# Sitk·Mills v. Their Workmen - **Citation:** [1963] 3 S.C.R. 558 - **Court:** Supreme Court of India - **Decided:** 1963 - **Case number:** Civil Appeal No. 394 of 1961 - **Bench:** P. B. Gajendragadkar, K. C. DAs Gl'l'.PTA, J. R. Mudholkar - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sitk-mills-v-their-workmen-2644 - **Pages:** 7 ## Headnote Inaustrial Dispute-Gratuity scheme, Framing of-Valiaitg -Employer's .financinl position --Amount of gratuity-Ceiling, if and when should be pl~ceil-Tribunal's determination to depend on relevant facts. The present appeal arises out of an industrial dispute between the appellant anrl the· respondents. The Industrial Tribunal gave an award and the appellant filed an appeal to this Court by way of special leave. The main contention of the appellant was that no case had been before the tribunal for the framing of a gratuity scheme. It was further urged that ~ven if a gratuity scheme had to be framed the tribunal was in error in not placing any ceiling on the amount of gratuitv payable to the employees. The third point raised was that one month's basic wages which had been provided by the scheme was excessive and it should be reduced to 15 days' basic wages. Bela, that having regard to the financial position of the app•llant the framing of the gratuity scheme wao justified. As . a general rule, where is no provision for superannuation and gratuity is paid at a fairly reasonable rate a ceiling should be placed on the amount of gratuity payable under the scheme. Even though gratuity schemes framed in the same indu~try in the same region shonld not disclose radical or violent differ· ences the rate of gratuity whicl-> should be av.•arded in a particular case will depend on the facts of that case. C:rvIL APPELLATE JURISDICTION: Civil Appeal No. 394 of 1961. Appeal by special leave from the Award dated November 6, l 960, of the Industrial Tribunal, Punjab, in Reference No. 43 of 1958. M· O. Setalvad! Attorney-General for India~ > ' 3 S.C.R. SUPR.EME COURT REPORTS 559 .S. K. Kapur, Bishamhher Lal, B. N. Kripal and K. K. Jain, for the appellant. Janardan Sharma, for the respondents. 1962. August, 2; The Judgment of the Court was delivered by GAJENDRAGADKA.R, J.- This appeal arises out of an industrial dhpute between the appellant Amritsar Rayon & Silk Mills and its workmen. The· dispute originally related to seven demands made by the respondents against the appellant and these seven demands were referred by the Punjab Government for industrial adjudication to the Industrial Tribunal, Jullundur under section lO(l){d) of the Industrial Disputes Act, 19'17. The Tribunal has made its a.ward in respect of these demands. In the present appeal, which has been brought to this Court by special leave, we are concerned with the award in so for as it deals with the respondents, claim for a gratuity scheme. The appellant urged that no case had been made out for the framing of a gratuity scheme. This plea hau been rejected by the Tribunal and a gratuity scheme has been framed. · It is the propriety and the validity of this scheme which are challenged before us by Mr, Kapoor on behalf of the appellant in this case. The scheme framed by the Tribunal reads thtis:- l ' (1) In case of death of an employee while he is in the service of the concern on his becoming inca.pable of serving further due to physical or mental disability. One month's basic wages for each year of hiA service. r962 Amritsar. f11J,14n alid Silk .Iii/I• -v. Their Workmen Gajendrngadl. ar J. 1962 ·Amrilsaf'·Ra1on and Sitk·Mills v. Their Workmen Gajtndragadkar J, II60 SUPREME OOURT REPORTS [1963] In case of death, the .gratuity will ;be . ._. payable to .the heirs or assigμs of the deceased workmen. (2) On termination of an employee's service ·by the concern .after he bas .put in five year's service -Half month's· basic wages for each year. of his service. ... (3) No gratuity would be payable to an emp· loyee who resigns•his job but if he has served for fifteen years continuously and is rendered unfit to serve further by old • age or protarcted ill •health, be shall be given gratuity calculated at the rate of onti month's ·basic wages for each comp· .,. leted year of bis service. (4) No gratuity would be payable to an employee who is dismissed· for misconduct. In rejecting the appellant's ## Text 558 SUPREME COURT REPORTS [1963] AMRITSAR RA YON & SILK MILLS V• THEIR WORKMJtN (P. B. GAJENDRAGADKAR, K. C. DAs Gl'l'.PTA and J. R. MUDHOLKAR, JJ.) Inaustrial Dispute-Gratuity scheme, Framing of-Valiaitg -Employer's .financinl position --Amount of gratuity-Ceiling, if and when should be pl~ceil-Tribunal's determination to depend on relevant facts. The present appeal arises out of an industrial dispute between the appellant anrl the· respondents. The Industrial Tribunal gave an award and the appellant filed an appeal to this Court by way of special leave. The main contention of the appellant was that no case had been before the tribunal for the framing of a gratuity scheme. It was further urged that ~ven if a gratuity scheme had to be framed the tribunal was in error in not placing any ceiling on the amount of gratuitv payable to the employees. The third point raised was that one month's basic wages which had been provided by the scheme was excessive and it should be reduced to 15 days' basic wages. Bela, that having regard to the financial position of the app•llant the framing of the gratuity scheme wao justified. As . a general rule, where is no provision for superannuation and gratuity is paid at a fairly reasonable rate a ceiling should be placed on the amount of gratuity payable under the scheme. Even though gratuity schemes framed in the same indu~try in the same region shonld not disclose radical or violent differ· ences the rate of gratuity whicl-> should be av.