Case: The Bharatkhand Textile Mfg. Co. Ltd.&amp; Others Vs. The Textile Labour Association,Ahmedabad

the industry. It has been strenuously argued before us that in assessing the extent of the liabilities the actual liabilities accrued as the result of the scheme has not been taken into account and the serious strain imposed on the industry by the imposition of excise duty has also been overlooked; on the other hand, undue importance has been attached to bonus shares and no account has been taken of the industrys obligation to contribute to the State Insurance Scheme. We are not impressed by these arguments. The argument about the actual liability accured is really theoretical and cannot have much practical significance.If it is suggested that in framing a scheme of gratuity the capacity to pay should be determined only if the employer can set apart a fund to cover the whole of the liability theoretically accrued, then gratuity schemes can be very rarely framed. Such schemes are long-term schemes and a fund to cover the total liability in that behalf must inevitably be built up in course of time year by year.In regard to the excise duty the industrial court has rightly pointed out that the imposition of a higher duty was the consequence of the excessive increase in prices of mill cloth and in fact it was levied "to mop off those extra profits". When the prices fall down it is not unlikely that the excise duty may be reduced.In any case the obligation to pay excise duty or to contribute to the insurance scheme, though perhaps relevant, may not have a material bearing on the framing of the scheme of gratuity.Then, as to the bonus shares, it is not right to contend that the industrial court has attributed undue importance to them. All that it has observed is that the issue of bonus shares by a large majority of the mills in addition to good dividends during the war and post-war period is an index to the prosperity enjoyed by the cotton textile industry in Ahmedabad. In our opinion, no criticism can be made against this statement. In this connection it may perhaps be pertinent to observe that the statutory ceiling placed on the agents commission may in the due course assist the mills to some extent in meeting their liability under the scheme.22. The last argument urged against the validity of the scheme is based on the assumption that in working out the preliminary figures before framing the scheme the industrial court has committed an error. What the industrial court has done is to take the information collected by the Association on the earlier occasion, to compare it with the statement prepared by the respondent, and to make a rough estimate about the extent of the industrys liability under the scheme. In considering these statements it is important to emphasis that the Associations calculations have been made not on the basis of basic pay but on the basis of pay including dearness allowance, and that naturally has made considerable additions to the amounts involved. The scheme framed is by reference to the basic wages. This position is not disputed. The other material point which deserves to be mentioned is that the calculations made by the Association proceed on the assumption that most of the employees would seek to retire from employment as soon as they complete fifteen years; service. Such an assumption seems to us to be not warranted at all. It is common ground that employees generally seek employment in textile industry between 18 and 20 years and the age of superannuation is 60. On an average each employee would work 35 to 40 years and so it would be unrealistic to make calculation on the basis that each one of the employees retires as soon as he completes 15 years of service. In the absence of better employment in Ahmedabad it is quite likely that most of the employees would stick on to their jobs until the age of superannuation. The figures collated are in respect of the years 1953, 1954 and 1955. They are collated in seven different columns, and ultimately the percentages of persons who retired during the three respective years are worked out as at 3.13%, 4.13% and 3.84%. The industrial court has observed that the largest number of persons retired voluntarily on payment of gratuity because there was an agreement between the Association and the respondent whereby the respondent agreed to rationalisation which involved retrenchment of staff on condition that the surplus staff retrenched would be given gratuity. It also appears that the retired workmen included a number of employees who voluntarily resigned because they had not completed 15 years of service and were not entitled to gratuity. It is on a consideration of all the relevant facts that the industrial court came to the conclusion that the number of persons who would have been entitled to gratuity under a normal gratuity scheme would probably not have exceeded 2% of the labour force. If it is assumed, as we think it can be safely assumed, that on an average an employee works 35 to 40 years with his employer the said percentage deduced by the industrial court cannot be said to be erroneous. Even so the scheme framed by the industrial court has provided, inter alia, one months basic wage for each completed year of service for the period before the coming into force of the Employees Provident Funds Act, 1952, and half-a-months basic wage for each completed year of service thereafter, subject to a maximum of 15 months basic wages to be paid to the employee or his heirs or executors or nominees as the case may be. This provision which amounts to a departure from the Bombay scheme of gratuity brings out that fact that the provisions made by the Employees Provident Funds Act have been duly taken into account by the industrial court. We are, therefore, satisfied that the scheme framed by the industrial court does not suffer from any infirmities as alleged by the appellants.

