LawDistill
Supreme Court of India

SHRI DIGVIJAY WOOLLEN MILLS LTD. ETC vs MAHENDRA PRATAPRAI BUCH ETC on 23 July, 1980

Cites 1 provisionsCites 0 judgmentsCited by 2
Official PDFBench Alak Chandra Gupta, Nand Lall Untwalia
PETITIONER:
SHRI DIGVIJAY WOOLLEN MILLS LTD. ETC.
Vs.
RESPONDENT:
MAHENDRA PRATAPRAI BUCH ETC.
DATE OF JUDGMENT23/07/1980
BENCH:
GUPTA, A.C.
BENCH:
GUPTA, A.C.
UNTWALIA, N.L.
CITATION:
1980 AIR 1944 1981 SCR (1) 64
1980 SCC (4) 106
CITATOR INFO :
R 1984 SC1842 (4,5,7,10,12)
ACT:
Payment of Gratuity Act, 1972-Section 4(2)-Scope of-
Gratuity how calculated.
HEADNOTE:
Section 4(2) of the Payment of Gratuity Act, 1972
provides that for every completed year of service or part
thereof in excess of six months, the employer shall pay
gratuity to an employee at the rate of 15 days’ wages based
on the rate of wages last drawn by the employee concerned.
The employers sought to pay gratuity by dividing the
workman’s monthly wages by 30 and computing the 15 days’
wages on that basis but the workman demanded that his
monthly wages should be taken as what he got for 26 working
days and not by taking half of his wages in a month of 30
days.
The Controlling Authority upheld the workman’s
contention. In dismissing the employer’s petition under Art.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1088 of 1976 and 480 of 1977.

Appeals from the Judgments and Orders dated 19-4-1976 and 12-10-1976 of the Gujarat High Court in S.C.A. No. 495/76 and S.C.A. No. 1641/76 respectively.

P.R. Mridul, P.H. Parekh and C.B. Singh and Miss Vineeta Caprihan for the Appellant in CA No. 480/77.

Gobind Das, A.N. Karkhanis and T. Sridharan and Mrs. Sunanda Bhandare for the Respondent in CA No. 480/77.

Y.S. Chitale, P.H. Parekh, R. Karan Jawala and Miss Vineeta Caprihan for the Appellant in CA No. 1088/76.

Y.M. Tarkunde, K.L. Hathi and P.C. Kapur for the Respondent in CA No. 1088/76.

Shanker Ghosh, G.B. Pai, and D.N. Gupta for the Intervener. (Superintendent, Mines and Quarries, Bisra Stone Lime Co. Ltd. & Anr.)

Anil Kumar Gupta for the Intervener (Baba Jha Bhai Talekar).

The Judgment of the Court was delivered by

GUPTA, J. .A common question arises for consideration in these two appeals relating to the mode of calculating fifteen days’ wages of a monthly rated employee under section 4(2) of the Payment of Gratuity Act, 1972 (hereinafter referred to as the Act). Section 4(2) provides:

"For every completed year of service or part

thereof in excess of six months, the employer shall pay

gratuity to an employee at the rate of fifteen days’

wages based on the rate of wages last drawn by the

employee concerned:

Provided that in the case of a piece-rated

employee, daily wages shall be computed on the average

of the total wages received by him for a period of

three months immediately preceding the termination of

his employment, and, for this purpose, the wages paid

for any overtime work shall not be taken into account:

Provided further that in the case of an employee

employed in a seasonal establishment, the employer

shall pay the gratuity at the rate of seven days’ wages

for each season."

"Wages" has been defined in section 2(s) of the Act as

follows:

""wages" means all emoluments which are earned by

an employee while on duty or on leave in accordance

with the terms and conditions of his employment and

which are paid or are payable to him in cash and

includes dearness allowance but does not include any

bonus, commission, house rent allowance, overtime wages

and any other allowance."

It is not necessary to state the facts in any great detail. In both cases the respondent was a monthly-rated employee and the appellant, a public limited company, was his employer. In Civil Appeal No. 1088 of 1976 (Shri Digvijay Woollen Mills Limited-appellant v. Shri Mahendra Prataprai Buch-respondent) the respondent ceased to be an employee on attaining the age of superannuation after completing 19 years of service. The appellant company calculated the amount of gratuity payable to him on the basis that fifteen days’ wages was half of the monthly wages last drawn by him. The respondent demanded an additional sum as gratuity on the ground that his monthly wages should be taken as what he got for 26 working days, his daily wages should be ascertained on that basis and his fifteen days’ wages worked out accordingly, not by just taking half of his wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30. The Controlling Authority under the Act accepted the respondent’s contention and his decision was affirmed by the appellate authority. A division bench of the High Court of Gujarat at Ahmedabad summarily dismissed the petition under Article 227 of the Constitution made by the appellant company challenging the decision of the authorities under the Act. The learned Judges however gave reasons in support of the order made. The appeal before us is by special leave.

