# THE GARMENT CLEANING WORKS v. ITS WORKMEN

- **Citation:** [1962] 1 S.C.R. 711
- **Court:** Supreme Court of India
- **Decided:** 1960-01-15
- **Case number:** Civil Appeal No. 621of1960
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-garment-cleaning-works-v-its-workmen-2069
- **Pages:** 7

## Headnote

Industrial Dispute-Gratuity-Scheme framed by TribunalValidity-The Industrial Disputes Act, r947 (q of 1947), s. r2(5).
The Industrial Tribunal, on a reference under s. 12 of the
Industrial Disputes Act, 1947. framed a gratuity scheme for
the appellant company. The company challenged the validity of some of the provisions of the scheme on the grounds,
inter alia, (r) that the scheme was framed on the basis of the
nnits, while it should have been done on industry-cum-region
basis, (2) that the scheme provided for the award of gratuity on
the retirement or resignation of a workman after ten years' service instead of fixing the period as fifteen years, and (3) that
cl. (ii )(b) of the scheme which provided that if a workman was
dismissed or discharged for misconduct causing financial loss to
the works, gratuity to the extent of the loss should not be paid
to the workman concerned, was erroneous, because, on principle,
misconduct put a blot on the character of his service and that
disqualified him from any claim of gratuity.
Held: (r) that industry-cum-region basis is not the only
basis on which a gratuity scheme could be framed and one
framed on the basis of the units cannot be challenged as invalid.
The Bharatkhand Textile Manufacturing Co. Ltd. v. The
Textile Labour Association, Ahmedabad, [1960] 3 S.C.R. 329, explained.
(2) that the clause in the scheme prescribing ten years'
minimum service to enable an employee to claim gratuity is
valid.
The Express Newspapers (P.) Ltd. v. Union of India, [1959]
S.C.R. 12, explained.
•
(3) that gratuity is not paid to an employee gratuitously
or merely as a matter of boon, but is paid to him for the service
rendered by him to the employer; consequently he should not be
wholly deprived of the benefit thus earned by long and meritorious service even though at the end of such service he might
have been found guilty of misconduct which entailed his dismissal. Accordingly, cl. (ii)(b) of the scheme is a valid provision.
Crvrr. APPELLATE JURISDICTION: Civil Appeal No.
621of1960.
Appeal by special leave from the Award dated
January 15, 1960, of the Industrial Tribunal, Bombay,
in Reference (LT.) No. 94 of 1959,
April 3.
I96I
G·arment
Cleaning lVorks
v.
Its Workmen
712
SUPREME COURT REPORTS
[1962)
B. Sen and I. N. Shroff, for the appellant.
G. L. Dhudia and K. L. Hathi: for the respondent.
1961. April 3.
The Judgment of the Court was
delivered by
G .
-- k
GAJENDRAGADKAR, J.-Two demands made by the
a;endrngad "'I· respondents, the workmen of the appellant company,
the Garment Cleaning Works, Bombay, were referred
for industrial adjudication to the industrial tribunal
under s. 12(5) of the Industrial Disputes Act, XIV of
1947. These demands were for gratuity and provident fund respectively. The tribunal has framed a
gratuity scheme and has passed an order that the
appellant should draw up a scheme of provident fund
on the lines of the model provident fund scheme
drawn by the Government under the Employees' Provident Funds Act, 1952 (XIX of 1952), with a rate of
contribution of 6i per cent. of total wages. Both the
gratuity scheme as drawn up and the directions as to
the drawing up of a provident fund scheme are challenged by the appellant by its present appeal which it
has brought to this Court by special leave.
In regard to the direction as to the gratuity scheme
the argument which has been urged before us by Mr.
Sen is that the problem of starting such a scheme
should have been considered on an industry-cum-region
basis and considerations relevant to the said basis
should have been taken into account. In support of
this argument he has relied upon a judgment of this
Court in The Bharatkhand Textile Mfg. Go. Ltd. & Ors.
v. The Textile Labour Association, Ahmedabad (' ).
In
that case the industrial court had no doubt dealt with
a claim for gratuity made by the workmen on the
industry-cum-region basis, and an attack against the
validity of the said approach made by the employer
in regard to the scheme

## Text

"J
1 S.C.R. SUPREME COURT REPORTS
711
THE GARMENT CLEANING WORKS
v.
ITS WORKMEN
(P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.)
Industrial Dispute-Gratuity-Scheme framed by TribunalValidity-The Industrial Disputes Act, r947 (q of 1947), s. r2(5).
