A gratuity scheme cannot be imposed on an industry that is going to close or has already closed.

Judgement

DAS GUPTA, J. : This appeal by special leave is against an award for the Industrial Court at Nagpur under Section 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. On an application by the Company under Article 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. Accordingly, the Industrial Court made a fresh award directing the payment of gratuity to the Company s employees at the rate of 1/2 month s average wages-the average wage to be calculated for the period December 1,1958 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, 1961.

2. The Appellant Company was a licensee 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 incense. 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 the Industrial Court was made only two days before the company s 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 business.

3. The main contention urges before us in support of the appeal is that the Tribunal was not justified in imposing on the Company a gratuity scheme at a time when it had already ceased to carry on its business. It is argued that gratuity- schemes are planned on a long term basis, the ruling principle being to make the employer to pay retrial benefits to such of its employees as retire from year to year. The framing of a gratuity scheme when an industry is on the verge of closure or after it has closed is, it is urged, wholly unjustified. In our opinion, there is considerable force in this contention.

4. It has been laid down by this Court that the statutory provision for payment of retrenchment compensation is no bar to the framing of a gratuity scheme. The question was fully considered by this Court in Indian Hume Pipe Co. v. Its Workmen, (1960) 2 SCR 32 where this Court pointed out that while gratuity is intended to help workmen after retirement to whatever cause the retirement, may be due to, 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. It has also been held by this Court in the Bharatkhand Textile Mfg., Co., Ltd. v. Textile Labour Assocn., (1960) 3 SCR 329 that the existence of a Provident Fund Scheme