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

Explanation:
0[ds]It is common ground that the modification permissible under S. 116A does not mean that the provisions of the award must always be reduced; it may mean even increasing the provisions, and so it is urged by the respondent that the word "modification" should receive a wider denotation in the context of S. 116A. This construction no doubt receives some support from the provision of S. 116A that a party may apply for the modification of the award instead of giving notice for its termination; and the latter clause tends to show that the procedure prescribed by S. 116A is an alternative to the procedure prescribed by S.The industrial court was apparently inclined to put a wider denotation on the word "modification" used in S. 116A.10. We do not think it is necessary to decide this large question of the construction of S. 116A because, in our opinion, in the present case, even if the limited and narrow construction suggested by the appellant is put on the word "modification", the respondents application cannot be said to be outside the purview of the said section. There is no doubt that the claim for gratuity made by the respondent in the earlier proceedings has been rejected by the industrial court and that is an award; but, whether or not the present application seeks for a modification of the said award within the meaning of S. 116A would depend on what the industrial court had decided on the earlier occasion. It is clear that the industrial court did not then consider the merits of the claim at all. It upheld the Associations contention that the matter should not be decided then but may be considered later in view of the fact that the Employees Provident Funds Act had already been passed and the statutory scheme for provident funds was about to come into force.It was on this ground alone that the industrial court rejected the claim as it was then made but it took the precaution of expressly adding that after the introduction of the provident funds scheme it would be open to the respondent or the Association to make a fresh application for the institution of a gratuity fund as it may deem expedient to claim.It would not be unreasonable, we think, to assume that when liberty was thus reserved to the parties to make a fresh application the industrial court had presumably S. 116A in mind. In substance, the effect of the order then passed was that the application was regarded as premature and liberty was reserved to the parties to renew the application if the statutory scheme was thought to be insufficient or unsatisfactory by either of them.In such a case, if the respondent applies to the industrial court for modification of its award it is difficult to accept the argument that the respondent seeks to alter the framework of the award or to change any principle decided in the award. The true position is that by the present application the respondent is asking the court to consider the demand now that the scheme has come into force and is, according to the respondent, insufficient to meet the workmens grievance. What the industrial court then promised to consider after the scheme came into force is brought before it for its decision again. That being the true nature of the award and the true scope of the prayer made by the respondent in its present application it is difficult to hold that the application is incompetent under S.have already referred to the items covered in the earlier proceedings as well as those which are the subject-matter of the present application. It is true that the notice served by the respondent prior to the earlier reference specifically set out the claim for gratuity in four categories of cases of termination of services of the employees, whereas in the present proceedings some other categories are included. The objection raised against the competence of the present application purports to treat the earlier notice in a very technical way and confines the subsequent proceedings taken before the industrial court to the said four categories only.There is no doubt that disputes in regard to industrial matters not covered by an award do not fall within the scope of S. 116 of theis difficult to answer this question in the affirmative.It is well known that a scheme for gratuity is an integrated scheme and it covers all classes of termination of service in which gratuity benefit can be legitimately claimed. Therefore, when the industrial court refused to frame a gratuity scheme in regard to the four categories brought before it on the earlier occasion, in substance its refusal amounted to a rejection of any scheme for gratuity at all; otherwise it is very difficult to assume that having rejected the claim for gratuity in respect of the said four categories it would still have entertained a claim for gratuity on behalf of other categories not included therein. That is why we are inclined to think that though in form the rejection of the demand for gratuity on the earlier occasion was in regard to the four categories specified in the notice, in effect it was rejection in regard to the claim for a gratuity scheme itself.13. It cannot be dispute that if the earlier demand had been for a gratuity scheme pure and simple and no categories had been specified in connection therewith the present application for the modification of the award coupled with a claim for a gratuity scheme in respect of all the categories specified in the application would be within the purview of S. 116 of the Act. That in substance is what was happened in this