1. Dispute concerning the fixation of retirement age and the implementation of a gratuity scheme for clerical and factory workmen. (Para 1 , 2 )
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1965 Supreme(SC) 290
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, V. RAMASWAMI AND P. SATYANARAYANA RAJU, JJ.
M/s. British Paints (India) Ltd., Appellant
Versus
Its Workmen, Respondents.
Civil Appeals Nos. 246 and 287 of 1965.
Advocates appeared
Mr. M. C. Setalvad, Senior Advocate, (Mr. D. N. Mukherjee, Advocate, with him), for Appellant (In C. A. No. 246 of 1965) and Respondent (In C. A. No. 287 of 1965).
Mr. A. S. R. Chari, Senior Advocate, (Mr. B. P. Maheshwari, Advocate, with him), for Respondent (In C. A. No. 246 of 1965) and Appellant (In C. A. No. 287 of 1965).
Advocates:
A.S.R.CHARI, B.P.MAHESHVARI, D.N.MUKHERJI, M.C.SETALVAD
A.S.R.CHARI, B.P.MAHESHVARI, D.N.MUKHERJI, M.C.SETALVAD
Retirement age should generally be 60 years due to increased longevity, unless work is particularly arduous. Gratuity for voluntary resignation requires a longer qualifying period to ensure retention, and its quantum should be based on basic wages excluding dearness allowance when other retiring benefits exist.
Headnote:(A) Industrial Disputes - Retirement Age - In cases where no retirement age was previously in force, fixing the age of retirement at 60 years is reasonable considering the general improvement in health standards and increase in longevity (Paras 3, 5). Generally, there should be no difference in the age of retirement between existing workmen and those employed in the future unless special circumstances justify such a difference (Para 4). Furthermore, no distinction should be made between clerical/subordinate staff and factory workmen unless the work in the factory is of a particularly arduous nature that justifies a lower retirement age (Para 7).
(B) Gratuity Scheme - Minimum Service - To prevent workmen from frequently changing employers after completing a short minimum service, a longer qualifying period is justified for those opting for voluntary retirement or resignation before reaching the age of superannuation (Paras 8, 11).
(C) Gratuity Scheme - Quantum - The usual pattern is to fix the quantum of gratuity on the basis of basic wages, excluding dearness allowance, especially when employees are already receiving other retiring benefits such as a provident fund (Paras 12, 14).
Facts of the case:
A dispute between a company and its workmen was referred to a tribunal regarding the age of retirement and the introduction of a gratuity scheme. The tribunal had fixed the retirement age at 58 years for clerical and subordinate staff and 55 years for factory workmen. It also introduced a gratuity scheme with a minimum service requirement of five years for all categories of termination, including voluntary resignation, and included dearness allowance in the calculation of basic wages for the gratuity quantum.
Findings of Court:
The court modified the tribunal's award, fixing the retirement age at 60 years for all workmen, whether existing or future, and regardless of whether they are clerical, subordinate, or factory staff. Regarding the gratuity scheme, the court increased the minimum qualifying service for voluntary retirement or resignation to ten years and excluded dearness allowance from the definition of basic wages for calculating the gratuity quantum.
Issues: Whether the retirement age should be uniform across different categories of employees and whether the minimum service period and the components of basic wages in the gratuity scheme were appropriately fixed.
Ratio Decidendi: The court reasoned that increased longevity and health standards justify a retirement age of 60. A distinction in retirement age for factory workers is only permissible if the work is exceptionally arduous, which was not the case here. For gratuity, a longer qualifying period for resignation encourages employee retention, and excluding dearness allowance from the quantum is standard practice when double retiring benefits (gratuity and provident fund) are provided.
Result: Appeals partly allowed.
