Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 15
PETITIONER:
MANAGEMENT OF WENGER & CO.
Vs.
RESPONDENT:
THEIR WORKMEN(And Vice Versa)
DATE OF JUDGMENT:
11/12/1962
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
WANCHOO, K.N.
GUPTA, K.C. DAS
SHAH, J.C.
CITATION:
1964 AIR 864 1963 SCR Supl. (2) 862
CITATOR INFO :
R 1965 SC 839 (3)
R 1966 SC 305 (47)
RF 1966 SC 732 (10)
F 1967 SC1206 (5)
E 1967 SC1286 (14)
E 1968 SC1076 (9)
RF 1969 SC 360 (38)
E 1970 SC 919 (8,36)
R 1970 SC1421 (16)
RF 1972 SC 343 (20)
F 1974 SC1132 (13)
RF 1976 SC2303 (1)
RF 1981 SC1685 (2)
ACT:
Industrial Dispute-Hotels and Restaurants-Whether wine shops
are part of the Hotel establishment-Financial position of
employer and wage Structure-Bonus-Remuneration of partners-
Extent and Scope of interference of this Court in appeal-
Firm whether a legal person-Tips-whether to be excluded in
the matter of D.A.Gratuity scheme-Whether justified when
provident fund scheme available-Misconduct-Involving moral
turpitude-Retrospective operation of award-Nature of the
Tribunal’s power-Constitution of India, Art. 136-Industial
Disputes Act, 1947 (14 of 1947), 8. 19A (4).
HEADNOTE:
An industrial dispute arising out of the demands made by the
employees against 13 Hotel and Restaurant institutions in
Delhi was -referred for adjudication to the Industrial
Tribunal and they were heard together with another reference
made to it concerning the disputes in the case of two other
hotels. The award given by the Tribunal in these two
references gave rise to the present four appeals by special
leave, two of which had been filed by the employees and the
other two by the employers.
The main contentions in the appeals were the following: it
was contended on behalf of the employers that the Tribunal
was in error in dealing with the two hotels and eleven
restau. rants together inasmuch as they were not similar in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 15
character. Their next contention was that the Tribunal
committed another error in treating the wine shops as part
of the restaurant esta. blishment. Thirdly it was contended
that in constructing the wage structure the Tribunal did not
consider properly the financial position of the employers.
The next contention was that the Tribunal erred in reducing
the amount of remuneration claimed by the employers for the
different partners who took active part in the management of
their respective,establishments. It was further contended
on their behalf that since each one of the workers got Rs.
50/-to 60/- by way of tips no
863
D.A. should have been awarded to the waiters. Another con.
tention was that in view of the fact that Employees
Provident Fund Scheme had already been introduced in these
establishments the introduction by the award of a gratuity
scheme was not justified. It was the case of the employers
that even if such a scheme was justified on principle the
scheme as contained in the present award is bad on merits.
It was further contended that the directions of the Tribunal
regarding the decisions of the service charges in the future
was outside the jurisdiction of the Tribunal, because this
was not a matter referred to it for adjudication. They
lastly contended that the Tribunal had no power to give
retrospective operation to the award.
The employees contended, among other things, that the bonus
awarded was inadequate on the ground that the calculation
made by the Tribunal in respect of income-tax claimed by the
employees as a prior charge are obviously inconsistent with
the decisions of this Court in recent case of Tulsi Das
Khimji v. Their Workmen, [1963] 1 S.C.R. 675.
Held, that though the nature of the service rendered in
Hotels is in some particulars different from that of the
Restaurants, both the establishments are constituents of the
catering trade. Taking into consideration that they are
situated in similar localities and carry on the same
business it is desirable that terms and conditions of
service of the employees working in them should as far as
possible be uniform; such uniformity is conducive to
industrial peace and harmony and to better, efficient and
satisfactory management.
The question whether there is functional intregrality
between two units has to be decided according to the facts
of each case. Absence of functional integrality and the
fact that the two units can exist one without the other do
not necessarily show that where they exist they are
necessarily separate units and do not constitute one
establishment.
Associated Cement Co. Ltd. v. Their Workmen, (1960) 1 L.
L.L.J. 1, Pratap Press v. Their Workmen, (1960)1 L.L.J. 497,
Pakshiraj Studios v. Its Workmen, (1961) II L.L.J. 380,
South Indian Millowners’ Association v.’ Coimbatore District
Textile Workers Union, (1962) 1 L. L. J. 223, Fine Knitting
Co. Ltd. v. Industrial Court, (1962) 1 L. L. J. 271 and
D.C.M. Chemical Works v. Its Workmen, (1962) 1 L.L.J. 388.
