As laid down in Delhi Cloth .f< General Mllls case dmt acts ami>unting
to misconduct as defined in the standing orders, when they are made, or
the model standing orders, where they are applicable differ in degree of
gravity, nature and th~r impact on the discipline and the working of the
concern, and that though grave in their nature all of them may not result
in loss capable of being calculated in terms of money. Amongst !hem
there would be llOll!e which would forthwith disentitle the workman from
Tetaining his employment and justifyina his dismilsal ..
For the reasoos given in the Dalhl Cloth & G••tral Mills case It waa
· necessary to modify the scheme di gratuity and to add in cl. 5 thereof · a
proviso that in caaes where 'there has been termination of service on
account of an employee found guilty of act or acta involving violence
against the management or other employees or riotoos or disorderly be·
haviour in or near the company's premises, the company would be .entitled
to forfeit the gratuity which would otherwise be payable to the concerned
workmen. Clause 5 should also be modified so as to introduce therein 15
years continuous service as the qualifying period for earning gratuity in
cases when the service of an employee has been terminated on account of
misconduct and that such gratuity should be payable at the rate prescribed
in cl. 3(d) of the scheme. [948 G-949 DJ
Calcutta Insuran<!e Co. Ltd. v. Their Workmen, [1967) 2 S.C.R. 596,
and Delhi Cloth & General Mills Co. Ltd. v. The Workmen, [1969) 2 8.C.R.
307, applied.
Garment Cleaning Works v. Its Workmen, [1962) 2 S.C.R. 711, Moti-
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pur Zami•dari (P) Ltd. v. Work1111n, [1965) 2 L.L.J. 139, Employees v.
Reserve Bank of India, (1966] 1 S.C.R. 25, 58, Remington Rand of India
F
Ltd. v. Their Workmen, [1968) 1 L.L.J. 542, Remington Rand of India v.
The Workmen, [1968) 1 S.C.R. 164, 168 and Indian Oxygen & Acetylene
Co Ltd, case [1956] 1 L.L.J. 435, considered.
CIVIL APPELLATE JURISDICTION: Civil A11peal No. 1551 of
1966.
Appeal by special leave from the Award dated February 28,
G
1966 of the Industrial Tribunal, Madras in I. D. No. 21 of 1965.
H. R. Gokhale and D. N. Gupta, for the appellant.
M. K. Ramamurthi, Sh,vamala Pappu and Vineet Kumar, for
the respondents.
The Judgment of the Court was delivered by
ff
·Shelat, J. On demands for revision of wage-scales, dearness
allowance, medical benefit, bonus for the year 1963-64, gratuity
REMINGTON ~Np v. WORKMEN (She/al, J.)
937
A etc. havin_g been made by the workmen of !he appellant-company
in its Madras and t!le other branches in tllat region and disputes
thereabout having arisen between the company and its said workmen, the Government of Madras referrec\ them by its notification
dated April 6, 1965 for adjudication to the Industrial Tribunal,
Madras. The Tribunal granted some and rejected the rest of the
B demands. Aggrieved by the award the company filed this appeal
under special leave granted by this Court.
Though the award dealt with a number of demands counsel
for the appellant-company restricted its challenge
against the
award on ihree subjects only.
Consequently, we are concerned
in ::his appeal with those three subjects only, namely, bonus for
C
the year 1963-64, medical benefits and revision by the Tribunal
of the company's existing gratuity scheme.
As regarc\s the bonus, !lie company had already paid to the
workmen bonus ai tile rate of 4 months' basic pay as against the
demand for th~ ma){4num bonus calcll\ated in accordance with
the Payment of Bonus Act, 1965, and on consolidated as against
D
the basic wages. The Tribu11al concec\ed that demand and
grAnt~\i bonus at 20% of the
consolidated wages.
