The method of calculating gratuity for monthly rated employees under S.4(2) of the Payment of Gratuity Act, 1972 may be based on the number of working days in a month, and the interpretation of 'average of the basic wage' supports this calculation method.

1. 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 S 4 (2) of the Payment of Gratuity Act, 1972 (hereinafter referred to as the Act). S.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 S.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."

2. 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 Art.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.

3. In civil appeal 480 of 1977 (The Maharana Mills Limited-appellant, v. Shri Gopal Das Ladhabhai Kakkad - respondent) 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

4. 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 years, of service and the only yardstick provided is that the rate of wages last drawn by an employee concerned shall be utilised and on th