# THE BHARATKHAND TEXTILE MFG. CO. LTD. & OTHERS v. THE TEXTILE LABOUR ASSOCIATION, AHMED ABAD

- **Citation:** [1960] 3 S.C.R. 329
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Civil Appeal Bharatkhand No. 1 of 1959
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-bharatkhand-textile-mfg-co-ltd-others-v-the-textile-labour-association-1603
- **Pages:** 22

## Headnote

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3 S.C.R. SUPREME COURT REPORTS
329
THE BHARATKHAND TEXTILE MFG. CO. LTD.
& OTHERS
v.
THE TEXTILE LABOUR ASSOCIATION,
AHMED ABAD.
- (P. B. G.AJENDR.AG.ADK.AR and K. N. WANCHoo, JJ.)
Industrial Dispute-Claim of gratuity by workmen in textile
industry-Framing of scheme in modification of previous awardV alidity-Gratuity, if in the nature of profit bonus-Applicability of
Full Bench formula-Duty of Industrial Court-Bombay Industrial
Relations Act, r946 (Bom. XI of r947), s. n6A-Employees' Provident Funds Act, r952 (XIX of r952), s. r7.
This was an appeal by certain textile mills of Ahmedabad
against a scheme for gratuity awarded by the Industrial Court.
The Labour Association, the respondent, gave a notice of change
under s. 42(2) of the Bombay Industrial Relations Act, 1946-
(Bom. XI of l9ll7), intimating the Mill Owners' Association that
they wanted a scheme for gratuity and mentioned four categories
of termination of service in the annexure. This demand was
refused and so referred to the Industrial Court under s. 73A of
the Act.
Pending the reference the Employees' Provident Funds
Act, 1952 (19 of 1952), came into operation and the Industrial
Court, on an objection by the Mill Owners' Association, held that
it was inadvisable to proceed with the reference and that a fresh
application should be made, if necessary, after the scheme envisaged by the Act is introduced and rejected the respondent's ·
demand. Thereafter a fresh ·notice of change was given by the
respondent and there were certain references to the Industrial ,
Court in respect of the demand. The parties came to an agreement to refer all their disputes to arbitration, the references were
withdrawn and the disputes were referred to the Board of Arbitrators.
Before the Board the Mill Owners' Association took the
objection that so long as the award of the Industrial Court dismissing the earlier reference subsisted, the claim for gratuity could
:not be considered by it. That objection was uplield by the Board
and it made no provision for gratuity. Thereupon the respondent applied for the modification of the award under s. n6A of
the Act, and the Industrial Court by its award, which is the subject matter of the present appeal, framed a.scheme for gratuity on
an industry-cum-region basis:
Held, that the decision of the Industrial Court was correct
and must be upheld.
Regard being had to the true nature of its earlier award and
the scope of the application for its modification, it could not be
said that the respondent was seeking to alter the framework or
change any of the principles of that award and the application
under s. n6A of the Act must be held to be competent.
·
Marek I].
z960
Bharatkhand
Taxtile Mfg. Co.
Ltd.
v.
i extile Labou1
Association
•
330
SUPREME COURT REPORTS
[1960]
A scheme for gratuity is by its nature an integrated scheme
and covers all classes of termination of service where gratuity
benefit can be legitimately claimed and the refusal of the Industrial Court in the earlier award amounted to a refusal to frame
any scheme at all.
The statutory provident fund created by the Employees'
Provident Funds Act, 1952, could be no bar to the respondent's
claim for a gratuity scheme although there can be no doubt that
in awarding such a scheme Industrial Courts must make due
allowance for it. Provisions of s. 17 of the said Act clearly indicate that the statutory benefits under the Act are the minimum to
which the employees are entitled and that they are no bar to
additional benefits claimed by the employees.
•
Indian Hume Pipe Co. Ltd. v. Their Workmen, [1960] 2 S.C.R.
32, referred to.
It was not correct to say that the claim for gratuity was
essentially similar to a claim for profit bonus and must always be
considered on unitwise basis.
The benefit of gratuity .is in the nature of a retiral benefit
and before framing such a scheme industrial adjudication has
to take into account such relevant factors as the linancial condition of the employer, his profi

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3 S.C.R. SUPREME COURT REPORTS
329
THE BHARATKHAND TEXTILE MFG. CO. LTD.
& OTHERS
v.
THE TEXTILE LABOUR ASSOCIATION,
AHMED ABAD.
- (P. B. G.AJENDR.AG.ADK.AR and K. N. WANCHoo, JJ.)
Industrial Dispute-Claim of gratuity by workmen in textile
industry-Framing of scheme in modification of previous awardV alidity-Gratuity, if in the nature of profit bonus-Applicability of
Full Bench formula-Duty of Industrial Court-Bombay Industrial
Relations Act, r946 (Bom. XI of r947), s. n6A-Employees' Provident Funds Act, r952 (XIX of r952), s. r7.
