Case: Bakshish Singh Vs. Darshan Engineering Works

service prescribed by the Statute have no right t o exist [vide Bijay Cotton Mills Ltd. v. State of Ajmerl, Crown Aluminium Works v. Workmen4 and U. Unichoyi v. State of Kerala 12]. 28. In Bijay Cotton Mills Ltd. case 3 it is observed as follows:It can scarcely be disputed that securing of living wages to labourers which ensure not only bare physical subsistence but also the maintenance of health and decency, is conducive to the general interest of the public. This is one of the Directive Principles of State Policy embodied in Article 43 of our Constitution. It is well known that in 1928 there was a Minimum Wages Fixing Machinery Convention held at Geneva and the resolutions passed in that convention were embodied in the International Labour Code. The Minimum Wages Act is said to have been passed with a view to give effect to these resolutions vide South India Estate Labour Relation Organisation v. State of Madras 15. If the labourers are to be secured in the enjoyment of minimum wages and they are to be protected against exploitation by their employers, it is absolutely necessary that restraints should be imposed upon their freedom of contract and such restrictions cannot in any sense be said to be unreasonable. On the other hand, the employer s cannot be heard to complain if they are compelled to pay minimum wages to their labourers even though the labourers, on account of their poverty and helplessness are willing to work on lesser wages. We could not really appreciate the argument of Mr Seervai that the provisions of the Act are bound to affect harshly and even oppressively a particular class of employers who for purely economic reasons are unable to pay the minimum wages fixed by the authorities but have ab solutely no dishonest intention of exploiting their labourers. If it is in the interest of the general public that the labourers should be secured adequate living wages, the intentions of the employers whether good or bad are really irrelevant. Individual employers 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 f or the (sic) striking down the law itself as unreasonable. 29. In Crown Aluminum Works case14 the Court observed as under: There is, however, one principle which admits of no exceptions. No industry has a right to exist unless it is able to pay its workmen at least a bare minimum wage. It is quite likely that in under-developed countries, where unemployment prevails on a very large scale, unorganised labour may be available on starvation wages; but the employment of labour on starvation wages cannot be encouraged or favoured in a modem democratic welfare state. If an employer cannot maintain his enterprise without cutting down the wages of his employees below even a bare subsistence or minimum wage, he would have no right to conduct his enterprise on such terms. * 30. The present Act is of the genre of Minimum Wages Act, the Payment of Bonus Act, the Provident Funds Act, Employees State Insurance Act, and other like statutes. These statutes lay down the minimum relevant benefits which must be made available to the employees. We have solemnly resolved to constitute this country, among others, into a socialist republic and to secure to all its citizens, which, of course, include workmen, social and economic justice. Article 38 requires the State to strive to promote the welfare of the people by securing and protecting as effectively as it may, a social order in which, among other things, social and economic justice shall inform all the institutions of the national life. Article 39 states that the State shall, in particular, direct its policy towards securing, among others, that the citizens have the right to an adequate means to livelihood and that the health and strength of workers are not abused. Article 41 of the Constitution directs the State to make effective provision, among others, for securing public assistance in old age and in other cases of undeserved want. Article 42 enjoins the State to make provision for securing just and humane conditions of work while Article 43 requires the State to endeavour to secure by suitable legislation to all workers a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. Article 47 requires that the State shall regard the raising of the level of nutrition and standard of living of its people and the improvement of publi c health as one of its primary duties. 31. Further, there is a restriction placed on the exercise of the Fundamental Right under Article 19(1)(g) by clause (6) of the said article. That clause states that nothing in sub-clause (g) of clause (1) shall affect the operation of any existing law or prevent the State from making any law imposing in the interests of the general public reasonable restrictions on the exercise of the right conferred by that sub-clause. It cannot be disputed that the present Act is a welfare measure introduced in the interest of the general public to secure social and economic justice to workmen to assist them in their old age and to ensure them a decent standard of life on their retirement. 32. On both grounds, therefore, viz. that the provisions for payment of gratuity contained in Section 4(1)(b) of the Act are one of the minimal service conditions which must be made available to the employees notwithstanding the financial capacity of the employer to bear its burden and that the said provisions are a reasonable restriction on the right of the employer to carry on his business within the meaning of Article 19(6) of the Constitution, the said provisions are both sustainable and valid. Hence the decision of the High Court has to be set aside.