Legal Category Hierarchy
Table of Contents
2. Workmen sought retirement age of 60 and higher gratuity; company proposed age 55 and contested the gratuity scheme's qualifying period and wage components. (Para 2 , 8 , 12 , 15 )
3. Increased longevity justifies retirement at 60; lower ages for factory workers require proof of arduous work; gratuity schemes should prevent frequent job-hopping and follow standard wage patterns. (Para 5 , 7 , 8 , 12 )
4. Retirement age should be uniform for existing and future employees unless arduous work justifies a difference; gratuity for resignation requires longer qualifying service to ensure employee stability. (Para 4 , 7 , 8 , 11 )
5. Retirement age fixed at 60 for all; gratuity qualifying service for resignation increased to ten years; dearness allowance excluded from basic wage for gratuity calculation. (Para 7 , 11 , 14 , 16 )
6. What is the appropriate retirement age when no prior age was fixed in a company?
In the absence of a prior retirement age, 60 years is considered fair and proper given improvements in health standards and increased longevity, unless special circumstances justify a lower age. (Para 3 , 5 )
7. Can factory workmen be subject to a lower retirement age than clerical staff?
Yes, but only if the work is of a particularly arduous nature. In the absence of such evidence, retirement age should be uniform across different categories of staff to ensure efficiency and experience. (Para 7 )
8. Why is a longer minimum service period often required for gratuity in cases of voluntary resignation?
A longer minimum period is prescribed for voluntary retirement or resignation to discourage employees from leaving concerns frequently after completing only a short qualifying service, thereby encouraging stability. (Para 8 )
9. Should dearness allowance be included in the calculation of basic wages for gratuity?
Generally, the usual pattern is to fix gratuity on basic wages excluding dearness allowance, especially when employees already receive other retiring benefits such as a provident fund. (Para 12 , 14 )
Judgement
WANCHOO, J.: These two appeals by special leave arise from the same award of the Seventh Industrial Tribunal, West Bengal, and will be dealt with together. Two matters in dispute between the management and the workmen were referred to the tribunal relating to (i) the age of retirement of the workmen at the head office and the factory of the company and (ii) the introduction of a gratuity scheme for workmen employed at the head office and the factory. The tribunal fixed the age of retirement for clerical and subordinate staff at 58 years and for workmen in the factory at 55 years. The tribunal also introduced a gratuity scheme after considering the objections raised to the draft-scheme proposed by the company of the two appeals one is by the company relating to the gratuity scheme and the other by the workmen relating to the age of retirement as well as to the gratuity-scheme.
2. We shall first consider the question of age of retirement. It may be mentioned that there was no retirement age in force in this company and so the position when the reference was made was that the workmen could continue to work so long as they were physically or mentally fit. The workmen contended that the age of retirement both for the head office and factory workmen should be fixed at 60 years. The company, however, proposed that the age of retirement should be 55 years for all workmen. The tribunal as already indicated has fixed the age of retirement at 58 years for clerical and subordinate staff and 55 years for factory workmen and has apparently relied on the decision of this Court in Workmen of Jessop and Co. Ltd. V. Jessop and Co. Ltd. , 1964-1 Lab LJ 451 (SC).
3. Now this is a case where there was no age of retirement before there was no age of retirement before the reference was made and the workmen whether at the head office or at the factory were all entitled to work so long as they were physically or mentally fit. So far as the existing workmen are concerned, we think that the tribunal should have fixed the age of retirement at 60 years both for the factory-workmen as well as head office workmen. It is enough in this connection to refer to the decision of this Court in Guest, Keen, Williams (Private) Ltd. v. P. J. Sterling (1960) 1 SCR 348: 1959-2 Lah LJ 405, where in a similar situation this Court fixed the age of retirement at 60 years in the case of existing workmen.
4. Then there is the question as to future workmen and whether their age of retirement should also be fixed at the same level as in the case of existing workmen. We are of opinion that generally speaking there should not be any difference in the age of retirement of existing workmen and others to be employed in future in a case like the present unless there are special circumstances justifying such difference. In this connection our attention is drawn to the case of Guest, Keen, Williams (P.) Ltd., (1960) 1 SCR 348 : 1959-2 Lab LJ 405, where the age of retirement of future workmen was 55 years. In that case, however, the age of retirement of future workmen was fixed at 55 years by the Standing Order and the question whether that age of retirement should be changed was not before this Court for consideration. All that this Court had to consider in that case was whether the age of retirement of existing employees, before the Standing Order fixing the age of retirement at 55 years was introduced, should be 60 years or not. In the present company so far there is no age of retirement and unless there are valid and cogent reasons for making a difference in the age of retirement of existing workmen and those employed in future, the future workmen should also have the benefit of the same age of superanuation.
5. Considering that there has been a general improvement in the standard of health in this country and also considering that longevity has increased, fixation of age of retirement at 60 years appears to us to be quite reasonable in the present circumstances. Age of retir
