Partly allowed

Management, Ghaziabad Engineering Co. (P) Ltd. v. Its Workmen

Supreme Court18 Jul 19691969 INSC 148 · [1970] 1 S.C.R. 6221969 INSC 148

Case brief

AI extract

What is this about?

Industrial dispute over a gratuity scheme and dearness allowance. The Supreme Court held that in the absence of evidence of industry practice or exceptional circumstances, gratuity must be linked to basic wage, not the consolidated wage packet, and modified the scheme accordingly; it declined to interfere with the flat-rate dearness allowance or the finding of sound finances.

What did the court decide?

Gratuity scheme modified: 'wages' redefined as basic salary/emoluments excluding dearness allowance; otherwise appeal dismissed, no costs.

Management, Ghaziabad Engineering Co. (P)… — Labour and Industrial Disputes | Supreme Court (1970)

¶1

MANAGEMENT, GHAZIABAD ENGINEERING CO (P) LID.

ITS WORKMEN

July 18, 1969

[J. C. SHAH AND G. K. MITTER, JJ. J

¶8

Industrial DiJpute-Gratui1y-Sche1ne framed relating gratuity to consolidated wage not to basic wcge-Princip/es governiflg fra1ninR of scheme-Dearness allowance at flat rare-Practice--Court's jurisdiction under Art. 136-Jnterf('rence 1..,·ith findings of Tribunal.

¶9

The Industrial Tribunal on a reference of the disputes between the appellant comp:uty and its workmen framed a gratuity scheme. -;be gratuity payable to a workman on termination of employment was to be computed on the total wage packet of the workman includin~ dearness allowance which he had last drav.·n. 1·he tribunal also av.·ardcd dearness allowance at a . flat uniform rate for every l 0 point rise in the cost of Consumer Price Index. The Tribun<1l found that the financial position of the company was sound and it had the capacity to bear the additional bu'rden. In appeal, thi, Court

¶10

HELD : ( i) The usual pattern in fixing gratuity is to relate it to the basic wage or salary and not to consolidated wage. A departure may be made from the normal rule, if there by some strong evidence or precedent in the industry, or conduct of the employer or other exceptional circumstances to justify that course. !n the absence of such evidence, gratuity should be related to the basic wage and not to the consolidated wage packet. [627 DJ

¶11

In the present case it v.·as found that !he financial posilion of the company \·as sound but there was no evidence that the company \'as "ma!Ung abnormally high profits", nOr \'as there any evidence that in its sister concern or in other engineering concerns in the region there was a practice of 3\·arding gr-:l!Uity related to consolidated wages.

¶12

Mis. British Paints (India) Ltd. v. Its Workmen, [1966] 2 S.C.R. 523, May & Baker (lndic.) Ud. v. Their Workmen, [1961] II L.L.J. 94, British India Corporation v, The Workmen, (1965) Vol. IO Factory Law Reports 244, Hindustan Antibiotics Ltd. v. Their Workmen, [1967] I. L.L.J. I 14, The Remington Rand of India Ltd. v. The Workmen. [19681 1 S.C.R. 164. and Delhi Cloth & General Mills Co. Ltd.'" The Workmen & Ors. [1969j 2 S.C.R. 307, referred to.

(ii) The rise in dearness allo,vancc \'as not related to the quantum of ba<>ic v.·a1te or consolidated \'age; it was a flat uniform rate applicable to everv v.·orkman. Therefore, the rise \'Ould not operate to give the v.·orkman: besides the additional dearness allo\·ance, a percentage increase in dearness allo\l;ance already paid as part of the consolidated ,,·age. r625 E-Fl

¶19

(iii) The Tribunal, on appreciation of evidence found that the financial position of the company \'as sound. Assuminc that the Trihunal was governed by the strict rules prescribed by the Evidence Act, sitting in appeal with Special Leave Ibis Court \l/OU1d not be justified in interfering

¶20

¶21

GHAZ!ABAD BNG!N. CO. V. WORKMEN (Shah, !.) 623

¶22

A ··.vith the finding cf the Tribunal even if it -be open to the criticism that a part of the evidence relied UP9fl was not in law relevant. [624 F] .\

¶23

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1408 of 1966.

