MANAGEMENT, CHITAVALSAH JUTE MILLS LTD.

A v.

WORKMEN OF CHITAVALSAH JUTE MILLS

February 2, 1968

(G. K. MITTER AND K. S. HJ!GDE, JJ.)

Industrial Dispute-Gratuity scheme framed by Ti-ibunal-Comiderations in framing scheme.

The appellant was a jute mill. The Industrial Tribunal framed a gra tuity scheme for its workers. It was challenged by tbe appellant before this Cou'rt in an appeal under Art. 136 of the Constitution. Two contentions were urged, namely: (i) tbat the wage board was unable to recommend a gratuity scheme for the jute industry and hence tbere 'was no justi fication to frame the impugned scheme; (ii) in view of the losses incurred by tbe appellant during the years 1960-65, no additional burden should have been cast on it by introducing a gratuity scheme.

HELD : (i) The Wage Board's recommendation pertained to the jute industry as a whole and not to anv individual industrial unit. It cannot be understood as recommending tbat there should be no gratuity scheme for the employees in any particular unit in that industry. What was re levant to find out was whetber tbe appellant could bear tb-, additional burden. [10 BJ

(ii) The Tribunal recommended the gratuity scheme after taking into consideration the financial position of the appellant as well as the fact that in a sister concern such a scheme was in existence. The losses suffered by tbe appellant were considered by the Tribunal to he a passing phase.

What is of essence is tbe profit makin~ capacity of the concern. In determining that question one has to take into consideration the paid up capital of the company, its reserves, its earnings in the past and its futlll'e prospects. .f>. practical view of the question has to he taken. [10 D, G]

In the light of these principles and on the ma!erial placed before the Tribunal it was not possible to hold that the Tribunal's conclusion was without any just basis. [12 A] ·

National Iron & Steel Co. Ltd. & Ors. v. State of West Bengal & Anr.

F (1967] 2 S.C.R. 391 and Calcutta Insurance Co. Ltd. v. Their Workmen, (1967] 2 S.C.R. 596, relied on.

CML APPELLATE JURISDICTION: Civil Appeal No. 1627 of 1967.

Appeal by special leave from the Award dated March 31, 1967 of the Industrial Tribunal, Andhra Pradesh in Industrial Dispute No. 55 of 1965.

H. R. Gokhale and D. N. Gupta, for the appellant.

M. K. Ramamurthi, Shyamala Pappu and Vineet Kumar, for the respondents.

The Judgment of the Court was delivered by Hegde, J. This appeal has been brought to this Court by special leave. It arises from the decision of the Industrial Tribunal,

H •

CIIlTAVALSAH MILLS v. WORKMEN (Hegde, J.) 9

Andhra Pradesh, Hyderabad. The only question that arises for decision is whether on the basis of the material on the record there was any justification for framing a gratuity scheme for appellant's staff.

The admitted facts are these : The appellant concern is having about 500 looms.

It has a subscribed capital of a little over 35 lakhs. Its built up reserve is over thirty lakhs. In three out of the six years during the period 1960-65 it has suffered substantial losses. Out of the "remaining three years, in ooo year It made a profit of about Rs. 45,000 in another year about Rs. 13,000

and in 1962 over rupees twelve lakhs. The annual expenses of the appellant's ncern under the head 'salaries, wages and bonus' are nearly 4 7 lakhs.

It was found by the tribunal that the appellant concern and the Nellimarla Jute Mills are sister concerns. Both of them are under a single management, viz.. M/ s. Mcleod and Company, Calcutta. They are located in the same region, the distance between the two being about 25 miles. In Nellimarla Jute Mills a gratuity scheme for the staff is in existence and that in addition to provident fund benefits. Our attention wa& not invited, to any material on record to show that these findings are not correct. In the appellant concern also there is a provident fund scheme for the staff.

The appellant iri its counter-affidavit filed before the tribunal admitted that it had always been the policy of the management to introduce identical terms of employment for the workmen at Nellimarla and Chitavalsah. From the material before us it is not possible to find out the financial position of the Nellimarla mills. We ascertained from the learned counsel for the appellant that the appellant concern had made a profit of over a lakh F of rupees in 1966. The tribunal has found and that finding was not challenged before us that the additional burden to be borne by the appellant as a result of the gratuity scheme framed by it is about Rs. 3,000 per year.

On behalf of the appellant , two contentions were advanced in opposition to the pfOJXl"ed gratuity scheme. They are ( 1 ) the wage board was unable to recommend a gratuity scheme for the jute industry and hence there was no justification to frame the impugned scheme, and (2) in view of the losses incurred by the appellant during the years 1960-65, no additional burden should have been cast on it by introducing a gratuity scheme.