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

Explanation:
1[ds]16. The aforesaid survey of the relevant authorities shows that in labour jurisprudence the concept of gratuity has undergone a metamorphosis over the years. The dictionary meaning may suggest that gratuity is a gratuitous payment, a gift or a boon made by the employer to the employee as per his sweet will. It necessarily means that it is in the discretion of the employer whether to make the payment or not and also to choose the payee as well as the quantum of payment.However, in the industrial adjudication it was considered as a reward for a long and meritorious service and its payment, therefore, depended upon the duration and the quality of the service rendered by the employee. At a later stage, it came to be recognised as aretiral benefit in consideration of the service rendered and the employees could raise an industrial dispute for introducing it as a condition of service. The industrial adjudicators recognised it as such and granted it either in lieu of or in addition to other retiral benefit(s) such as pension or provident fund depending mainly upon the financial stability and capacity of the employer. The other factors which were taken into consideration while introducing gratuity scheme were the service conditions prevalent in the other units in the industry and the region, the availability or otherwise of the other retiral benefits, the standard of other service conditions etc. The quantum of gratuity was also determined by the said factors. The recognition of gratuity as a retiral benefit brought in its wake further modifications of the concept. It could be paid even if the employee resigned or voluntarily retired from service. The minimum qualifying service for entitlement to it, rate at which it was to be paid and the maximum amount payable was determined likewise on the basis of the said factors. It had also to be acknowledged that it could not be denied to the employee on account of his misconduct. He could be denied gratuity only to the extent of the financial loss caused by his misconduct, and no more. Thus even before the present Act was placed on the statute book, the courts had recognised gratuity as a legitimate retiral benefit earned by the employee on account of the service rendered by him. It became a service condition wherever it was introduced whether in lieu of or in addition to the other retrial benefit(s). The employees could also legitimately demand its introduction as such retiral benefit by raising an industrial dispute in that behalf, if necessary. The industrial adjudicators granted or rejected the demand on the basis of the factors indicated above17. It is true that while doing so, the industrial adjudicators insisted upon certain minimum years of qualifying service before an employee could claim it whether on superannuation or resignation or voluntary retirementThis was undoubtedly inconsistent with the concept of the gratuity being an earning for the services rendered. What is, however, necessary to remember in this connection is that there is no fixed concept of gratuity or of the method of its payment. Like all other service conditions, gratuity schemes may differ from establishment to establishment depending upon the various factors mentioned above, prominent among them being the financial capacity of the employer to bear the burden. There has commonly been one distinction between a retiral benefit like provident fund and gratuity, viz. the former generally consists of the contribution from the employee as well. It is, however, not a necessary ingredient and where the employee is required to make his contribution, there is no uniformity in the proportion of his share of contribution. Likewise, the gratuity schemes may also provide differing qualifying service for entitlement to gratuity. It is true that in the case of gratuity an additional factor weighed with the industrial adjudicators and courts, viz. that being entirely a payment made by the employer without there being a corresponding contribution from the employee, the gratuity scheme should not be so liberal as would induce the employees to change employment after employment after putting in the minimum service qualifying them to earn itBut as has been pointed out by this Court in the Straw Board Mfg. Co. Ltd. case in view of the constantly growing unemployment, the surplus labour and meager opportunities for employment, the premise on which a longer qualifying period of service was prescribed for entitlement to gratuity on voluntary retirement or resignation, was unsupported by reality. In the face of the dire prospects of unemployment, it was facile to assume that the labour would change or keep changing employment to secure the paltry benefit of gratuity18. Even assuming that the presumption that a longer period of service for entitlement to gratuity on voluntary retirement or resignation is necessary to prevent labour from changing employment frequently, that consideration has no bearing on the question whether a short period of qualifying service is violative of Article 19(1)(g) of the Constitution. That article comes into picture only if, among others, (a) it is shown that the short qualifying period of service throws on any particular employer such financial burden as would force him to close his establishment and (b) the provision is not one of the