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In Re: V.N. Sundar and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKerala High Court
Decided On
Judge
Reported in(1975)IILLJ477Ker
AppellantIn Re: V.N. Sundar and ors.
Cases ReferredIn Ramchander v. State of Punjab
Excerpt:
- - the act saves the right of any better terms of gratuity or retirement benefits under any award or agreement or contract with the employer. the voluntary retirement of an inefficient or old or worn out employee on the assurance that he is to get a retiral benefit leads to the avoidance of industrial disputes, promotes contentment among those who look for promotions, draws better kind of employees and improve the tone and morale of the industry. (supra). 12. it is now well-settled that gratuity is a reward for good efficient and faithful service rendered for a fairly substantial period and that it is not paid to the employee gratuitously or merely as a matter of boon but for long and meritorious service. a gratuity scheme is to the benefit of the employer as well. the restriction.....p. govindan nair, c.j.1. all these petitions challenge the validity of the kerala industrial employees' payment of gratuity act, 1970, for short the act which came into force on february 18, 1970, this act replaced ordinance 7 of 1969 which had had come into operation on december 10, 1969. the act was superseded by the coming into force of the payment of gratuity act, 1972 (hereinafter referred to as the central act) passed by parliament and which came into force on september 16, 1972. section 14 of the central act specifically provides that the central act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the central act or in any instrument or contract having effect by virtue of any enactment other than.....
Judgment:

P. Govindan Nair, C.J.

1. All these petitions challenge the validity of the Kerala Industrial Employees' Payment of Gratuity Act, 1970, for short the Act which came into force on February 18, 1970, This Act replaced Ordinance 7 of 1969 which had had come into operation on December 10, 1969. The Act was superseded by the coming into force of the Payment of Gratuity Act, 1972 (hereinafter referred to as the Central Act) passed by Parliament and which came into force on September 16, 1972. Section 14 of the Central Act specifically provides that the Central Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the Central Act or in any instrument or contract having effect by virtue of any enactment other than that Act.

2. Before we proceed to deal with the contentions raised by counsel it is necessary to state the scheme provided by the Act. Section 4 enjoins that 'gratuity shall be payable to an employee--

(a) on his superannuation;

(b) on his retirement, resignation, retrenchment, discharge or dismissal from service after completion of a minimum period of five years of continuous service.

(c) on his death or total disablement due to accident or disease.

The gratuity payable is at the rate of 15 days' wages on the last drawn wages for every completed year of service or part thereof in excess of six months subject to a maximum amount of 15 months' wages. The Act saves the right of any better terms of gratuity or retirement benefits under any award or agreement or contract with the employer. The last two provisos to Section 4 of the Act are in these terms:

Provided also that in the case of voluntary retirement or resignation from service in any particular year, not more than five per cent of the total number of employees in the factory, plantation, establishment or undertaking shall be entitled to payment of gratuity and if the number of employees who voluntarily retire or resign from service exceeds five per cent of the total number of employees, the eligibility of an employee for payment of gratuity shall be determined on the basis of the length of the service of the employee in the factory, plantation, establishment or undertaking:Provided further that an employee who voluntarily retires or resigns from service shall be eligible to claim gratuity only if one month's notice in writing of his intention so to retire or resign had been given to the employer.

3. The gratuity is payable after completion of a minimum period of five-years of continuous service. ' Continuous service ' is defined in Section 2(b) thus:

2. In this Act, unless the context otherwise requires--

(a) ...

(b) 'continuous service' means uninterrupted service and includes service which may be interrupted by sickness, accident, leave, strike, lock-out or cessation of work not due to employee's fault;

4. And 'wages' is defined in Section 2(j) in these terms:

2(j) 'wages' means all remuneration capable of being expressed in terms of money, which would, if the terms of employment expressed or implied, were fulfilled, be payable to an employee in respect of his employment, or of work done in such employment and includes--

(i) such allowances (including dear-ness allowance) as the employee is for the time being entitled to;

(ii) the value of any house accommodation or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food-grains or other articles;

(iii) any travelling concession; but does not include bonus, commission, overtime wages and night allowance.

5. The Central Act contains similar provisions. The rate under that Act is also 15 days wages. The maximum, how ever, is a total of twenty months' wages. The expression 'continuous service' is defined in almost similar terms as in the Act. The definition of the term ' wages ' in the Central Act, however, is not the same definition contained in the Act. Section 2(s) of the Central Act defining wages is in these terms:

2(s) 'wages' means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

6. Obviously the wages under the Act will include allowances and payments which will not fall within the definition of that term in the Central Act.

7. The most important differences are those introduced by the second proviso to Sub-section (2), of Section 4 of the Central Act in relation to the case of an employee in a seasonal establishment and the restrictions in the right of an employee dismissed for misconduct to payment of gratuity introduced by Clauses (a) and (b) of Sub-section (6) of Section 4 of the Central Act.

