Case: Management Of Wenger &amp; Co Vs. Their Workmen(And Vice Versa)

by the gratuity scheme. One is to capitalise the burden on actuarial basis and that would naturally show theoretically that the burden would be very heavy; the other is to look at the scheme in its practical aspect and this would show that that speaking broadly, no more than 3 to 4 per cent of the employees retire every year. It is desirable that in assessing the impact of the gratuity scheme on the financial position of the employer this practical approach should be taken into account.Thus considered, we see no reason to accept Mr. Pathaks argument that the financial position of the employers would be unable to bear the practical burden which the gratuity scheme would impose on them, vide Sone Valley Portland Cement Co. v. Its Workmen, 1962-1 Lab LJ 218 : (AIR 1963 SC 495 ). 26. Turning then to the merits of the scheme we are satisfied that some modifications must be made. The scheme made by the Tribunal provides as under; For service of less than two years. Nil. For continuous service of two years and more, on termination of service of the workman for whatever reason except by way of dismissal for misconduct, involving moral turpitude. Fifteen days basic pay for every year of completed service subject to a maximum of twelve months basic pay The first criticism which Mr. Pathak has made against this provision is that the clause about misconduct involving moral turpitude is unusual and would create complications,. This position is not disputed by the learned Attorney-General. We would, therefore, delete the words "involving moral turpitude" from the said provision. The second criticism made by Mr. Pathak against the provision is that the limit of two years imposed by the provision is unduly liberal. We think this criticism also is well founded. Besides, a distinction must be made between the termination of service caused by the employer and the termination resulting from the resignation given by the employee. We would, therefore, provide that for termination of service cause by the employer the minimum period of service for payment of gratuity should be five years, and in regard to this category of termination of service, we would like to add that if the termination is the result of misconduct which has caused financial loss to the employer, that loss should be first compensated from the gratuity payable to the employee and the balance, if any, should be paid to him. In regard to resignation., we would like to provide that if the employee resigns he would be entitled to get gratuity only if he has completed ten years service or more. The rate prescribed by the Tribunal for the payment of gratuity and the ceiling placed by it in that behalf would remain the same. 26A. There is one more point which still remains to be considered, and that is in regard to the claim for a share in the service charges in respect of the Claridges Hotel. We have already indicted the nature of the directions issued by the Tribunal in that behalf. The Tribunal has held that no direction need the issued in respect of the employees claim for a share in the service charges for a period prior to the date of the award. It has however, purported to issue a direction in respect of the division of the service charges in future, and Mr. Pathak contends that this direction is outside the jurisdiction of the Tribunal because this was not a matter referred to it for its adjudication. Paragraph 1(d) of the reference clearly supports Mr. Pathaks contention. This clause is worded thus:"Are the workmen entitled to share the service charges collected previously by different managements up to the date of reference of this dispute? If so, what should be the percentage and what directions are necessary in this respect? It is plain that the claim which has been referred to the Tribunal for adjudication does not cover a period subsequent to the date of reference. This position is not disputed. We must accordingly set aside the direction issued by the Tribunal in respect of the division of service charges in future." 27. Mr. Pathak no doubt attempted to argue that the directions given by the award in respect of uniforms and holidays should be serviced. We are not impressed by Mr. Pathaks argument on these points. These are matters of detail which it was for the Tribunal to consider on the merits and the grievance made by Mr. Pathak raises no question of law on which we can interfere with the decision of the Tribunal. 28. The last point urged by Mr. Pathak is in regard to what he characterised as retrospective operation of the award. It appears that the present demands were made by the employees on October 1, 1958 and the references were made on September 9, 1959 and December 12, 1959 respectively. The award was pronounced on March 16, 1962 and it has directed that its directions should take effect from January 1, 1961. Technically speaking, this direction cannot be said to be retrospective because it takes effect from a date subsequent to the date of the reference. Under S. 17A(4) of the Industrial Disputes Act. 1947 (No 14 of 1947), it is open to the Industrial Tribunal to name the date from which it should come into operation and in cases where the Industrial Tribunal thinks that it is fair and just that its award should come into force from a date prior to the date of reference, it is authorised to issue such direction. When such a direction is issued, it may be said appropriately that the award takes effect retrospectively. Apart from this technical aspect of the matter, is, in the circumstances of this case, the Tribunal held that the award should take effect not from the date of reference but from a later date which was January 1, 1961, we see no reason why we should interfere with its direction.