In view,
however, of this coμrt's decision in Ja/μn Trading Co. v. Mill
Mazaoor Union, (1) Mr. Ramamμrthi for the workman conceded
that the Act cannot apply in respect of the year in question and
that the bonus payable for that year will have to be calculated on
the basis of the Full Bench Fonriula as approved by this Court.
E The award to that extent, therefore, has to be sei aside and
remanded to the Tribunal for determining the bonus in accordance
with the said Formula.
On the question of medical facilities, the workmen's demand
is containe\i in paras 27 to 31 of t!leir statement of claim filed
F
before the Tribunal according to which the workmen wanted the
company to reimburse all medical expenses incurred by them on
-production of bills therefor.
In paras 27 and 28 of the statement,
it was stated that the company had a scheme for medical benefit
for its workmen at Calcutta made under the consent award of
1962 and that there was no reason "why this amenity should be
refused to the workmen in this region".
Para 30 of the statement
G
st~ted that there was a discussion between the parties regarding
this demanc\ when the company agree\! to
appoint a medical
officer for consultation by the workmen and also to meet the cost
of medicines up to Rs. 100 for a workman per year.
This offer,
however, was rejected on three grounds: (1) that the condition
as to the ceiling was discriminatory, (2) that the ceiling was too
H
low and ( 3) that there was no warrant for not extending the
benefit to workmen of the branch offices outside Madras.
(1) [1967] I S.C.R. IS,
938
SUPREME COURT REPORTS
[1970] 2 S.C.R.
This demand is dealt with by the Tribunal in para 14 of the
award.
It is clear therefrom that the union's contention before
the Tribunal was that there was no reason why "this amenity of
medical facility which the company has granted to its Calcutta
workmen
should
be
refused
to
the
workmen
of
the
Madras region".
The
contention thus
clearly was that the
company having made a scheme for its Calcutta employees, it
was discriminatory to refuse such a scheme to its workmen in
Madras region.
It is equally clear that the offer made by the
company and referred to in the statement of claim by the workmen
was rejected as it contained a ceiling which was not in its Calcutta .
scheme, and it was, therefore, that its offer was considered discriminatory. In view of these contentions the Tribunal agreed
that a scheme for medical benefit for this region was called for.
The Calcutta scheme was not produced before the Tribujll'al and
therefore the Tribunal proceeded to frame its own scheme.
The
Tribunal rejected the demand for reimbursement of all medical
expenses in respect of which bills would be produced as it felt that
such a provision would lead to abuses including the obtaining of
false bills.
Instead, the Tribunal
directed that the
company
should pay the cost of such medicines as are prescribed by the
company's doctor, if support~d by genuine bills, and should also
pay all cost of hospitalisation if and when it was recommended by
the company's doctor.
Counsel for the company objected to this part of the award
on the grounds ( 1) that the Tribunal was not justified in throwing
on the company the entire burden of medical expenses including
the cost of hospitalisation even in cases of major diseases which
workmen might suffer or contact, ( 2) that it was no part of the
employer's obligation to provide for such expenses and that too
to an unlimited degree, and ( 3) that the award should have provided a ceiling both in respect of the cost of medicines and of
hospitalisation.
The argument was that the grievance cf the
workmen was that denial of the medical amenity to them as the
one given to its Calcutta workmen was discriminatory, and therefore, if the Tribunal decided to concede the demand, it should
have been on the same lines as the Calcutta scheme.
Mr. Ramamurthi, on the other hand, contended that (a) it was an accepted
principle that thoulift a company may have an all India organisation, it was not necessary that ii should have uniform conditions
of service in all the regions and that, therefore, merely because
the company has a medical scheme for its Calcutta office it did
not follow thai that scheme must also be applied to its workmen
in Madras region, and (b) that the scheme framed by the Tribunal was fair and should not be interfered with in order only to
bring it in line with that of Calcutta.
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REMINGTON RAND v. WORKMEN (She/at, J.)
