1. These two appeals have been heard together as the identical question involved in them is whether an employee of the Tata Iron and Steel Co. Ltd. for the sake of brevity referred to as Tisco Ltd or the Company, is entitled, as a matter of right to get gratuity on his retirement from service. I shall refer separately to the facts of the two cases, which are also similar, and then proceed to discuss and decide the common question which falls for determination in these appeals.
F. A. 444/63.
2. Tisco Ltd. is the appellant in this appeal. The suit of the employee for gratuity and interest has been decreed by the court below against the appellant which was defendant No. 1 Tata Industries Private Ltd. The Managing Agents of Tisco Ltd. was impleaded as defendant No. 2 in the action. T. V. S. Ratnam, defendant No. 3 was the Head of the Department in which the plaintiff respondent was working at the time of his retirement. The suit has been dismissed against defendants 2 and 3.
3. The plaintiff's case is that he was a permanent uncovenanted employee under Tisco Ltd. and during the relevant period in July and August 1959 was acting as a General Foreman, Furnaces, in New S. M. S. No. 3 Department although at that time he was holding a substantive post of a Foreman, Furnaces in the said Department. He served as an uncovenanted employee of Tisco Ltd. Jam-shedpur, from 31-12-29 to 31-8-59 in various capacities, and at the time of retirement from service of the Company, he was drawing a basic monthly salary of Rs.
936. Under the service conditions of the defendant Company, besides the salary, the plaintiff was entitled to several kinds of bonus and other perquisites, benefit of leave, benefit of provident fund and the retiring gratuity. The plaintiff during the period of about 30 years of service rendered valuable and faithful service to the company to its utmost satisfaction and without any blemish or fault. The plaintiff had his due promotions, etc.
In recognition of the services, the Company also sent him abroad at its expense for specialised training for a period of a month. The plaintiff's case further is that in accordance with the Standing orders in force in the Company he submitted his letter of resignation dated 27-7-59 to defendant No. 5. the Superintendent of the Department giving one month's notice therein, as required under the Standing orders. The resignation was unconditionally accepted by defendant No. 3 on behalf of defendant No. 1 by his letter dated 27-8-59, and the plaintiff was released from service with effect from 1-9-59. The Company had its provident fund and gratuity as retiring benefits for its uncovenanted employees and they were operated by separate rules framed for the purpose as amended from time to time. The gratuity scheme was brought about with effect from 1-4-37.
Relevant rules were framed and brought into force in pursuance of a resolution of the Board of Directors of the Company passed on 6-1-37. The scheme was given retrospective effect in computing the period of continuous service. The said rules and benefits were made applicable to all employees who were in service at that time, and the benefits were given to all who retired thereafter. On retirement from service, the company has paid to the plaintiff his provident fund dues, both his own contribution and the Company's contribution together with accretions thereto. But no application for the retiring gratuity was drawn up by defendant No. 3 and no gratuity was sanctioned or paid to the plaintiff by the Company or its Managing Agents. Nonpayment of the gratuity without any rhyme or reason or without any blemish or fault on the part of plaintiff is arbitrary, illegal, unjust and vindictive and the defendants are jointly and severally liable to the plaintiff for payment of the same.
It is also pleaded in the plaint that the plaintiff submitted his letter of resignation of 27-7-59 personally to defendant" No. 3. In that letter, he had made a request to the effect that as he had earned leave to his credit, he may be granted leave from 28-7-59 till 31-8-59. Defendant No. 3 verbally told the plaintiff that the leave would be granted and resignation would be accepted in due course. Accordingly, the plaintiff stayed away from the works on 28-7-59 when to his great surprise he received a confidential letter from the superintendent (defendant no, 3) in the afternoon of that day requesting him to submit his explanation on or before 30-7-59 for staying away from works from the morning of 28-7-59 without obtaining proper sanction. A reply was sent to the letter on 29-7-59. Enquiry was held in the office of the Chief Personnel Manager on 31-7-59. Thereafter the Superintendent (defendant No. 3) by his letter dated 3-8-59 warned the plaintiff for his shortcoming for keeping away from the works on 28-7-59 and requested him to join duty immediately as the leave asked for by him on 27-7-59 had not been granted to him due to shortage of officials. The plaintiff complied with the directions of the Superintendent and joined his duties. By letter dated 7-8-59, however, defendant No. 3 informed the plaintiff that he could avail of his leave from 8-8-59 to 31-8-59. Subsequently, by letter dated 27-8-59 defendant No. 3 informed the plaintiff that his resignation had been accepted and he had been released with effect from 1-9-59. The plaintiff pressed for his claim of gratuity which came to the tune of Rs. 14,040 and ultimately, while pressing his claim through lawyer's notice, also intimated to the Company that it will be liable to pay interest on the said amount
4. The pleas taken by the defendants in their written statement, inter alia, are that the plaintiff was not entitled as a matter of right, to the benefit of leave according to the rules or to retiring gratuity under the service conditions. It was not correct to say that the service of the plaintiff was without any blemish or fault before he resigned as he was found guilty of misconduct under the works standing orders of the defendant Company which apply to all employees of defendant No. 1. The letter of resignation dated 27-7-59 giving one month's notice was handed over by the plaintiff to defendant No. 3 at about 7 P. M, of a sudden and it was accepted in due course but not unconditionally.