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]But the test of functional integrality or the test whether one unit can exit without the other, though important in some cases, cannot be stressed in every case without having regard to the relevant facts of that case, and so, we are not prepared to accede to the argument that the absence of functional integrality and the fact that the two units can exist one without the other necessarily show that where they exist they are necessarily separate units and do not amount to one establishmentIt is true that many establishments keep separate accounts and independent balance-sheets for wine shops and restaurants; but that clearly is not decisive because it may be that the establishments want to determine from stage to stage which line of business is yielding more profit. Ultimately, the profits and losses are usually pooled together. Thus generally stated, there is unity of ownership unity of finance, unity of management and unity of labour; employees from the restaurant can be transferred to the wine shop and vice versa. Besides, it is significant that in no case has the establishment registered the wine shops and the restaurants separately under S. 5 of the Delhi Shops and Establishments Act 1954 (No. VII of 1954).In fact, when Mr. Nirula the Secretary of the Employers Association was called upon to register his wine shop separately, he protested and urged that separate registration of the several departments was unnecessary; and that clearly indicated that wine shop was treated by the establishment as one of its departments and nothing more. The failure to register a wine shop as a separate establishment is, in our opinion not consistent with the employers case that wine shops are separate and independent units. Having regard to all the facts to which we have just referred we do not think it would be possible to accept Mr. Pathaks argument that the Tribunal was in error in holding that the wine shops and restaurants form part of the same industrial establishmentsThe Tribunal has carefully examined the relevant balance-sheets and considered the profit and loss position of each establishment for the three years in respect of which bonus was claimed; they are 1956-57, 57-58 and 58-59.In constructing a wage structure, industrial adjudication has undoubtedly to take into account the overall financial position of the employer because a scheme of wage structure including scales of increment is a long-term scheme and before it is framed, the Tribunal must be satisfied that the burden imposed by the scheme would not be beyond the means of the employer. In regard to the minimum wage no such consideration arises because it is the duty of industrial employer to pay the basic minimum to his employees. But when a wage structure is constructed and it provides for increments, the financial position of the employer has to be borne in mind.The Tribunal has recognised this principle and on examining the accounts produced before it, it has come to the conclusion that the establishments in questions have shown uniform prosperity and all of them, except the Delhi Restaurant, can be properly characterised as established concerns. Besides, it has referred to the fact that in the Delhi region, there are various establishments which have pay scales for workmen, though, except for the award made by Mr. Dulat, there were no previous instances of pay scales having been introduced restaurants in the awards or settlements cited before the Tribunal. It was however urged before the Tribunal and the same plea has been repeated before us that the possibility of the introduction of total prohibition in New Delhi should have been borne in mind in considering the problem of wage structure in the present proceedings. We do not think that the award made by the Tribunal in this case can be validly attacked on the ground that the Tribunal refused to attach due importance to the apprehension expressed before it by the employers that total prohibition may soon be introduced in New Delhi and that may impair the prosperity of the trade. The Tribunal has noticed that even after the partial introduction of prohibition the profits of the trade have not shown any adverse effect. On the contrary, they show an upward tendency, and the Tribunal was not satisfied that there was any evidence adduced before it to justify the contention that in the every near future total prohibition would be introduced in New Delhi. It was urged by the employees that all indications pointed to the fact that total prohibition may not be introduced in New Delhi and the Tribunal thought, and we think rightly, that it would be idle to speculate in this matter; if in course of time, total prohibition is introduced and it materially affects the prosperity of the trade, it would be open to the employers to raise a dispute for the reduction in the wage structure and in case they are able to show that as a result of the introduction of total prohibition their financial position is weakened to such an extent that they cannot bear the burden of the wage structure directed by the present award, the matter may have to be examined on the merits. Therefore, we do not think that the hypothetical consideration that total prohibition may be introduced in the near future, can play any part in the decision of the wage problem in the present proceedingsThe decisions of Industrial Tribunals on questions of fact and their conclusions in matters within their discretion are not usually revised by this Court under Art. 136. Besides, the claim made by the employers by way of remuneration to the partners has not been properly established by adequate evidence. That is the conclusion of the Tribunal, and on the record it seems to be well founded. It also appears that in some cases, the amounts of remuneration claimed are not debited in the books of account; but the present claim is made for the purpose of working the Full Bench Formula. Therefore, on a question of this kind, we do not think Mr. Pathak is justified in making a grievance before us under Art. 136It is true that the employees claim additional bonus on this ground; but we are not satisfied that the difference made by a fresh calculation of the Income-tax according to the decision to the amount already awarded by the Tribunal by way of bonus for the respective years in questionAs we have already pointed out the employers conceded that the wage packet in the case of Hotels should be Rs. 70/- p. m. including service charges and in the case of the Restaurants should be Rs. 60/- and the Tribunal has fixed the minimum content of the wage packet at Rs. 65/- p.m. We see no reason to interfere with this decision. The Tribunal has fixed Rs. 35/- as a flat rate for dearness allowance and has provided for appropriate deductions from the said amount for amenities like food residence and tea which the employers provide to some of their employees. We see no reason to interfere with this part of the award as well. The categories of workers into unskilled, semi-skilled and skilled also appear to us to be fully justified, and on the material adduced on the record, no case has been made out against the said categories either23. In our opinion, in dealing with this question, it would not be appropriate to adopt an academic or a doctrinaire approach. In considering the problem of wage structure in regard to hotels and restaurants industrial adjudication has necessarily to adopt a pragmatic approach and in fixing the wage structure and the D. A. it has to take care to see that the legitimate demand of the employees is met without doing in justice to the employer