Case: Management, Ghaziabad Engineering Co (P) Ltd Vs. Its Workmen

makes a departure from the normal rule which is adopted in industrial awards. In British Paints (India) Ltd. v. Its Workmen, (1966) 2 SCR 523 = (AIR 1966 SC 732 ) this Court while introducing a gratuity scheme for the first time in the concern directed that the amount of gratuity shall be related to the basic wage or salary and not to the consolidated wage including dearness allowance. A similar order was made in May and Baker (India) Ltd. v. Their Workmen, (1961) 2 Lab LJ 94=(AIR 1967 SC 678 ). It is true that in British Indian Corporation v. The Workmen, (1965) 10 Fax LR 244 (SC), an award made by the Tribunal fixing quantum of gratuity on gross salary i.e., basic wage plus dearness allowance was upheld by this Court. The Court affirmed that the usual pattern in fixing the gratuity is to relate it to the basic wage, but refused to interfere with the order because the practice in that concern was to fix gratuity on the consolidated wage.8. Similarly, in Hindustan Antibiotics Ltd. v Their Workmen, (1967) 1 Lab. LJ 114=(AIR 1967 SC 948 ), the Tribunal directed the employer to pay gratuity at the rate of one half of wages for each month including dearness allowance but excluding house rent and all other allowances for each completed year of service subject to a maximum of wages for ten months. In rejecting the claim of the employers for relating gratuity to the basic wage, this Court observed:"If the industry is a flourishing one, we do not see any reason why the labour shall not have the benefit of both the schemes i.e., the employees, provident fund and the gratuity scheme. Gratuity is an additional form of relief for the workmen to fall back upon. If the industry can bear the burden, there is no reason why he shall not be entitled to both the retirement benefits. The Tribunal considered all the relevant circumstances the stability of the concern, the profits made by it in the past, its future prospects and its capacity and came to the conclusion that, in the concern in question, the labour should be provided with a gratuity scheme in addition to that of a provident fund scheme. There was no justification to disturb this conclusion."9. In The Remington Rand of India Ltd. v. The Workmen C. A. 2105 of 1967, D/- 11-8-1967 (SC) this Court declined to interfere with the order of the Tribunal awarding gratuity related to the consolidated wage including dearness allowance "in view of the flourishing nature of the concern, the enormous profits it was making, the reserves it had built up as also in view of the fact that it was paying gratuity to executives on the basis of consolidated wages." In Delhi Cloth and General Mills Co., Ltd. v. The Workmen C. A. No. 2168 of 1967, D/- 27-9-1968 (SC) this Court had to consider whether gratuity payable to workmen in the textile industry in the Delhi region should be related to the consolidated wage. After referring to the decisions which were brought to the notice of the Court, it was observed that:"it is not easy to extract any principle from these cases: as precedents they are conflicting.....The Tribunal has failed to take into account the prevailing pattern in the textile industry all over the country...It is a countrywide industry: and in that industry except in one case to be presently noticed, gratuity has never been granted on the basis of consolidated wages."10. The Court after referring to the schemes framed in respect of the industries in Bombay and Ahmedabad and other industries concluded that"determination of gratuity is not based on any definite rules. In each case it must depend upon the prosperity of the concern, needs of the workmen and the prevailing economic conditions examined in the light of the auxiliary benefits which the workmen may get on determination of employment."11. There is no clear evidence on the record, and no precedents have been brought to our notice, to justify a departure from the normal rule that the quantum of gratuity is related not to the consolidated wage packet but to the basic wage. A departure may be made from the normal rule, if there be some strong evidence or precedent in the industry. or conduct of the employer or other exception circumstances to justify that course. In the absence of such evidence, we are of the view that gratuity should be related to the basic wage and not to the consolidated wage packet. In the present case it is found that the financial position of the Company is sound but there is no evidence that the company is "making abnormally high profits" nor is there any evidence that in its sister concerns or in other engineering concerns in the region there is a practice of awarding gratuity related to consolidated wages.12. It was urged on behalf of the company that even though the workmen had, in the claim made by them, demanded a scheme of gratuity benefit at the rate of 15 days wages for each year of service in case of death or retirement on attaining the age of superanuation or on becoming mentally or physically unfit for further service, the Tribunal had awarded gratuity at the rate of one months wages for each year of service subject to a maximum of 15 months wages. But the claim was made on the footing that the wages were to include dearness allowance. When that claim is not accepted, we cannot hold theworkmen bound by the multiples.13. We make no modification in cl. (1) of the scheme. We modify the scheme in so far as it relates to the dearness allowance and direct that for the last sentence of the gratuity scheme the following shall be substituted."The word wages in the scheme shall mean basic salary or emoluments excluding dearness allowance and other allowances and benefits payable to the workman which he had last drawn".

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

Explanation:
0[ds]6. The Tribunal has awarded dearness allowance at the flat rate of Rs. 3 for every 10 point rise in the cost of Consumer Price Index. The rise is not related to the quantum of basic wage or consolidated wage. It is a flat uniform rate applicable to every workman.The Tribunal was of the view that the allocation between the basic wage and the dearness allowance was "not fair", but for the purpose of the present reference, the question is academic because dearness allowance is not related to the quantum of salary that the workmen receive. The argument that the rise will operate to give to the workmen besides the additional dearness allowance, percentage increase in dearness allowance already paid as part of the consolidated wage cannot be accepted. We do not therefore see any reason to interfere with the order passed by the Tribunal with regard to the dearness allowance "at the rate of Rs. 3 for every 10 point rise in the Consumer Price Index".The Court after referring to the schemes framed in respect of the industries in Bombay and Ahmedabad and other industries concluded that"determination of gratuity is not based on any definite rules. In each case it must depend upon the prosperity of the concern, needs of the workmen and the prevailing economic conditions examined in the light of the auxiliary benefits which the workmen may get on determination of. There is no clear evidence on the record, and no precedents have been brought to our notice, to justify a departure from the normal rule that the quantum of gratuity is related not to the consolidated wage packet but to the basic wage. A departure may be made from the normal rule, if there be some strong evidence or precedent in the industry. or conduct of the employer or other exception circumstances to justify that course. In the absence of such evidence, we are of the view that gratuity should be related to the basic wage and not to the consolidated wage packet. In the present case it is found that the financial position of the Company is sound but there is no evidence that the company is "making abnormally high profits" nor is there any evidence that in its sister concerns or in other engineering concerns in the region there is a practice of awarding gratuity related to consolidated wages.We make no modification in cl. (1) of the scheme. We modify the scheme in so far as it relates to the dearness allowance and direct that for the last sentence of the gratuity scheme the following shall beword wages in the scheme shall mean basic salary or emoluments excluding dearness allowance and other allowances and benefits payable to the workman which he had last drawn".