With respect to gratuity as retiring benefit, there is a set of rules but the rules do not provide that gratuity is payable as of right to all employees after completion of 15 years' service with the Company. The gratuity is payable at the absolute discretion of the Company irrespective of the fact whether the plaintiff has or has not performed all or any of the conditions stated in the rules and. no employee, howsoever otherwise eligible, is entitled as of right to any payment under the Gratuity Rules. The omission on the part of defendant No. 3 in not drawing up the gratuity application or non-payment of gratuity was not wrongful, arbitrary, vexatious or malicious. The further plea is that on 27-7-59 at 7 p. m. when the plaintiff submitted his letter of resignation, he was acting in the place of the General Foreman who was on leave and he was also looking after the work of the Assistant Superintendent of the Department who had suddenly been taken ill. In the absence of his two superiors, whose work he was looking after, it was not possible to grant leave to the plaintiff and the leave asked for was accordingly refused to him. In spite of this refusal, the plaintiff stayed away from the work from the 28th July. 1959.
Accordingly a charge sheet was issued to him asking him to show cause why disciplinary action should not be taken against Mm for staying away from work in dereliction of his duty and in defiance of the superior's orders expressly asking him not to proceed on leave. Explanation was submitted and enquiry was held in the Chief Personnel Manager's office on 31-7-59, as a result of which the plaintiff was found guilty of gross misconduct in that he wilfully disobeyed the superior's order. The Management, however, did not take any strong disciplinary action against the plaintiff. He resumed his duty on the 4th August, 1959 and was subsequently granted leave from 8th August on which day the Assistant Superintendent of the Department resumed duty.
5. Sri Arabinda Mukherji, the learned Subordinate Judge, who tried and decreed the suit against defendant No. 1 did not think it necessary to go into the question and. in my opinion, rightly as to whether the plaintiff's conduct in absenting from duty from 28-7-59 was justified or not The admitted fact is that he was not dismissed from service for the alleged misconduct but was allowed to retire unconditionally on his resignation. He, however, held, relying upon the decisions in Indian Hume Pipe Co. Ltd. v. The Workmen, AIR 1960 SC 251, The Garment Cleaning Works v. The Workmen, AIR 1962 SC 673 and Tirjugi Sitaram v. Badlu Prasad Bheruprashad, AIR 1962 Madh Pra 361 and on interpretation of the relevant rules framed by the Company, that the plaintiff is entitled to claim the gratuity money as a matter of right.
6. The letter of resignation dated 27-7-59 is not an exhibit in the case but it is annexure A to the plaint, and there is no doubt that by the same letter the plaintiff asked for leave from the 28th July till 31st August, 1959. The letter dated 28-7-59, Ext. 4(ka), was sent to the plaintiff as is the evidence of D. W. 1 T. V. S. Ratnam on the advice of some superior officer and probably in the afternoon. Ext 4(kha) dated 29-7-59 is the explanation submitted by the plaintiff. Since the facts are not in dispute, or in any event some of the disputed ones are not necessary to be decided, it is needless to refer to other exhibits. I would, however, like to refer to the evidence of Sudhir Chandra Sarkar, the plaintiff, who examined himself as P. W. 2. His statement in examination-in-chief is that as a condition of his service he was to take among other facilities and emoluments, the retiring gratuity money as one of the benefits of the service condition and that he was entitled to the gratuity money according to the rules and conditions of service he was in. In cross-examination he stated that there is a set of rules regarding granting of gratuity money to the employees and his claim is based on those rules. He further said that the gratuity rules will show that the payment of gratuity is a condition of the service. There does not seem to be any denial of this fact. Reading the pleadings and the evidence of the parties in this case, I have no difficulty in arriving at the conclusion that the service conditions of the plaintiff were governed by the Works Standing orders and that it was an implied condition of service that he could get gratuity in accordance with the Retiring Gratuity Rules, 1937 framed by the Company. The Works Standing orders are Ext. C in the case and the Retiring Gratuity Rules, as they stood at the relevant time are Ext. D.
F. A. 554 of 1964.
7. The relevant facts to be stated from the plaintiff's case in this appeal are these. The plaintiff worked in various capacities in the different departments of Tisco Ltd. which is the sole defendant in this suit, from February. 1940 to August 1960 as an uncovenanted employee. At the time of his retirement, he was working as Assistant Chief Project Engineer (Electrical) and was drawing a salary of Rs. 1,000 per month. His service was regulated by the Service Standing Orders, and he had the benefits under the Provident Fund and the Retiring Gratuity Rules, 1937 besides all kinds of bonus, leave, etc. The plaintiff rendered most valuable and faithful services to the company to its utmost satisfaction during the course of his 20 years' service. On the 16th June, 1960 the plaintiff submitted his letter of resignation from service of the defendant Company with effect from 1st August, 1960. It was accepted unconditionally on or about the 4th of August, 1960 with effect from the 15th of August 1960. The plaintiff claims in clear terms that under the Retiring Gratuity Rules of 1937 he is entitled to be paid retiring gratuity equal to half month's salary or wages for every completed year of continuous service. The same was not paid in spite of demands. Finally it was refused. The plaintiff sent solicitor's notice to the defendant Company demanding payment of his gratuity dues and also claimed interest thereon. The total amount of claim in this suit is Rs. 11,550, gratuity money Rs. 10,000 and interest Rs. 1,550.