and without acting unfairly by him. If the object of D. A. is to neutralise the rise in the cost of living, it would be purely doctrinaire to ignore altogether the fact that as waiters working in their respective establishments they invariably get some amount of tips from the customs, and so, we think it would not be right to treat the tips received by the waiters as being wholly irrelevant to the decision of the question about the matter of D. A. Similarly, it would not be right to make a calculation about the tips received and treat the said amount as a substitute either whole or partial, for the D. A. itself. All that we can do is to bear in mind the fact that tips are received and make some suitable adjustment in that behalf. It would, of course, not be right to treat these tips as substantially amounting to payments made by or on behalf of the employers, for if that were so, logically, it may be open to the employers to say that the said tips may be taken into account even while fixing a basic wage. That clearly is not and cannot be the employers case. It is true that the amount of tips may vary and in that sense be uncertain,. But if evidence adduced by the parties satisfactorily proves that each waiter would invariably receive a certain amount of tips in the minimum it would not be unfair or unjust to take such a minimum amount into account in determining the quantum of D. A. at a flat rate. Such an approach, we think, would do no injustice to the employees claim for D. A. and would be fair to the employers as well24. We have, therefore, examined the evidence to find out what amount can be reasonably taken to be the minimum which a waiter is bound to get in each one of the establishments before us. As often happens, the witnesses examined by the managements have made overstatements on the point and witnesses examined by the Union have made under-statements. According to the former set of witnesses more than Rs. 50/- are received by the waiter by way of tips every month, whereas according to the latter, between Rs. 10/- to Rs. 15/- are received per month. Some employers claimed that if their waiters were sent out for service, they themselves compensated the waiters for the loss of their tips caused by outside service and paid appropriate amounts to them in that behalf and in support of this claim, evidence, documentary and oral, was adduced. We are satisfied that the said evidence is not reliable and the claim based on it is untenable. Tips are paid by the customers and not by employers in any case. It is common ground that since the introduction of prohibition, tips paid to the employees in the restaurants and hotels have gone down. But it seems to us that there is no difficulty whatever in holding that each one of the waiters gets at least Rs. 10/- p.m. by way of tips. This conclusion may amount to an under-estimate in regard to some of the establishments before us because it is likely that waiters employed in the more prosperous establishments must be receiving by way of tips amounts very much larger than Rs.10/- p.m., but in the absence of adequate and satisfactory evidence in respect of each one of the establishments with which we are concerned. It would not be safe or advisable to make a definite finding that more than Rs. 10/- are received by waiters in each one of these establishments. That being the state of evidence adduced by the employers in the present proceedings, we would content ourselves with accepting the principle that in fixing D. A., a reasonable deduction may be made in respect of waiters on the ground that they receive a certain amount of minimum tips from the customers every day. We are, therefore, inclined to think that in the case of waiters who receive tips, it would not be unfair or unjust to direct that a deduction of Rs. 10/- should be made from Rs. 35/- per month. In the case of waiters who receive food, tea and accommodation from their employers, Rs. 27/- p.m. are already ordered to be deducted from the D. A. In respect of these waiters we direct that only Rs. 8/- should be further deducted on account of tips, because we have no doubt that no deduction can be made on account of these considerations from the basic wageBesides, a distinction must be made between the termination of service caused by the employer and the termination resulting from the resignation given by the employee. We would, therefore, provide that for termination of service cause by the employer the minimum period of service for payment of gratuity should be five years, and in regard to this category of termination of service, we would like to add that if the termination is the result of misconduct which has caused financial loss to the employer, that loss should be first compensated from the gratuity payable to the employee and the balance, if any, should be paid to him. In regard to resignation., we would like to provide that if the employee resigns he would be entitled to get gratuity only if he has completed ten years service or more. The rate prescribed by the Tribunal for the payment of gratuity and the ceiling placed by it in that behalf would remain the same27. Mr. Pathak no doubt attempted to argue that the directions given by the award in respect of uniforms and holidays should be serviced. We are not impressed by Mr. Pathaks argument on these points. These are matters of detail which it was for the Tribunal to consider on the merits and the grievance made by Mr. Pathak raises no question of law on which we can interfere with the decision of the TribunalIt appears that the present demands were made by the employees on October 1, 1958 and the references were made on September 9, 1959 and December 12, 1959 respectively. The award was pronounced on March 16, 1962 and it has directed that its directions should take effect from January 1, 1961. Technically speaking, this direction cannot be said to be retrospective because it takes effect from a date subsequent to the date of the reference. Under S. 17A(4) of the Industrial Disputes Act. 1947 (No 14 of 1947), it is open to the Industrial Tribunal to name the date from which it should come into operation and in cases where the Industrial Tribunal thinks that it is fair and just that its award should come into force from a date prior to the date of reference, it is authorised to issue such direction. When such a direction is issued, it may be said appropriately that the award takes effect retrospectively. Apart from this technical aspect of the matter, is, in the circumstances of this case, the Tribunal held that the award should take effect not from the date of reference but from a later date which was January 1, 1961, we see no reason why we should interfere with its direction.