Case: British India Corporation Vs. Its Workmen and Others

Gajendragadkar, C.J.1. The short question which arises in this appeal by special leave is whether the industrial tribunal was justified in revising the service gratuity scheme which has been in existence in the Cawnpore Woollen Mills Branch, Kanpur, since 1954. The appellant, the British India Corporation, is a public limited company with its registered office at Kanpur. Amongst the industrial undertakings run by the appellant is the Cawnpore Woollen Mills Branch, Kanpur. At the instance of the appellants workmen, the respondents, an industrial dispute was raised in regard to the revision of the existing service gratuity scheme and this dispute was referred by the Uttar Pradesh Government for adjudication to the industrial tribunal III at Allahabad. Before the tribunal several pleas were raised by the appellant. They have all been rejected by the tribunal with the result that the existing scheme has been revised and an award made accordingly. As a result of the award, the revised scheme has been ordered to be brought into force from the date of the order of reference, 12 May, 1961. In the present appeal, Sri Pathak, for the appellant, has urged that the tribunal was in error in upholding the respondents case for revision of the existing scheme.2. The first contention raised by Sri Pathak is that the tribunal should have refused to revise the existing scheme in the case of the mills, because schemes of gratuity should be framed on industry-cum-region basis and should not be framed by reference to particular units of any industrial undertaking. In support of this argument, Sri Pathak has relied upon a decision of this Court in Bharatkhand Textile Manufacturing Company, Ltd. v. Textile Labour Association, Ahmedabad [1960 - II L.L.J. 21].3. This argument cannot, however, be upheld. As was pointed out in a subsequent decision of this Court in Garment Cleaning Works v. Its workmen [1961 - I L.L.J. 513], the observations made in the case of Bharatkhand Company, Ltd. [1960 - II L.L.J. 21] (vide supra), do not justify the proposition that a gratuity scheme must in every case be framed on an industry-cum-region basis. In Bharatkhand Company, Ltd. [1960 - II L.L.J. 21] (vide supra), the argument urged before the Court was that gratuity scheme could not be framed on industry-cum-region basis, and that argument was rejected. It is, therefore, clear that the true legal position in regard to gratuity schemes is that though it is permissible and would be legitimate to frame such a scheme on industry-cum-region basis, it does not follow that a gratuity scheme cannot be framed in respect of a single unit of an industrial undertaking. In the present case, the reference made to the industrial tribunal was in regard to the existing gratuity scheme in the Cawnpore Woollen Mills Branch, Kanpur, and it would not be legitimate for the appellant to contend that when such a limited reference is made, the tribunal should have refused to consider the problem, because a reference had not been made to it on an industry-cum-region basis. Therefore, the argument that no relief should have been granted to the respondent in the present case cannot be sustained. The next contention urged by Sri Pathak is that in dealing with the question about the financial capacity of the mills, the tribunal should have taken into account the financial capacity of the appellant as a whole. The appellant has four branches :(1) The Cawnpore Woollen Mills Branch, Kanpur, Uttar Pradesh.(2) The Cooper Allen Branch, Kanpur, (Leather);(3) The North-west Tannery Branch, Kanpur (Leather); and(4) The New Egerton Woollen Mills Branch, Dhariwal, Punjab.4. The appellant is also managing a number of other companies such as Elgin Mills Company, Ltd., and Cawnpore Textiles, Ltd., as their secretaries and treasurers. The argument was that it is not permissible to treat the financial position of the woollen mills in isolation, because the woollen mills are an integral part of one big industrial undertaking run by the appellant. The tribunal has refused to entertain this contention, because it has found on evidence that the woollen mills can be treated as a separate unit by itself in regard to the question with which the tribunal was concerned. It appears that an award has already been made by an industrial tribunal in a similar dispute between the New Egerton Woollen Mills Branch, Dhariwal, and its workmen. The gratuity scheme which existed in those mills has been revised on a reference made to the industrial tribunal and that award was not challenged by the appellant. That is one piece of evidence on which the tribunal has relied. The other piece of evidence on which the tribunal relies is that even the existing scheme of gratuity which is sought to be revised in the present proceedings is not being uniformly followed in regard to all the companies owned or managed by the appellant. Besides, though the existing schemes of gratuity seem to provide for deduction of employers contribution to the provident fund, such deductions are made in some cases and are not made in other cases. In the case of woollen mills with which we are concerned, such deductions are not made. So, the practice of making deductions is not uniform. In evidence it was virtually admitted by Sri Sinharay that separate figures of revenue and expenditure of the Cawnpore Woollen Mills branch are also audited and corrected. The witness added that the financial position of the Cawnpore Woollen Mills branch is definitely sound. Therefore, on the evidence adduced before it the tribunal has come to the conclusion that for the purpose of considering the question of revising the existing gratuity scheme, the appellant cannot successfully contend that the woollen mills in question should not be