Case: The Akola Electric Supply Co- Vs. J. N. Jarare &amp; Ors

This appeal by, special leave is against an award of the Industrial Court at Nagpur tinder s. 38 (a) of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947 dated April 29, 1961. By an earlier award dated December 4, 1959, the Industrial Court ordered the payment of gratuity to the employees of the appellant Company on certain rates. The award was to come into force from December 4, 1959. OD an application by the Company under Art. 227 of the Constitution, the Nagpur High Court set aside the industrial Courts order and remanded the matter for reconsideration of the question after examining the financial condition of the Company. After remand the Industrial Court took evidence of both parties as regards the financial condition of the Company and came to the conclusion that the Company was in a very sound financial position and could easily bear the burden of payment of gratuity to the extent of Rs. 50, 000/- or even more. Accordinglyv, the Industrial Court made a fresh award directing the payment of gratuity to the Companys employees at the rate of 1 months average wage the average wage to be calculated for the period December 1, 1-958 to November 30, 1959 to every employee who had to his credit uninterrupted continuous service of not less than five years on termination of his service, except by dismissal on account of misconduct. The award was directed to come into force from April 29,t Company was a licensce for supplying electric energy to the public within the area approximating to the Municipal limits of Akola. The license expired on December 6, 1959. Prior, to this the State Electricity Board had by a notice dated November 27, 1957, intimated its intention to exercise its option to purchase the undertaking on the expiry of the license. It was after this notice had been served and it was known that the Company would be closing its business on December 6, 1959, that the claim for gratuity in respect of which the Industrial Court has made its award, was first made. Indeed, the very application for referring this and other disputes for arbitration contained the frank statement that it was in view of the impending closure of business that the claim for gratuity was being made. It is interesting to notice that the earlier award by tile Industrial Court was made only two days before the Companys license expired and the business was taken over by the Bombay Electricity Board. The award now under appeal was made more than a year after the Company had closed its

Court's reasoning:
These observations emphasise the position that gratuity schemes are always made in the expectation of the industry continuing to function for a long time to come. It has to be noticed that the provision for gratuity scheme is not based on any statutory enactment, but has been evolved by industrial adjudication as a step to achieve social justice. In doing so, industrial adjudication has proceeded on the basis that only a small percentage of the workmen retire in any particular year and so the provision for paying gratuity to retiring workmen would ordinarily be not an unreasonable burden for the employer to be asked toposition is materially altered however when the industry is expected to close in the immediate future, or has actually closed. In such a case the entire body of workmen will "retiring" at one and the same time so that in substance, though not in name, the provision of gratuity would be equivalent to the grant of retrenchment compensation, in addition to what is provided for in the statute. We can find no justification for this in the principles of socialhave therefore come to the conclusion that the Industrial Court acted wrongly in directing any gratuity to be paid by the Company to its employees.