8. In the written statement, the defendant Company has not denied that the service of the plaintiff was governed by the Standing orders but asserts that the plaintiff is not entitled to any gratuity under those orders; the rules for gratuity are altogether different. The Retiring Gratuity Rules of the Company "constitute a part of the terms and conditions of service between the company and the employee and the employee cannot legally claim anything against such terms and conditions." In this case, there is no dispute or complication of any fact at all. The only witness examined in the case is the plaintiff himself (P. W. 1). His definite evidence is that he is entitled to get retiring gratuity under the rules. From the pleadings and the evidence in this case also, there is no difficulty in arriving at the conclusion that the service conditions of the plaintiff were governed by the Works Standing orders and he could get gratuity on his retirement under the Retiring Gratuity Rules, 1937. The Works Standing orders do not seem to have been exhibited in this suit. But at the time of the hearing of the appeals they were referred to in both the cases, and as already stated, they are Ext. C in the other case. The Retiring Gratuity Rules, 1937 as they stood before the amendment brought about in 1955, were marked Ext. A in this case but the Rules as they stood on the relevant date, were marked Ext. A/1. Exts. D of the other case and A/1 of this case are identical.
9. Sri Ramavatar Lal Das, the learned subordinate Judge, who tried and dismissed this suit, came to the conclusion that the Gratuity Rules, 1937 constituted the terms and conditions of the service between the defendant and the plaintiff. But distinguishing the three authorities, 2 of the Supreme Court and one of the Madhya Pradesh High Court -- the very same authorities which were relied upon by the other learned Subordinate Judge in the other suit, and on interpretation of the same Rules, he came to the conclusion that the plaintiff is not entitled to any retiring gratuity benefit, it is almost an ex gratia payment depending on the will and pleasure of the employer and it is in the nature of gift to be made by the employer as it likes. The suit has been dismissed, and the plaintiff employee has come up in appeal.
10. I may state at the outset that in neither of the cases it was claimed in the Court below that the plaintiff is a workman within the meaning of Clause (s) of Section 2 of the Industrial Disputes Act, 1947 (Central Act 14 of 1947). Some vague attempt was made here on behalf of both of them that they were such workmen. But, as was observed by the Supreme Court in some cases which will be referred to hereinafter whether a particular employee is a workman within the meaning of the provision of law aforesaid is a question of fact. No facts were pleaded to assert that either of the two plaintiffs was workman. No claim was made by either of them in his evidence that he was such a workman. I shall, therefore, proceed upon the footing that both the plaintiffs were employees of Tisco Ltd. but it has not been asserted or proved that they were workmen within the meaning of Clause (s) of Section 2 of Act, 14 of 1947. This fact by itself, however, in my opinion, will not make any difference in the final conclusion at which I shall arrive in both the cases.
11. The Works Standing Orders which are Ext, C in the suit giving rise to First Appeal 444/63, as stated in them at the beginning, came into force in accordance with Section 7 of the Industrial Employment (Standing Orders) Act, 1946 (Central Act, 20 of 1946). On reading the preamble of this Act and the various provisions contained therein, it would seem that Mr. Lalnarayan Sinha the learned Advocate General, who argued the appeals on behalf of Tisco Ltd. was right in his submission that the Standing Orders made in accordance with Central Act 20 of 1946 are primarily made for governing the service conditions of the workmen and the employer as defined in that Act. It would be noticed that the definition of 'workman' in Clause (1) of Section 2 of this Act is identical to that given in Clause (s) of Section 2 of Central Act 14 of 1947. On being framed in accordance with the provisions of Act 20 of 1946, the Standing Orders came into operation under Section 7 and are binding on the employer and the workmen. Nonetheless, there is nothing in the Industrial Employment (Standing Orders) Act (sic) to all its employees. The Standing orders themselves clearly state that they
"will apply to all employees at the Works of the Company at Jamshedpur including the Agrico and Chemi. Co. department and to employees in offices forming part of one or other department of the Works unless specifically otherwise stated or except in so far as employees under contract of employment with the Company may be governed by special contract rules. Subject as aforesaid the orders will apply to all classes of employees."
Not only impliedly the plaintiffs of both the cases had agreed to be governed by these Standing orders but, as I read the pleadings in both the suits, expressly they claim to be so governed and the defendant Company did not dispute this fact. I would, therefore, overrule the contention of the learned Advocate-General that the Works Standing orders having been framed and adopted in accordance with Central Act 20 of 1946 could apply to the plaintiffs only if they plead and prove that they were workmen within the meaning of that Act, and hold that the Standing orders applied to them.
12. There is no provision, however, in the Works Standing orders conferring any right on an employee of Tisco Ltd. to get gratuity money on retirement either in terms of the Standing Orders or with reference to the Retiring Gratuity Rules. The only relevant provision in this connection put in the negative form in paragraph 24(a) of these standing orders is:
"An employee shall be liable to be dismissed if he has been guilty of misconduct. An employee dismissed for misconduct shall not be entitled to any notice or pay in lieu of notice and thereupon shall not be entitled to any benefits or privileges under these orders or any other benefits or privileges provided by the Company."