This was an appeal by certain textile mills of Ahmedabad
against a scheme for gratuity awarded by the Industrial Court.
The Labour Association, the respondent, gave a notice of change
under s. 42(2) of the Bombay Industrial Relations Act, 1946-
(Bom. XI of l9ll7), intimating the Mill Owners' Association that
they wanted a scheme for gratuity and mentioned four categories
of termination of service in the annexure. This demand was
refused and so referred to the Industrial Court under s. 73A of
the Act.
Pending the reference the Employees' Provident Funds
Act, 1952 (19 of 1952), came into operation and the Industrial
Court, on an objection by the Mill Owners' Association, held that
it was inadvisable to proceed with the reference and that a fresh
application should be made, if necessary, after the scheme envisaged by the Act is introduced and rejected the respondent's ·
demand. Thereafter a fresh ·notice of change was given by the
respondent and there were certain references to the Industrial ,
Court in respect of the demand. The parties came to an agreement to refer all their disputes to arbitration, the references were
withdrawn and the disputes were referred to the Board of Arbitrators.
Before the Board the Mill Owners' Association took the
objection that so long as the award of the Industrial Court dismissing the earlier reference subsisted, the claim for gratuity could
:not be considered by it. That objection was uplield by the Board
and it made no provision for gratuity. Thereupon the respondent applied for the modification of the award under s. n6A of
the Act, and the Industrial Court by its award, which is the subject matter of the present appeal, framed a.scheme for gratuity on
an industry-cum-region basis:
Held, that the decision of the Industrial Court was correct
and must be upheld.
Regard being had to the true nature of its earlier award and
the scope of the application for its modification, it could not be
said that the respondent was seeking to alter the framework or
change any of the principles of that award and the application
under s. n6A of the Act must be held to be competent.
·
Marek I].
z960
Bharatkhand
Taxtile Mfg. Co.
Ltd.
v.
i extile Labou1
Association
•
330
SUPREME COURT REPORTS
[1960]
A scheme for gratuity is by its nature an integrated scheme
and covers all classes of termination of service where gratuity
benefit can be legitimately claimed and the refusal of the Industrial Court in the earlier award amounted to a refusal to frame
any scheme at all.
The statutory provident fund created by the Employees'
Provident Funds Act, 1952, could be no bar to the respondent's
claim for a gratuity scheme although there can be no doubt that
in awarding such a scheme Industrial Courts must make due
allowance for it. Provisions of s. 17 of the said Act clearly indicate that the statutory benefits under the Act are the minimum to
which the employees are entitled and that they are no bar to
additional benefits claimed by the employees.
•
Indian Hume Pipe Co. Ltd. v. Their Workmen, [1960] 2 S.C.R.
32, referred to.
It was not correct to say that the claim for gratuity was
essentially similar to a claim for profit bonus and must always be
considered on unitwise basis.
The benefit of gratuity .is in the nature of a retiral benefit
and before framing such a scheme industrial adjudication has
to take into account such relevant factors as the linancial condition of the employer, his profit-making capacity, the profits earned by him in the past, the extent of his reserves and the chances
of his replenishing them as well as the claims for capital invested
by him, and in evolving a long term scheme a long view of the
employer's financial condition should be taken and on that basis
alone the feasibility of a scheme and the extent of the benefit to
be given should be determined.
Arthur Butler & Co. (Muzaffarpur) Ltd. and Arthur Butler
· Workers' Union, (1952) II L.L.J. 29 and Boots Pure Drug Co.
(India) Ltd. v. Their Workmen, (1956) I L.L.J. 293, referred to.
Even assuming that gratuity is no part of deferred wage, it
would not be reasonable to assimilate the scheme for gratuity to
that of profit bonus or to apply the principles of the Full Bench
formula applicable to the latter. A claim for gratuity is strictly
not a claim to receive a share of the profits at all.
Express Newspapers (Private) Ltd. v. The Union of India,
[1959] S.C.R. 12_ and Indian Oxygen and Acetylene Co. Ltd.
Employees' Union v. Indian Oxygen and Acetylene Co. Ltd., (1956)
r L.L.J. 435, referred to.
It was not correct to say that an industry-wise basis is wholly
inappropriate in dealing with gratuity or that the Industrial Court
was in error in adopting that basis. Although some hardship to
the weaker units in the industry may not be avoided, there were
several factors in its favour both from the point of view of
employers and employees.
Since in the present state of economic development in the
country the propriety of the adoption of an all-India basis for a
scheme of gratuity may be open to doubt, no exception can on
principle be taken to the industry-cum-region basis adopted in
th.e .instant case.
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3 S.C.R. SUPREME COURT REPORTS
331
Express Newspapers (Private) Ltd. v. The Union of India,
r960
[1959] S.C.R. 12, applied.
CIVIL APPELLATE JURISDICTION: Civil Appeal
Bharatkhand
No. 1 of 1959.