•arded in a particular case will depend on the facts of that case. C:rvIL APPELLATE JURISDICTION: Civil Appeal No. 394 of 1961. Appeal by special leave from the Award dated November 6, l 960, of the Industrial Tribunal, Punjab, in Reference No. 43 of 1958. M· O. Setalvad! Attorney-General for India~ > ' 3 S.C.R. SUPR.EME COURT REPORTS 559 .S. K. Kapur, Bishamhher Lal, B. N. Kripal and K. K. Jain, for the appellant. Janardan Sharma, for the respondents. 1962. August, 2; The Judgment of the Court was delivered by GAJENDRAGADKA.R, J.- This appeal arises out of an industrial dhpute between the appellant Amritsar Rayon & Silk Mills and its workmen. The· dispute originally related to seven demands made by the respondents against the appellant and these seven demands were referred by the Punjab Government for industrial adjudication to the Industrial Tribunal, Jullundur under section lO(l){d) of the Industrial Disputes Act, 19'17. The Tribunal has made its a.ward in respect of these demands. In the present appeal, which has been brought to this Court by special leave, we are concerned with the award in so for as it deals with the respondents, claim for a gratuity scheme. The appellant urged that no case had been made out for the framing of a gratuity scheme. This plea hau been rejected by the Tribunal and a gratuity scheme has been framed. · It is the propriety and the validity of this scheme which are challenged before us by Mr, Kapoor on behalf of the appellant in this case. The scheme framed by the Tribunal reads thtis:- l ' (1) In case of death of an employee while he is in the service of the concern on his becoming inca.pable of serving further due to physical or mental disability. One month's basic wages for each year of hiA service. r962 Amritsar. f11J,14n alid Silk .Iii/I• -v. Their Workmen Gajendrngadl. ar J. 1962 ·Amrilsaf'·Ra1on and Sitk·Mills v. Their Workmen Gajtndragadkar J, II60 SUPREME OOURT REPORTS [1963] In case of death, the .gratuity will ;be . ._. payable to .the heirs or assigμs of the deceased workmen. (2) On termination of an employee's service ·by the concern .after he bas .put in five year's service -Half month's· basic wages for each year. of his service. ... (3) No gratuity would be payable to an emp· loyee who resigns•his job but if he has served for fifteen years continuously and is rendered unfit to serve further by old • age or protarcted ill •health, be shall be given gratuity calculated at the rate of onti month's ·basic wages for each comp· .,. leted year of bis service. (4) No gratuity would be payable to an employee who is dismissed· for misconduct. In rejecting the appellant's contention that no scheme should be framed, the Tribunal has found that the appellant which was started in 1934 is r,:- the biggest Textile Mills in Amritsar and its ·~ career so far has been one of success all along the line. The invested capital of the concern is Rs.14 'lakhs and its working capital is Rs.2,70,000/-. On its roll r.re employed 1,250 employees whose monthly wage bill comes to Rs.1,20,000/-. It is admitted that the appellant ha.s been paying bonus to its workmen since 1946 and has allowed dividend on ~ invested capital. It contributes to the Provident Fund and the Employees·State Insurance Scheme. Having regard to· this ·financial position of the appellant, the · Tribunal has held, and we think rightly, that the appellant cannot successfully resist the demand for the framing of a gratuity scheme. . • Mr. Kapoor, however, contends that even if a gratuit;r scheme has to be framed, the Tribuna.l 3 S.C.R. SUPREME >OOURT REPORTS 561 was in error~ not placing a.ny ceiling on the amount •111112 of ,gratuity payable to the employees. In our 'Amrilsar Rayon, Mid opinion, this contention is well-founded. Speaking Siik Mill• generally, where there is no provision for supera- {L'Jie;,., w;,,km1n nnuation and gratuity is paid at a fairly reasonable __ . rate, gratuity schemes framed by Industrial Gaj.nd~dliar;J. Tribunals generally provide for a ceiling, and so, we do not see how --the Tribunal was justified in departing from this generally accepted position ... The rate fixed in the present case is not unduly low and admittedly, there is no provision for superannuation. Therefore we think that the appellant is justified in contending that a ceiling should be put on the amount of gratuity payable under th~ scheme. On the whole, we think it would be reas· . onable if the maximum amount of gratuity payable under the scheme is fixed at 15 months' basic wages. We ougl:t to make it clear that in coming to this conclusion we do not propose to lay down any hard and fast rule that a ceiling must be placed in every case and that it should be of the order of 15 months' basic wages; as we have repeatedly observed, in framing gratuity scheme, all relevant factors have to be taken