Wine shops and Restaurants form part of the same
establishment because there is unity of ownership, unity of
864
finance, unity of management and unity of labour and they
are not separately registered.
Where a wage structure is constructed and it provides for
increments the financial position of the employer has to be
considered. The hypothetical consideration that total
prohibition may be introduced in the near future, cannot
play any part in the decision of the wage problem in the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 15
present case. It would be open to the employers to raise a
dispute for the reduction in the wage structure in case they
are able to show that as a result of the introduction of
total prohibition their financial position is weakened to
such an extent that they cannot bear the burden of the wage
structure directed by the award.
When this court entertain appeals in industrial matters
under Art. 136 of the Constitution it does not act as a
court of appeal on facts. It is only where general
’questions of law are raised that this Court feels called
upon to pronounce its decision on them.
A firm is not a legal person within the meaning of the
Industrial Disputes Act. It is the partners of the firm who
are the employers.
Tulsidas Khimji v. Their Workmen, [19631 1 S.C.R. 675,
referred to.
It would not be right to treat the tips received by the
waiters as being wholly irrelevant to the decision of the
question about the matter of D.A. But it would not be right
to make a calculation about the tip; received and treat the
said amount as a substitute either whole or partial for the
D.A. itself. What can be done is to bear in mind the fact
that tips are received and make some suitable adjustment in
that behalf.
State Bank of India v. Their Workmen, (1939) 2 L.L J. 205
and Morthaclav v. Regent Street Florida Restaurant, (I 951)
2 K.B. 277, distinguished.
Workmen of M/s. A. Fingo’s Ltd. v. M/s. A. Fingo’s Ltd.,
(1953) L.A.C. 480, referred to.
The object intended to be achieved by the Provident Fund
Scheme is not the same as the object of the gratuity scheme
and in any case where the financial position of the employer
justi. fies the introduction of both benefits, there is no
reason why the employers should not get the benefits of both
the schemes.
865
Bharatkhand Textile Mfg. Co. Ltd. v. Textile Labour
Association, Ahmedabad, (1960) 2 L.L.J. 21 and Garment
Cleaning Works v. Its Workmen, [1962] 1 S.C.R. 71, followed.
For the termination of service caused by the employer the
minimum period of service for payment of gratuity should be
five years and if the employee resigns he would be entitled
to get gratuity only if he has completed ten years service
or more. If the termination is the result of misconduct
which has caused financial loss to the employer that loss
should be first compen. sated from the gratuity payable to
the employee.
Since the direction of the Tribunal for the decision of the
service charges in future is not covered by the terms of
reference that direction is invalid.
Under s. 17A (4) of the Industrial Disputes Act, 1947, it is
open to the industrial Tribunal to name the date from which
it should come into operation.
JUDGMENT:
CIVIL APPELLATE JURISDTCTION: Civil Appeals Nos. 609 and 610
of 1962.
AND
Civil Appeals Nos. 622 and 623 of 1962.
Appeals by special leave from the award dated March 16.
1962, of the Industrial Tribunal, Delhi, in 1. D. Nos. 581
and 620 of 1959.
G.S. Pathak, Veda Vyasa, B. Datta, J. B. Dadachanji, 0.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 15
C. Mathur and Ravinder Narain, for the appellants (in C. A.
Nos. 609 and 610 of 1962) and the respondents (in C.A. Nos.
622 and 623 of 1962).
M.C. Setalvad, Attorney-General for India and Janardan
Sharma, for the respondents (in C. A. Nos. 609 and 610 of
1962) and for the appellants (in C.A. Nos. 622 and 623 of
1962).
1962. December 11. The judgment of the Court was delivered
by
866
GAJENDRAGADKAR, J.-An industrial dispute arising out of ten
demands made by the employees against 13 Hotel and
Restaurant institutions in New Delhi, was referred by the
Chief Commissioner, Delhi to the Industrial Tribunal for
adjudication. Reference in Ii. D. No. 581 of 1959 which
was made on September 9, 1959, included two Hotels-Clari-
dge’s Hotel and Nirula Hotel-, whereas reference in I. D.
No. 620/1959 which related to United Coffee House was made
on December 12, 1959. These two references were
consolidated by the Tribunal and were heard together. Out
of the demands made by the employees, three demands were
rejected by the Tribunal ; they were demands Nos. 4, 9 and
10. Demand No. 4 was in regard to medical treatment, No. 9
was in regard to the revision of the hours of work of
Chowkidars and No. 10 was in regard to the recognition or
appointment of Central Negotiating Committee on Association
or Union level. The other demands have been partially
allowed. The principal amongst these demands were a claim
for a wage structure with adequate provision for increment
in scales, provision for Provident Fund and Gratuity and
Bonus for the years 1956-57, ’57-58 and 58-59. There were,
other subsidiary demands to which reference would be made
later. The award pronounced by the Tribunal in these two
references has given rise to four appeals by special leave
before this Court. Appeals Nos. 609-610,/1962 have been
preferred by the employers, whereas appeals Nos. 622 and
623/1962 have been filed by the employees.