So far as the Wage Board recommendations is concerned, it pertains to the jute indnstry as a whole. After taking into consideration the importance of the jute industry for the national IASup. CI/68-2.

10 SUPllEMB COU'P.T lll!PO&TS

[1968] 3 S.C.R.

eoonomy and the difficulties currently experienced by that industry, the Wage Board thought that it would be inappropriate to oompel the industry to introduce a gratuity scheme for its employees. This recommendation relates to the industry as a wholo and not to any individual industrial unit. That recommendation

cannot be understood as recommending that there should be no gratuity scheme for the employees in any particular unit in that industry. What is true of an industry as a whole need not necessarily be so in respect of a unit therein. That position in law was not disputed by Mr. Gokhale, learned counsel for the appellant.

Therefore in considering the appropriateness or otherwise of the impugned scheme, we have to primarily consider its repercussion on the appellant. What is relevant to find out is whether the appellant can bear the additional burden and whether in the circumstances of the case there is justification for throwing that burden on it.

The tribunal has recontmended a gratuity scheme for the staff of the appellant after -taking into consideration its financial position as well as the fact that in the sister concern, i.e., the Nellimarla Mills such a scheme is in existence. It is n0 more in controversy that in determining the conditions of service of the industrial workers in any unit, it' is necessary to bear in mind the conditions prevailing in similar units in that region.

Generally speaking the basis for such a determination is industry-cum-region .

The appellant concern is an economic unit. Jute mills having 300 or more looms are considered as economic units. The appellant has 500 looms. Similarly the Nellimarla Mills have also got

500 looms. As seen earlier, the appellant is a big concern. Its paid up capital is over Rs. 35 lakhs. Its reserve is nearly as much as its paid up capital. This shows that in the past the appellant was a prosperous concern. It is true that it did suffer losses in some years in the recent past. But the question is whe.ther it is a temporary phase or not, The tribunal has come to the conclusion

that it is a passing phase. It is well settled that in drawing up enduring schemes like gratuity schemes temporary losses or gains should not be taken into consideration. What is of the essence is the profit making capacity of the concern. In determining that G question one has to take into consideration the paid up capital of the company, its reserves, its earnings in the past alld its future prospects.

A practical vew of the question has to be taken.

In National Iron and Steel Co. Ltd. and others v1 State of West Bengal and another(1 ), this Court speaking through one of H us (Mitter, J.) quoted with approval the following passage in


CIUTAVALSAH MILLS V. WORKMEN (Hegde, ].) 11

Burhanpur Tapti Mills Ltd. v. B. T. Mills Mazdoor Sangh [(1965)

1LU453]: ·

". . . there are two general methods of fixing . the terms of a gratuity scheme. It may be fixed on the basis of industry-cum-region or on the basis of units.

Both systems are admissible but regard must be had to the> surrounding circumstances to select the right basis Emphasis must always be laid upon the financial position of the employer and his profit-making capacity whichever method is selected", and it must be further seen ''whether the industrial court was right in appraising the financial condition and the profitmaking capacity of the company. A scheme for gratuity no doubt imposes a burden on the finances of the concern but the pressure is ex facie distributed over the years for ii is limited to .the number of retirements each year. Tue employer is not required to provide the whole amount at once. He may create a fund, if he likes and pay from the interest which accrues on a capitalised sum determined actuari

ally. This is one of providing the money. Ordinaril~ the payment is made eachyear to those who retire. T• judge whether the financial position would bear th strain the average number of retirements per year mu be found out. This is one part of the inquiry. 'T' next part of the inquiry is to see whether the emploi

can be expected to bear the burden from year to yei.

The present condition of his finances, the past history and the future prospects all enter into the appraisal of his ability."

In Calcutta Insurance Co. Ltd. v. Their Workmen('), this Court observed :

"On the financial aspect of a gratuity scheme, we were referred to the case of Wenger & Co. v. Their workment [ (1963) II LU 403]. There it was observed by this Court that the problem of the burden imposed by the gratuity scheme could be looked at in two ways.

One was to capitalise the burden on actuarial basis which would show theoretically that the burden would be very heavy; and the other was to look at the scheme in its practical aspect and find out how many employ~

retire every year on average.

Accrdmg to this Court, it was this. practical approach which ought to be taken into account."

(I) (1967] 2 S.C.R. 596.

12 SUPREME COURT llBPOllTS [1968j 3 S.C.R..1

In the light of the principles noted above and on the material A. placed before the tribunal it is not possible to hold that the tribunal's conclusion was without any just basis.

For the reasons mentioned above this appeal fails and the same is dismissed with costs.

G.C. 8 Appeal dismissed.