8. The obligation of the employer in a seasonal establishment to pay gratuity in regard to his employee is only at the rate of seven days' wages. And the claim to gratuity of an employee whose services had been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, or when the services have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or in the case of termination for any act which constitutes an offence involving moral turpitude, the act being committed in the course of his employment, are governed by Clauses (a) and (b) of Sub-section (6) of Section 4 of the Central Act. In the first mentioned case the gratuity payable to the employee ' shall be forfeited to the extent of the damages or loss so caused and in cases falling under Sub-sections (2) and (3) of Section 4 there shall be a total forfeiture of the gratuity.

9. The provision in the Act which was the same as that in Ordinance 7 of 1969 remained in force only between December 10, 1969 and September 16, 1972. The Central Act having superseded the Act on the latter date the liability arising under the Act to those employees whose services had been terminated for the reasons mentioned in Section 4(1)(a), (b) and (c) already extracted will be limited to termination that took place between December 10, 1969 and September 16, 1972. The Act has thus very limited application though it cannot be said to be a temporary piece of legislation.

10. The arguments in these batch of cases were advanced by counsel for the petitioner in O.P. 2831 of 1970, Sri M. Ramachandran, by counsel for the petitioners in O.P. Nos. 2134 and 2411 of 1971, Sri Venkitachalam, on behalf of the petitioners for the batch of cases 12 in number O.P. 3141 of 1970 and 11 more cases relating to cashew industries by Sri B.S. Krishnan, counsel for the petitioner in O.P. 775 of 1971 of Sri M. Ramachandra Pillai, and in the batch of cases O.P. 5080 of 1971 and 9 other cases by counsel for the petitioners therein, Sri K.A. Nair, and by the Advocate General and Sri M. P. Menon, Advocate for the respondents.

11. The contentions advanced for the petitioners may be summarised under the following heads:

(1) The Act is discriminatory and violative of Article 14 of the Constitution. (2) The Act infringes Article 19(1)(g) of the Constitution in that the terms imposed are unreasonable restrictions on the right to carry on any occupation, trade or business; the Act has provided a gratuity scheme geared to total wages with qualifying period of only five years and with a maximum gratuity payable of 15 months wages without any reference whatever to the capacity of a unit to meet the liability; the enactment has imposed the obligation to pay gratuity to seasonal establishments without making any distinction between seasonable establishments and other establishments; the instance by the Act that gratuity to employees dismissed from service for misconduct involving wilful or negligent acts resulting in loss to employer without providing for the loss being set off from the gratuity payable and the provision for gratuity payable even in cases where the employee had been guilty of riotous or disorderly conduct or any other act of violence and acts amounting to offences involving moral turpitude. In regard to the last aspect it was also argued that the provision has no relation whatever to the objects sought to be achieved by the Act.

12. The learned Advocate General contended that the Act is a piece of legislation introduced for the purpose of doing justice to the employees, that it was a legislation introduced for the object of social control and necessitated by social interest and the question whether the restrictions imposed by the Act are reasonable or not must be viewed from the point of view of the workmen and not from the point of view of the employer; that the Act is an expression of the social consciousness and the restrictions are introduced not merely for the sake of the workmen but in the interests of the general public.

13. The Advocate General also contend ed that the term of five years qualifying period is not unreasonable, that a total of 15 months' wages is not unusual, the scheme being for the purpose of providing a retirement benefit which is necessary to ensure social justice. The inability of a particular unit to pay the gratuity because of financial incapacity is immaterial and that there has been no violation of Articles 14 and 19 and that there was no material which would even prima facie show that there has been violation of either Article 14 or Article 19 of the Constitution. There is not even an averment in the cases relating to the cashew industry as con ended by counsel appearing for that industry, Sri B.S. Krishnan, that the industry was seasonal in character. He also contended that the payment of gratuity considering its object cannot be said to be unreasonable even in cases of dismissal where the employee committed serious offences involving riotous or disorderly behaviour or violence or had committed offences involving moral turpitude or wilful omission or negligence causing any damage or loss to the employer. We shall deal with the various aspects. To understand the scope and ambit of the Act to decide whether it is violative of Articles 14 and 19 it is necessary to inform oneself about the concept of gratuity. In Burhanpur Tapti Mills Ltd. v. Burhanpur Tapti Mills Mazdoor Sangh 1965-I L.L.J. 453. The Supreme Court observed:

4. We may here add that it is wrong to think of such a scheme as a mere burden and as if no benefit to the employer. It may be admitted that such appears at first sight to be so. But this concept of gratuity is not accurate. A scheme of gratuity and a scheme of pensions have much in common. Gratuity is a lump sum payment while pension is a periodic payment of a stated sum. They are both 'efficiency devices' and are considered necessary for an 'orderly and humane elimination' from industry of superannuated or disabled employees who but for such retiring benefits would continue in employment even though they function inefficiently. The voluntary retirement of an inefficient or old or worn out employee on the assurance that he is to get a retiral benefit leads to the avoidance of industrial disputes, promotes contentment among those who look for promotions, draws better kind of employees and improve the tone and morale of the industry. It is beneficial all round. It compensates the employee who as he grows old knows that some compensation for the gradual destruction of his wage earning capacity is being built up. By inducing voluntary retirement of old and worn out workmen it confers on the employer a benefit akin to the replacing of old and worn out machinery. An indirect saving also results when workmen at the top of the wage scales retire and their place is taken by more energetic workmen at lower scales. In this connection we cannot compare compensation for retrenchment and provident fund on the one hand with gratuity or pension on the other. Compensation for retrenchment is solatium for premature termination of employment. Contribution to the provident fund is designed to induce thrift so that the employee may lay by from his present earnings a portion for a rainy day or for his old age. As the workman can-not be expected to spare very much regard being had to the gap between what he earns and what he must spend, the employer is expected to make a contribution. Gratuity is retrial benefit of a very different kind, because it is earned by giving service. The existence of any one of the three schemes, therefore, does not obviously overlap any of the other two. They can all exist together, provided the financial position justifies such a course.

Similar observations have been made in other decisions of the Supreme Court in Express Newspaper Ltd. v. Union India : (1961)ILLJ339SC , Garment Cleaning Works Bombay v. Workmen 1961-I L.L.J. 513; Hydro (Engineers) Pvt. Ltd. v. Workmen : (1969)ILLJ713SC , and Delhi Cloth and General Mills Co. Ltd. etc. v. Workmen and Ors. etc. : (1969)IILLJ755SC . We shall extract passages from the decisions in Hydro (Engineers) Pvt. Ltd. v. Workmen (supra) and Delhi Cloth and General Mills Co. Ltd v. Workmen and Ors. etc. (supra).

12. It is now well-settled that gratuity is a reward for good efficient and faithful service rendered for a fairly substantial period and that it is not paid to the employee gratuitously or merely as a matter of boon but for long and meritorious service.

13. Gratuity paid to workmen is intended to help them after retirement on superannuation death, retirement, physical incapacity, disability or otherwise. The object of providing a gratuity scheme is to provide a retiring benefit to workmen who have rendered long and unblemished service to the employer and thereby contributed to the prosperity of the employer. It is one of the 'efficiency, devices' and is considered necessary for an ' orderly and human elimination' from industry of superannuated or disabled employees who, but for such retiring benefits, would continue in employment even though they function inefficiently. It is not paid to an employee gratuitously or merely as a matter of boon; it is paid to him for long and meritorious service rendered by him to the employer.

14. It is thus clear that by long and meritorious service the workmen earn the right to gratuity. In considering the impugned provisions this aspect has to be borne in mind. Though the payment of gratuity cannot be treated as similar to the obligation to pay a minimum wage it is certainly an obligation which is different from an obligation to pay a fair wage or a living wage. A gratuity scheme is to the benefit of the employer as well. It is necessary for industrial peace. It is a retirement benefit essential for social justice. Ordinarily, therefore, a scheme of gratuity can only be understood to be in furtherance of social justice and in the interests of the general public unless the scheme is established or proved to be destructive of particular industries as a whole. It is not enough to establish that such a scheme as injurious or even destructive of particular units of an industry to hold that the scheme is violative of the guarantee under the Constitution. It will thus be difficult to declare a statute such as the Act as violative of the guarantee under Article 19(1)(g) of the Constitution. We see force in the contention advanced by the learned Advocate General that the matter must be looked at from the point of view of the workmen, from the point of view of social justice and social interest and from the point of view of the general public. It is certainly in the interests of the general public that there should be a contented labour force and a workman must have the assurance that when he resigns or retires voluntarily or when he is superannuated he can look forward to some reasonable payment for the number of years of work that he had put in. This is a piece of legislation to achieve social justice. Dealing with the validity of Section 25FFF of the Industrial Disputes Act, 1947 this aspect of social justice was again emphasised by the Supreme Court in Hathising ., Ahmedabad and Anr. v. Union of India and Anr. 1960-II L.L.J. 1, with reference to Section 25FFF of the Industrial Disputes Act, 1947:

The object of retrenchment compensation is, therefore, to give partial protection to the retrenched employee to enable him to tide over the period of unemployment. Loss of service due to closure stands on the same footing as loss of service due to retrenchment, for in both cases, the employee is thrown out of employment suddenly and for no fault of his and the hardships which he has to face are, whether unemployment is the result of retrenchment or closure of business, the same. If the true basis of the impugned provision is the achievement of social justice, it is immaterial to consider the motives of the employer or to decide whether the closure is bona fide or otherwise.