939
In a r~ent decision concerning this very company and its'
workmen in
Bangalore,
Hyderabad
and Kerala
branches
(Remington Rand of India
v.
The Workmen)('), this Court
had to consider this very question.
The Tribunals in those cases
had, as in this case, made schemes which imposed the burden of
medical facilities on the company without any ceiling and extended therein such benefit to the family members of the workmen
also.
In those case;s, on our finding the company's Calcutta
scheme to be fair and reasonable, we substituted it for the schemes
framed by the respective Tribunals. The Calcutta scheme is thus in
operation in those areas also.
Counsel for the workmen has not
shown to us any substantial difference between those areas and
the Madras region affecting the question of medical benefit.
We,
therefore, find no legitimate reason why the Calcutta scheme
should not be applied to these workmen. It is true that medical
benefit is excepted in that scheme for certain diseases of a contagious and epidemic nature.
That presumably was done on the
ground that for such diseases the primary duty to give relief is of
the State and not of the employer.
For the reasons given in that
decision, we set aside the directions given by the Tribunal in .this
behalf and substitute them by the following scheme :
I. When a workman during the course of his duty
requires medical attention, and where such
attention
is given by the company's doctor
(i.e. a doctor or
doctors nominated by the company including a doctor
nominated as a part-time doctor) and medicines
are
prescribed by him, the cost of such prescription should
be borne by the company;
2. In the eveeit of a workman falling sick at his
residence and the illness is other than a venereal
disease, leprosy, smallpox, typhoid or cholera, he should
be paid the cost of the medicines prescribed;
3. Bills or cash vouchers pertaining to Juch prescription should be produced for counter signature of
the company's doctor before payment is authorised;
4. Disease of a serious nature requiring hospitalisation will be subject to consideration by the company;
5. At the time of employment the company will be
entitled to get the prospective employees examined by
the company's doctor and their employment will
be
subject to being found medically fit;
6. All company employees who are presently employed or those employed in future will be medically
(l) C.A. Nos. 856. 1475 and 2119of1968, decided on December 10, 1968.
940
SUl'·REME COURT REl'ORTS
[ 1970] 2 S.C.11..
examinlld by the company's <,ioctor once a year or at
such other periooical intervals getermined by thJ: com-
.pany but the results of such me<,I;cal examinations will
not be prejudicial to the ·workmen's employment;
7. In case a workman is found medically unfit to
.continue in service, the company will decide his case
in consultation with the union's secretary; and
8. This scheme will come to an end as and when
the Employees' State Insurance Scheme is extended to
the employees concerne<,1.
The question of laying down any ceiling need not be con-
'.Sidere<,i as the company, we are told, is agreeable to extend this
'Scheme in this regi0n.
The third item in respect of which the company challenges
the award is the revision made by the Tribunal of the existing
·gratuity scheme.
The workmen's demand in this respect was :
(I)· that the maxilnum limit of 15 months' salary should be
enhanced to 20 months' salary, and (2) that the provision in
the existing scheme th9t no gratuity would be payable to a work-
. man dismisse\I on the ground of misconduct should be substituted
by a p;ovhion that even in such cases gratuity should be payable
but the company would be enti.tled to deduct from such gratuity
amount the l\ffiOunt of financial loss, if any, resulting from such
misconi!uct.
The Tribunal's view was that these demands were
reasonable and accordi'lgly made modifications in the existing
schr.me. At first, Mr. Gokhale objected to this part of the award.
firstly on the ground that the "'ribunal oughi not to ltave allowed
i:ratuity even in cases of dismissal for misconduct, and secondly,
that the qualifying period in the case of termination of service
t>y the company otherwise than for misconduct should be
10
years and not the graded periods from 5 to 15 years as provided
in the awar\I.
On second thoughts he did not press the second
objection. ;md therefore, nothing need be said about it. He,
however, contended that if gratuity even in cases of dismissal for
misconduct is to be made payable, a provision should be made
that it would be forfeited if the misconduct is a gross one involving violence, riotous behaviour etc. and for the rest of the cases,
the qualifying period should be 15 years of continuous service.