.
Textile Mfg. Co.
Appeal by special leave from the award dated
L;~·
September "16, 1957, of the Industrial Cour,t, Bombay,
Textile Labour
in Misc. Application (IC) No. 20 of 1957.
Association
M. 0. Setalvad, Attorney-General for India, I. M.
Nanavati, S. N. Andley, J.B. Dadach.anji, Rameshwar
Nath and P. L. Vohra, for the appellants.
0. K. Daphtary, Solicitor-General of India, B. R. L.
Iyengar and K. L. Hathi, for the respondent.
0. K. Daphtary, Solicitor-General of India, H.J.
Umrigar and R. H. Dhebar, for the Intervener.
1960. March 17. The Judgment of the Court was
delivered by
G.AJENDR.AG.ADKAR, J.-This appeal by special leave Gajendragadkar J.
is directed against the award passed by the Industrial
Court, Bombay, by which a scheme for1 gratuity has
been framed in favour of the workmen represented by
the respondent, Textile Labour Association, Ahmedabad, who are employed by the textile mills in Ahmedabad including the twenty appellant mills before us.
In order to appreciate the points of law raised by the
appellants in the present appeal we ought to state at
the outset the material facts leading to the present
dispute in which the impugned scheme for gratuity
has been framed. On June 13, 1950, the respondent
gave notice under s. 42(2) of the Bombay Industrial
Relations Act, 1946 (Born. XI of 1947) (hereinafter
called the Act), intimating to the MiHOwners' Association at Ahmedabad (hereinafter called the Association) that it desired a change as specified in the
annexure to the communication.
The annexure
showed that the respondent wanted a change in that
a scheme for gratuity should be framed wherever
services of ·an employee are teriniriated by the mills
on grounds of old-age, invalidity, incapacity or
natural death. It was further claimed that the pay-·
ment of gratuity in the said cases should be at the
rate of one month's wages (in..cluding dearness allowance). per every year of service.
Some incidental
demands . were· also specified in the a.nuexure. . T.b.e
332
SUPREME COURT REPORTS
[1960]
r960
demand thus made was not accepted by the Associa.
tion, and so it was referred to the Industrial Court.
Bharatkhand
Pending the reference the Employees' Provident Funds
Textile Mfg. Co. Act, 1952 (19 ofl952), came into operation on March 4,
Ltd.
v.
1952, and it was urged before the Industr~l Court on
T .. til, Labaur behalf of the Association that since the statutory
Association
scheme of provident fund would soon become compul-
.
-
sory it would not be advisable to adjudicate upon the
Gajendragadkar J. respondent's claim for the specified items of gratuity
at that stage. This argument was accepted by the
Industrial Court; it held that when the scheme envisaged by the new Act is introduced it would be possible
to see from what date it would be operative, and that,
if after the introduction of the said scheme it be found
that a sufficient margin is left, it would then be open
to the respondent and the Association to make a fresh
application for the institution of a gratuity fund either
for all the employees or for the benefit of such of
them as will have to retire within the next few years.
It was on this ground that the demand made by the
respondent was rejected on April 18, 1952.
It appears that the prescribed scheme under the
Provident Funds Act came into operation on Octo.
her 1, 1952. In June 1955, a fresh notice of change
was given by the respondent to all the mills in respect
of the demand for gratuity and the said demand
became the subject-matter of certain references to the
Industrial Court at Bombay under s. 73A of the Act.
At that time the asso.ciation and the respondent had
entered into an agreement to refer all their disputes to
arbitration, and in accordance with the spirit of the
said agreement the references pending before the
Industrial Court in respect of gratuity were withdrawn
and referred to the Board of Arbitrators. Before the
Board it was, however, urged by the Association that,
so Jong as the award passed by the Industrial Court
on the earlier reference was subsisting and in operation, a claim for gratuity which was the subject-matter
of the said reference and award could not be properly
or validly considered by the Board.
This objection
was upheld by the Boa;rd, and so it made no provision
for gratuity. The decision of the Board of Arbitrators
. iu the said proceedings was published on July 25, 1957.
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3 S.C.R. SUPREME COURT REPORTS
333
After the said decision was made and before it was
. rg6o
published the respondent made the present application
for modification of the earlier award under s. 116A of
Bharatkhand
Texlile Mfg. Co.
the Act on July 6, 1957. In this application the resLtd.
pondent alleged that there was sufficient justification
v.
for modifying the previous award and for introducing Te:rtile Labour
a scheme of gratuity as claimed by it. In this applicaAssociation
tion a demand for gratuity was made on the followingG . d-d,. 1
1.
a;en raga ar
•
ines:~
·
·(I) In the case of
death while in
service or becoming physically or
mentally unfit for
further service :
(2) On voluntary retirement or resignation of an
employee:
(3) On terminatioh
of service by the
company:
One month's basic wages and
average Dearness Allowance per completed year of
service.