15. Speaking with reference to Punjab Trade Employees Act (10 of 1940) the Supreme Court observed in Manohar Lal v. State of Punjab 1961-II L.L.J. 67.

The legislation is in effect the exercise of social control over the manner in which business should be carried or regulated in the interests of the health and welfare not merely of those employed in it but of all those engaged in it. The restriction imposed by the terms of Section 7(1) is with a view to secure this purpose and would, therefore, be clearly saved by Article 19(6) of the Constitution....

Again in Jyoti Pershad v. Union Territory of Delhi and Ors. : [1962]2SCR125 , the Supreme Court dealing with the question of the restriction imposed on eviction under the Slum Areas (improvement and Clearance) Act, (1956) observed as follows at para 21:

It has already been pointed out that the restrictions imposed on the right of the landlord to evict have a reasonable and rational connection with the object sought to be achieved by the Act, viz., the ultimate elimination of slums with protection to the slum-dwellers from being meanwhile thrown out on the streets. The question might still remain whether this restriction on the rights of the landlords is excessive in the sense that it invades and trenches on their rights in a manner or to an extent not really or strictly necessary to afford protection to the reasonable needs of the slum-dwellers which it is the aim and object of the legislation to sub serve. The criteria for determining the degree of restriction on the right to hold property which would be considered reasonable, are by no means fixed or static, but must obviously vary from age to age and be related to the adjustments necessary to solve the problems which communities face from time to time. The tests, therefore, evolved by communities living in sheltered or placid times, or laid down in decisions applicable to them can hardly serve as a guide for the solution of the problems of post-partition India with its stresses and strains arising out of movements of populations which have had few parallels in history. If law failed to take account of unusual situations of pressing urgency arising in the country, and of the social urges generated by the patterns of thought-evolution and of social consciousness which we witness in the second half of this century, it would have to be written down as having failed in the very purpose of its existence. Where the legislature vary human problem the tests of 'reasonableness' have to be viewed in the context of the issues which faced the legislature. In the construction of such laws and particularly in judging of their validity the Courts have necessarily to approach it from the point of view of furthering the social interest which it is the purpose of the legislation to promote, for the Courts are not, in these matters, functioning as it were in vacuo, but as parts of a society which is trying, by enacted law, to solve its problems and achieve social concord and peaceful adjustment and thus furthering the moral and material progress of the community as a whole.

The burden to prove discrimination in cases where the allegation is that there has been violation of Article 14 of the Constitution may be on the petitioner whereas the burden to show that a restriction is reasonable for the purpose of Article 19(6) may have to be discharged by the respondent. This matter has been dealt with in paragraph 35 of the decision in Khverbari Tea Co. Ltd. and Anr. v. State of Assam and Ors. : [1964]5SCR975 , thus:

It is true that on several occasions, this Court has generally observed that a presumption of consitutionality arises where a statute is impeached as being unconstitutional, but as has been held in the case of Saghir Ahmad : [1955]1SCR707 , in regard to the fundamental right under Article 19(1)(g) as soon as the invasion of the right is proved, it is for the State to prove its case that the impugned legislation falls within Clause (6) of Article 19. The position may be different when we are dealing with Article 14, because under that article the initial presumption of constitutionality may have a larger sway inasmuch as it may place the burden on the petitioner to show that the impugned law denied equally before the law or equal protection of the laws. We may in this connection refer to the observations made by this Court in the case of Hamdard Dawakhana v. Union of India : 1960CriLJ671 .

16. There are no sufficient averments, much less prima facie proof that the restriction imposed in the form of an obligation to pay gratuity as provided by the Act have resulted in an infringement of the guarantee under Article 19(1)(g) of the Constitution, There are averments in some of the cases as in O.P. No. 5080 of 1971 that there has been continuous losses and that even the paid up capital is being used up for the working of the company and that the company cannot afford a gratuity scheme. But as we said earlier we cannot, in a statute of this nature embodying social legislation with the object of achieving social justice and in the interests of the general public come to the conclusion that there has been violation of the article of a few persons are affected in such a manner as to infringe the guarantee under Article 19(1)(g) of the Constitution. If the legislation is otherwise supportable in the interests of the general public individual hardships cannot be taken note of. The Chief Justice of India referred to these aspects in the recent decision in M/s. Gammon India, Ltd. etc., etc. v. Union of India and Ors. 1974-I L.L.J. 489, in paragraphs 21 and 24 of the judgment and there is the direct authority of the Supreme Court that the reasonableness must be determined not with reference to individual cases in Hathising ., Ahmedabad and Anr. v. Union of India and Anr. (supra):

That in certain events, a statute may impose restrictions which will be irksome and may be so regarded by certain citizens as unreasonable, is not decisive of the question whether it imposes a reasonable restriction. As observed in Mohd. Hanif Quareshi v. State of Bihar A.I.R 1958 S.C. 831, by Das, C.J.:

In determining that question (the reasonableness of the restriction) the court we conceive, cannot proceed on a general notion of what is reasonable in the abstract or even on a consideration of what is reasonable from the point of view of the person or persons on whom the restriction are imposed. The right conferred by Sub-clause (g) is expressed in general language and if there had been no qualifying provision like Clause (6), the right so conferred would have been an absolute one. To the person who has this right, any restriction will be irksome and may well be regarded by him as unreasonable. But the question cannot be decided on that basis. What the Court has to do is to consider whether the restrictions imposed are reasonable in the interest of the general public.