The Industrial Tribunal, on a reference under s. 12 of the
Industrial Disputes Act, 1947. framed a gratuity scheme for
the appellant company. The company challenged the validity of some of the provisions of the scheme on the grounds,
inter alia, (r) that the scheme was framed on the basis of the
nnits, while it should have been done on industry-cum-region
basis, (2) that the scheme provided for the award of gratuity on
the retirement or resignation of a workman after ten years' service instead of fixing the period as fifteen years, and (3) that
cl. (ii )(b) of the scheme which provided that if a workman was
dismissed or discharged for misconduct causing financial loss to
the works, gratuity to the extent of the loss should not be paid
to the workman concerned, was erroneous, because, on principle,
misconduct put a blot on the character of his service and that
disqualified him from any claim of gratuity.
Held: (r) that industry-cum-region basis is not the only
basis on which a gratuity scheme could be framed and one
framed on the basis of the units cannot be challenged as invalid.
The Bharatkhand Textile Manufacturing Co. Ltd. v. The
Textile Labour Association, Ahmedabad, [1960] 3 S.C.R. 329, explained.
(2) that the clause in the scheme prescribing ten years'
minimum service to enable an employee to claim gratuity is
valid.
The Express Newspapers (P.) Ltd. v. Union of India, [1959]
S.C.R. 12, explained.
•
(3) that gratuity is not paid to an employee gratuitously
or merely as a matter of boon, but is paid to him for the service
rendered by him to the employer; consequently he should not be
wholly deprived of the benefit thus earned by long and meritorious service even though at the end of such service he might
have been found guilty of misconduct which entailed his dismissal. Accordingly, cl. (ii)(b) of the scheme is a valid provision.
Crvrr. APPELLATE JURISDICTION: Civil Appeal No.
621of1960.
Appeal by special leave from the Award dated
January 15, 1960, of the Industrial Tribunal, Bombay,
in Reference (LT.) No. 94 of 1959,
April 3.
I96I
G·arment
Cleaning lVorks
v.
Its Workmen
712
SUPREME COURT REPORTS
[1962)
B. Sen and I. N. Shroff, for the appellant.
G. L. Dhudia and K. L. Hathi: for the respondent.
1961. April 3.
The Judgment of the Court was
delivered by
G .
-- k
GAJENDRAGADKAR, J.-Two demands made by the
a;endrngad "'I· respondents, the workmen of the appellant company,
the Garment Cleaning Works, Bombay, were referred
for industrial adjudication to the industrial tribunal
under s. 12(5) of the Industrial Disputes Act, XIV of
1947. These demands were for gratuity and provident fund respectively. The tribunal has framed a
gratuity scheme and has passed an order that the
appellant should draw up a scheme of provident fund
on the lines of the model provident fund scheme
drawn by the Government under the Employees' Provident Funds Act, 1952 (XIX of 1952), with a rate of
contribution of 6i per cent. of total wages. Both the
gratuity scheme as drawn up and the directions as to
the drawing up of a provident fund scheme are challenged by the appellant by its present appeal which it
has brought to this Court by special leave.
In regard to the direction as to the gratuity scheme
the argument which has been urged before us by Mr.
Sen is that the problem of starting such a scheme
should have been considered on an industry-cum-region
basis and considerations relevant to the said basis
should have been taken into account. In support of
this argument he has relied upon a judgment of this
Court in The Bharatkhand Textile Mfg. Go. Ltd. & Ors.
v. The Textile Labour Association, Ahmedabad (' ).
In
that case the industrial court had no doubt dealt with
a claim for gratuity made by the workmen on the
industry-cum-region basis, and an attack against the
validity of the said approach made by the employer
in regard to the scheme was repelled by this Court.
It would, however, be noticed that all that this Court
decided in that case was that it was erroneous to con-
'
tend that a gratuity scheme could never be based on
industry-cum-region basis, and in support of this conclusion several considerations wero set forth in the
\1) ~196oj 3 S.C.R. 32~.
1 S.C.R. SUPREME COURT REPORTS
713
judgment. It is clear that it is one thing to hold that
the gratuity scheme can in a proper case be framed
Garment
on industry-cum-region basis, and another thing to Cleaning Works
say that industry-cum-region basis is the only basis
v.
on which gratuity scheme can be framed. In fact, in
Its Workmen
. a large majority of cases gratuity schemes are drafted _ .
th b .
f h
't
d 't h
b
t;a1endragadkar J.
on
e as1s o t e um s an
I
as never een suggested or held that such schemes are not permissible.