After 10 continuous years of
service in the company
same as in (1)
For less than 10 but more
than 7 years at 3/4 rate of
(I), For less than 7 years
but 5 years or more than 5
years at the 1/2 rate of (I),
For more than 10 years'
continuous service as in (I)
above.
It appears that in the application thus made a typing
mistake had crept in which failed to type properly the
third category of cases. The respondent applied on
August 21, 1957, for amendment of the said typing
mistake and the said amendment was naturally
allowed. It is the demand made by this application
that is the subject-matter of the present proceedings
· under s. 116A of the Act.
In the present proceedings the Association did not
file a written statement and in fact withdrew leaving
it open to each mill to file a separate written statement
of its own. It appears that there was a difference
of opinion amongst the constituents of the Association. Accordingly written statements were filed on
43
Bharatkhand
Textile Mfg. Co.
Ltd.
v.
334
SUPREME COURT REPORTS
[1960)
behalf of the 65 constituent mills and the large majority of the said written statements raised some preliminary objections against the competence of the
present proceedings and disputed the respondent's
claim for gratuity also on the merits. The Industrial
Textile Labour
Court has overruled all the preliminary objections and
Association
h
"t "t b
f
d
h
,.
t ·
on t e men s I
as rame a sc eme ,or gra mty on
Gajendragadkar J. industry-cum-region basis. The award framing the
said scheme was pronounced on September 16, 1957.
It is against this award that 21 out of the 65 mills
have come to this Court by special leave.
One of the
appellant mills has subsequently withdrawn from the
appeal with the result that out of 65 mills 45 mills do
not feel aggrieved by the award but 20 mills do; and
the contentions raised by them fall to be considered in
the present appeal.
Before dealing with the merits of the points raised
by the appellants it would be relevant to refer very
briefly to the relevant provisions of the Act. The
Act has been passed by the Bombay Legislature
because it thought that "it was expedient to provide
for the regulation of the relations of employers and
employees in certain matters, to consolidate and amend
the law relating to the settlement of industrial disputes
and to provide for certain other purposes". With
this object the Act has made elaborate provisions for
the regulation of industrial relationships and for the
speedy disposal of industrial disputes. An" industrial
dispute" under s. 3, sub-s. (17), means "any dispute or
difference between an employer and employer, or
between employers and employees, or between employees and employees and which is connected with
any industrial matter ". The expression " industrial
matter" has been inclusively defined in a very wide
sense. "Approved Union" in s. 3(2) means "a union
on the approved list", "primary union" under
s. 3(28) means " a union for the time being registered as a primary union under the Act ", " registered
union " under s. 3(30) means " a union registered under
the Act", while "representative union" under s. 3(33)
means " a union for the time being registered as a
Tepresentative union under the Act". Section 3(39)
defines "wages " as meaning "remuneration of all
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3 S.C.R. SUPREME COURT REPORTS
335
kinds capable of being expressed in terms of money
z96o
and payable to an employee in respect of his employBh
tkh nd
mentor work done in such employment, and includes, Textii:'~t; co.
inter alia, any gratuity payable on discharge ". SecLtd.
tion 42, sub-s. (2), provides that an employee desiring
v.
a change in respect of an industrial matter not' Textile La~our
'fi d .
S h d 1 I
II h 11
.
t'
.
Association
spem e
m
c e u e
or
s a
give no me m
_
the prescribed form to the employer through the Gajendragadkar J.
representative of employees but shall forward a copy
of the same to the Chief Conciliator, the Conciliator of
the industry concerned for the local area, the Registrar, the Labour Officer, and such other person as may
be prescribed. Section 66(1) provides, inter alia, that
if an employer and a representative union or ar.y
other registered union which is the .representative of
the employees by a written agreement agree to submit
any present or future industrial dispute or class of
such disputes to the arbitration of any person, whether.
such arbitrator is named in such agreement or not,
such agreement shall be called submission. We have
already noticed that the Association and the respondent had entered into a submission in respect of several
disputes which were referred to the Board of Arbitra.
tors. Section 73A is important for our purpose; it
deals with reference to arbitration by unions, and provides that "notwithstanding anything contained in
this Act, a registered union which is a representative
of employees, and which is also an approved union,
may refer any industrial dispute for arbitration to the
industrial court subject to the proviso prescribed
under it." It is under s. 73A. that the reference was
made on the earlier occasion to adjudicate upon the
respondent's claim for a gratuity as specified in its
notice of change.
That takes us to ss. 116 and 116A. Section 116
provides, inter alia, for the period during which an
award would be binding. Section 116(1) lays down in
regard to an award that it shall cease to have effect
on the date specified therein, and if no such date is
specified, on the expiry of the period of two months
from the date on which notice in writing to terminate
such an award is given in the prescribed manner by
a.ny of the parties thereto to the other party, provided
Bharatkhand
Textile Mfg. Co.
Ltd.