minimum service conditions which must be made available to the employees. Hence, the provision for a short qualifying period per se is not invalid and cannot be struck down generally as being violative of Article 19(1)(g) of the Constitution as is done by the High Court in the present case. The High Courts reliance on the decisions referred to by it, for the purpose of holding that the provision of a period of service of five years is violative of Article 19(1)(g) of the Constitution, is misplaced for the Court has failed to notice that the view taken by this Court was in a different factual context. In the first instance, at that time, gratuity had not come to be accepted as one of the minimum service conditions, much less any particular scheme of gratuity. Secondly, the courts in those cases were concerned with establishments of differing financial capacity in a particular industry and with evolving uniform service conditions for the industry as a whole for the maintenance of industrial peace. Further, except the decision of this Court in Express Newspaper case2 the other decisions which have laid down more than five years qualifying service, have not based their conclusion on the vulnerability of the shorter qualifying service on the anvil of Article 19(1)(g) of the Constitution19. On the other hand, in Wenger and Co. c ase8 this Court pointed out that in dealing with the financial obligations involved on account of the introduction of the gratuity scheme, it was necessary to bear in mind the actual rather than the theoretical impact of the scheme. Since not more than 3 to 4 per cent of the employees retired every year, the financial burden caused by the gratuity scheme was much less than what its theoretical enunciation would indicate. The Court there also held that the minimum qualifying period of five years service was reasonable20. In Delhi Cloth and General Mills Co. Ltd. case9 the Court was at pains to point out that in matters relating to the grant of gratuity and even generally in the settlement of disputes arising out of industrial relations, there were no fixed principles on the application of which the problems arising before the tribunals or the courts could be determined and often precedents of cases determined ad hoc were utilised to win the claims or to resist t hem. It was, therefore, futile to attempt to reduce the grounds of the decisions given by the courts to the dimensions of any recognised principle21. In Straw Board Mfg. Co. Ltd. case11 which was decided after the present statute came into operation, as pointed out above, the Court upheld the five years minimum qualifying period of service for entitlement to gratuity on voluntary retirement or resignation, by stating that the qualifying period of ten years service prescribed in British Paints case, was not meant to be laid down as a uniform standard to be followed in all cases. This is apart from the fact that the court also stated there that the premise underlying the reasons which impelled the said higher qualifying service was not in conformity with the current reality23. What is observed by this Court in relation to the award of the Wage Board with regard to thee in the Express Newspaper case2 applies equally to the gratuity scheme framed by the Wage Board under the said Act. The gratuity scheme introduced by the Wage Board was not a minimal service condition. This is apart from the fact that in that case the gratuity scheme which was held to be violative of Article 19(1)(g) was fixed not by any statute laying down minimum condition of service but by a Wage Board, constituted under an Act24. Coming now to the provisions of the present Act, it will be seen that the Act extends to the whole of India except to plantations and ports in the State of Jammu &Kashmir. The provisions of the Act apply uniformly to (a) every factory, mine, oil field, plantation, port and railway company; (b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months; and (c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf as provided in subsection (3) of Section 1 of the Act. It defines retirement under Section 2(q) to mean termination of the service of an employee otherwise than on superannuation. Section 2(s) defines wages to mean 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 allowance26. As the object of the statute shows, it was enacted because there was no central Act to regulate the payment of gratuity to industrial workers except the Working Journalists (Conditions of Service) Miscellaneous Provisions Act, 1955 which had come up for consideration in the Express Newspaper case2. The Governments of Kerala and West Bengal had enacted their own statutes for payment of gratuity to workers employed in establishments in their States. Since the enactment of the Kerala and West Bengal Acts, some other State Governments had also voiced their intention to enact similar legislations in their States. It had, therefore, become necessary to have a central law on the subject so as to ensure a uniform pattern on payment of gratuity to the employees throughout the country. The enactment of a central law was also necessary to avoid different treatment to the employees of establishments having branches in more than one State particularly when under the conditions of their service, the employees were liable to be transferred from one State to another. The proposal for central legislation