Appeal No 1627 of 1967
Appeal by special leave from the Award dated March 31 1967 of the Industrial Tribunal Andhra Pradesh in Industrial Dispute No 55 of 1965
H R Gokhale and D N Gupta for the appellant
M K Ramamurthi Shyamala Pappu and Vineet Kumar for the respondents
The Judgment of the Court was delivered by Hegde J
This appeal has been brought to this Court by special leave
It arises from the decision  of the Industrial Tribunal 9 Andhra Pradesh Hyderabad
The only question that arises for decision is whether on the basis of the material on the record there was any justification for framing a gratuity scheme for appellant s staff
The admitted facts are these  The appellant concern is hav ing about 500 looms  It has a subscribed capital of a little over 3 5 lakhs
Its built up reserve is over thirty lakhs
In three out of the six years during the period 1960 65 it has suffered substantial losses
Out of the remaining three years in one year it made a profit of about Rs 45000 in another year about Rs 13000 and in 1962 over rupees twelve lakhs
The annual expenses of the appellant s concern under the head salaries wages and bonus  are nearly 47 lakhs
It was found by the tribunal that the appellant concern and the Nellimarla Jute Mills are sister concerns
Both of them are under a single management viz Ms Mcleod and Company Calcutta
They are located in the same region the distance between the two being about 25 miles
In Nellimarla Jute Mills a gratuity scheme for the staff is in existence and that in addition to provident fund benefits
Our attention was not invited to any material on record to show that these findings are not correct
In the appellant concern also there is a provident fund scheme for the staff
The appellant in its counter affidavit filed before the tribunal admitted that it had always been the policy of the management to introduce identical terms of employment for the workmen at Nellimarla and Chitavalsah
From the material before us it is not possible to find out the financial position of the Nellimarla mills
We ascertained from the learned counsel for the appellant that the appellant concern had made a profit of over a lakh of rupees in 1966
The tribunal has found and that finding was not challenged before us that the additional burden to be borne by the appellant as a result of the gratuity scheme framed by it is about Rs 3000 per year
On behalf of the appellant two contentions were advanced in opposition to the proposed gratuity scheme
They are 1 the wage board was unable to recommend a gratuity scheme for the jute industry and hence there was no justification to frame the impugned scheme and 2 in view of the losses incurred by the appellant during the years 1960 65 no additional burden should have been cast on it by introducing a gratuity scheme
So far as the Wage Board recommendations is concerned it pertains to the jute industry as a whole
After taking into consideration the importance of the jute industry for
the national L4Sup
Cl68 2 11 Burhanpur Tapti Mills Ltd vs B T Mills Mazdoor Sangh 1965   there are two general methods of fixing the terms of a gratuity scheme
It may be fixed on the basis of industry cum region or on the basis of units
Both systems are admissible but regard must be had to the surrounding circumstances to select the right basis
Emphasis must always be laid upon the financial position of the employer and his profit making capacity whichever method is selected and it must be further seen whether the industrial court was right in appraising the financial condition and the profit making capacity of the company A scheme for gratuity no doubt imposes a burden on the finances of the concern but the pressure is ex facie distributed over the years for it is limited to the number of retirements each year
The employer is not required to provide the whole amount at once
He may create a fund if he likes and pay from the interest which accrues on a capitalised sum determined actuarially
This is one of providing the money
Ordinarily the payment is made each year to those who retire
To judge whether the financial position would bear the strain the average number of retirements per year must be found out
This is one part of the inquiry
The next part of the inquiry is to see whether the employer can be expected to bear the burden from year to year
The present condition of his finances the past history and the future prospects all enter into the appraisal of
his ability In Calcutta Insurance Co Ltd vs Their Workmen1 this Court observed On the financial aspect of a gratuity scheme we were referred to the case of Wenger  Co vs Their workment 1963 II LIJ 403
There it was observed by this Court that the problem of the burden imposed by the gratuity scheme could be looked at in two ways
one was to capitalise the burden on actuarial basis
which would show theoretically that the burden would be very heavy and the other was to look at the scheme in its practical aspect and find out how many employees retire every year on the average
According to this Court it was this practical approach which ought to be taken into account 1  12 In the light of the principles noted above and on the material placed before the tribunal it is not possible to hold that the tribunal s conclusion was without any just basis
For the reasons mentioned above this appeal fails and the same is dismissed with costs
GC Appeal dismissed


Summary:
The appellant was a jute mill
The Industrial Tribunal framed a gratuity scheme for its workers
It was challenged by the appellant before this Court in an appeal under article 136 of the Constitution
Two contentions were urged namely  i that the wage board was unable to recommend a gratuity scheme for the jute industry and hence there was no justi fication to frame the impugned scheme ii in view of the losses incurred by the appellant during the years 1960 65 no additional burden should have been cast on it by introducing a gratuity scheme
HELD  i The Wage Board s recommendation pertained to the jute industry as a whole and not to any individual industrial unit
It cannot be understood as recommending that there should be no gratuity scheme for the employees in any particular unit in that industry
What was relevant to find out was whether the appellant could bear the additional burden
10 B ii The Tribunal recommended the gratuity scheme after taking into consideration the financial position of the appellant as well as the fact that in a sister concern such a scheme was in existence
The losses suffered by the appellant were considered by the Tribunal to be a passing phase
What is of essence is the profit making capacity of the concern
In determining that question one has to take into consideration the paid up capital of the company its reserves its earnings in the past and its future prospects
A practical view of the question has to be taken
10 D G In the light of these principles and on the material placed before the Tribunal it was not possible to hold that the Tribunal s conclusion was without any just basis
12 A National Iron  Steel Co Led  Ors
vs State of West Bengal  Anr
 and Calcutta Insurance Co Ltd vs Their Workmen   relied on