336
SUPREME COURT REPORTS
[1960]
that no such notice shall be given till the expiry of
three months after the award comes into operation;
in other words, the award cannot be terminated at
least for three months after it has come irito operav.
tion; thereafter it may be terminated as prescribed
Textile Labour bys. 116(1).
With the rest of the provisions of s.116
Association
d ·
h
1 S
we are not concerne
m t e present appea .
ecGoj•ndragadkar J. tion 116A(l) prescribes, inter alia, that any party who
und_er the provisions of s. 116 is entitled to give notice
of termination of an award may, instead of giving
such notice, apply after the expiry of the period
specified in sub-s. (2) to the industrial court making
the award for its modification. It is unnecessary to
set out the other provisions of s. 116A.
The award
under appeal has, been made by the industrial court
on the application made by the respondent under
s. 116A.
The first contention raised before us by the learned
Attorney-General on behalf of the appellant is that
the application for modification made by the respondent under s. 116A is incompetent, because what the
respondent seeks is not any modification of the earlier
award which is permissible under s. 116A, but a reversal and a revision of the said award which is not
permissible under the said section. The expression
"modification of the award" may include alteration
in the details of the award or any other subsidiary
incidental matters. In this connection it must be
borne in mind that there is a radical difference between
the meaning of the word " change " as distinguished
from the meaning of the word "modification ".
Section 116(2) allows for a change or modification of
the registered agreement, settlement or award in terms
of the agreement, and that clearly brings out the
difference between the two concepts of " change" and
" modification ". In cases falling under s. 116(2) the
agreements or settlements can be wholly revoked and
fresh ones substituted in their place by consent, or by
consent they may be modified in subsidiary or incidental details.
Where the Legislature wanted to
provide for change it has expressly done so in s. 116(2)
by using both the words " changed " or " modified ".
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3 S.C.R. SUPREME COURT REPORTS
337
Section 116A, however, is confined only to modificaI96o
tion of the award and not its change.
T
• 1
d ·
h
£
I •
Bharatkhand
he same argument IS pace m anot er orm.
t IS Textile Mfg.-co.
contended that it was not the intention of the LegislaLtd.
ture to permit the proceedings under s. l 16A for change
v.
of policy underlying the award or its essential frameTextile Labour
work. Such a result can be achieved only by terminating
Association
t.he award under s. 116(1) and raising an industrial G .
-
dispute as provided by the Act. In support of this
a;endragadkar.J.
contention reliance has been placed on the observations
made by ;M:ukherjea, J., as he then was, in the case of Re:
Delhi Laws Act, 1912(1) where the learned judge stated
t,hat "the word ' modification ' occurring in s; 7 of
the Delhi Laws Act did not mean or involve any
change of policy but was confined to alteration of such
a character which keeps the policy of the Act intact
and introduces such changes as are appropriate to
local conditions of which the executive government
is made the judge". In the same case Bose, J. observed that " the power to restrict and modify does
not import the power to make essential changes ".
On the other hand, the learned Solicitor-General ha.s
contended that the context in which the word' modification' has been used in s. 116A does not justify the
adoption of the limited meaning of the word " modify "
for which the appellants contend. The policy of the
Act and the reason why s. 116A has been enacted
show that the word " modification" has been used in
a sense larger· than its ordinary meaning. The Legislature realised that the procedure prescribed bys. 116,
sub-s. (I), for terminating the award which necessitates
the other subsequent steps was apt to be dilatory and
involved and so it has purported to provide for an
effective alternative speedy remedy for the change of
the award under s. 116A. In support of this argument
reliance has been placed on the meaning assigned to ·
1;he word" modified" in "Words and Phrases" where
it is stated that "though one of the primary meanings
of the word ' modify ' is no doubt ' to limit ' or
' restrict' it also means' to vary', and there is authority
that it may even mean 'to extend ' or ' enlarge ' " (2 ).
(r) [1955] 2 S.C.R. 747, 1006.
{2) "Words and Phrases" by Roland Burrows, Vol, 3, p. 399,
Bharatkhand
Textile Mfg. Co.
Ltd.
v.
Textile Labour
Association
Gajendragadkar J.
338
SUPREME COURT HEPORTS
[1960)
It is common ground that the modification permissible
under s. 116A does not mean that the provisions of
the award must always be reduced; it may mean even
increasing the provisions, and so it is urged by the
respondent that the word "modification" should receive
a wider denotation in the context of s. 116A. This
construction no doubt receives some support from the
provision of s. 116A that ,a party may apply for the
modification of the award instead of giving notice for
its termination ; and the latter clause tends to show
that the procedure prescribed by s. 116A is ;i.n alternative to the procedure prescribed by s. 116. The
industrial court was apparently inclined to put a
wider denotation on the word " modification " used in
s. 116A.