In Civil Appeal 480 of 1977 (The Maharana Mills Limited-appellant v. Shri Gopal Das Ladhabhai Kakkadrespondent) the respondent resigned his job after a little over 22 years of service. The appellant company paid him gratuity calculating his daily wages by dividing his monthly wages by 30 and computing fifteen days’ wages on that basis. Here also the respondent claimed an additional sum as gratuity and the basis of the claim was the same as in the other appeal. The Controlling Authority accepted the respondent’s contention and the appellate authority affirmed his decision following the view taken by the Gujarat High Court in the other case. In this case also the Gujarat High Court summarily rejected the petition made by the appellant company challenging the decision of the authorities under the Act. This appeal however is brought on a certificate granted by the High Court.

In dismissing the petition in Digvijay Woollen Mills case the division bench of the Gujarat High Court observed as follows:

"The employee is to be paid gratuity for every

completed year of service and the only yardstick

provided is that the rate of wages last drawn by an

employee concerned shall be utilised and on that basis

at the rate of fifteen days’ wages for each year of

service, the gratuity would be computed. In any factory

it is well known that an employee never works and could

never be permitted to work for all the 30 days of the

month. He gets 52 Sundays in a year as paid holidays

and, therefore, the basic wages

and dearness allowance are always fixed by taking into

consideration this economic reality........A worker

gets full month’s wages not by remaining on duty for

all the 30 days within a month but by remaining on work

and doing duty for only 26 days. The other extra

holidays may make some marginal variation into 26

working days, but all wage boards and wage fixing

authorities or Tribunals in the country have always

followed this pattern of fixation of wages by this

method of 26 working days."

The view expressed in the extract quoted above appears to be legitimate and reasonable. Ordinarily of course a month is understood to mean 30 days, but the manner of calculating gratuity payable under the Act to the employees who work for 26 days a month followed by the Gujarat High Court cannot be called perverse. It is not necessary to consider whether another view is possible. The High Court summarily dismissed the petition of the appellant in both the appeals before us and upheld the decision of the authorities under the Act. We are not inclined to interfere with the decision of the High Court because it seems to us that the view taken by the authorities is not in any way unreasonable or perverse. Incidentally, to indicate that treating monthly wages as wages for 26 working days is not anything unique or unknown, we may refer to a passage from the judgment of this Court in Delhi Cloth and General Mills Company Ltd. v. Workmen and other etc.(1) which disposed of several appeals arising out of an award made by the Industrial Tribunal, Delhi. In the award schemes were framed relating to the payment of gratuity. The expression "average of the basic wage" occurring in the schemes was explained by this Court as follows:

"It was also urged by Mr. Ramamurthi that the

expression "average of the basic wage" in the

definition of "wages" in Cl. 4 of the Schemes is likely

to create complications in the implementation of the

Schemes. He urged that if the wages earned by a workman

during a month are divided by the total number of

working days, the expression "wages" will have an

artificial meaning and especially where the workman is

old or disabled or incapacitated from rendering

service, gratuity payable to him will be substantially

reduced. We do not think that there is any cause for

such apprehension. The expression "average of the basic

wage" can only mean the wage earned by a workman during

a month divided by the number of days for which he has

worked

and multiplied by 26 in order to arrive at the monthly

wage for the computation of gratuity payable. Counsel

for the employers agree to this interpretation."

In the view we take we do not find it necessary to consider the decisions of some of the High Courts cited at the bar taking one view or the other on the question involved in these appeals; also, the decisions based on some provisions of the Minimum Wages Act and other statutes which were relied on by either side are in our opinion not relevant on the question of computation of fifteen days’ wages under section 4(2) of the Payment of Gratuity Act.

The appeals are dismissed, in civil appeal 480 of 1977 with costs, in civil appeal 1088 of 1976 this Court while granting special leave on September 22, 1976 had directed the appellant to pay the costs of the appeal in any event accordingly respondent Mahendra Prataprai Buch will be entitled to his costs. P.B.R. Appeals dismissed.