¶24

Appeal by special leave from the Award dated May 19, 1965

¶25

B February 23, 1966 of the Addi. Industrial Tribunal, Delhi in Industrial Dispute No. 109 of 1965.

¶26

H. R. Gokhale, G. L. Sanghi and K. P. Gupta, for the. appellant.

¶27

Urmila Kapur and 'Bh~fan Ramrakhiani, for the respondents. c The Judgment· qf the Court was delivered by

¶28

. ' . ) Shah, J. By,9rder February 24, 1965 the C:hief Commissioner of Delhi refei:red for adjudication, industrial disputes between the' appellant company a.nd its workmen relating to dearness allowance and introduction· of a scheme of gratuity for the D benefit of the workmen. The Industrial Tribunal, Delhi framed the following "gratuity scheme" : ·

¶29

¶30

¶31

(1)On deathorretire1nenton attaining the ageof superannuation oronbecoming mentally or physically unfit for further service. .-. .	One month's wages for each yearofserviceorpart there- ofinexcessofsixmonths subject to a maximumof_15_ months' wages.Incaseof deathofemployee the gra- tuity shall be payabletohis nomineeorifthereisno nomineetohis legal . heirs.
(2) On termination afterfiveyears' service for any cause whatsoever exceptbywayofretrench- mentorresignation.	15d°aysWagesfor each yearof serviceorparttherrofin excessofsix months' subject toa 'maximumof15months wages.
(3) Onresignation after10yearsofservice.	15days wages for each yearof serviceorpartthereof in excessofsix months subject toamaximumof15n1onths wages.

¶32

G Provided that 'if t~rmination is for any misconduct causing financial loss to the company, the amount of loss shall be deducted from the gratuity payable. The word 'wages' in this Scheme shall mean the total pay packet of the workman including dearness which he was last· drawing."

¶33

¶34

The Tribunal also directed that "all workmen who were appointed in 1960 or earlier should get dearness allowance at Rs. 3 for every ten point rise in the cost of Consumer Price Index base 1960 over and above their existing wages with effect from

-·

~24

[1970] l S.C.R

SUPREME COURT REPORTS

¶39

1st January, 1965. In case of workmen appointed after 1960, the consumer price index base 1960 on the date of his appointment shall be found out and he shall be given Rs. 3 as dearness for every ten point rise in cost of Consumer Price Index base 1960 above it with effect from !st January, 1965 or such later date on which the limit of 10 point rise in cost of Consumer Price Jnde~ base is crossed." The Tribunal also direr.ted that dearness allowance will not be enhanced till the limit of ten points be "crossed", and that dearness allowance once granted will not be reduced till the Consumer Price Index falls by more than 10 points. The Company has appealed to this Court with special leave.

¶40

Jn the view of the Tribunal. the financial position of the company "is very sound" and that it has "financial capacity and, stability to bear the additional burden of dearness allowance and of the gratuity scheme." In reaching that conclmion the Tribunal relied upon a news item published in the newspapers that 2000 Russian Tractors were being immediately imported by the Company even though the agency of the Company was being terminated. In relying upon newspaper reports the Tribunal may have erred. But the conclusion of the Tribunal is founded upon a review of several other circumstances. It is true that one of the primary lines of business of the company was of selling tractors as agents of Russian manufacturers. That agency was in danger of being terminated because the State Tradini< Corporation had arranged to take over the agency. But the balance sheets of the company show that the agency was only one of the many lines of business and the closure of the agency of th.~ tractor manufacturers was not likely to affect the financial structure of the Company seriously. The Tribunal has on appreciation of evidence come to the conclusion that the financial position of the company was sound and assuming that the Tnbunal is governed by the strict rules prescribed by the Evidence Act, sitting in appeal with special leave we will not be justified in interfering with the finding of the Tribunal even if it be open to the criticism that a part of the evidence relied upon is not in law relevant.