Again, as observed in Bijay Cotton Mills Ltd. v. State of Ajmer 1955-I L.L.J. 129.

Individual employees might find it difficult to carry on the business on the basis of the minimum wages fixed under the Act but this must be due entirely to the economic conditions of these particular employers. That cannot be a reason for the striking down the law itself as unreasonable,

By the explanation, certain persons may, because of persistent losses or accumulation of stock find themselves unable to carry on the business, and may still not be entitled to the benefit of the proviso, but that will not be a ground for holding that the explanation is unreasonable. The tribunal called upon to decide whether the case of an employer is covered by the proviso will certainly be entitled to look into the causes which led to the financial losses or the accumulation of shocks and ascertain whether the closure was merely on account of financial losses or accumulation of stocks or was on account, of circumstances beyond the control of the employer, and in assessing whether the circumstances were beyond the control of the employer, the fact that the employer has suffered financial losses or there is accumulation of stocks is not required by the legislature to be excluded from consideration.

17. Now we shall consider the contentions that the Act has imposed restrictions which are unreasonable because the provision for gratuity is linked with the total emoluments and that the qualifying period is only five years. We will have to remember that the observations made by the Supreme Court with reference to gratuity schemes introduced by awards which were appealed against cannot afford any guidelines as laying down specific principles on the basis of which gratuity schemes should invariably be drawn up. It is enough to refer to the decision of the Supreme Court in The Delhi Cloth and General Mills Co. Ltd., etc. v. The Workmen and Ors. etc. : (1969)IILLJ755SC , to make the position clear that 'in adjudication of industrial disputes settled legal principles have little play; the awards made by Industrial Tribunals are often the result of ad hoc determination of disputed questions, and each determination forms a precedent for determination of other disputes. An attempt to search for principle from the law built up on those precents is a futile exercise,' (para 23). Justice Shah repeated this in two more places in the judgment:

We may repeat that in matters relating to the grant of gratuity and even generally in the settlement of disputes arising out of industrial relations, there are no fixed principles, on the application of which the problems arising before the Tribunal or the Courts may be determined and often precedents of cases determined ad hoc are utilised to build up claims or to resist them. It would in the circumstances be futile to attempt to reduce the grounds of the decisions given by the Industrial Tribunals, the Labour Appellate Tribunals and the High Courts to the dimensions of any recognized principle. (para 27).

After saying so the learned Judge referred to some of the precedents relating to the grant of gratuity and observed:

It is not easy to extract any principle from these cases, as precedents they are conflicting.

18. After having said so the learned Judge proceeded to say that the award of the Tribunal was interfered with only because. 'The Tribunal has failed to take into account the prevailing pattern in the textile industry all over the country.'

19. Much assistance cannot, therefore, be derived from he pronouncements of the Labour Appellate Tribunal and the Supreme Court. As regards the qualifying period, the Supreme Court itself accepted the five years period in Express Newspaper (Private) Ltd. and Anr. v. Union of India and Ors. (supra). It was only the provision that gratuity would be payable on voluntary retirement or resignation after three years service that was set aside by the Supreme Court. When the Central Act has been introduced as applicable to all the industries coming within its ambit and applicable to the whole country laying down a social policy of the Legislature there is little scope for contending that the Act is violative of Article 19(1)(g) of the Constitution, because the qualifying period is only five years or that the gratuity is linked with the total emoluments. In fact apart from the decision in Express Newspaper (Private) Ltd. and Anr. v. Union of India and Ors. (supra) which dealt with a scheme that provided for a qualifying period of only three years, those in Garment Cleaning Works, Bombay v. Workmen 1961-I L.L.J. 513; British Paints (India) Ltd v. Its Workmen 1966-I L.L.J. 407 and May and Baker (India) Ltd. v. Their Workmen A.I.R. 1967 S.C. 678 upheld the awards where the qualifying period has been only five years. In the decision in Express Newspaper (Privte) Ltd. and Anr. v. Union of India and Ors. (supra) the gratuity was related to basic wages and allowances. That the legislation was passed in the wake of this pronouncements also establishes that nothing out of the ordinary has been introduced by the Act.