I may note here in passing that misconduct as defined in a clause of paragraph 23 of the said orders means "Habitual late attendance, and habitual absence without leave or without sufficient cause." Even in regard to the plaintiff in First Appeal 444 of 1963 it was not pleaded or found that he was dismissed for misconduct or that he was guilty of misconduct as defined in Clause (vi) of paragraph 23. What I want to emphasise, however, with reference to paragraph 24 (a) is that its language does not confer any right on the employee to claim any benefit or privilege, under the Retiring Gratuity Rules. There were various kinds of benefits and privileges provided by the Company as stated by both the plaintiffs in their respective plaint One has to determine the nature of the privileges with reference to the Rules themselves.
13. Paragraph 51 of the Standing orders makes provision for requisite period of notice in respect of various employees of the Company to enable it at any time to discharge an employee from service or terminate his services. Paragraph 52 says that the employees who wish to leave the Company's service must give the company the same notice as the company is required to give them. The plaintiffs claim that they gave notice to the Company in accordance with the Standing Orders, Paragraph 54 of the Standing orders says that every uncov-enanted employee will retire from service on attaining the age of 60 years, while making provision under certain circumstances for extension of service. Paragraph 55 provides that every permanent employee shall be entitled to a service certificate at the time of his dismissal, discharge or retirement from service. With reference to paragraph 55, I may observe here that the plaintiff of First Appeal 444 of 1963 was entitled to a service certificate at the time of his retirement, which was not Riven to him.
14. Then comes the question whether the Retiring Gratuity Rules of 1937 were a condition of service of the plaintiffs. Rule 2 says that the Rules shall be deemed to have been established on and from the 1st of April. 1937 pursuant to a resolution of the Directors of the Company passed on the 6th day of January. 1937 but the present Rules shall be deemed to have come into force as from 1st January. 1948 pursuant to the resolution of the Directors of the Company passed on the 4-4-1948. Neither of the plaintiffs has claimed or could claim that when he joined service of the Tisco Ltd. in one case in the year 1929 and in the other in the year 1940, he did so expressly agreeing to the Gratuity Rules being one of the conditions of his service. Ext. 5 a notice of advertisement dated 26-4-63 in the suit giving rise to First Appeal 444/63, inviting applications to a certain post in a stated salary with other allowances as permissible under the rules, provident fund, leave, privileges, retiring gratuity, etc. is of no consequence. I. however, hold that the Gratuity Rules when they came into force from 1st January. 1948, impliedty became the service conditions of all the employees under service of Tisco Ltd. unless expressly excluded. Again I say on the basis of the pleadings of the parties and the unchallenged evidence of the plaintiff that this position is not disputed -- rather is admitted.
15. But the question Is what is the nature of the privilege conferred by the Retiring Gratuity Rules as an implied condition of service. In a Civil Court for the enforcement of an alleged right of gratuity, the answer is to be found on interpretation of the Rules themselves and within their four corners. Cases decided by the Supreme Court under the Industrial Disputes Act. 1947 are not a safe guide and do not fully cover the point to be decided for enforcement of the alleged right in a Civil Court.
16. I shall now read some of the relevant rules from the Retiring Gratuity Rules of 1937 (Ext D or Ext A/1), Rule 6(a) says -
"Subject to the conditions referred to in these Rules, every permanent uncovenanted employee of the Company, whether paid on a monthly, weekly or daily basis, including those borne on the pay rolls of the Company at the Collieries and at the Ore Mines and Quarries, will be eligible for a retiring gratuity which shall be equal to half a month's salary or wages for every completed year of continuous service, subject to a maximum of twenty months' salary or wages in all."
Rule 7 was added by an amendment brought about by the resolution of the Board of Directors dated 1st May, 1959, and it reads thus -
"Notwithstanding anything contained in these Rules a gratuity shall become due and be payable and shall always have been deemed to have become due and payable only in such instalments and over period or periods as may be fixed by the Board of Directors of the Company or subject to the direction of the Board by the Managing Agents. Until any such instalment shall become or have become due and payable, the employee or any dependant who qualifies for payment under the Gratuity Rules shall not be eligible to receive or be paid and shall not have been deemed to have become eligible to receive or be paid any such instalment of the gratuity."
Rule 8 provides for taking into consideration the periods of service in different sister concerns for computing the total period of service. Rule 10 which in my opinion, creates the insurmountable difficulty in the way of the plaintiffs in enforcing their claim of gratuity as a matter of right runs thus -
"AH retiring gratuities granted under these Rules other than special gratuity to be paid under the provisions of Rule 22 hereof shall be at the absolute dis- cretion of the Company Irrespective of whether an employee has or has not performed any of the conditions hereinafter stated, and no employee howsoever otherwise eligible shall be deemed to be entitled as of right to any payment under these Rules."