case according to the finding of the industrial court on this point, and having regard to the unusual circumstances of this case we see no reason to interfere withprovident fund guaranteed by the statute under the statutory scheme is one kind of retirement benefit and since this retirement benefit is now available to the workmen it was not open to the industrial court to provide an additional gratuity scheme; that in substance is theEmployees Provident Funds Act has no doubt been passed for the institution of provident funds for employees covered by it; and the statutory scheme for provident funds is intended to afford to the employees some sort of a retirement benefit; but it cannot be ignored that what the statute has prescribed in the scheme is the minimum to which, according to the Legislature, the employees are entitled; and so in all cases where the industrial courts are satisfied that a larger and higher benefit can be afforded to the employees no bar can be pleaded by virtue of the Provident Funds Act. It is true that after the Act came into force, the industrial courts would undoubtedly have to bear in mind the benefit of the statutory scheme to which the employees may be entitled; and it is only after bearing that factor in mind and making due allowance for it that any additional scheme for gratuity can and must be framed by them; but it is not open to an employer to contend that the Act excludes the jurisdiction of industrial courts to frame an additionalmust accordingly hold that the Industrial Court was right in rejecting the appellants contention that the statutory provision for provident fund under the Employees Provident Funds Act is a bar to the present claim for a gratuityis not disputed that the benefit of gratuity is in the nature of retrial benefit and there can be no doubt that before framing a scheme for gratuity industrial adjudication has to take into account several relevant facts; the financial condition of the employer, his profit-making capacity, the profits earned by him in the past, the extent of his reserves and the chances of his replenishing them as well as the claims for capital invested by him, these and other material considerations may have to be borne in mind in determining the terms of the gratuityour present purpose it is really not necessary to embark upon the academic question as to whether gratuity is a part of deferred wage or not; we will assume that it is not.Even so it would not be reasonable to assimilate the character of the scheme for gratuity to that of a profit bonus and to seek to import the considerations of the Full Bench formula which governs the grant of bonus. A claim for profit bonus is based on the assumption that the employees contribute at least partially to the profits made by the employer and that they are entitled to ask for a share in the said profits in order to bridge the gulf between the waged actually receive by them and a living wage to which they are ultimately entitled. A claim for gratuity is a claim for retrial benefit and it is strictly not a claim to receive a share of the profits at all; and so there would be no scope for importing the several considerations which are relevant in determining the claim for profitwe are not prepared to accept the argument that the claim for gratuity is essentially similar to a claim for profit bonus, and like profit bonus it must always be considered on unit-wise basis. Incidentally we may add that even a claim for profit bonus can and often is settled on industry-wisemay be conceded that when an industry-wise basis is adopted in dealing with a claim like gratuity often enough stronger units of the industry get a benefit while the weaker units suffer athe present economic development of our country we think industrial adjudication would hesitate to adopt an all-India basis for the decision of an industrial dispute like that of gratuity and so, on principle, it would be difficult to take exception to the approach adopted by the industrial court in dealing with the presentwould no doubt have been open to the industrial court to deal with the dispute unit-wise just as it was open to the court to deal with it on an industry-wise basis. As we have already indicated there are several factors in favour of adopting the latter approach though it may be conceded that by adopting the said course some hardship may conceivably be caused to the weakest units in the industry.Having carefully considered this question in all its aspects we are, however, not prepared to hold that the scheme of gratuity under appeal should be set aside on the ground that the industrial court ought to have adopted a unit-wise approach.In this connection it may not be out of place to observe that the cotton textile industry is the premier industry of our country and there is a concentration of a large number of mills in Ahmedabad. A good many of them have capitalised large portions of reserves and documents produced in the present proceedings show that the production has steadily increased and has found a responsive market. There is a gratuity scheme framed on an industry-wise basis in operation in Bombay and a similar scheme appears to have been extended to Nadiad and Khandesh. In fact an award for gratuity has been made on an industry-wise basis even in respect of the textile industry at Coimbatore. Having regard to these facts we think the industrial court was right in observing that "there was no justification why an important textile centre like Ahmedabad should not have a gratuity scheme when the needs of the labour require it