# SHRI DIGVIJAY WOOLLEN MILLS LTD. ETC v. MAHENDRA PRATAPRAI BUCH ETC

- **Citation:** [1981] 1 S.C.R. 64
- **Court:** Supreme Court of India
- **Decided:** 1980-07-23
- **Case number:** Civil Appeal Nos. 1083 of 1976
- **Bench:** A. C. Gupta, N. L. Untwalia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shri-digvijay-woollen-mills-ltd-etc-v-mahendra-prataprai-buch-etc-8156
- **Pages:** 5

## Headnote

Payment of Gratuity Act, 1972-Section 4(2}-Scope
of-Gratuity how
calculated.
Section 4(2) of the Payment oli Gratuity Act, 1972 provides that for every
completed year of service or part thereof in excess of six months, the employer
shall pay gratuity to an employee at the rate of 15 days' wages based on the
rate of wages las.t drawn by the employee concerned.
The employers sought to pay gratuity by dividing the workman's monthly
wages by 30 and computing the 15 days' wages on that basis but the workman
demanded that his monthly wages should be takrn as what he got for 26
working days and. not by taking half of his wages in a month of 30 days.
The Controlling Authority upheld the workman's contention. In dismissing
the employer's petition under Art. 227 of the Constitution the High Court
observed that a worker received a full month's wages not. by remaining on
duty' for all the 30 da,ys within a month but by remaining on work and doing
duty for only 26 days and, therefore, gratuity payable to him should be
calculated on this basis.
Dismissing the employers' appeals,
HELD : The view taken by the authorities, and upheld by the High Court,
is not in any way unreasonable.
Although a month is understood tD mean
30 days, the manner of calculating gratuity payable under the Act to employees
'who worked for 26 days a month followed by the High Court cannot be
called perverse. [67C]
Treating monthly wages as wages for 26 working days i.s not new or un·
known.
The expression "average of the basic wage" occurring in an award
has been interpreted by ibis Court to mean the wage earned by a workman
during a month divided by the number of days for which he has worked
and multiplied by 26 in order to arrive at the monthly wage for the computation of .gratuity payable to the workman. [67D & HJ
Delhi Cloth and General Mills Company Ltd. v. Workmen and others etc.,
(1969] 2 SCR 107, referred to.