Therefore the decision in the case of the Bharatkhand
Textile Mfg. Co. Ltd.(') does not support the proposition for which Mr. Sen contends.
Mr. Sen has then criticised some of the provisions
in the gratuity scheme. Clause (ii) (a) of the gratuity
,
scheme provides that on retirement or resignation of
a workman after ten years' service ten day's consolidated wages for each year's service should be awarded
as gratuity. Mr. Sen quarrels with this provision. He
contends that no gratuity should be admissible under
this clause until and unless fifteen years' service has
~ been put in by the employee. In support of this argument Mr. Sen has referred us to certain observations
made by this Court in the case of The Express Newspapers (Private) Ltd. & Anr. v. The Union of India &
Ors. (2 ). In that case the provisions of s. 5 (l)(a) (iii) of
the Working Journalists (Conditions of Service) and
Miscellaneous Provisions Act, 1955 (45 of 1955), was
struck down on the ground that its provisions violated
the fundamental right guaranteed by Art. 19(1)(g).
The conclusion of this Court was that the provision
for gratuity made by the said clause to an employee
'
who had put in three years' service imposes an unreasonable restriction on the employer's right to carry
on business and is therefore liable to be struck down
as unconstitutional. Dealing with that provision this
Court incidentally observed that where the employee
has been in continuous service of the employer for a
period of more than fifteen years he would be entitled
to gratuity on his resigning his post. Mr. Sen contends
that this observation indicates that an employee who
i
resigns his post cannot be entitled to any gratuity
(1) [1960] 3 S.C.R. 329.
90
(2) [1959] S.C.R. 12, 154.
' ;.
714
SUPREME COURT REPORTS
[1962]
' ' '-
I96I
unless he has put in fifteen years' service. In our
opinion, the observation on which this argument is
Clea~~;;·~orks base? w~s n_ot intended to lay do"".n a rule of universal
v.
apphcat10n rn regard to all gratmty schemes, and so
Its Workmen
it cannot be made the basis of an attack against a
.
-
gratuity scheme where instead of fifteen years' service
Ga;endragadkar J. IO years' minimum service is prescribed to enable an
employee to claim gratuity at the rate determined if
he resigns after ten years' service. Therefore, we do
not think that the provision of cl. (ii)( a) can be successfully challenged as being unreasonable.
Clause (iv) is then challenged by Mr. Sen. This
clause provides that if a workman is dismissed or discharged for misconduct causing financial loss to the
'
works gratuity to the extent of the loss should not be
paid to the workman concerned. Mr. Sen contends
that this clause is inconsistent with the principles on
which gratuity claims are generally based. Gratuity
which is in the nature of retiral benefit is based on
long and meritorious service, and the argument is that
~
if the service of an employee is terminated on the
ground of misconduct it would not be open to him on
principle to claim gratuity because misconduct puts a
blot on the character of his service and that disqualifies him from any claim of gratuity. In this connection
he has referred us to the definition of 'retrenchment'
contained in s. 2 ( oo) of the Industrial Disputes Act.
Retrenchment, according to the definition, means,
inter alia, the termination by the employer of the
service of a workman for any reason whatsoever,
otherwise than as a punishment inflicted by way of
#
disciplinary action. Mr. Sen suggests that the retrench-
. ment benefit and gratuity are payments made to the
employee for a similar purpose, and if dismissal of au
employee for misconduct does not entitle him to a
claim for retrenchment benefit so should gratuity be
denied to him in case he is dismissed for misconduct.
A similar argument is based on the rules framed under
the Employees' Provident Funds Act, 1952.
Rule 71
of the Provident Funds Scheme Rules provides for
certain deductions from the account of a member dismissed for serious and wilful misconduct. By analogy
L
•
•
·,
I S.C.R. SUPREME COURT REPORTS
715
it is urged that this rule also shows that a dismissed
'96'
employee is not entitled to gratuity. We are not imGa,mrnt
pressed by these arguments.
