Case: May and Baker (India) Limited Vs. J.S. Coutinho, National Union of Commercial Employees

M.L. PENDSE, J.( 1 ) THE short question which falls for determination in this petition filed under Articles 226 and 227 of the Constitution of India is whether for the purpose of calculating gratuity, a days wage is to be arrived at by dividing a months wages by 26 days or number of actual working days in a month. The question arises for consideration in the following circumstances:( 2 ) THE petitioner is a Public Limited Company having its registered Office in Bombay and also a factory at Kanjurmarg in State of Maharashtra. The Company has also various branches and factories situated all over India. The Respondent No. 1 was employed as a clerk by the Company from March 30, 1942. The Respondent No. 1 retired on reaching the age of superannuation on April 1, 1981 and at the time of retirement the salary of Respondent No. 1 was Rs. 989. 45. The respondent No. 1 was covered by the provisions of the Payment of Gratuity Act, 1972 till June 1972 as after that date, the total wages drawn by Respondent No. 1 exceeded Rs. 1,000/ -. On retirement, the Company paid a sum of Rs. 14,841. 75 as gratuity to Respondent No. 1 for 30 eligible years of continuous service. The amount was calculated by dividing a months wages by 30 days. The Respondent No. 1 accepted the amount and thereafter instituted proceedings by filing an application before the Controlling Authority under the Act. The Respondent No. 1 claimed that the gratuity should have been calculated by dividing monthly salary by number of days working in a month. The Respondent No. 1 claimed that the employees of the Company worked only on 22 days in a month as Saturday and Sunday are declared as holidays. The respondent No. 1 claimed that the difference of amount of gratuity which is paid to Respondent no. 1 and which is payable was Rs. 4,947. 25.( 3 ) THE Company resisted the application by claiming that the amount of gratuity was properly calculated. The Company claimed that till year 1972, Saturday was not a holiday but the employees used to work for half a day. By settlement between the employer and the Union, Saturday was declared as holiday by increasing the hours of work between Monday and Friday. The Company claimed that practice of arriving at day rate of wage by dividing the monthly wages by 30 days is accurate. The Controlling Authority by order dated October 7, 1981 held that the monthly wages should have been divided by 26 days and not by 30 days as was done by the Company. On the strength of this finding, the Controlling Authority directed payment of additional amount of Rs. 2,285. 25. The Respondent No. 1 challenged the order of the Controlling Authority by filing appeal before the Appellate Authority under the Act and this appeal was allowed by decision dated March 19, 1982. The Appellate Authority held that to arrive at a days wage, normal working days in a month should be taken into account and normal working days in the month in the establishment run by the petitioner are only 22 days. The Appellate Authority also observed that for the purpose of over-time wages and deduction on account of absence without leave, the Company had divided the monthly wages of employees by 22 days only. On the strength of this finding, the Appellate Authority directed payment of Rs. 5,399. 25 in addition to what the Company had paid to Respondent No. 1 towards gratuity. The order of the Appellate Authority is under challenge. ( 4 ) SHRI Cama, learned counsel appearing on behalf of the Company submitted that the view taken by the Appellate Authority is entirely unsustainable. The learned Counsel urged that it is now well settled by the decision of the Supreme Court in the case of Digvijay Woollen Mills Ltd v. Mahendra Prataprai Buck reported in 1980 (2) Labour Law Journal 252 that for arriving at a days wage, 26 working days of a month should be taken into consideration. The learned counsel urged that the Appellate Authority had by-passed the decision of the Supreme Court by observing that though the Supreme Court had observed that 26 days in a month should be taken into consideration for arriving at days wage, the observations are not applicable to all the cases. The Appellate Authority is clearly in error in by-passing the Supreme Court judgment in this fashion. The Appellate Authority also overlooked that Respondent No. 1 was covered by the provision of the Act only till June 1972 and the Company started working for 22 days in a month only after June 1972 and that too because of the settlement reached between the employees and the employer. Even in respect of the settlement, the working hours were reduced only by half-an-hour and while declaring Saturday as a holiday, the working hours between Monday and Friday were increased. In our judgment, the Appellate Authority was clearly in error in disturbing the well considered decision of the Controlling Authority. The decision of the appellate Authority is, therefore, required to be reversed.( 5 ) SHRI Cama, very fairly stated that the Company had approached this Court by filing the present petition only with a view to settle the correct position of law and the Company is not insisting that Respondent No. 1 should be deprived of the small amount awarded by the appellate Authority. Indeed by interim order passed by this Court, the Company was directed to deposit a sum of Rs. 3114/- which is difference between the amount awarded by the Controlling authority and the Appellate Authority in this Court and the said amount was withdrawn by respondent No. 1, Shri Cama stated that though the decision of the Appellate Authority is set aside, the Company does not wish to recover back the amount from Respondent No. 1.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The Appellate Authority is clearly in error inthe Supreme Court judgment in this fashion. The Appellate Authority also overlooked that Respondent No. 1 was covered by the provision of the Act only till June 1972 and the Company started working for 22 days in a month only after June 1972 and that too because of the settlement reached between the employees and the employer. Even in respect of the settlement, the working hours were reduced only byand while declaring Saturday as a holiday, the working hours between Monday and Friday were increased. In our judgment, the Appellate Authority was clearly in error in disturbing the well considered decision of the Controlling Authority. The decision of the appellate Authority is, therefore, required to be reversed.