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These objections involve a principle,
and
therefore, need
-serious consideration. The principle invoked by Mr. Gokhale is,
'firstly, that since gratuity is paid as a reward for long and meriH
1orious service it would be inconsistent with that principle to
:award gratuity in cases of dismissal for misconduct, for. such
cases cannot be treated as
cases of meritorious service, and
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AEM\NGTON RAND v. WORKMEN (Shelat, J.)
941
secondly, the provi9ion in such cases for deduction only of financial Joss resulting from misconduct committed by the workman
is neither proper nor consistent with the
principle on which
gratuity is made payable by an employer.
A workman may l:>e
guilty of gross Misconduct, such as riotous behaviour or assault
on a member of the staff. Such misconduct may not result in
any financial loss to the company, and therefore, the workman
would be paid full gratuity amount.
The contention_ was that it
would be a serious anomaly that while a workman, who has
caused some damage to the company's property and is dismissed
on the ground that he was guilty of misconduct would have the
gratuity amount payable to him reduced to the extent ot that
damage, another workman, who, for instance, assaults and causes
ini11ry, even a serious injury, to another employee would, though
liable to be dismissed, be entitlei;I to the full gratuity merely because the misconduct of which he is guilty,
though graver in
nature, does not result in pecuniary loss to the company.
In support of his contention, Mr. Gokhale leaned heavily on
two recent deci~ions of this Court in Calcutta Insurance Co. Ltd.
v. Their Workmen(')
and The Delhi Cloth & General Mills
Company Ltd. v. The Workmen(').
Relying on these decisions,
he urged that in cases of dismissal for misconduct, the qualifying
period should not be as prescribed by the Tribunal but must be
15 years of continuous service.
Mr. Ramamurthi, on the other
hand, contended that the principle that gratuity is a reward for
long and meritorious service and that for a single mi:,conducl
after such service, such misconduct should not result in depri ;ation of gratuity except to the extent of the actual monetary loss
caused to the employer has been l<•ng accepted in industrial adjudication and should not be abandoned, and that the two decisions
f
relied on by Mr. Gokhale should not be construed as having the
cumulative result of enhancing the qualifying period and also depriving gratuity in cases of dismissal for misconduct. The first
decision, according to him, lays down an increase in the qualify,
ing period from 10 years, which generally used to be the period
fo!" eamin~ gratuity, to 15 years, and the second lays down c~r
tam excep~1ons to the ~ccepted rule ti.at deduction of monetary
loss resultmg from misconduct was sufficient.
He argued that
G
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neither of the two decisions lays down th'lt both the consequences
!1JUSt follo.w where a workman is dismissed for misconduct, even
if such misconduct has not resulted .n any monetary loss to the
employer.
In view of these contentions it becomes necessary for us to
examine the earlier decisions cited before us before we come to
(I) [1967) 2 S.C.R. 596.
(2) [1969) 2 S.C.R. 307.
942
SUPREME COURT REPORTS
[1970] 2 S.C.R.
the cases of Calcutta ln.•urance Co. Ltd.(') and the Delhi Cloth
& General Mills Co. Ltd.(').
The question as to whether gratuity should be payable even
though the concerned workman is
dismissed for misconduct
appears to have lieen raised for the first time in The Garment
Cleaning Works
v.
Its Workmen(•). The objection there
raised related to cl. 4 of the gratuity scheme framed by the Tri·
bunal which provided that even if a workman was dismissed or
discharged for misconduct, gratuity would still be payable except that if such a misconduct resulted in financial loss to the
works, gratuity should be paid after deducting such loss.
The
contention urged by counsel, but which failed, was that such a
· clause was inconsistent with the principle on which gratuity
claims were based, namely, that they were in the nafure of retiral
benefit based on long and meritorious service. Therefore, if a
workman was guilty of misconduct and was dismissed or discharged, it would be a blot on his long and meritorious service
and in such a case it would not be oper. to him to claim gratuity.