¶41

The company had on its roll 244 workmen out of whom 118 entered employment after 1960. The company has been paying to its workmen wages consisting of two components-basic wages and 50 per cent of the basic wages as dearness allowance. Payment of wages is made in this form to all workmen whether their employment. commenced before the year 1960 or thereafter. It is true that before 1960 the company used to make a consolidated payment without specifying any amount of basic salary or dearness allowance. Since 1960 in every appointment Jetter it was expressly recited that the emplovee will ~et a consolidated salary ronsisting of 2/3rd of the consolidated sal&ry as basic wages and

GHAZIABAD ENGIN. CO. v. WORKMEN (Shah, J.)

¶52

625

¶53

A the balance as dearness allowance. The company has produced before the Tribunal 118 such letters of appointment in respect of all employees employed after the year 1960. In respect of the employees appointed prior to the year 1960 in the salary register basic salary and dearness allowance was separately entered though at the time of appointment of employees there was '° allocation B as basic wages and dearness allowance.

¶54

There is no dispute that since the year 1960 there llas been a rise in the cost of living. The Consumer Price Index for Industrial Workers which was 100 in 1960, had risen to more than 130 in 1965. The management of the company granted dearness allowance to employees in other concerns under its management c even though those other concerns were not financially very sound. No serious argument has been advanced before us that the rise in dearness allowance is not justified. The only ground of complaint is that by relating the cl.earness allowance to the total wage packet the workmen are given a rise both in the dearness allowance and in the basic wage. ·

¶55

¶56

The Tribunal has awarded dearness allowance at the flat rate of Rs. 3 for every 10 µoint rise in the cost of Consumer Price Index. The rise is not related to the quantum of basic wage or consolidated wage. It is a flat uniform rate applicable to every workman. The Tribunal was of the view that the allocation betE ween the basic wage arid the dearness allowance was "not fair", but for the purpose of 'the present reference, the question is academic because dearness allowance is not related to the quantum of salary that ;the workmen receive. The argument that the rise will operate to give to the workmen besides the additional dearness allowance, a percentage increase in dearness allowance already paid as part of the consolidated wage cannot be accepted. F We do not therefore s~ any reason to interfere with the order passed by "the Tribunal, with regard to the dearness allowance at the rate of Rs. 3 for every 10 point rise in the Consumer Price Index."

¶57

Gratuity payable to a' workman on termination of employment G is to be computed on the total wage packet of the workman including dearness allowance which he has last drawn. This order makes a departure from tre normal rule which is adopted in industrial awards. In M/s. Bntish Paints (India) Ltd. v. Its Workmen(1) this Court while introducing a gratuity scheme for the first time in the concern directed that the amount of gratuity shall be related to the basfo wa~ or salary and not to the consolidated H wage inrluding dearnss '<illowanc. A similar order was made in May and Baker (India)' Ltd. v. Their Workmen('). It is true

¶58

(!) [1966] 2 S.C.R. 523.

¶59

(2) t1961] II L.L

¶60

[ l 970] l S.C.R.

¶61

SUPREME COURT REPORTS

¶62

626

¶63

that in British India Corporation v. The Workmen('), an award made by the Tribunal fixing the quantum of gratuity on gross salary i.e., basic wage plus dearness allowance was upheld by this Court. The Court atlirmed that the usual pattern in fixing the gratuity is to relate it to the basic wage, but refused to interfere with the order because the practice in that concern was to fix gratuity on the consolidated wage.

¶64

Similarly, in Hindustan Antibiotics Ltd. v. Their Workmen ('), the Tribunal directed the employer to pay gratuity at the rate of one half of wages for each month including dearness allowance but excluding house rent and all other allowances for each completed year of service subject to a maximum of wages for ten months. In rejecting the claim of the employers for relating gratuity to the basic wage, this Court observed :

¶65

"If the industry is a flourishing one, we do no see any reason why the labour shall not have the benefit of both the schemes i.e. the employees prvvidenc fund and the gratuity scheme. Gratuity is an additional form of relief for the workmen to fall back upon. If the industry can bear the burden, there is no reason why he shall not be entitled to both the retirement benefits. The Tribunal considered all the relevant circumstances : the stability of the concern, the profits made by it in the past, ics future prospects and its capacity and came to the conclusion that, in the concern in question, the labour should be provided with a gratuity ;cheme in addition to that of a provident fund scheme. There was no justification to disturb this conclusion."