This rule was amended on 25-8-55. Before amendment, it was Rule 9 as contained in Ext. A. The relevant words with which we are concerned in these appeals were identical. The only amendment was that special gratuity to be paid under the provision of Rule 22 was not left at the absolute discretion of the Company and by necessary implication was provided to be claimed as a matter of right. Rule 22 provides for special gratuity in case of an employee who agrees in writing to forgo the amount of annual bonus, in other words, special gratuity is to be paid in lieu of bonus which the employee could have got but for his forgoing to receive it
Rule 11(1) says that uncovenanted employees of the Company governed by the Industrial Disputes Act or any legislation providing for any retiring or retrenchment benefit will be granted the retiring or retrenchment benefit as provided in the aforesaid Act, but may be granted the excess under the Rules. Sub-rule (2) of Rule 11 says that uncovenanted employee of the Company, not governed by the said Act or any other legislation may. subject to the provisions of the Rules, be granted a gratuity, on fulfilment of the conditions provided therein, one of which is completion of 15 years continuous service. It would thus be seen that under Rule 6 on fulfilment of service condition an employee becomes eligible for retiring gratuity, he does not become entitled, as a matter of right He merely attains, on fulfilment of the condition, the benefit of eligibility or suitability for the retiring gratuity and not the right. Under Rule 6, the whole of the amount of gratuity becomes payable in one lump sum, and that is the reason that rule 7 was introduced by an amendment in the year 1959 that "notwithstanding anything contained in these Rules" which phrase by necessary implication has got to mean that notwithstanding the contrary provision in Rule 6, a gratuity shall become due and be payable In such instalments as may be fixed by the Board of Directors of the Company. The first part of rule 7 does not repeal or wipe off the effect of rule 10; rather the second part fortifies it in that it savs that until any such instalment shall become or have become due and payable, the employee who qualifies for payment under the Gratuity Rules shall not be eligible to receive it. In my opinion, therefore, until and unless the Company has decided to pay the gratuity money, in accordance with rule 7 or otherwise, the mere fact of the employee becoming eligible to get it under Rule 6 does not create any right for the payment of gratuity under the Rules by enforcement of such a claim in a Civil Court. The matter of payment of gratuity is at the absolute discretion of the Company and the employee, however unfortunate the position may be under the modern stage of the society, is not entitled to claim it as a matter of right even though payment of gratuity under the Rules is an implied condition of service, yet the condition is further conditioned by the provisions made in the rules and is subject to them,
It is, no doubt, true that the plaintiffs were in the service of the Tisco Ltd. on the tacit understanding and hope that on retirement they would get the gratuity money in accordance with the Rules. As a court of law however dealing with the enforcement of the alleged right in a Civil Court. I cannot persuade myself to take the view that it is possible to decree the suit of the plaintiffs on the footing of the Rules being an unconditional promise on the part of the employer to pay the gratuity money. It may well be that an industrial dispute can be raised by the workmen of Tisco Ltd. to do away with the provision of Rule 10 contained in the Rules as it is unconscionable and incompatible with the modern notions or conditions which ought to govern the relation between employer and employee,
It may further well be that If an industrial dispute raised by workmen claiming gratuity even according to the Rules as they exist goes before the Tribunal under the Central Act 14 of 1947, the Tribunal may be in a position to award the gratuity as a matter of right even under the existing Rules. But a Civil Court cannot do so. An industrial tribunal deciding a dispute under Central Act 14 of 1947, as laid down by the Federal Court in Western India Automobile Association v. Industrial Tribunal, AIR 1949 FC 111 and Bharat Bank Ltd. v. Employees of the Bharat Bank Ltd., 1950 SCR 459 = (AIR 1950 SC 188), can create new rights and bring about industrial truce by awarding such sums as ought to be granted. But the Civil Court is unable to do so. Payment of gratuity money can, no longer, be called a gratuitous payment or payment as a matter of reward or boon as was the view expressed earlier in many cases, to wit, Bawan Das v. Mulchand, ILR (1884) 6 All 173, Janki Das v. East Indian Rly. Co., (1884) ILR 6 All 634, Natha Gulab and Co. v. W. C. Shaller, AIR 1924 Bom 88, Usman Abubakar Sani v. Chief Ac- counts Officer, G. I. P. Rly., AIR 1943 Bom 453, Secy. of State v. Jamuna Das, AIR 1932 Pat 311 and Secy, of State v. Bhola Nath, AIR 1933 Cal 409. It may be called an earned money or a money which the workman is entitled to get as a matter of right on fulfilment of the conditions entitling him to claim the benefit of gratuity when the matter is before the industrial tribunal under Central Act, 14 of 1947. Yet I do not find it possible to hold that the law of contract or the law of master and servant which is the only law to be enforced in a Civil Court can justify an interpretation of the Gratuity Rules in question that the plaintiffs can be granted decrees for payment of gratuity money on the footing that it was the unconditional or unconditioned contractual obligation of the employer to pay such a money.
17. In the case of AIR 1949 FC 111 Mahajan J. as he then was, observed at page 117 (column 1):
"..... that when dispute arises about the employment of a person at the instance of a trade union, or a trade union objects to the employment of a certain person, the definition of industrial dispute would cover both those cases. In each of those cases although the employer may be unwilling to do so, there will be jurisdiction in the Tribunal to direct the employment or non-employment of the person by the employer. This is the same thing as making a contract of employment when the employer is unwilling to enter into such a contract with a particular person."
In Bharat Bank's case, 1950 SCR 459 = (AIR 1950 SC 188), Mukherjee, J. as he then was, pointed out that the function of the Industrial Tribunal was not merely to interpret or give effect to contractual rights but it can create new rights and obligations for the purpose of keeping industrial peace. On this very reasoning, case under the Industrial Disputes Act laying down that the Industrial Tribunal could go into the question of colourable or mala fide exercise of right to terminate the services of an employee by an employer were distinguished by a Bench of this Court in Jagdish Vastralaya v. State of Bihar, AIR 1964 Pat 180 while dealing with the power of the authority under Section 26 of the Bihar Shops and Establishments Act of 1954, and it was held that the power was restricted and that the authority could not go into similar questions.