This was a general argument and was repelled as such is clear
from what the Court said at page 715 of the Report :
"On principle, if gratuity is earned by an empl_9yee
for long and meritorious service it is difficult to under·
stand why the benefit thus earned by long and .meritorious service should not be available to the employee
even though at the end of such . service he may have
been found guilty of misconduct which entails his dismissal.
Grautity is not paid to the employee gratuitously or merely as a matter of boon. It is paid to him
for the service rendered .l:>y him to the employer, and
when it is once earned it is difficult to understand why
it should necessarily be denied to him whatever may
be the nature of misconuct for his dismissal-Therefore
we do not think that ii would be possible to accede to
the general argument that in all cases where the service
of an employee is terminated for misconduct graiuity
should not be paid to him."
The words "why it should necessarily be denied to him whatever
may be the natur~ of misconduct" occurring in the earlier part of
the passage and the words "general argument that in all cases
where the service of an employee is terminated for misconduct
gratuity should not be paid" and the reference by the Court to
certain awards made by tribunals where simple misconduct was
distinguished from grave misconduct and forfeiture of gratuity
(I) [1967] 2 S.C.R. 596.
(2) [1969] 2 S.C.R. 307.
(3) [1%2] 2 S.C.R. 711.
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REMINGTON RAND v. WORKMEN (She/at, J.)
943
A
was provided for the later occurring after this passage clearly
show, firstly, that the Court was dealing with and
re~lled the
general proposition that without any distinction between simple
and gross misconduct there should be forfeiture in all cases of
dismisFal for misconduct of whatsoever nature, and secondly, that
though the Court approved the scheme which
provided that
B gratuity should be paid after deducting financial loss resulting
from the workman's misconduct, the Court did not lay down any
principle that gratuity should be paid in cases of grave misconduct
involving even violence which though it may not result in financial damage may yet be more serious than the one which results
in monetary luss. The decision thus is not an authority for the
proposition that even if a workman were guilty of misconduct,
C
such as riotous behaviour or an assault on another employee, industrial adjudication should not countenance a provision for
forfeiture of gratuity in such ca5es merely because it does not
result in monetary loss or that such a provision would be inconsistent with the principle that gratuity is not a boon or a gratuitous
payment but one which is earned for long and meritorious
D service.
E
In Motipur Zamindari (P) Ltd. vs.
Workmen(') the only
question considered was whether the award was justified in providing forfeiture of gratuity in a case where the misconduct involved moral turpitude. The Court following Garmeni Cleaning Works(') directed that instead of forfeiture, the clause should
provide deduction of the amount of monetary Joss, if any, caused
by such misconduct. It is clear that no one canvassed the question as to whether a provision in a gratuity scheme that a workman should forfeit gratuity in the event of his committing misconduct involving violence or riotous behaviour within or around
the works premises would be justified or noi. Nor was it conF
sidered whether it *ould be anomalous to provide for exaction of
compensation from gratuity amount in case of misconduct involving moral turpitude while not making any provision against misconduct, such as the use of violence or force, which though not
resulting in monetary loss, yet is unquestionably of a graver
lliature .. The case of Employees v. Reserve Bank of India(')
G was agam a case where there was a general clause in the gratuity
scheme providing forfeiture in cases of dismissal for misconduct
whatsoever and where in view of the decision in Garment Cleaning Works('), the Bank conceded to substitute the rule by providing deduction from gratuity the amount of monetary loss
occasioned by the misconduct for which dismissal is ordered.
H
Thus, in none of the cases cited before us the question as to what
should be the minimum qualifying period in cases of dismissal
(I) (1965] 2 L.L.J. 139.
(2) [1962] 2 S.C.R. 711.
(3) [1966] I S.C.R. 25, at 58.