We do not think it is necessary to decide this larger
question of the construction of s. 116A because, in our
opinion, in the present case, even if the limited and
narrow construction suggested by the appellant is put
on the word "modification", the respondent's application cannot be said to be outside the purview of the
said section. There is no doubt that the claim for
gratuity made by the respondent in the earlier proceedings has been rejected by the industrial court and that
is an award; but, whether or not the present application seeks for a modification of the said award within
the meaning of s. l 16A would depend on what the industrial court had decided on the earlier occasion. It is
clear that the industrial court did not then consider
the merits of the claim at all. It upheld the Association's contention that the matter should not be decided
then but may be considered later in view of the fact
that the Employees' Provident Funds Act had already
been passed and the statutory scheme for provident
funds was about to come into force. It was on this
ground alone that the industrial court rejected the
claim as it was then made but it took the precaution of
expressly adding that after the introduction of the
provident funds scheme it would be open to the respondent or the Association to make a fresh application
for the institution of a gratuity fund as it may deem
expedient to claim. It would not be unreasonable, we
think, to assume that when liberty was thus reserved
\..
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3 S.C.R. SUPREME COURT REPORTS
339
to the parties to make a fresh application the in-
:1960
dustrial court had presumably s. 116A in mind. In
substance, the effect of the order then passed was that
Bharatkhand
Textile Mfg. Co.
the application was regarded as premature and liberty
Ltd.
was reserved to the parties to renew the application if
v.
the statutory scheme was thought to be insufficient or
Textile Labour
unsatisfactory by either of them. In such a case, if
Association
the respondent applies to the industrial court for modi-
. -
k
1
fi t.
f 't
d 't · d'ffi lt t
t th
Ga;endragad ar .
: ca 10n o 1 s awar 1 IS
I cu
o accep
e argument that the respondent seeks to alter the framework
of the award or to change any principle decided in
the award. The true position is that by the present
:ipplication the respondent is asking the court to
consider the demand now that the scheme has come
into force and is, according to the respondent, insufficient to meet the workmen's grievance. What the
industrial court then promised to consider after the
scheme came into force is brought before it for its
decision again. That being the true nature of the
award and the true scope of the prayer made by the
respondent in its present application it is difficult to
hold that the application is incompetent under
s. 116A.
The next argument which is pressed before us by the
learned Attorney-General is that the application for
modification is incompetent in regard to matters not
covered in the earlier proceedingR. We have already
referred to the items 9overed in the earlier proceedings
:is well as those which are the subject-matter of the
present application. It is true that the notice served
by the respondent prior to the earlier reference specifically set out the claim for gratuity in four categories -of cases of termination of services of the
employees, whereas in the present proceedings some
other categories are included. The objection raised
a.gainst the competence of the present application
purports to treat the earlier notice in a very technical
way and confines the subsequent proceedings taken
before the industrial court to the said four categories
only. The argument is that the cases of termination
of services which were not specified in the earlier
notice cannot now be brought before the industrial .
court under the guise of the modification of the <1.wa.rd.
340
SUPREME COURT REPORTS
[1960)
'960
If the modification of the award can be claimed under
Bharatilhand
s. 116A it must be claimed only in regard to the said
Textile Mfg. co. four categories and no more.
This argument has
Ltd.
been rejected by the industrial court, and it has been
v.
held that in substance the earlier notice should be conTextile Labour strued a.s constituting a claim for the scheme of gratuity
A s.wciation
_
in general. The validity of this conclusion has been
Gajendragadkar J. seriously challenged by the appellant.
There is no doubt that disputes in regard to industrial matters not covered by an award do not fall
within the scope of s. 116 of the Act; and so if the
claim for gratuity in regard to categories not specified
in the earlier notice is deemed to be outside the said
notice and the relevant reference proceedings, could
the respondent have made a claim in that behalf and
ask for industrial adjudication without terminating the
a ward? It is difficult to answer this question in the
affirmative.
It is well-known that a scheme for
gratuity is an integrated scheme and it covers all classes
of termination of service in which gratuity benefit
can be legitimately claimed. Therefore, when the
industrial court refused to frame a gratuity scheme in
regard to the four categories brought before it on the
earlier occasion, in ·substance its refusal amounted to
a rejection of any scheme for gratuity at all; otherwise it is very difficult to assume that having rejected
the claim for gratuity in respect of the said four categories it would still have entertained a claim for
gratuity on behalf of other categories not included
therein. That is why we are inclined to think that
though in form the rejection of the demand for
gratuity on the earlier occasion was in regard to the
four categories specified in the notice, in effect it was
rejection in regard to the claim for a gratuity scheme
itself.
It cannot be disputed that if the earlier demand had
been for a gratuity scheme pure and simple and no
categories had been specified in connection therewith
the present application for the modification of the
award coupled with a claim for a gratuity scheme in
respect of all the categories specified in the application
. would.be.within the purview of s. 116 of the Act. That
in substance is what has happened in this case
-
3 :S.C.R. SUPREME COURT REPORTS
341
according to the finding of the industrial court on this
i96o
Point, and having regard to the unusual circumstanBharatkhand
ces of this case we see no reason to interfere with it.