20. How Article 14 has been violated has not been made clear. It was pointed out that the scheme was applicable to prosperous as well as to non-prosperous concerns in an equal manner and that it was applicable to all those who were earning upto Rs. 750 without making distinction between the very low-paid and those with comparatively higher salary. So it was contended that there was no classification at all; the prosperous and the non-prosperous; the low paid and comparatively high paid have all been treated equally. We have already dealt with the question as to whether individual cases of hardship can be taken note of in considering whether a legislation of the kind we are dealing with has violated Article 19 and have said that such an argument is not sustainable. As regards the point that the Act is applicable to all receiving upto Rs. 750 per month, we think that the classification with reference to the object of the Act is a reasonable classification. We, therefore, negative the contention that the section has violated Article 14.

21. Sri B.S. Krishnan submitted that the cashew industry is a seasonal industry and he invited our attention to the second proviso to Section 4(2) and Explanations I and II to Section 2(c) of the Central Act which are in these terms:

Provided further that in the case of an employee employed in a seasonal establishment, the employer shall pay the gratuity at the rate of seven days' wages for each season.

Explanation I.--In the case of an employee who is not in uninterrupted service for one year. he shall be deemed to be in continuous service if he has been actually employed by an employer during the twelve months immediately preceding the year for not less than--

(i) 190 days, if employed below the ground in a mine, or

(ii) 240 days, in any other case, except when he is employed in a seasonal establishment.

Explanation II.--An employee of a seasonal establishment shall be to be in continuous service if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during the year;(d) ' controlling authority ' means an authority appointed by the appropriate Government under Section 3;

We find there are no averments whatever in any of the petitions in which counsel Sri B. S. Krishnan was appearing that the cashew industry is a seasonal industry. No other counsel has raised any similar contention. We do not think that we are called upon to decide whether the Act is violative of Article 19(1)(g) of the Constitution because it has been made applicable to seasonal industries or the question whether it is violative of Article 14 because it applied to seasonal as well as non-seasonal industries.

22. Only one point remains now to be considered and that has reference to the provision for payment of gratuity even in cases of dismissal irrespective of the grounds on which employees were dismissed. Sri K. A. Nair emphatically contended that, such a provision has no relation whatever to the objects sought to be achieved by the Act; that there is no social justice involved in a provision like that. That such a provision was against the interest of the general public as encouraging disorderly behaviour and would encourage indiscipline all lawlessness which will be detrimental to the industries and the general public and the provision is, therefore, clearly violative of Article 19(1)(g). He relied on the passages from the decisions in Remington Rand off India Ltd. v. Their Workmen (1971) 39 F.J.R. 437 at p. 448, para 3, K.K. Bhaskaran and Ors. v. State of Kerala and Ors. 1973-I L.L.J. 204; Tournamulla Estate v. Their Workmen 1973-II L.L.J. 241; and Delhi Cloth and General Mills Co. Ltd., etc. v. The Workmen and Ors. etc. (supra). He also invited our attention to the provision in Sub-section (6) of Section 4 of the Control Act which is in these terms:

4(6) Notwithstanding anything contained in Sub-section (1):

(a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer shall be forfeited to the extent of the damage or loss so caused.

(b) the gratuity payable to an employee shall be wholly forfeited--

(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or

(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by Kim in the course of his employment.

Counsel contended that the provision in the Act cannot stand as it applies to employees dismissed for misconduct involving loss to the employer as well as to employees dismissed for acts of violence and disorderly behaviour and for misconduct amounting to offences involving moral turpitude. It was urged that the section cannot stand as it is not possible to separate that part of the section which is bad from that which is good. There is force in the contention that the provision for payment of gratuity to a workman who has been guilty of conduct resulting in loss to the employer, and to those who have been guilty of disorderly behaviour or violence or who had committed offences involving moral turpitude cannot be a provision in the interest of social justice or in the interest of the general public and such a provision is certainly an infringement of the right guaranteed by Article 19(1)(g) of the Constitution. We do not, however, think that ' it is necessary to strike down the entire section as contended by Sri K.A. Nair. Here we must apply the principle of so interpreting or understanding the statute as to make it conform to the Constitution. In such cases it would be necessary to give a limited meaning to a word or an expression and read down the provision. So we have to read 'dismissal' in Section 4(1)(b) of the Act as dismissal for misconduct not involving riotous or disorderly behaviour or violence or offence involving moral turpitude or misconduct causing damages or losses to the employer. We may refer to some of the decisions where the principle has been applied.

