Full Judgment Text
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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.
227 of the Constitution the High Court observed that a
worker received a 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 and, therefore,
gratuity payable to him should be calculated on this basis.
Dismissing the employers’ appeals,
^
HELD: The view taken by the authorities, and upheld by
the High Court, is not in any way unreasonable. Although a
month is understood to mean 30 days, the manner of
calculating gratuity payable under the Act to employees who
worked for 26 days a month followed by the High Court cannot
be called perverse. [67C]
Treating monthly wages as wages for 26 working days is
not new or unknown. The expression "average of the basic
wage" occurring in an award has been interpreted by this
Court to 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 to the workman. [67D &
H]
Delhi Cloth and General Mills Company Ltd. v. Workmen
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and others etc., [1969]]2 SCR 107, referred to.
JUDGMENT:
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.
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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.
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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
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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 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.
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
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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
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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
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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.
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