and the industry can afford it".20. It is true that in dealing with industrial disputes on industry-cum-region basis, if the region covers the whole of the country industrial adjudication sometimes takes resort to the classification of the constituent units of the industry in question. Industrial adjudication in regard to the fixation of wage-structure in respect of newspapers and banks in the country is an illustration in point. The need for such a classification is not as great when the region happens to be limited in area, though, even in respect of a limited area, in proper case industrial adjudication may adopt the course of classification. In the present case the industrial court took the view that classification was not possible and would be inexpedient. No classification was made in dealing with the textile mills in Bombay, and the industrial court did not feel called upon to make a departure in respect of Ahmedabad. We do not think that this conclusion suffers from anyare not impressed by these arguments. The argument about the actual liability accured is really theoretical and cannot have much practical significance.If it is suggested that in framing a scheme of gratuity the capacity to pay should be determined only if the employer can set apart a fund to cover the whole of the liability theoretically accrued, then gratuity schemes can be very rarely framed. Such schemes are long-term schemes and a fund to cover the total liability in that behalf must inevitably be built up in course of time year by year.In regard to the excise duty the industrial court has rightly pointed out that the imposition of a higher duty was the consequence of the excessive increase in prices of mill cloth and in fact it was levied "to mop off those extra profits". When the prices fall down it is not unlikely that the excise duty may be reduced.In any case the obligation to pay excise duty or to contribute to the insurance scheme, though perhaps relevant, may not have a material bearing on the framing of the scheme of gratuity.Then, as to the bonus shares, it is not right to contend that the industrial court has attributed undue importance to them. All that it has observed is that the issue of bonus shares by a large majority of the mills in addition to good dividends during the war and post-war period is an index to the prosperity enjoyed by the cotton textile industry in Ahmedabad. In our opinion, no criticism can be made against this statement. In this connection it may perhaps be pertinent to observe that the statutory ceiling placed on the agents commission may in the due course assist the mills to some extent in meeting their liability under the scheme.The scheme framed is by reference to the basic wages. This position is not disputed. The other material point which deserves to be mentioned is that the calculations made by the Association proceed on the assumption that most of the employees would seek to retire from employment as soon as they complete fifteen years; service. Such an assumption seems to us to be not warranted at all. It is common ground that employees generally seek employment in textile industry between 18 and 20 years and the age of superannuation is 60. On an average each employee would work 35 to 40 years and so it would be unrealistic to make calculation on the basis that each one of the employees retires as soon as he completes 15 years of service. In the absence of better employment in Ahmedabad it is quite likely that most of the employees would stick on to their jobs until the age of superannuation. The figures collated are in respect of the years 1953, 1954 and 1955. They are collated in seven different columns, and ultimately the percentages of persons who retired during the three respective years are worked out as at 3.13%, 4.13% and 3.84%. The industrial court has observed that the largest number of persons retired voluntarily on payment of gratuity because there was an agreement between the Association and the respondent whereby the respondent agreed to rationalisation which involved retrenchment of staff on condition that the surplus staff retrenched would be given gratuity. It also appears that the retired workmen included a number of employees who voluntarily resigned because they had not completed 15 years of service and were not entitled to gratuity. It is on a consideration of all the relevant facts that the industrial court came to the conclusion that the number of persons who would have been entitled to gratuity under a normal gratuity scheme would probably not have exceeded 2% of the labour force. If it is assumed, as we think it can be safely assumed, that on an average an employee works 35 to 40 years with his employer the said percentage deduced by the industrial court cannot be said to be erroneous. Even so the scheme framed by the industrial court has provided, inter alia, one months basic wage for each completed year of service for the period before the coming into force of the Employees Provident Funds Act, 1952, and half-a-months basic wage for each completed year of service thereafter, subject to a maximum of 15 months basic wages to be paid to the employee or his heirs or executors or nominees as the case may be. This provision which amounts to a departure from the Bombay scheme of gratuity brings out that fact that the provisions made by the Employees Provident Funds Act have been duly taken into account by the industrial court. We are, therefore, satisfied that the scheme framed by the industrial court does not suffer from any infirmities as alleged by the appellants.