18. Learned Advocate-General attempted to support his argument based upon rule 10 of the Gratuity Rules with reference to Rules 3 and 4, and specially he strongly relied upon the latter. The former merely says -
"These Rules shall be interpreted by the Agents whose decision shall be final and binding."
Even assuming it to be so, no question of interpretation of the rule is involved in this case. Rule 4 lays down---
"The Board of Directors of the Company shall have the power, from time to time, and at any time, to repeal, add to, vary or alter these Rules or frame such other Rules as they may think fit."
Counsel submitted that promise to give a benefit conditioned with the power to withdraw it at any time is no valid or effective grant of the benefit or the gift. He relied upon a passage at page 783 in Mulla's Transfer of Property Act, 5th Edition, which says -
". . . . .a gift revocable at pleasure is no gift at all. The same principle applies in the law of contracts, for a promise to pay what the promisor pleases is no promise at all;"
At the foot note is noted the case of Roberts v. Smith, (1859) 4 H. & N. 315 = 157 ER 861 in support of the above principle of law. In that case, the matter of remuneration was left open by the employee at the discretion and pleasure of the employer for his time and labour, which he may think deserving of; in other words, the employee agreed to work; he left the remuneration in the hands of the employer. Martin, B. said at page 863 of the English Report -
"..... In reason and commonsense that is a liability in honour, and not a liability by contract."
Bramwell, B. and Watson, B. also agreed. The former said at page 864 -
"The obvious construction of the letters is this, that if the Company is not formed there is to be no claim, but defendant may give something as a gratuity."
I dp not think that Rule 4 is capable of being placed at par with the words which were the subject matter of consideration in Roberts's case. My interpretation of Rule 4 is that the Board of Directors of the Company had the power from time to time and at any time to repeal or amend the Rules. If they repeal them before retirement of a particular employee, the employee will not be eligible to any benefit granted under the Rules; he may not be able to challenge the repeal in a court of law and to enforce the payment of gratuity. The position may be different before industrial tribunal. But until and unless the Rules are repealed, mere power to repeal them cannot mean that if otherwise a right could be found to have been created under them, the power of repeal will militate against the creation of such a right.
19. The view which I have expressed above finds some support from the deci- sion of P. B. Mukharji, J. in Benode Behary Roy v. General Insurance Society Ltd., AIR 1950 Cal 232. Rule 94 of the bye law of the company making provision for grant of gratuities was held to be ineffective because in accordance with bye-law 4 which granted to the Board of Directors the right of altering or adding to the rules had been exercised before the retirement of the plaintiff in that case. Bye-law 9 had been cancelled before his retirement. In that view of the matter, following the decisions is Smith v. Galloway, (1898) 1 QB 71 and the decision in Yeo v. Stewart, (1947) 2 All ER 28 the learned Judge held at page 235 (Column 2) -
"I have come to the conclusion that when an employee of a company, by the very terms of his contract of service is to act according to the bye-laws of the Company, and one of such bye-laws is that the bye-laws can be added to or altered at any time by the Company, then the employee is bound by any alteration or addition of the bye-laws that may duly be made by the Company even though such addition or alteration was made after the contract of service. This is so even if it means that the employee thereby loses any vested right, i. e. any right acquired by him before such alteration or addition."
I am not quite sure as to whether the view expressed in the last part of the passage extracted is correct, but it seems to me that an employee having agreed to adopt the rules as a service condition, one of which rules granted the power to the employer to repeal or alter them could not make a grievance if they were so repealed or altered before his retirement. I find it difficult to see how a right to get gratuity, if one can spell out such a right from the Rules, is created before retirement. The right can only be found on retirement, and if before the coming into existence of such a right the Rules are altered or repealed, no grievance can be made for the same. But until and unless they are so repealed merely because of the power to do so, it cannot be said that no right will be created.
Mr. Lalnarayan Sinha fairly conceded that rule 10 would be in the nature of a forfeiture or penal clause and as in equity the courts in India could give relief to the employee against such a clause if otherwise a right could be found to have been created in favour of the employee who has retired. He, however, submitted that reading rules 4 and 10 together it should be held that no right was created and rule 10 is neither a forfeiture nor a penal clause. For the reasons given above, the argument as placed by the learned Advocate General does not fully commend itself to me but, at the same time, reading and interpreting the rules as a whole, I hold no right is created in favour of a retiring employee to claim retiring benefit of gratuity as a matter of right and it is not a case where the right, if vested in the employee, has been allowed to be divested at the sweet will of the employer under rule 10 of the Gratuity Rules.
20. The view I have expressed above on interpretation of the gratuity rules, especially Rule 10, finds support from 3 decisions of the English Courts cited on behalf of the appellant. In Rose and Frank Co. v. Crompton and Brothers Ltd., 1925 AC 445 one of the clauses of the written arrangement arrived at between the English company and the American Firm ran as follows:--
"This arrangement is not entered into nor is the memorandum written, as a formal or legal agreement, and shall not be subject to legal jurisdiction in the law Courts either of the United States or England, but it is only a definite expression and record of the purpose and intention of the three parties concerned, to which they each honourably pledge themselves, with the fullest confidence based on past business with each other that it will be carried through by each of the three parties with mutual loyalty and friendly co-operation.