## Text

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64
SHRI DIGVIJAY WOOLLEN MILLS LTD. ETC.
v.
MAHENDRA PRATAPRAI BUCH ETC.
July 23, 1980
[A. C. GUPTA, AND N. L. UNTWALIA, JJ.J
Payment of Gratuity Act, 1972-Section 4(2}-Scope
of-Gratuity how
calculated.
Section 4(2) of the Payment oli Gratuity Act, 1972 provides that for every
completed year of service or part thereof in excess of six months, the employer
shall pay gratuity to an employee at the rate of 15 days' wages based on the
rate of wages las.t drawn by the employee concerned.
The employers sought to pay gratuity by dividing the workman's monthly
wages by 30 and computing the 15 days' wages on that basis but the workman
demanded that his monthly wages should be takrn as what he got for 26
working days and. not by taking half of his wages in a month of 30 days.
The Controlling Authority upheld the workman's contention. In dismissing
the employer's petition under Art. 227 of the Constitution the High Court
observed that a worker received a full month's wages not. by remaining on
duty' for all the 30 da,ys within a month but by remaining on work and doing
duty for only 26 days and, therefore, gratuity payable to him should be
calculated on this basis.
Dismissing the employers' appeals,
HELD : The view taken by the authorities, and upheld by the High Court,
is not in any way unreasonable.
Although a month is understood tD mean
30 days, the manner of calculating gratuity payable under the Act to employees
'who worked for 26 days a month followed by the High Court cannot be
called perverse. [67C]
Treating monthly wages as wages for 26 working days i.s not new or un·
known.
The expression "average of the basic wage" occurring in an award
has been interpreted by ibis Court to mean the wage earned by a workman
during a month divided by the number of days for which he has worked
and multiplied by 26 in order to arrive at the monthly wage for the computation of .gratuity payable to the workman. [67D & HJ
Delhi Cloth and General Mills Company Ltd. v. Workmen and others etc.,
(1969] 2 SCR 107, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1083 of 1976
and 480 of 1977.
Appeals from the Judgments and Orders dated 19-4-1976
and
12-10-1976 of the Gujarat High Court in S.C.A. No. 495/76 and
S.C.A. No. 1641 /76 respectively.
P. R. Mridul, P. H. Parekh and C. B. Singh and Miss Vineeta
Caprihan for the. Appellant in CA No. 480/77.
SHRI DIGVIJAY WOOLLEN MILLS v. MAHENDRA PRATAPRAI (Gupta. ].)
6 i
Gobind Das, A. N. Karkhanis and T. Sridharan ·and Mrs. Sunanda
A
Bhandare for the Respondent in CA No. 480/77.
Y. S. Chitale, P. H. Parekh, R. Karan Jawala and Miss Vineeta
.!
Caprihan for the Appellant in CA No. 1088/76.
Y. M. Tarkunde, K. L. HaJhi and P. C. Kapur for the Respondent
in CA No. 1088/76.
Shanker Ghosh, G. B. Pai, and D. N. Gupta for the,Intervener.
(Superintendent, Mines and Quarries, Bisra Stone Lime Co. Ltd. & Anr.)
Anil Kumar Gupta for the Intervener (Baba Jija Bhai Talekar).
The Judgment of the Court was delivered by
. GUPTA, J. A common question arises for consideration in these
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two appeals relating to the mode of calculating fifteen days' wages
of· a monthly rated employee under section 4(2) of the Payment of
Gratuity Act, 1972 (hereinafter referred to as the Act).
Section 4(2)
provides :
"For every completed year of ~ervice or part thereof in excess
of six months, the employer shall pay gratuity to an employee at
the rate of fifteen days' wages based on the rate of wages last
drawn by the employee concerned :
Provided that in the case of a piece-rated employee, daily
wages shall be computed on the average of the total wages received
by him for a period of three months immediately preceding the
termination of his employment, and, for this purpose, the wages
paid for any overtime work shall not be 1aken into account :
Provided further that in the case of an employee employed
in a seasonal establishment, the employer shall pay the gratuity
at the rate of seven days' wages for each season."
"Wages" has been defined in section 2(s) of the Act as follows :
" "wages" means all emoluments which are earned by an
employee while on duty or on leave in accordance with the terms
and conditions of his employment and which are paid or are
payable to him in cash and includes dearness allowance but does
not include any bonus. commission, house rent allowance, overtime wages and any other allowance."
It is not necessary to state the facts in any great detail. In both
cases the respondent was a monthly-rated employee and the appellant, a public limited company, was his employer.
In Civil Appeal
No. 1088 of 1976 (Shri Digvijay Woollen Mills Limited-appellant v.
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66
SUPREME COURT REPORTS
[1981] I S.C.R.
. Shri Mahendra Prataprai Buch-respondent) the respondent ceased to
be an employee on attaining the age of superannuation after completing 19 years of service. The appellant company calculated the amount
of gratuiiy payable to him on the basis that fifteen days' wages was
half of the monthly wages last drawn by him. The respondent demand-·
cd an additional sum as gratuity on the ground thai his monthly
·wages should be taken as what be got for 26 working days, his daily
wages should be ascertained on that basis and his fifteen days' wages ·
worked out accordingly, not by just taking half of his ~ages for a
month of 30 days or fixing his daily wages by dividing his monthly
wages by 30. The Controlling Authority under the Act accepted the
respondent's contention and his decision was affirmed by the appellate
