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1961 Supreme(SC) 14
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, K.N. WANCHOO AND K.C. DAS GUPTA, JJ.
Jardine Henderson Ltd., Appellants
Versus
Their Employees, Respondents.
Civil Appeals Nos. 239 and 240 of 1960, dated 13-1-1961.
Advocates appeared
Mr. M. C. Setalvad Attorney-General for India, M/s. Sukumar Ghose and B. N. Ghose, Advocates, with him, for Appellants (In C. A. No. 239) and Respondents (In C. A. No. 240); Mr. N. C. Chatterjee, Senior Advocate, M/s. K. P. Basu and P. K:. Chatterjee Advocates, with him, for Respondents (In C. A. No. 239) and Appellants (In C. A. No. 240).
B.N.GHOSH, K.P.BASU, M.C.SETALVAD, N.C.CHATTERJI, P.K.CHATTERJI, SUMUMAR GHOSE
The financial capacity of the employer is a relevant factor in determining whether to increase the burden of a gratuity scheme.
Headnote:
RETIRING BENEFITS - INDUSTRIAL DISPUTES ACT, 1947 - SECTION 10(1)(d) - GRATUITY SCHEME - DEDUCTION OF COMPANY'S CONTRIBUTION TO PROVIDENT FUND - FINANCIAL CAPACITY OF EMPLOYER - INCREASE IN GRATUITY - REDUCTION IN WAGE-STRUCTURE - JUSTIFICATION.
Fact of the Case:
The company and its employees represented by two unions had disputes regarding scales of pay, dearness allowance, and retiring benefits. The Industrial Tribunal awarded one single retiring benefit in the form of contributory provident fund with a contribution on either side of 10% of the basic pay for clerical staff and 61/4% of the basic wage for the subordinate staff. The company appealed against the increase in gratuity, while the workmen appealed against the scales of pay, dearness allowance, and retiring benefits.
Finding of the Court:
The Supreme Court held that the Tribunal erred in increasing the gratuity without considering the company's financial position, which had deteriorated since the Mercantile Tribunal's award in 1949. The Court found that the company's financial position did not justify an increase in the gratuity burden. The Court also upheld the Tribunal's findings that there was no case for an increase in the scales of pay or dearness allowance for the subordinate staff, and that the different rates of retiring benefits for clerical and subordinate staff were justified.
Issues: 1. Whether the Tribunal erred in increasing the gratuity without considering the company's financial position? 2. Whether there was a case for an increase in the scales of pay or dearness allowance for the subordinate staff? 3. Whether the different rates of retiring benefits for clerical and subordinate staff were justified?
Ratio Decidendi: 1. The financial position of the employer must be considered before increasing the burden of a gratuity scheme. 2. The Tribunal's finding that the company's financial position had deteriorated since 1949 was not unjustified. 3. The different rates of retiring benefits for clerical and subordinate staff were justified based on their different commitments and the prevailing practice in Bengal.
Final Decision: The company's appeal was allowed, and the provision for deducting the company's contribution to provident fund from the gratuity payable was restored. The workmen's appeal was dismissed.
Judgment
WANCHOO, J. : These two appeals by special leave will be dealt with together, as they arise out of the same award of the Third Industrial Tribunal, West Bengal. There were disputes between Messrs. Jardine Henderson Ltd. (hereinafter called the company) and their employees represented by two unions (hereinafter called the workmen) with respect to a large number of matters. These disputes were referred to the Third Industrial Tribunal by the West Bengal Government on November 9, 1957. In the present appeals, however, we are concerned with only three matters out of those referred: (1) Scales of pay, (2) Dearness allowance, and (3) Retiring benefits. The company s appeal is with respect to retiring benefits while the workmen s appeal is with respect to all the three matters.
2. It is not necessary to set out the case of the parties in detail, as it will appear from what we say with respect to each matter. We shall, therefore, take the three points which survive in these appeals one by one and begin with the company s appeal with respect to retiring benefits.
3. The company was a party before the Mercantile Tribunal, which gave an award in June 1949 with respect to a large number of matters in dispute between the mercantile firms in Calcutta and their employees. It appears that the Mercantile Tribunal almost uniformly awarded one single retiring benefit in the form of contributory provident fund with a contribution on either side of 10 per cent of the basic pay in the case of clerical staff and 61/4 percent of the basic wage for the subordinate staff. Only in cases where the employers voluntarily introduced more than one scheme, the Mercantile Tribunal could not and did not reduce the benefit. But in such eases where there was double benefit, it was provided that the company s contribution to the provident fund would be deducted from the gratuity payable, (see James Finlay and Co. Ltd. Employees Union v. James Finlay and Co. Ltd. Calcutta, 1957 Lab AC 154). That pattern seems to be prevalent in Bengal. The workmen, however, claim that the company should not make any deduction from the gratuity with respect to its contribution to the provident fund. In fact this means in case of those firms which are paying double benefit, an increase in the amount of gratuity. The tribunal allowed this claim considering that the demand of the workmen was reasonable. The company in its appeal contends that the tribunal was wrong in thus increasing the gratuity, particularly as it had found when dealing with the scales of pay that the financial position of the company had deteriorated since the award by the Mercantile Tribunal in 1949 and a reduction in the wage-structure would be justified and not an increase as claimed by the workmen. Consequently it refused the claim of the workmen for an increase in the wage-structure, though it did not reduce it. The contention on behalf of the company is that the tribunal seems to have overlooked this finding of its own when it decided to increase the burden on the company with respect to gratuity, when it said that it appeared that the company had also financial capacity to bear the burden. Reliance in this connection was placed on The Indian Hume Pipe Co. Ltd. v. The Workmen, (1960) 2 SCR 32: where it was pointed out that the financial position of the employer must he considered and the tribunal must keep in mind whether the burden of the scheme can be borne by him before it proceeds to frame a scheme for gratuity. In the present case, the question is not of framing a scheme for gratuity but increasing the burden placed on the company over and above what the scheme already in force provides. In such cases also the same principle, namely, the capacity of the employer to bear the financial burden must always be kept in mind. It is submitted on behalf of the company that when the tribunal found that the financial position of the company had deteriorated since 1949 and there was even a case for reduction i