23. The meaning to be attributed to the expression 'prize competitions' in Section 2(d) of the Prize Competitions Act (42 of 1955) was considered by the Supreme Court in R.M.D. Chamarbaugwaila and Anr. v. Union of India and Anr. : [1957]1SCR930 . The question arose in circumstances stated thus in paragraph 5 of the judgment:

5. As regards competitions which involve substantial skill, however, different considerations arise. They are business activities, the protection of which is guaranteed by Article 19(1)(g), and the question would have to be determined with reference to those competitions whether Section 4 and 5 and Rules 11 and 12 are reasonable restrictions enacted in public interest. But Mr. Seervai has fairly conceded before us that on one materials on record in these proceedings, he could not maintain that the restrictions contained in those provisions are saved by Article 19(6) as being reasonable aim in the public interest. The ground being thus cleared, the only questions that survive for our decision are, (1) whether, on the definition of prize competition' in Section 2(d) the Act applies to competitions which involve substantial skill and are not in the nature of gambling; and (2) if it does, whether the provisions of Sections 4 and 5 and Rules 11 and 12 which are, ex concessi void, as regards such competitions, can on the principle of severability be enforced against competitions which are in the nature of gambling.

24. There is an elaborate discussion in the judgment of the principles of severability. The question whether a statute can be saved in part if that part did not offend the Constitution and the principles to be applied in deciding whether a statute can be saved in that manner have also been discussed at length. Further whether a limited meaning should be given to words or expressions in a statute was also dealt with in this connection reference was made to the decision of the Federal Court in 1941 F.C.R. 12 wherein the word 'property' in Act 18 of 1937 was construed as property other than agricultural land. 'The validity of that statute was upheld by the Federal Court after construing the word 'property' to mean property other than agricultural land. And it was held in R.M.D. Chamar baugwaila and Anr. v. Union of India and Anr. : [1957]1SCR930 , that even if the definition in Section 2(d) of the Prize Competition Act considered therein is wide enough to comprehend all kinds of competitions it will apply only to such competitions in which success does no, depend to any substantial extent on skill.

25. In Kedar Nath Singh v. State of Bihar : AIR1962SC955 , the interpretation to be placed on Section 12A and 505 of the Indian Penal Code arose for consideration. No withstanding the wide terms of the sections and the view taken by previous judicial decisions it was held that Section 124A will have only a limited application 'to acts involving intention or tendency to create disorder or disturbance of law and order or incitement to violence.' And in Shri Govindlalji v. State of Rajasthan : [1964]1SCR561 , the Supreme Court interpreted 'affairs of the temple' in Section 16 of Act 13 of 1959 (Rajasthan Act) to relate only to 'secular affairs' as otherwise the section would violate Articles 25 and 26 of the Constitution. A similar view was taken relating to land acquisition for public purposes in R.L. Arora v. State of U.P. and Ors. : [1964]6SCR784 , and it was held that acquisition for a company could be made only for a public purpose. Again in The Malankara Rubber and Produce Co. Ltd., etc. v. State of Kerala and Ors. etc. : [1973]1SCR399 , the Supreme Court ruled that notwithstanding the amendment made to a section in the Kerala Land Reforms Act apparently to get over the view expressed by this Court on a former occasion that provision can be made only for 'agrarian reform' the principle of what we may be termed reading down the section must be applied. This is what the Supreme Court said:

The fact however that the Legislature has once again used the same general language in spite of the aforesaid interpretation given by the High Court need not lend us to strike down wholly the subsection. In accordance with the well recognised canon of construction adopted in a number of cases decided by this Court we read the sub-section to mean only reservation of the land for such public purposes as would bring about agrarian reform inasmuch as any acquisition under Article 31A for any public purpose other than falling under the expression ' agrarian reform ' cannot be considered as having the protection of that Article.

26. In Assam Rawther v. Ammu Umma (1971) K.L.T. 684, Krishna Iyer, J. observed:

Judicial salvage of a statutory provision by limiting the semantic sweep of the expressions used and tailoring it to the constitutional requirements if that is possible without a re-writing of the provision is a sound practice honoured and adopted by eminent Judges.

27. We have already dealt with the nature of the legislation with which we are concerned in this batch of cases. We have said that the statute is an expression of the social consciousness of the community, that it is in the interests not only of the workmen but of the employers and in the larger interest of the general public. In a statute of that nature it is in conceivable that the Legislature have in tended that a workman dismissed for dis orderly or riotous behaviour or for commission of offence involving moral turpitude or acts or omissions which resulted in loss to the company should also be paid gratuity disregarding the nature and gravity of the misconduct committed by him. Such a provision will not serve the purpose or the object of the Act. In fact it will be detrimental to the society. It would place a premium on indiscipline which will disrupt the growth or even the continuance of industries and thus adversely affect the general public. Such a provision would be an unreasonable restriction on the right to carry on any business, trade or occupation and would be violative of Article 19(1)(g) of the Constitution. We have, therefore, no hesitation in coming to the conclusion that the word dismissal in Section 4(1)(b) of the Act must be understood as dismissal for misconduct not involving riotous or disorderly behaviour or violence or offence involving moral turpitude or misconduct causing damage or loss to the employer. We hold accordingly.

