Case: Sudhir Chandra Sarkar Vs. Tata Iron &amp; Steel Co. Ltd. And Others

stark albeit unpalatable outcome. It is, therefore, necessary to take a leaf out of history bearing on the question of retiral benefits like pension to which gratuity is equated : Burhanpur Tapti Mills Ltd. v. Burhanpur Tapti Mills Mazdoor Sangh, [1965 - I LLJ 453 at 455], wherein this Court observed that :"A scheme of gratuity and a scheme of pension have much in common. Gratuity is a lump sum payment while pension is a periodic payment of a stated sum." Undoubtedly both have to be earned by long and continuous service. 16. For centuries the courts swung in favour of the view that pension is either a bounty or a gratuitous payment for loyal service rendered depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through court. This view held the field and suit to recover pension was held not maintainable. With the modern notions of social justice and social security, concept of pension underwent a radical change and it is now well settled that pension is a right and payment of it does not depend upon the discretion of the employer, nor can it be denied at the sweet will or fancy of the employer : Deokinandan Prasad v. State of Bihar, [1971 - I LLJ, 557], State of Punjab v. Iqbal Singh [1976 - II LLJ 377] and D. S. Nakara v. Union of India [1983 - I LLJ 104]. If pension which is the retiral benefit as a measure of social security can be recovered through a civil suit, we see no justification in treating gratuity on a different footing. Pension and gratuity in the matter of retiral benefits and for recovering the same must be put on par. 17. The question then is : can the court ignore Rule 10 ? If gratuity is a retiral benefit and can be earned as a matter of right on fulfilling the conditions subject to which it is earned, any rule conferring absolute discretion not testable on reason, justice or fair play must be treated as utterly arbitrary and unreasonable and discarded. If rules for payment to gratuity became incorporated in the Standing Orders and thereby acquired the status of statutory condition of service, an arbitrary denial referable to whim, fancy or sweet will of the employer must be rejected as arbitrary. Section4 of the 1946 Act, which confers power on the certifying officer or appellate authority to adjudicate upon the fairness or reasonableness of the provisions, would enable this Court to reject that part of Rule 10 conferring absolute discretion on the employer to pay or not to pay the gratuity even if it is earned as utterly unreasonable and unfair. It must be treated as ineffective and unenforceable. It is well-settled that if the Certifying Officer and the appellate authority under the 1946 Act while certifying the Standing Orders has power to adjudicate upon the fairness or reasonableness of the provisions of any Standing Orders, this Court in appeal under Art. 136 shall have the power to do the same things when especially it is called upon to enforce the unreasonable and unfair part of the Standing Order. It, therefore, follows that the part of Rule 10 which confers absolute discretion on the employer to pay gratuity even if it is earned, at its absolute discretion is ineffective and unenforceable. This approach does not require any precedent but if one is needed the decision of this Court in Western India Match Company Ltd.s case (supra) clearly rules to that effect. In that case, the company relied on a special agreement which was to some extent in derogation of the provisions of the certified Standing Order. The court observed that to uphold such special agreement would mean giving a go-by to the principle of three-party participation in the settlement of the terms of employment, as represented by the certified Standing Orders and, therefore, the inconsistent part of the special agreement is ineffective and unenforceable. The claim to absolute discretion not to pay gratuity even when it is earned is a hangover of the laissez fair days and utterly inconsistent with the modern nations of fair industrial relations and, therefore, it must be rejected as ineffective and hence unenforceable. 18. Viewed from a slightly different angle, our Constitution envisages a society governed by rule of law. Absolute discretion uncontrolled by guidelines which may permit denial of equality before law is the antithesis of the rule of law. Absolute discretion not judicially reviewable inheres the pernicious tendency to be arbitrary and is, therefore, violative of Art. 14. Equality before law and absolute discretion to grant or deny benefit of the law are diametrically opposed to each other and cannot co-exist. Therefore, also the conterment of absolute discretion by Rule 10 of the Gratuity Rules to give or deny the be rejected as unenforceable. 19. The High Court reversed the decree of the trial court on the sole ground that Rule 10 confers an absolute discretion on the respondent company to pay or not to pay gratuity at its sweet will. Once Rule 10 is out of the way, the judgment of the High Court has to be reversed. Accordingly, this appeal succeeds and will have to be allowed. 20. The trial court decreed the plaintiffs suit with costs and with interest at 6% per annum. Interest at 6% per annum has become utterly irrelevant in these days with devolution of the rupee. Further, in our opinion, the company declined to meet its obligation on an utterly unreasonable stand and denied to the plaintiff for a period of a quarter of a century what the plaintiff was legitimately entitled without the slightest shadow of doubt. Therefore, while allowing the appeal in order to compensate the loss suffered by the plaintiff who died before enjoying the fruits of his decree, we direct that the interest shall be paid at 15% per annum and full costs throughout.