treated as a separate unit, but must be regarded as an integral part of a bigger concern consisting of all the undertakings owned or managed by the appellant. That being so, we do not think that there is any substance in the grievance made by Sri Pathak that the financial position of the woollen mills alone should not have been considered. Then it is urged that the revision of the gratuity scheme is not justified, because the provident fund scheme has now come into operation and there is hardly any case for enforcing the additional retirement benefit and that too by revising the existing gratuity scheme. Sri Pathak invited our attention to the fact that when the present service gratuity scheme was introduced by the appellant on 1 March, 1954 in the Cawnpore Woollen Mills branch, the appellant wanted to safe-guard the interests of the respondents, because it was thought that under the Employees Provident Funds Act, 1952, the amount recoverable from the statutory fund by retiring workmen would necessarily be small until sufficient period had elapsed after the Act came into force, and it was with a view to compensate the workmen in that behalf that this scheme was introduced. Now that the Employees Provident Funds Act has been in operation for several years, the relevant consideration with which the existing scheme was introduced has lost its point and purpose, and so, there is no justification for revising the said scheme.5. We are not impressed by this argument. It is true that the appellant introduced the existing scheme in 1954 for the reason which we have just indicated; but it is well-known that both the gratuity scheme and the Employees Provident Funds Act are introduced in industrial undertakings, provided, of course, the introduction of such a double retirement benefit is justified by the financial position of the employer. There is no doubt that the financial position of the woollen mills in question is perfectly sound, and so, the appellant cannot be heard to say that the existing scheme should not be revised in view of the fact that its genesis was a desire to compensate the workmen during the first few years of the operation of Employees Provident Funds Act.Then it is argued that in as much as the scheme has provided for the payment of gratuity at a certain rate by reference to the consolidated wages of the workman, the tribunal has made a departure in that usually in providing for payment of gratuity at a specified rate, the basic wages are taken into account and not the consolidated wages. Prima facie there is some force in this contention; but in dealing with this argument, we cannot overlook the fact that the existing scheme itself has taken consolidated wages for the purpose of determining at what rate gratuity should be paid to workmen. Under the existing scheme, Cls. (a) and (b) which deal with workmen according to the period of service to their credit, rates are fixed by reference to the consolidated wages; and so, when the tribunal was considering the question of revising the existing scheme, it has made some modifications, but has naturally retained the basis of consolidated wages.6. We have examined the scheme and we see no reason which would justify the appellants contention that the revision made by the tribunal is unreasonable. Whilst we are dealing with this point, we would like to mention the fact that in the scheme framed for the New Egerton Woollen Mills, Dhariwal, though the rate has been prescribed by reference to basic wages, no ceiling has been prescribed under Cl. (b) as it has been done in the present revised scheme. Under the Dhariwal award, a workman who had served for more than fifteen years would be entitled to claim gratuity at one months basic wage for each completed year of his service and this clause is not subject to any ceiling at all, whereas under the revised scheme in question for workmen who had put in fifteen years continuous service and over, gratuity awardable to them is one months consolidated wages, subject to a maximum gratuity of twenty months consolidated wages. No doubt, no ceiling has been prescribed for cases falling under Cls. (a) and (b) of the scheme, but that is because these two clauses deal with workmen who have put in five years but less than ten years continuous service, and ten years but less than fifteen years continuous service respectively. There is hardly any occasion to prescribe a ceiling for these cases. On the merits, then, we see no reason to interfere with the revised scheme framed by the tribunal.Sri Pathak attempted to argue that in considering the question of revising the scheme, the tribunal should have taken into account the gratuity scheme prevailing in the textile cotton mills at Kanpur. He referred to the fact that in dealing with the industrial dispute as to wage-structure between the woollen mills and its employees which was the subject-matter of another reference, the tribunal has treated the textile cotton mills as a comparable industrial undertaking, and he argues that the said mills should have been similarly treated in dealing with the question of revision of gratuity scheme. We do not think there is any substance in this argument. What the tribunal has done in dealing with the wage-structure in another proceeding can hardly be relevant for the purpose of dealing with the present appeal. Besides, as we have just indicated, the scheme actually framed by the tribunal seems to us, on the whole, to be reasonable and it does not appear to have made any radical departure from the usual pattern of such schemes. The only departure made, if at all, is to take the consolidated wages for the purpose of fixing the rate at which gratuity should be paid; but this feature, as we have already indicated, has been taken by the tribunal from the existing scheme itself.