authority. .A division bench of the High Court of Gujarat at Aluuedabad summarily dismissed the petition under Article 227 of the Constitution made by· the appellant company challenging the decision of the
authorities under the Act. The learned Judges however gave reasons
in support of the order made. The appeal before us is by special
leave.
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In Civil Appeal 480 of 1977 (The Maharana Mills Limited-appellant v. Shri Gopal Das Ladhabhai Kakkad-respondent) the respondent.
resigned his job after a lit!!~ over 22 years of service. The appel!ant
company paid him gratuity calculating his daily wages by dividing his
monthly wages by 30 and computing fifteen days' wages on that basis.
Here also the respondent claimed an additional sum as gratuity. and
the basis of the claim was the same as in the other appeal.
The
·Controlling Authority accepted the respondent's contention and the
appellate authority affirmed his decision following the view taken by
the Gujarat High Court in the other case. In tbis case also the Gujarat High Court summarily rejected the petition made ·by the appellant
company challenging the decision of the authorities under the Act.
·.This appeal however is brought on a certificate granted by the High
Court. •
In dismissing the petition in Digvijay Woollen Mills case the
division bench of the Gujarat High Court observed as follows :
"The employee is to be paid gratuity for every completed
year of service and the only yardstick provided is that the rate
·of wages last drawn by an employee concerned shall be utilised
and on that basis at the rate of fifteen days' wages for each year
of service, the gratuity would be computed. In any factory it i.s
well kriown that an. employee never works and could never be
permitted to work for all the 30 days of the month. He gets 52
Sundays in a year as paid holidays and, therefore, the basic wages
.SHRI DIGVJJAY WOOLLEN MILLS v. MAHENDM l'RATAl'RAI (Gupta,. J.)
67
and dearness allowance are always fixed by taking into consideration this economic reality ............ A worker gets full month's
wages not by remaining on duty for all the 30 days within a month
but by remaining on work and doing duty for only 26 days. The
other extra holidays may make some marginal variation into 26
working days, but all wage boards and wage fixing authorities
or Tribunals in the country have always followed this pat!ern of
fixation of wages by this method of 26 working days."
The view expressed in the extract quoted above appears to be
legitimate and reasonable. Ordinarily of course a month is understood
•to mean 30 days, but the manner of calculating gratuity payable under
the Act to the employees who work for 26 days a month followed
by the Gujarat High Court cannot be called perverse. It is not necessary to consider whether another view is possible.
The High Court
summarily dismissed the petition of the appellant in both the appeals
before us and upheld the decision of the· authorities under the Act.
We are not inclined to interfere with the decision of the High Court
because it seems to us (hat the view taken by the authorities is ;10t
in any way unreasonable or perverse.
Incidentally, to indicate that
treating monthly wages as wages for 26 working days is not anything
·unique or unknown, we may refer to a passage from the judgment of
this Court in Delhi Cloth and General Mills Company Ltd. v Workmen and other. etc.(1) which disposed of several appeals arising out
of an award made by the Industrial Tribnnal, Delhi.
In the award
schemes were framed relating to the payment of gratuity. The expres- '
sion "average of the basic wage" occurring in the schemes was explain~
·ed by this Court as follows:
"It was also urged by Mr. Ramamurthi that the expression
"average of the basic wage" in the definition of "wages" in Cl. 4
of the Schemes is likely to create complications in the implementation of the Schemes.
He urged that if the wages earned by a
workman during a month are divided by the total nl)mber of
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working days, the expression "wages" will have an artificial meanG
ing and especially where lhe workman is old or disabled or incapacitated from rendering service, gratuity payable to him will
be substantially reduced. We do not think that there is any cause
for such apprehension.
The expression "average of the basic
wage" can only mean the wage earned by a workman during a
month divided by ihe number of days for which he has worked
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(I) [1969] 2 S.C.R. 107.
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68
SUPREME COURT REPORTS
[1981] 1 S.C.R.
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and multiplied by 26 in order to arrive at the monthly wage for
the computation of gratuity payable. Counsel for the employers
agree to this interpretation."
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In the view we take we do not find it necessary to consider the
decisions of some of the High Courts cited at the bar taking one view
or ·the other on the question involved in these appeals; also, the decisions based on some provisions of the Minimum Wages Act and other
statutes which were relied on by either side are in our opinion not
relevant on the question of computation of fifteen days' wages undersection 4(2) of the Payment of Gratuity Act.
The appeals are dismissed, in civil appeal 480 of 1977 with costs,
in civil appeal 1088 of 1976 this· Court while granting special leave
on September 22, 1976 had directed the appellant to pay. the costs
of the appeal in any event accordingly respondent Mahendra Prataprai
Buch will be entitled to his costs.
P.B.R .
Appeals dismissed ..