SUP!l!ME tO\Jtl.t !EPoll.'i'S
(1970] 2 S.C.R.
for misconduct and the question as to whether a proviSion for
A
forfeiture of gratuity in the event of sucii llismlssal having been
ordered for misco!\duct involving violence we~ either canvassed
or considered. On the other hand, in a recent detision betWeen
this very eolllpany and its workmen in Bangalore region
(Remington Rand of India Ltd.
v.
Their Workmen)('), the
gratuity scheme made by the Ttiblinal provided for a qualifying
&
period in cases of termination of service otherwise than for misconduct, but no qualifying petiod was pto'Vided for cases where
termination of service was by way of punishment for misconduct.
This Court accepted the objection of the company on the ground
of this omission and laid down the qualifying period of lS years'
service in such cases. In this decision tl.e Court followed the
earlier decision in Calcutta Insurance Co.(2)
In another such
C
case (Remington Rand of India vs. The Workme1;( 8 ), where the
dispute concerned the workmen of the company in Kerala region
15 years service was proviaed as the qualifying period in cases
of dismissal for misconduct.
In the case of Calcutta Insurance Co.(') on a contention
having been raised that the qualifying period for earning gratuity
in cases of retirement and resignation should be 15 years' service
and that no gratuity should be payable in cases of dismiSsal for
misconduct, the Court examined the earlier decisions commencing from the Indian Oxygen & Acetylene Co. Ltd.(') to the case
of Garment Cleaning Works(')
and registered its demurrer
against the observation made in the latter case that as gratuity
was earned by an employee for long and meritorious service, it
should consequently be available to him even though at the end
of such service he may have been found guilty of misconduct
entailing his dismissal. In so doing the Court at page 608 of the
Report remarked :
''In principle, it is difficult to concur in the above
opinion. Gratuity cannot be put on the same level as
wages. We are inclined to think that it 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 finoocial
loss to hiS employer, the employer would under the general law have a right of action agaiil.~t the employee for
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(1) (1968] 1 L.L.J. 542.
(2) (1967] 2 S.C.R. 596.
(3) (19681 I S.C.R. 164, at J68.
(4) [1956] I L.L.J. 435.
(5) [19621 2 S.C.R. 711.
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!I.EMINGTON RAND v. WORKMEN (She/at, I.)
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the loss caused and making a provision for withholding
payment of gratuity where such loss caused to _the employer does not seem to aid to the harmonious employment of labourers or workmen. Further, the misconduct may be sJch as to undermine the discipline in the
workers-a case in which it would be extremely diffi8
cult to assess the financial loss to the employer."
Continuity, in other words, must govem both the service and its
character of meritoriousness.
The Court further observed that
a mere provision in a .gratuity scheme enabling an employer to
deduct from the gratuity amount the actual loss caused as a
resuli of misconduct for which the workmen incurs the punishC
ment of dismissal or discharge cannot subserve industrial peace
and harmony, firstly, because an employer even without such a
provision has under the law the right of action for claiming
damages, a right not taken away by industrial law; and secondly,
because a misconduct resulting in dismissal may be such as may
undermine discipline in the workmen, in which case it would be
D extremely difficult to assess the financial Joss.
As regards the
qualifying period, the Court laid down 10 years service in cases
of resignation or retirement and "following the principles laid
down in the former decisions of this Court" provided 15 years'
service for qualifying for gratuity in cases of dismissal for mis·
conduct.
E
In the case of Delhi Cloth & General Mills Co. Ltd.(') an
objection was raised on behalf of the workmen to cl. 3 of the
gratuity scheme framed by the Tribunal. That clause provided
as follows :
"On termination of service on any ground whatsoever except on the ground cl misconduct as jn cl. 1 (a)
F
and l(b) above."
