Case: M/S. Muller &amp; Phipps (India) Ltd Vs. K. C. Sud

Sud, who was a workman of the appellant company, M/s. Muller and Phipps (India) Ltd., was retrenched by the company on 31-1-1958. At that time a reference on the question of introduction of a gratuity scheme for the workmen of the company was pending before the Industrial Tribunal. An application by Sud against this order of retrenchment under S. 33A failed. In the reference above mentioned the Court made an award framing a gratuity scheme in the following terms:"On the death of an employee while in the service of the company, or on his becoming physically or mentally incapable of further service, half a months basic salary or wages each year of continuous service shall be paid to the disabled employees, or if he had died, to his heirs or legal representatives or assignsOn voluntary retirement or resignation of an employee, after five years continuous service, half a months basic salary or wages for each year of continuous serviceOn termination of service by the company, half a months basis salary or wages for each year of completed service."2. The scheme was also made applicable with effect from the date on which the reference had been made, viz., June 28, 1957. It was on the basis of this award that Sud had made his application under S. 33C, his case being that as his retrenchment amounted to termination of service within the meaning of the award he was entitled of half a months basic salary for each year of completed service. Admittedly he had completed two years of service. It is also not disputed that his basic wage at the time of retrenchment was Rs. 80.42 nP. If, therefore he is entitled to have a gratuity in accordance with the scheme of the award the amount due to him will be Rs. 80.42 nP.

Court's reasoning:
This Court there considered in some detail the real nature and object of the retrenchment compensation provided by Section 25F of the Industrial Disputes Act and the nature and object of a gratuity scheme as a retirement benefit. It pointed out that while gratuity is intended to help workmen after retirement to whatever cause the retirement may be due to, the retrenchment compensation is intended to give relief for the sudden and unexpected termination of employment by giving partial protection to the retrenched person and his family to enable them to tide over the hard period of unemployment. The Court also traced the history of development of the industrial law as regards gratuity schemes and retrenchment compensations, and after a full consideration of the question, came to the conclusion that there was nothing in law to prevent a workman from getting double benefit, one under a gratuity scheme and the other as retrenchment compensation. The Court however took care to point out that gratuity schemes may be so framed, whether by consent or by award, that retrenchment compensation is thereunder payable only in lieu of gratuity and again they may be so framed as to provide for payment of gratuity in addition to retrenchment compensation. Accordingly, the Court laid it down that the question as to whether retrenched workmen can claim the benefit of a gratuity scheme in addition to the retrenchment compensation under S. 25F or not would depend on the construction of the material terms of the scheme considered in the light of the provisions of S. 25F of the ActIt is important to notice that the workmen themselves in their statement of claim had urged for a distinct provision for retrenchment in addition to other modes of termination of service. The Tribunal however made no special provision for retrenchment but provided in its scheme of gratuity for three classes of cases, namely, (i) on the death of an employee or on his becoming physically or mentally incapable of further service, (ii) on voluntary retirement or resignation and (iii) on termination of service by the company. Retrenchment, it is true, will fall within the termination of service. That, however, as is clear from the above cases, cannot by itself justify a conclusion that the gratuity that could be claimed under such a scheme in case of retrenchment was in lieu of retrenchment compensation.If the intention was that in cases of retrenchment the gratuity will be in lieu of retrenchment compensation provided under S. 25F the obvious thing would be to make separate provisions for gratuity for retrenchment as such and gratuity for other modes of termination of service. That was the method followed in the award that fell for consideration in Brahmcharis case, 1959-2 Lab LJ 840 : (AIR 1960 SC 257  ). That method had however not been followed in the award that we have to consider here. In this case there is no specific reference in the award to retrenchment as such.The reasonable conclusion from the scheme as drawn up is that the gratuity that could be claimed under this award by retrenched workmen because of the fact that retrenchment is also one kind of termination of service within the meaning of the award was intended to be in addition to the retrenchment compensation and not in lieu thereof7. The decision in Brahmcharis case, 1959-2 Lab LJ 840 : (AIR 1960 SC 257  ), on the special facts of the award therein is therefore of no assistance to the appellant. We are bound to hold on an examination of the award in the present case that the gratuity which the respondent claims on the basis of the award is distinct from and in addition to the retrenchment compensation he has received. We are of opinion therefore that the Tribunal was right in holding that the respondent is entitled to such gratuity even though he has already received payment of compensation for retrenchment in accordance with the provisions of S. 25F of the Industrial Disputes Act.