28. We dismiss these petitions. There will be no order as to costs.

V.P. Gopalan Nambiyar, J.

1. I agree that the writ petitions have to be dismissed, I shall indicate my reasons briefly. The Act was challenged on the grounds: (1) that it has linked up gratuity with total or consolidated wages rather than with the basic wage; (2) fixed qualifying service for earning gratuity at a low period of five years, against the accepted view, crystallised in judicial decisions that the length of qualifying service should be at least ten years; (3) that the Act has drawn no distinction between seasonal and non-seasonal industries, the rich and the poor employers, the benevolent employers who had provided retirement benefits and other social welfare schemes to the employees and those who had not, and has made gratuity payable at a uniform rate in cases of all employers regardless of their difference in status, capacity or the conditions of employment; and (4) that the Act has made gratuity payable even in cases of gross misconduct involving moral turpitude and disorderly and riotous behaviour on the part of the workman, a provision subversive of good order and discipline in industry, and abhorrent alike to the well accepted judicial connotation of gratuity.

2. While there is much to be said in favour of the view that the minimum qualifying service for earning gratuity has been fixed at a rather small period of five years this appears to be an uncertain and an inadequate ground to strike down the statue as unconstitutional. In the Express Newspapers case (supra) a scheme making gratuity payable at the end of three years was upheld except in one particular aspect (See paragraph 202). In Ramchander v. State of Punjab : (1961)IILLJ102SC . it was observed that the concept of what is necessary to secure social welfare of labour, or indeed of the elements which determine its contents, pre neither of them fixed nor static, but dynamic, being merely the manifestation or index of the social conscience as it grows and develops from time to time. In similar vein spoke Shah J. in the Delhi Cloth and General Mills Co.'s case (supra) when the learned Judge stated that any attempt to search for a principle from the law based upon precedents would be a futile exercise. In the light of these, I cannot accept the argument of the counsel for the petitioners that gratuity linked up to the total wages and not to the basic wage is opposed to the very concept of the term as known to law, and that for that reason, the statute must be struck down. Nor can I accede to the argument that the provision making gratuity payable for five years of qualifying service, is offensive and bad in law.

3. The argument of discrimination on the ground that the Act draws no distinction between the seasonal and non- seasonal industries, or between the rich and the poor employer, or between the benevolent and the harsh one, does not fall for consideration, in view of lack of proper pleading and proof in regard to these aspects.

4. But, I was much troubled by the provision in Section 4 of the Act, which makes gratuity payable to an employee, even on 'dismissal' from service (vide Section 4(1)(b) of the Act. All things considered, I think this provision in the statute has to be read down. Under Section 4(1)(b) gratuity shall be payable to an employer, inter alia on his dismissal from service, after completion of a minimum period of five years of continuous service. It did seem shocking that gratuity should be eligible even where a workman had been dismissed for a glaring misconduct or offences involving violence or riotous and disorderly behaviour, or moral turpitude, such as murder, assault, or any outrage on the employer or the members of his family, and the like. Does Section 4(1)(b), on a proper rendering of it, make gratuity payable on dismissal from service, even for such causes If it does, it seems to ride roughshod over the principle settled by the Delhi Cloth and General Mill's case (supra) which after examining and reconciling the prior decisions, settled that long and unblemished service is required for the payment of gratuity. It graded the classes of cases where gratuity could be wholly withheld or merely docked, depending upon the severity of the misconduct of the employee. Technical misconduct, not affecting payment of gratuity, misconduct involving riotous and disorderly behaviour and invloving moral turpitude, justifying forfeiture of gratuity; and misconduct liable to be dealt with only as giving rise to a financial claim against the employee--these were the classes of misconduct elucidated by Shah, J., who spoke for the Court. In Remington R and's case (supra) forfeiture of gratuity for gross misconduct involving violence was held justified. After this current of judicial decisions, to state that gratuity is payable even on dismissal from service, without any qualification, seems to put the clock back. But on a closer reading and analysis of the scheme and the provisions of the Act, a different interpretation appears plausible. Under Section 4(1)(b), itself, gratuity is payable only after completion of five years of 'continuous service.' 'Continuous service' is defined by Section 2(b) as uninterrupted service, including service which may be interrupted by...cessation of work not due to employee's fault. This, I think, affords a clue that the dismissal contemplated by Section 4(1)(b) of the Act, should be a dismissal other than due to the employee's fault. The concept of unblemished service of the employee which has been stressed by the judicial decisions seems to have entered into the provisions of Clause (a) of Section (2) which defines 'completed year of service' and of Clause (b) which defines 'continuous service'. Both these stress that the cessation of work should not be due to the employee's fault. I would read down the provisions of Section 4(b) so as to make the dismissal of the employee contemplated by it, as one, of dismissal not due to the employee's fault. So read down, I would uphold the provisions of the Act and dismiss the writ petitions.


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