CI. l(a) and l(b) :provided for payment of gratuity in the event
of the death of an employee while in service or on his being
phy~ically and mentally incapacitated for further service and
laid down the rates and the qualifying periods as follows :
G
(a) After 5 years continuous service arid less than
10 years' service-12 days' wages· for each completed year of service
(b) Afier corrtll!uOus service of 10 years-15 days'
wages for each completed year of service.
H
The effect of &I. 3, therefore, was that in case of tenttittation of
service an employee would be entitled to get gtatllity tit the above
(1) C.A. Nos.2168, 2569of1966 and 76, 123 and 560 of 1967, decided on Septomber
27, 1968.
946
SUPREME COURT REPORTS
( 1970] 2 S.C.R.
Iates if h.e had put in service for the aforesaid periods, but would
forfeit it if the termination was due to any misconduct committed
by him.
The objection was that this provision was inconsistent'
with the decisions so far given by this Court, that according to
.those decisions the only provision permissible to the Tribunal
was to enable the employer to deduct actual monetary loss arising
from misconduct, and that therefore, the mere fact that a workman's service was terminated for misconduct was no ground for
depriving him altogether of gratuity earned by him as a result of
his long and meritorious service until ihe date when he commits
such misconduct.
In examining the validity of this contention
the Court analysed the previous decisions and pointed out that
.none of them laid down a general principle that an industrial tribunal cannot justifiably provide that an employer need not be
made to pay gratuity even where the workman bad incurred termination of service on account of his having committed misconduct, not merely technical but of a grave character.
·nie Court
observed that in some decisions this Court, no doubt, had held
that the fact that dismissal of a workman on account of his having committed misconduct need noi entail forfeiture and that it
would be sufficient to forfeit partially the gratuity payable to him
to the extent of monetary loss caused io the employer. But then
no decision had laid down as a principle that a provision for such
forfeiture cannot be justified, however grave the misconduct may
be, provided it had not caused monetary loss. The Court noiiced
that the trend in the earlier decisions was to deny gratuity in all
cases where the workman's service was terminated for misconduct
bui that in later years in cases such as the Garment Cleanir;;
Works(') "a Jess rigid approach" was adopted. The Court then
<Observed :
"A bare perusal of the Schedule ('Model Standing
Orders) shows that the expression "misconduct" covers
a large area of human conduct.
On the one hand are
the habitual late attendance, habitual negligence
and
neglect of work on the other hand 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
equatr.,d ·in terms of money, but it would render the
working of the establishment impossible. One may also
~I) \19621 2 S.C.R. 711.
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REMINGTON RAND V. WORKMEN (She/at, J.)
941
envisage several acts of misconduct not directly involv·
mg the estabiishment in any loss, but which are destruc·
tive of· discipline and cannot be tolerated. ln none of
the cases cited any detailed examination of what mis·
conduct would or would not involve to the employer
loss capable of being compensated in terms of money
was made. l t was broadly stated in the cases 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 principle
we think that in the application of those cases as pre·
cedents a distin~tion should be made between techni·
cal misconduct which leaves no trail of indiscipline,
misconduct resulting in damage to the employer's property, which may be compensated
by
forfeiture of
gratuity or part thereof, and serious misconduct which
though not directly causing damage, such as acts of
violence a,gainst the management or other employees
or riotous or disorderly behaviour, in or near the rlace
of employment is conducive to grave indiscipline. The
first should involve no forfeiture: the second may involve forfeiture of an amount equal to the loss directly
suffered by the employer in consequence of the miscon·
duct and the third may entail forfeiture of gratuity due
to the workmen.
The precedents of this Court, e.g.,
Wenger & Co. v. Its Workmen [1963(2) L.L.J. 3881,
Remington Ra11d of India Ltd.'s case (1968(1) L.L.J.