¶66

Jn The Remington Rand of India l.td. v. The Workmen(³ ) this Court declined to interfere with th•! order of the Tribunal awardin~ gratuity related to the consolidated wage including dearness allowance "in view of the flourishing nature of the concern, the enormous profits it was making, th.~ -reserves it had built up as also in view of the fact that it was payin~ gratuity to executives on the basis of consolidated wages." Jn The Delhi Cloth & General Mi//.r Co., Ltd. v. The Workmen & Ors.(') this Court had to consider whether gratuity payable to workmen in the textile industry in the Delhi region should be related to the consolidated wage. After referring to the decisions which were brou~ht to the notice of the Court, it was observed that :

¶67

"It is not easy to extract any principle from these cases : as precedents trzy arc conflicting. . . . The ---- (I) (J9fi5) Vol. 10 Factory I.aw ·- Rr~on, 244. (2) [1967] I L.1.J. 114. ()) [1968) I S.C.R.164. _<4_ [1'!6?[ 2 S.C:.R. 307.

" GHAZIABAD EHGJN. CO. v. WORKMEN (Shah, J.) 627

¶77

¶78

Tribunal has failed to take into account the prevailing pattern in the textile industry all over the country .... It is a countrywide industry : and in that industry, except in one case to be presently noticed, gratuity has never been granted on the basis 0f consolidated v1ages."

¶79

¶80

The Court after referring to . the schemes framed in respect of the industries in Bombay and Ahmedabad and other industries concluded that "determination of gratuity is not based on any definite rules. In each case it must depend upon the prosperity of the concern, needs of the workmen and the prevailing economic conditions examined in the light of the auxiliary benefits which c the workmen may .get on determination of employment."

¶81

There is no clear evidence on the record, and no precedents have been brought to our notke, to justify a departure from the normal rule that the quantum of gratuity is related not to the consolidated wage packet but to the basic wage. A departure may be made from the normal rule, if there be some strong evidence or· precedent in the industry, or conduct of the employer or other exceptional circumstances to justify that course. In the absence of such evidence, we are of the view that gratuity should be related to the basic wage and not to the consolidated wage packet. In the present case it is found that the financial position of the Company is sound but there is no evidence that the company is "making E abnormally high profits" nor is there any evidence that in its sister concerns or in other engineering concerns in the region there is a practice of awarding gra_tuity related to consolidated wages.

¶82

It was urged on behalf of the company that even though the workmen had, in the claim made by them, demanded a scheme of F gratuity benefit at the rate of 15 days wages for each year of service in case of death or retirement on attaining the age of superannuation or on' becoming mentally or physica!ly unfit for further service, the Tribunal had awa,rded gratuity at the rate of one month's wages for' each year of service subject to a maximum of 15 months' wages. But the claim was made on the footing that the wages were to inclJ!de dearness allowance. When the claim is G not accepted, we cannot hold the workmen bound by the multiples.

¶83

We make no modification in clause (1) of the scheme. We modify the scheme in so far as it relates to the dearness allowance and direct that for the last sentence of the gratuity scheme the H following shall be substituted :

¶84

"The word 'wages' in the scheme shall mean .basic salary or emoluments excluding dearness ·allowance and

¶85

(1970] l S.C.R.

¶86

628

¶87

SUPREME COURT REPORTS

¶88

other allowances and benefits payable to the workman A- which he had last drawn."

¶89

Subject to the above modification, the appeal fails and is dismissed. There will be no order as to costs in the appeal.

¶90

Y.P. Scheme modified and appeal dismissed. B

Management, Ghaziabad Engineering Co. (P) Ltd. v. Its Workmen

Case brief

What is this about?

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Management, Ghaziabad Engineering Co. (P) Ltd. v. Its Workmen

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