Cleaning wo,ks
On principle if gratuity is earned by an employee
v.
for long and meritorious service it is difficult to underIts Workmen
stand why the benefit thus earned by long and meri- G . d --
torious service should not be available to the employee a;en ragadkar f.
even though at the end of such service he may have
been found guilty of misconduct which entails his dismissal. Gratuity is not paid to the employee gratuitously or merely as a matter of boon. It is paid to him
for the service rendered by 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 misconduct for his dismissal. Then,
as to the definition of retrenchment in the Industrial
Disputes Act, we are not satisfied that gratuity and
retrenchment compensation stand exactly on the same
footing in regard to the effect of misconduct on the
rights of workmen. The rule of the provident fund
scheme shows not that the whole provident fund is
denied to the employee even if he is dismissed but it
merely authorises certain deductions to be made and
then too the deductions thus made do not revert to
the employer either. Therefore we do not think that
it would be possible to accede to the general argument
that in all cases where the service of an employee is
terminated for misconduct gratuity should not be paid
to him. It appears that in awards which framed
gratuity schemes sometimes simple misconduct is distinguished from gross misconduct and a penalty of
forfeiture of gratuity benefit is denied in the latter
case but not in the former, but latterly industrial tribunals appear generally to have adopted the rule
which is contained in cl. (ii) {b) of the present scheme.
If the misconduct for which the service of an employee is terminated has caused financial loss to the
works, then before gratuity could be paid to the employee he is called upon to compensate the employer
for the whole of the financial loss caused by his misconduct, and after this compensation is paid to the
employer if any balance from the gratuity claimable
716
SUPREME COURT REPORTS
(1962)
1961
by the employee remains that is paid to him. On the
Ga'"ient
whole we are r;ot sa~isfied ~hat the clause thus framed
Cleaning Works by the Industnal Tnbunal m the present case needs to
v.
be revised.
Its Workmen
The last contention raised by Mr. Sen in regard to
.
the gratuity scheme has reference to cl. (v) of the
Ga;md..agadkar J. scheme. This clause provides that for calculating
years of service the entire service of the workmen
•
should be taken into account. Mr. Sen contends that
though the word "continuous" has not been used
either in cl. (v) or in clauses (i), (ii) and (iii) we should
make it clear that the service referred to in all the
said clauses referred to continuous service. This position is not disputed by Mr. Dudhia for the respondents. We would accordingly make it clear that the
•
service referred to in clauses (i), (ii) and (iii) refers to
continuous service.
That takes us to the appellant's grievance against
the direction issued by the Tribunal in regard to the
framing of the provident fund scheme on the lines of
the model provident fund scheme drawn by the •
Government in the Employees' Provident Funds Act.
Mr. Sen contends that in issuing this direction the tribunal has not properly assessed the extent of the
•
financial obligation which the scheme would impose
upon the appellant and the limited nature of its
financial capacity. "It appears that when the appellant produced its balance-sheet and other relevant papers it claimed privilege under s. 21 of
the Industrial Disputes Act. Inevitably the Tribunal could not discuss the figures disclosed by the
~
said books in its award though it must have examined the said figures carefully. In the result the
tribunal has naturally contented itself with the general
observation as to the financial position of the appellant. It has observed that the question to consider in
framing the provident fund scheme is whether the
employer has made good profits, whether its future is
assured, whether it has capacity to build up adequate
reserves. Having thus posed the question the Tribunal
has come to the conclusion that the appellant satisfies
all these requirements. Mr. Sen contends that the
,.
•
I S.C.R. SUPREME COURT REPORTS
717
tribunal did not take into account the fact that the
1961
appellant has no reserves and that it had borrowed
Garment
large loans. We do not see how that would enable the Cleaning Works
appellant now to agitate a question which is purely a
v.
question of fact. Mr. Sen realised the difficulties in
Its Workmen
his way because, since his client had claimed the pri-
. -
vilege of s. 21 the Tribunal was fully justified in not Ga1endragadkar J.
discussing the figures in its a ward.
He, therefore,
faintly suggested that we niay remand the case subject
to any order as to costs that we may deem fit to make
and ask the Tribunal to reconsider the matter in the
light of the relevant documents, and he assured us
that he would not claim privilege under s. 21 after
remand. This r~quest is plainly untenable. If the
appellant wanted the tribunal to consider the figures
and state its conclusions in the light of the said figures
in its award it need not have claimed privilege under
s. 21 at the trial. It is now too late to suggest that
the privilege be waived and that the matter be considered afresh by the tribunal or by us in the appeal.
Therefore we see no reason to interfere with the direction given by the Tribunal in regard to the framing of
the provident fund scheme.
The result is the appeal fails and is dismissed with
costs.
Appeal dismissed.
M/S. JEEWANLAL (1929) LTD., CALCUTTA
v.
ITS WORKMEN
(P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.)
Industrial Dispute-Gratuity-'Continuous service'-[ nterpretation of-Industrial Disputes Act, 1947 (14 of 1947).
One Bhanu Bala had joined the appellant's service as a
workman in 1929 and resigned in 1957· During this period of
bis service he had ren1ained absent from duty without permission or leave for nearly 8 months between February, 1945, to
April 3.