Textilt Mfg. Co.
Then it is urged that the industrial court has erred
Ltd,
in law in framing a gratuity scheme even though the
v.
statutory scheme under the Employees' Provident Te:rtilt Labour
Funds Act has been in operation since 1952. The
Association
provident fund guaranteed by the statute under the G •
~ -,. 1
h
.
k' d f
.
b
fi
a1en,.ragau,.ar · ,
statutory sc eme is one m o retuement ene t and
since this retirement benefit is now available to the
workmen it was not open to the industrial court to
provide an additfonal gratuity scheme ; that in substance is the contention. This contention has been
frequently raised before the industrial courts and has
been generally rejected. The Employees' Provident
Funds Act has no doubt been passed for the institution .of provident funds £or employees covered by it;
and the statutory scheme for provident funds is
intended to afford to the employees some sort of a
retirement benefit; but it cannot be ignored that
what the statute has prescribed in the scheme is the
minimum to which, according to the Legislature, the
employees are entitled; and so in all cases where the
industrial courts are satisfied that a larger and higher
benefit can be afforded to the employees no bar can
be pleaded by virtue of tJhe Provident Funds Act. It
is true that after the Act came into force, the industrial courts would undoubtedly have to bear in mind
the benefit of the statutory scheme to which the employees may be entitled ; and it is only after bearing
tha,t factor in mind and making due allowance for it
that any additional scheme for gratuity can and must
be framed by them; but it is not open to·an employer
to contend that the Act excludes the jurisdiction of
industrial courts to frame an additional scheme.
In this connection it may be pertinent to point out
tiha,t s. 17 of the Employees' Provident Funds Act
empowers the appropriate government to exempt from
the operation of all or any of the provisions of the
statutory scheme to establishments as specified in.
s. 17(l)(a) and (b).
Under s. 17(1)(b), for instance, any
establishment may apply for exemption if its employees are in enjoyment of benefits in the na.ture of
4i
Bharatkhand
Textile _""'1fg. Co.
Ltd.
v.
1'extile LabouY
Association
Gajendragadkar ].
342
SUPREME COURT REPORTS
[1960]
provident fund, pension or gratuity which, in the
opinion of the appropriate government, are on the
whole not less favourable to such employees than the
benefits provided under the Act or any scheme in rela;
tion to employees in any other establishment of a
similar character. This provision brings out two points
very clearly. If the benefits provided by the employer
are not less favourable than the statutory benefits he
may apply for exemption and the appropriate government may grant him such exemption. If, on the
other hand, the benefits conferred by him are less
favourable than the statutory benefits he may not be ·
entitled to any exemption, in which case both the
benefits would be available to the employees. These
provisions clearly indicate that the statutory benefits
which in the opinion of the L.(lgislature are the minimum to which the employees are entitled, cannot
·create a bar against the employees' claim for additional benefits from their employers.
In this connection we may incidentally refer to the decision of this
Court in the case of Indian Hume Pipe Go. Ltd. v.
The Workmen (1) where this Court has held that the
statutory provision for the payment of retrenchment
compensation under s. 25F is no bar to a claim for
gratuity. The argument urged that the statutory
retrenchment partook the character of gratuity· and
thus constituted a bar for the additional claim for
gratuity was rejected. We must accordingly hold that
the Industrial Court was right in rejecting the appellants' contention that the statutory provision for provident fund under the Employees' Provident Funds
Act is a bar to the present claim for a gratuity scheme.
The learned Attorney-General has then challenged
the validity of the scheme on the ground that the
Industrial Court was in error in dealing with the problem on industry-wise rather than unit-wise basis. He
contends that the claim for gratuity is more allied to a
claim for bonus and must, therefore, be dealt with on
unit-wise basis. It is not disputed that the benefit of
gratuity is in the nature of retiral benefit and there
can be no doubt that before framing a scheme for
gratuity industrial adjudication has to take into
(I) [1960] 2 S.C.R. 32.
.- -
t
..
3 S.O.R. SUPREME COURT REPORTS
343
account several relevant facts ; the financial condition
r96~
of the employer, his profit-making capacity, the profits
Bharatkhand
earned by him in the past, the extent of his reserves Textile Mfg. co.
and the chances of his replenishing them as well as
Ltd.
'
the claims for capital invested by him, these and other
v.
ma.terial coQsiderations may have to be borne in mind Textile Labour
in determining the terms -0f the gratuity scheme. This
Association
position has always been recognised by industrial G . d::-:-:dk
1
.
a1en raga ar .
courts (V1de: Arthur Butler & Go. (Muzaffarpur) Ltd.