This is hereinafter referred to as the 'honourable pledge clause'. Disputes arose between the parties and the English Company determined the arrangement without notice. Before the relations between the parties were broken off, the American Firm had given and one of the English Companies had accepted certain orders for goods. In an action by the American Firm for breach of contract and for non-delivery of goods it was said by Lord Phillimore in his speech at page 454 -
"It is true that when the tribunal has before it for construction an instrument which unquestionably creates a legal interest, and the dispute is only as to the quality and extent of that interest, then later repugnant clauses in the instrument cutting down that interest which the earlier part of it has given are to be rejected, but doctrine does not apply when the question is whether it is intended to create any legal interest at all. Here, I think, the overriding clause in the document is that which provides that it is to be a contract of honour only and unenforceable at law."
Following this decision the same view was expressed by Atkinson, J., in Jones v. Vernon's Pools, Ltd., (1938) 2 All EH 626 and by the court of Appeal in Apple-son v. H. Littlewood, Ltd., (1939) 1 All ER 464.
21. In all the earlier cases referred to above, except in the Calcutta case, AIR 1933 Cal 409, the question was whether the gratuity money was attachable in execution of a creditor's decree before the money was delivered to the retired employee. It was held that it was in the nature of a gift which was not complete before delivery and hence it was not attachable. The notion of gratuity money being so was on the footing that it was purely a gratuitous payment or a gift. It is difficult to go whole hog with this view in modern times. In the Calcutta case the plaintiff sued for gratuity money. Rule 8 of the Rules for the grant, of gratuity stated that on fulfilment of certain conditions gratuity may be allowed. The argument that the word 'may' should be construed to mean as 'shall' was rejected, inter alia, on the ground that "gratuity . . . .. is something of the nature of a Rift and a gift is not a thing which can be compelled".
The other learned Judge also said that "being a gift it is something which the employee cannot claim as of right. "I am not prepared to call the payment of gratuity money a gift -- pure and simple yet. I am constrained to take the view that under the Rules of Tisco Ltd. it is In the nature of an inchoate claim or interest, and not a right enforceable by a suit in a court. Under the contract of service, the grant of gratuity money has been left to the sole discretion of the employer, saying in express words that no employee howsoever otherwise eligible shall be deemed to be entitled as of right to any payment under the Rules.
22. Before I deal with the Supreme Court cases under the Industrial Disputes Act, I may say a word about the decisions of the Madhya Pradesh High Court in AIR 1962 Madh Pra 361. A learned single Judge held in that case that the term 'wages' included also gratuity payable to a workman on the termination of his employment. The question which falls for decision in these appeals did not arise to be canvassed or decided in that case.
23. In AIR 1960 SC 251. the point for determination was whether the workmen were entitled to the double benefit of a gratuity scheme as well as retrenchment compensation under Section 25-F of the Industrial Disputes Act. The Industrial Tribunal made an award after examining the financial position of the company and held that the gratuity scheme framed by the earlier award should be enforced subject to certain modification specified by it. The company went up in appeal to the Supreme Court. In that context. Gajendragadkar, J. as he then was, delivering the judgment of the Court, said at page 253 (column 2)-
"Gratuity is a kind of retirement benefit like the provident fund or pension. At one time it was treated as payment gratuitously made by the employer to his employee at his pleasure, but as a result of a long series of decisions of industrial tribunals gratuity has now come to be regarded as a legitimate claim which workmen can make and which, in a proper case can give rise to an industrial dispute. Gratuity paid to workmen is intended to help them after retirement, whether the retirement is the result of the rules of superannuation or of physical disability. The general principle underlying such gratuity schemes is that by their length of service workmen are entitled to claim a certain amount as a retiral benefit."
Likewise I could extend the principle laid down by the Supreme Court in the above case arising out of an industrial dispute to the enforcement of the alleged contractual obligation in the Civil Court, but I feel I cannot legitimately do so. Apart from other considerations, the provision of law contained in Central Act 14 of 1947 brings about the distinction, Sub-section (3) of Section 18 says:
"A settlement arrived at in the course of conciliation proceedings under this Act or an arbitration award in a case where notification has been issued under Sub-section (3A) of Section 10A or an award of a Labour Court, Tribunal or National Tribunal which has become enforceable shall be binding on -
"(a) all parties to the industrial dispute."
The scope of an industrial award and matters which can be covered thereunder are materially different from those of a decree of a Civil Court. The observation of the Supreme Court has got. therefore, to be understood in the light of the powers of the industrial tribunal to create new rights and contracts for industrial peace and its award being binding on the parties to the industrial dispute Unfortunately, the law to be administered in a suit filed in a Civil Court does not permit me to go to extent to which the Supreme Court could go in an appeal from an award of the industrial tribunal. Similar is the position in regard to the other Supreme Court cases, namely Bharatkhand Textile Manufacturing Co. Ltd. v. Textile Labour Association. AIR 1960 SC 833. AIR 1962 SC 673, Burhanpur Tapti Mills Ltd v. Burhanpur Tapti Mills Mazdoor Sanyh. AIR 1965 SC 839 and All India Reserve Bank Employees' Association v. Reserve Bank of India. AIR 1966 SC 305. In the case of Bharatkhand Textile Co. Ltd.. AIR 1960 SC 833. the claim for gratuity made by the workmen of the Textile Co. had been rejected by an industrial court as being premature in view of the fact that the Employees' Provident Funds Act had al- ready been passed and the statutory scheme for provident fund was about to come into force.