into account and so, inevitably the schemes are likely to differ from case to case. Mr. Kapoor then contends that one month's basic wages which has been provided for by clauses (1) and (3) is excessive and it should be reduced to 15 days' basic wages. This argument fa that the usual pattern of gratuity schemes in the Punjab , shows that it is 15 days' basic wages which' is provided under similar clauses. In suport of his argument, Mr. Kapoor has referred us to some of the awards produced by him. In the gratuity scheme framed in the New India Embroidery Mills, Ohheharta, 15 days' wages has been adopted as the basis, but this award includes dearness allowance cand so,,this provision is.not very helpful because in the present Calle, the rate has been fixed by 1901 "Jtm.,..i·1sar Rayon and Silk Milli ,, Their Workm~n , Gr!;endragadkcr J. 562 SUPREME COURT REPORTS [1963J reference to the basic wages alone.• The scheme framed in the Niemla Textile Finishing Mills, Chheharta, is on the eame lines as the scheme under the New India Embroidery Mills and the same comment, therefore, falls to be made about it. The gratuity scheme in the Technological Institute of Textiles, Bhiwani, h!\s adopted the basis of 1/2 month's basic wages for each completed year of service, but t,here is no ceiling placed by the scheme. Ou the other haud, the gratuity scheme in the Shambhu Nath & Sons Ltd,, Amritsar, adopts one month's basic wages for each completed year of service and so does the scheme in the India Woollen Textile Mills, Chheharta, and the India Calico Printing Mills. The Jagatjit Cotton Textile Mills ·Ltd,, l'hagwara, has 1/2 month's basic wa;,es; the Punjab Distilling Industries Ltd, provides for one month's basic wages; so does the. New Egerton Woollen Mill, DhariwaL The Jawala Flour Mills Amritsar, provides for thLt ! he claim made by the appellant that the pattern of gratuity schemes in the Punjab invariably· shows the adoption of the rate of 15 days' basic wages for. each completed year of service, is not supported by the several awards produced by the parties before us, and so, it cannot be said that the present award has departed from any fixed uniform pattern in the matter. Mr. Kapoor then referred to the decision of this Oourt in Bharatkhand Textile Mfg. Co, Ltd. v. The Textile Labour Association Ahmedabad ( ') where the gratuity scheme provided, inter alia, for one month's basic wages for each completed year of service for . the period before the coming into force of the . "• Employees Provident Funds Act, 1952, and h,alf (I) !1960) 8 S. C. R. 329. s s.c.R. SUPREME OOURT REPORTS 563 a month's basic wages for each completed year of service thereafter, subject to a maximum of 15 month's basie wages. Tliis shows that the award with which this Court was dealing in that case had ma.de a distinction between gratuity sohemeA prior to 1952 and those subsequent to it, and this distinction was based on the fact that the Employees' Provident Funds Act had come into force in 1952. Therefore, we do not, think it would be fair to suggest that becauRe the scheme thus framed wrts accepted by this Court in appea.1 it follows that this Court has laid down that in every case half a month's basic wages should be pa.id after 1952. Mr. Kapoor has also relied on thf' decision of the Industrial Tril•unal at Rajkot in Arvind Mills Oo-operati?Je Supply Societv Ltd., 4hmedabad v. Their Workmen(1). The scheme framed by the Tribunal in this case no doubt provides for 15 day's ba11ic wages as centended by Mr. Kapoor and prescribes the ceiling of 10 months's basic wages .. Simifarly. in the Rashtriya Mill Majdoor Sangh, Bombuy. v. Millowners' Association, Bambay (2) the gratuity schemes framed appears to be substantially Aimilar to the one framed in the Bharatkhand Te:ctile Mfq. Oo. Ltd.('). These decisions merely show that 15 days basic wages has been adopted as a rate by some of the gratuity schemes framed by Industrial Tribunals. We W•)uld, however, not be prepared to accept. Mr. Kapoor's contention that these decisions support the general argument that invariably the rate of 15 days' basic wages must be adopted. That is a question which has to be decided by the Tribunal on the facts of each case; and though it may be desirable that gratuity schemes framed in the same industry in the same region should not disclose radical or violent differences, it' would not be possible to introduce uniformity by accepting the argument that 15 days () ( 1959) 2 L.L,J.107, 119 8_l [\956-57] II F.J. R. 372. . (S} Cl960J s s. a. 129, .. 1962 Amritsar R .yon anil Silk Mills v. Thei1 Workmen Gaj1indragadkii1' J; • 1903 ..imrif.far 1Ra,.10n and Silk Mills v. TJltir·.Workmen <;hJj~dragadkar J. 19~11 '564 SUPREME COURT REPOH.TS (1963) ·should· be treated as the invariable rate in' the· gratuity schemes. On the inatetial adduced before us, we are not preparetl ·to hold that the basis adoptPd by the award under appeal ·has made either a violent or radical departure fromlthe pattern prevailing in the same industry in the ''unjab or is otherwise unjustified on the merits. The fact that we decline to interfere with the rate prescribed by the award under appeal does not also mean that according to us, that rate should be adopted in other cases without reference to the relevant facts in each tlf them. The result is, the awar