Decision reasoning: 0[ds]This argument cannot, however, be upheld. As was pointed out in a subsequent decision of this Court in Garment Cleaning Works v. Its workmen [1961I L.L.J. 513], the observations made in the case of Bharatkhand Company, Ltd. [1960II L.L.J. 21] (vide supra), do not justify the proposition that a gratuity scheme must in every case be framed on anbasis. In Bharatkhand Company, Ltd. [1960II L.L.J. 21] (vide supra), the argument urged before the Court was that gratuity scheme could not be framed onbasis, and that argument was rejected. It is, therefore, clear that the true legal position in regard to gratuity schemes is that though it is permissible and would be legitimate to frame such a scheme onbasis, it does not follow that a gratuity scheme cannot be framed in respect of a single unit of an industrial undertaking. In the present case, the reference made to the industrial tribunal was in regard to the existing gratuity scheme in the Cawnpore Woollen Mills Branch, Kanpur, and it would not be legitimate for the appellant to contend that when such a limited reference is made, the tribunal should have refused to consider the problem, because a reference had not been made to it on anbasis. Therefore, the argument that no relief should have been granted to the respondent in the present case cannot beon the evidence adduced before it the tribunal has come to the conclusion that for the purpose of considering the question of revising the existing gratuity scheme, the appellant cannot successfully contend that the woollen mills in question should not be treated as a separate unit, but must be regarded as an integral part of a bigger concern consisting of all the undertakings owned or managed by the appellant. That being so, we do not think that there is any substance in the grievance made by Sri Pathak that the financial position of the woollen mills alone should not have beenPathak invited our attention to the fact that when the present service gratuity scheme was introduced by the appellant on 1 March, 1954 in the Cawnpore Woollen Mills branch, the appellant wanted toe interests of the respondents, because it was thought that under the Employees Provident Funds Act, 1952, the amount recoverable from the statutory fund by retiring workmen would necessarily be small until sufficient period had elapsed after the Act came into force, and it was with a view to compensate the workmen in that behalf that this scheme wasintroduced. Now that the Employees Provident Funds Act has been in operation for several years, the relevant consideration with which the existing scheme was introduced has lost its point and purpose, and so, there is no justification for revising the said scheme.We are not impressed by this argument. It is true that the appellant introduced the existing scheme in 1954 for the reason which we have just indicated; but it isthat both the gratuity scheme and the Employees Provident Funds Act are introduced in industrial undertakings, provided, of course, the introduction of such a double retirement benefit is justified by the financial position of the employer. There is no doubt that the financial position of the woollen mills in question is perfectly sound, and so, the appellant cannot be heard to say that the existing scheme should not be revised in view of the fact that its genesis was a desire to compensate the workmen during the first few years of the operation of Employees Provident Fundsit is argued that in as much as the scheme has provided for the payment of gratuity at a certain rate by reference to the consolidated wages of the workman, the tribunal has made a departure in that usually in providing for payment of gratuity at a specified rate, the basic wages are taken into account and not the consolidatedwages. Prima facie there is some force in this contention; but in dealing with this argument, we cannot overlook the fact that the existing scheme itself has taken consolidated wages for the purpose of determining at what rate gratuity should be paid to workmen. Under the existing scheme, Cls. (a) and (b) which deal with workmen according to the period of service to their credit, rates are fixed by reference to the consolidated wages; and so, when the tribunal was considering the question of revising the existing scheme, it has made some modifications, but has naturally retained the basis of consolidated wages.We have examined the scheme and we see no reason which would justify the appellants contention that the revision made by the tribunal iswe are dealing with this point, we would like to mention the fact that in the scheme framed for the New Egerton Woollen Mills, Dhariwal, though the rate has been prescribed by reference to basic wages, no ceiling has been prescribed under Cl. (b) as it has been done in the present revised scheme. Under the Dhariwal award, a workman who had served for more than fifteen years would be entitled to claim gratuity at one months basic wage for each completed year of his service and this clause is not subject to any ceiling at all, whereas under the revised scheme in question for workmen who had put in fifteen years continuous service and over, gratuity awardable to them is one months consolidated wages, subject to a maximum gratuity of twenty months consolidated wages. No doubt, no ceiling has been prescribed for cases falling under Cls. (a) and (b) of the scheme, but that is because these two clauses deal with workmen who have put in five years but less than ten years continuous service, and ten years but less than fifteen years continuous service respectively. There is hardly any occasion to prescribe a ceiling for these cases. On the merits, then, we see no reason to interfere with the revised scheme framed by thek attempted to argue that in considering the question of revising the scheme, the tribunal should have taken into account the gratuity scheme prevailing in the textile cotton mills at Kanpur. He referred to the fact that in dealing with the industrial dispute as tobetween the woollen mills and its employees which was thef another reference, the tribunal has treated the textile cotton mills as a comparable industrial undertaking, and he argues that the said mills should have been similarly treated in dealing with the question of revision of gratuity scheme.We do not think there is any substance in this argument. What the tribunal has done in dealing with thein another proceeding can hardly be relevant for the purpose of dealing with the present appeal. Besides, as we have just indicated, the scheme actually framed by the tribunal seems to us, on the whole, to be reasonable and it does not appear to have made any radical departure from the usual pattern of such schemes. The only departure made, if at all, is to take the consolidated wages for the purpose of fixing the rate at which gratuity should be paid; but this feature, as we have already indicated, has been taken by the tribunal from the existing scheme itself.