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

Explanation:
1[ds]If gratuity is a retiral benefit and can be earned as a matter of right on fulfilling the conditions subject to which it is earned, any rule conferring absolute discretion not testable on reason, justice or fair play must be treated as utterly arbitrary and unreasonable and discarded. If rules for payment to gratuity became incorporated in the Standing Orders and thereby acquired the status of statutory condition of service, an arbitrary denial referable to whim, fancy or sweet will of the employer must be rejected as arbitrary. Section4 of the 1946 Act, which confers power on the certifying officer or appellate authority to adjudicate upon the fairness or reasonableness of the provisions, would enable this Court to reject that part of Rule 10 conferring absolute discretion on the employer to pay or not to pay the gratuity even if it is earned as utterly unreasonable and unfair. It must be treated as ineffective and unenforceable. It is well-settled that if the Certifying Officer and the appellate authority under the 1946 Act while certifying the Standing Orders has power to adjudicate upon the fairness or reasonableness of the provisions of any Standing Orders, this Court in appeal under Art. 136 shall have the power to do the same things when especially it is called upon to enforce the unreasonable and unfair part of the Standing Order. It, therefore, follows that the part of Rule 10 which confers absolute discretion on the employer to pay gratuity even if it is earned, at its absolute discretion is ineffective and unenforceable. This approach does not require any precedent but if one is needed the decision of this Court in Western India Match Company Ltd.s case (supra) clearly rules to that effect. In that case, the company relied on a special agreement which was to some extent in derogation of the provisions of the certified Standing Order. The court observed that to uphold such special agreement would mean giving a go-by to the principle of three-party participation in the settlement of the terms of employment, as represented by the certified Standing Orders and, therefore, the inconsistent part of the special agreement is ineffective and unenforceable. The claim to absolute discretion not to pay gratuity even when it is earned is a hangover of the laissez fair days and utterly inconsistent with the modern nations of fair industrial relations and, therefore, it must be rejected as ineffective and hence unenforceable18. Viewed from a slightly different angle, our Constitution envisages a society governed by rule of law. Absolute discretion uncontrolled by guidelines which may permit denial of equality before law is the antithesis of the rule of law. Absolute discretion not judicially reviewable inheres the pernicious tendency to be arbitrary and is, therefore, violative of Art. 14. Equality before law and absolute discretion to grant or deny benefit of the law are diametrically opposed to each other and cannot co-exist. Therefore, also the conterment of absolute discretion by Rule 10 of the Gratuity Rules to give or deny the be rejected as unenforceable19. The High Court reversed the decree of the trial court on the sole ground that Rule 10 confers an absolute discretion on the respondent company to pay or not to pay gratuity at its sweet will. Once Rule 10 is out of the way, the judgment of the High Court has to be reversed. Accordingly, this appeal succeeds and will have to be allowed20. The trial court decreed the plaintiffs suit with costs and with interest at 6% per annum. Interest at 6% per annum has become utterly irrelevant in these days with devolution of the rupee. Further, in our opinion, the company declined to meet its obligation on an utterly unreasonable stand and denied to the plaintiff for a period of a quarter of a century what the plaintiff was legitimately entitled without the slightest shadow of doubt. Therefore, while allowing the appeal in order to compensate the loss suffered by the plaintiff who died before enjoying the fruits of his decree, we direct that the interest shall be paid at 15% per annum and full costs throughout.