In accordance with the observation of the industrial court, in the previous award the workmen made an application for institution of a gratuity fund after coming into force of the Employees' Provident Funds Act. claiming introduction of a comprehensive scheme of gratuity. Under these circumstances, it was held that the Employees' Provident Funds Act did not exclude the jurisdiction of Industrial court to frame an additional scheme for gratuity. In that connection, it was observed by Gajendragadkar, J. at page 839 (column 2):
"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."
In the case of the Garment Cleaning Works, AIR 1962 SC 673 the matter again arose out of an industrial dispute, in which two demands made by the respondent workmen of the appellant company were referred for industrial adjudication; the demands were for gratuity and provident fund respectively. In that connection similar observations were made by Gajendragadkar, J. at page 675 (column 2). and then it was said that gratuity once earned could not necessarily be denied to the workmen on the ground of his dismissal for misconduct. In the case of Burhanpur Tapti Mills Ltd. the only question before the Supreme Court was whether the industrial Court of Madhya Pradesh erred in introducing in its award a scheme of gratuity. In that case, Hidayatullah, J. as he then was said at page 841 -
"A scheme of gratuity and a scheme of pensions have much in common. Gratuity is a lump sum payment while pension periodic payment of a stated sum. They are both 'efficiency device' and are considered necessary for an 'orderly and humane elimination' from industry of superannuated or disabled employees who but for such retiring benefit would continue in employment even though they function inefficiently. ....
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."
In the Reserve Bank's case before the Supreme Court. AIR 1966 SC 305 again arising out of an industrial dispute, in paragraph 41 at page 321 reference was made to several decisions of the Supreme Court, and then tt was said:
"In these cases it was held by this Court that gratuity is not a gift but is earned and forfeiture except to recoup a loss occasioned to the establishment, is not justified".
In view of the law of the land so firmly established with reference to the cases arising out of industrial disputes, Mr. Palkhivala appearing for the Reserve Bank undertook to get the rules brought in line with the decisions of the Supreme Court. No case was cited before us either by Mr. B. C. Ghose or by Mr. G. C. Mukherji appearing for the different plaintiff in support of his contention that in view of the weighty observations of the Supreme Court in cases arising out of industrial disputes, the alleged right to get the gratuity money should be enforced by grant of a decree in a Civil Court at the instance of an employee. I must hasten to add that I do not mean to say that it can never be enforced, it can be so done provided the terms and conditions of service can be spelt out to create such a right.
24. In Braithwaite and Co. (India) Ltd. v. Employees' State Insurance Corporation, (1968) 1 SCA 394 = (AIR 1968 SC 413) on which reliance was placed by the learned Advocate General the facts were that the Insurance Company which was the appellant before the Supreme Court had introduced a scheme of paying mam to its employees. The payment of inam was not among the original terms of contract of employment. The offer under the scheme was to make incentive payments, if certain specified conditions were fulfilled by the employees. The appellant reserved the right of withdrawing the scheme altogether without assigning any reason and of revising its conditions at its sole discretion. The question was whether the inam was wages within the meaning of Section 2(22) of the Employees' State Insurance Act of 1948. It was answered by the Supreme Court in the negative, Bhar-gava, J. delivering the judgment of the court laid stress on the fact that while making the offer, the company in clear words, reserved the right to withdraw the scheme altogether without assigning any reason or to revise its conditions at its sole discretion. On a consideration of that clause as also the other clauses of the scheme, it was held by the Supreme Court that the payment of inam had not become a term of contract of the employment. I am not prepared to hold on the basis of the authority, as I find the distinctive features between the facts of the case before the Supreme Court and of that in our hand, that Gratuity Rules had not become a part of the condition of service of the two plaintiffs. As I have said above, undisputedly on the pleadings and unchallengeably on the evidence, it had become so.
25. While holding therefore, that neither of the plaintiffs is entitled to get a decree for the gratuity money to which he became eligible on his retiring from service, I feel inclined to observe that the Company, on its Rules framed for the benefit of the employees, would have been well advised to pay the gratuity money to the plaintiffs. The only justification which appears to me in the records of these cases of not paying the gratuity money is that on a strict interpretation of the word 'retirement' which is defined in Clause (g) of Rule 1 of the Gratuity Rules, 1937 perhaps, the case of termination of service on the part of the employee is not covered by the definition. I must make it clear that at no point of time this was the stand of the company nor was this argument advanced before us. Clause (g) of Rule 1 says -
" 'Retirement' shall mean the termination of service by reason of any cause other than removal by dismissal or discharge due to misconduct."
Dismissal or discharge postulates action of the employer which brings about termination of service. And, reading in that light, perhaps, the spirit of the rule is that if the termination of the service is brought about by the employer by service of notice, he must not ask the employee to leave the service without payment of compensation in the shape of retiral benefit. The position on strict interpretation of the term 'retirement' or in equity may not be identical. An employee who brings about the termination of his service by a notice without any rhyme or reason is, perhaps, not on the same footing as the employee whose service has been terminated by the employer. Be that as it may the conclusion at which I have arrived in the appeals is not based upon the view point which I have just expressed.
26. In the result, I allow First Appeal No. 444 of 1963, set aside the judgment and decree of the court below and dismiss the plaintiff's suit. First Appeal No. 554 of 1964 is dismissed and the dismissal of the plaintiff's suit is maintained. On the facts and in the circumstances of the cases, however, I shall direct the parties to bear their own costs throughout in both.
27. I agree.