And Arthur Butler Workers' Union( 1). It appears also
to be well recognised that though the grant of a claim
for gratuity must depend upon the capacity of the
employer to stand the burden on a long-term basis it
would not be permissible to place undue emphasis
either on the temporary prosperity or the temporary ·
adversity of the employer. In evolving a long-term
scheme a long-term view has to be taken of the
employer's financial condition and it iS"on such a basis
alone that the question as to whether a scheme should
be framed or not must be decided, and if a scheme has
to be framed the extent of the benefit should be determined (Vide: Boots Pure Drug Go. (India) Ltd. And
Their Workmen (2) ).
For our present purpose it is
really not necessary to embark upon the academic
question as to whether gratuity is a part of deferred
wage or not; we will assume that it is not. Even so
it would not be reasonable to assimilate the character
of 1;he scheme for gratuity to that of a profit bonus
and to seek to import the considerations of the Full
Bench formula which governs the grant of bonus. A
claim for profit bonus is based on the assumption that
the employees contribute at least partially to the
profits made by the employer and that they are entitled
to ask for a share in the said profits in order to bridge
the gulf between the wages actually received by them
and a living wage to which they are ultimately entitled.
A claim for gratuity is a claim for retiral benefit and
it is strictly not a claim to receive a share of the profits at all; and so there would be no scope for importing the several considerations which are relevant in
determining the claim for profit bonus. That is the
view taken by the Labour Appellate Tribunal in Indian
(t) [1952] JI L.L.J. 29.
(2) [1956] I L.L.J. 293.
344
SUPREME COURT REPORTS
[1960)
1960
Oxygen and Acetylene Co. Ltd. Employees' Union And
Indian Oxygen and Acetylene Co. Ltd. (1) and the said
Bharatkhand
Textile Mfg. co. decision has been cited with approval by this Court in
Ltd.
Express Newspapers (Private) Ltd. v. The Union of
v.
India (2).
Therefore, we are not prepared to accept
Textile Labou• the argument that the claim for gratuity is essentially
Association
similar to a claim for profit bonus, and like profit bonus
G . d-dk 1 it must always be considered on unit-wise basis. Incia;en raga
ar . d
11
dd h
1 .
,_.
fi b
enta y we may a
t at even a c aim ior pro t onus
can and often is settled on industry-wise basis.
That still leaves the larger question to be considered
whether the industrial court was in error in dealing
with the claim for gratuity on industry-wise basis. It
is urged for the appellants that an industry.wise basis
is wholly inappropriate in dealing with gratuity and it
should not have been adopted by the industrial court.
It may be conceded that when an industry-wise basis
is adopted in dealing with a claim like gratuity often
enough stronger units of the industry get a benefit
while the weaker units suffer a disadvantage. Take
the case of a gratuity scheme. If such 11 scheme is
based on industry· wise basis employees working under
the stronger units do not get that amount of benefit of
gratuity which they would have got if the question
had been considered unit-wise, whereas employees
working in weaker units get a better scheme than they
would have got if the matter had been considered
unit-wise. Such a result is inevitable in an industrywise approach. This possible mischief can, however,
be mitigated by taking a fair cross-section of the industry or by working on a rule of averages after collecting
the relevant facts of all the constituent units of the
industry. Even eo, if some of the units of the industry
are very weak they are apt to suffer a disadvantage
just as the very strong units in the industry are likely
to get an undue advantage in the process; but the
question which calls for our decision is: does this
possible result mean that a scheme for gratuity should
on principle not be framed on an industry. wise basis
but must always be framed on a unit-wise basis?
There are several factors which militate against the
appellants' suggestion that unit-wise basis is the only
(I) [1~56] l L.L J. 435•
(2) [1959] S.C.R. ti at p. 156.
-
....
3 S.C.R. SUPREME COURT REPORTS
345
basis which should be adopted in such a case. Equality
r960
of competitive conditions is in a sense necessary
from t}ie point of view of the employers themselves ;
Bharatkhand
Textile Mfg. Co.
that in fact was the claim made by the Association
Ltd.
which suggested that the gratuity scheme should be
v.
framed on industry-wise basis spread over the whole
Textile Labour
of the country. Similarly equality of benefits such as
Association
gratuity is likely to secure contentment and satisfac- G .
-
tion of the employees and lead to industrial peace and a1endragadkar f.
ha.rmony. If similar gratuity schemes are framed for
all the units of the industry migration of employees
from one unit to another is inevitably checked, and
industrial disputes arising from unequal treatment in
that behalf are minimised. Thus, from the point of
vi.ew of both employers and employees industry-wise
approach is on the whole desirable. It is well-known
that the Committee on Fair Wages which had examined this problem in all its aspects had come to the
definite conclusion that "in determining the capacity
of an industry to pay it would be wrong to take the
capacity of a particular unit or the capacity of all the
industries in the country. The relevant criterion should
be the capacity of a particular industry in a specified
region", and it recommended that as far as possible
the same wages should be prescribed for all units of
that industry in that region. This approach has been
approved by this Court in the case of Express Newspapers (Private) Ltd. (1) (p. 19).