on gratuity was discussed in the Labour Ministers Conference and also in the Indian Labour Conference. There was general agreement in these conferences that the legislation on payment of gratuity be enacted as early as possible. While enacting the statute for West Bengal in August 1971, care had been taken to so design its provisions that they could serve, as far as possible, as norms for the central law. The bill had, therefore, been drafted on the lines of the West Bengal statute on the subject with some modifications which had been made in the light of the views expressed at the Indian Labour Conference. Hence, the present statute, which was also amended twice once in 1984 to correct the definition of continuous service under Section 2(c) of the Act and second time in 1987 to provide, among other things, for a timelimit for the payment of gratuity and for recovery of interest in cases where the payment was not made in time.The second amendment also made certain other changes in the Act including extension of its coverage to employees drawing salary upto Rs 2500 per month as against the earlier limit which was Rs 1600 per month27. It would thus be apparent both from its object as well as its provisions that the Act was placed on the statute book as a welfare measure to improve the service conditions of the employees. The provisions of the statute were applied uniformly throughout the country to all establishmentscovered by it. They applied to all employees drawing a monthly salary upto a particular limit in factories, shops and establishments etc. whether the employees were engaged to do any skilled,, unskilled, manual, supervisory, technical or clerical work. The provisions of the Act were thus meant for laying down gratuity as one of the minimal service conditions available to all employees covered by the Act. There is no provision in the Act for exempting any factory, shop etc. from the purview of the Act covered by it except those where, as pointed out above, the employees are in receipt of gratuity or pensionary benefits which are no less favourable than the benefit conferred under the Act. The payment of gratuity under the Act is thus obligatory being one of the minimum conditions of service. The noncompliance o f the provisions of the Act is made an offence punishable with imprisonment or fine. It is settled law that the establishments which have no capacity to give to their workmen the minimum conditions of service prescribed by the Statute have no right t o exist [vide Bijay Cotton Mills Ltd. v. State of Ajmerl, Crown Aluminium Works v. Workmen4 and U. Unichoyi v. State of Kerala 12]30. The present Act is of the genre of Minimum Wages Act, the Payment of Bonus Act, the Provident Funds Act, Employees State Insurance Act, and other like statutes. These statutes lay down the minimum relevant benefits which must be made available to the employees. We have solemnly resolved to constitute this country, among others, into a socialist republic and to secure to all its citizens, which, of course, include workmen, social and economic justice. Article 38 requires the State to strive to promote the welfare of the people by securing and protecting as effectively as it may, a social order in which, among other things, social and economic justice shall inform all the institutions of the national life. Article 39 states that the State shall, in particular, direct its policy towards securing, among others, that the citizens have the right to an adequate means to livelihood and that the health and strength of workers are not abused. Article 41 of the Constitution directs the State to make effective provision, among others, for securing public assistance in old age and in other cases of undeserved want. Article 42 enjoins the State to make provision for securing just and humane conditions of work while Article 43 requires the State to endeavour to secure by suitable legislation to all workers a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. Article 47 requires that the State shall regard the raising of the level of nutrition and standard of living of its people and the improvement of publi c health as one of its primary duties31. Further, there is a restriction placed on the exercise of the Fundamental Right under Article 19(1)(g) by clause (6) of the said article. That clause states that nothing ine (g) of clause (1) shall affect the operation of any existing law or prevent the State from making any law imposing in the interests of the general public reasonable restrictions on the exercise of the right conferred by that. It cannot be disputed that the present Act is a welfare measure introduced in the interest of the general public to secure social and economic justice to workmen to assist them in their old age and to ensure them a decent standard of life on their retirement32. On both grounds, therefore, viz. that the provisions for payment of gratuity contained in Section 4(1)(b) of the Act are one of the minimal service conditions which must be made available to the employees notwithstanding the financial capacity of the employer to bear its burden and that the said provisions are a reasonable restriction on the right of the employer to carry on his business within the meaning of Article 19(6) of the Constitution, the said provisions are both sustainable and valid. Hence the decision of the High Court has to be set aside.