542] and Motipur Zamindari (P) Ltd.'s case (1965(2)
L.L.J. 139] do not compel us to hold that no misconduct however gmve may be visited with forfeiture
of gratuity. In our judgment, the rule set out by this
Court in Wenger & Co.'s case and Motipur Zamindari
(P) Ltd.'s case applies only to those cases where there
has been by actions wilful or negligent any loss occasioned to the property of the employer and the misconduct does not involve acts of violence against the
management or other employees, or
riotous or disorderly behaviour in or near the place of employment.
In these exceptional cases-the third class of cas~
the employer may exercise the right to forfeit gratuity·
to hold otherwise would be to put a premium upon con:
duct destructive of maintenance of discipline."
[n this view, the Court modified cl. 3 of the scheme by adding
H
an explanation, the e~ect of which was that though the em·
ploy~r could not depnve the workma~ of th~ .gratuity in all cases
o~ m1scondu~t, he could do so where 1t consisted of acts involving
violence agamst the management or ether employees or riotous
LSSup.Cl/70-15
948
SUPREME COURT REPORTS
[1970] i S.C.R.
or disorderly behaviour in or near the place of employment and
A
aiso gave right to the employer to deduct from gratuity such
amount of loss as is occasioned by the workman's misconduct.
We may mention that the Court did not alter the qualifying period
in cases of misconduct since no objection appears to have been
raised on that ground.
As against the contention that a provision in accordance with
these two decisions should be introduced in the scheme under -
examination, Mr. Ramamurthi submitted that the two decisions
should not be construed as if they laid down principles, which
should have the cumulative effect, firstly, as to the qualifying
period, and secondly, as to deprivation of gratuity in cases specified in the Delhi Cloth & General Mills case( 1 ). It is true that
this decision does not lay down that the qualifying period in cases
of misconduct should be 15 years as was held in Calcutta lnsumnce Gompany(2 ). But, as aforesaid, that was because that question was not raised, while in the Calcutta Insurance Co. case(2 ) it
was expressly raised and the Court laid down that in such cases it
would be proper to provide 15 years continuous service as a
criterion.
·
Once the principle that gratuity is paid to ensure good conduct throughout the period that the workman serves his employer
is accepted as laid down in Calcutta Insurance Co.(') some distinction in the matter of the qualifying period between cases of
resignation and retirement on the one hand and dismissal for
misconduct on the other becomes logically necessary. Such a
distinction cannot legitimately
be
assailed
as
unreasonable.
Similarly, if the object underlying schemes of gratuity is to secure
industrial harmony and satisfaction among workmen it is
impossible to equate cases of death,
physical incapacity,
retirement and resignation with cases of tennination of service incurred
on account of misconduct. Besides, a longer qualifying period
in th.-: latter cases would ensure restraint against wilful use of
violence and force neglect etc.
No serious argument was advanced that such a distinction would not be reasonable. The objection was against the insertion of both and not against the merit
of such distinction.
As regards the clause as to misconduct, it is not possible to
disagree with the proposition laid down in the Delhi Cloth &
General Mills case(') that acts amounting to misconduct as
defined in the standing orders, where they are made, or the mooel
standing orders, where they are applicable, differ in degree of
(I) (1909! 2 S.C.R. 307.
(2) [1967] 2 S.C.R. 596.
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REMJKGTON RAND v. WORKMEN (She/at, J.)
949
gravity, nature and their impact on the discipline and the working
of the concern, and that though grave in their nature and results,
all of them may not result in loss capable of being caculated in
terms of money. Amongst them there would be some which
would forthwith disentitle the workman from retammg his employment and justifying his dismissal. For the reasons given in
the Delhi Cloth & General Mills' case(') with which we, with
respect, concur, we must agree with counsel for the company that
it is necessary to modify the scheme and to add in cL 5 thereof
a proviso that in cases where there has been termination of service on account of an employee found guiliy of act or acts involving violence agaimt the management or other employees or
riotous or disorderly b.ehaviour in or near the company's premises,
the company would be entitled to forfeit the gratuity which would
otherwise be payable io the concerned workman. Cl.