It would be convenient to set out briefly the broad features
of the directions issued by the Tribunal in respect of the
employees’ claims. The Tribunal has examined the employees’
claim with regard to bonus for the three years in question.
It took the claim for bonus in respect of each one of the
employers, it examined the financial position of the
employer for the respective years and determined the
867
question as to the available surplus by the application of
the Full Bench Formula in each individual case. Claims made
by the employers for deduction of certain items were
examined in the light of the comments made by the employees
in respect of them. The usual prior charges were taken into
account, and on determining the available surplus,
directions were issued for the payment of bonus for the
three respective years. In some cases, the employer has
been asked to pay bonus for all the three years, while in
some others the employer has been asked to pay bonus for one
or two years according as the available surplus justified or
did not justify the award of bonus for the particular year.
The Tribunal then proceeded to deal with the other demands
made by the employees. The claim made by the employees for
suitable uniforms and other apparel according to the nature
of the duties of individual workman was, in substance,
rejected by the Tribunal. It has, however, ordered that all
the managements, with the exception of Delhi Restaurant,
should give winter uniforms consisting of a woollen coat and
a pair of woollen trousers to Waiters, Bearers, Page Boys,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 15
Lift Boys, Peons and Chowkidars and Butlers once in three
years. Similarly, the managements have been asked to give
to ’Masalchis, Sweepers and Malis a woollen jersy once in
three years.
The Tribunal then examined the claim for additional leave
facilities and held that there was no justification for
granting separately sick leave as such. Three national
holidays were allowed by the employers on the January 26,
August 15, and October 2. The Tribunal has held that three
more holidays should be allowed, one for Holi, one for
Dussehra and one for Diwali.
On the question of the introduction of Provi. dent Fund
Scheme and the, Cratuity Scheme, the
868
Tribunal noticed the fact that the P. F. Scheme had been
introduced by the employers in accordance with the
requirements of the relevant statute. The employers’ case
that in view of the fact that a P.F. Scheme had been
introduced, no Gratuity Scheme should be framed, was
rejected and a provision has been made for the introduction
of the Gratuity Scheme.
The Tribunal then proceeded to consider the vexed question
about the construction of a suitable wage structure, and in
dealing with this problem, the Tribunal first examined the
point as to what should be the minimum wage in those
concerns. It appears that before the Tribunal it was
conceded by the managements that the total pay packet in the
case of Hotels should be Rs. 70/- p.m. inclusive of service
charges and in respect of Restaurants Rs. 60/p.m. he
Tribunal came to the conclusion that, on the whole, it would
be fair and reasonable if the minimum total wage packet
includes Rs. 65/- p.m. Rs. 30/- being the minimum basic wage
and Rs. 351being a flat dearness allowance payable to each
one of the employees. Having thus determined the minimum
content of the total wage packet, the Tribunal took into
account the fact that several establishments gave food and
accommodation to some of their employees and it has
accordingly directed that for food Rs. 15/- should be
deducted from the D. A. for accommodation Rs. 51- should be
deducted and Rs. 7/- or Rs. 3/50 nP. should be deducted for
tea according as tea was given twice or once. In other
words, having fixed the flat rate of Rs. 35/- for the
payment of D.A. the Tribunal provided for appropriate
deductions for amenities which the employers gave to their
employees in this trade.
The Tribunal then classified the workmen into unskilled,
semi-skilled and skilled, and in the last category it
provided for two grades Grade II and Grade I. Having
thus classified the employees in three
869
categories, the Tribunal prescribed a wage scale for each
one of them. In respect of this wage scale, the Tribunal
has given certain appropriate directions as to the
adjustment of the employees in the new wage scale. One of
the important directions given in that behalf is on the
usual lines that no workman should be prejudicially affected
by this process of adjustment and that if he was getting
higher emoluments than he would be entitled to by virtue of
the adjustment in the new wage scale, he would continue to
get the higher emoluments.
Then the Tribunal considered the question as to whether the
award should be given retrospective effect and it held that
it should come into effect as from January 1, 1961, the
award having been pronounced on March 16, 1962.
The employees in the Claridge’s Hotel had made a demand for
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 15
a share in the service charges collected by the employer.
The Tribunal held that for the period prior to the
reference, the employer had paid to the employees about 3
months’ wages out of the service charges and so, it took the
view that no further direction was required in respect of
the said period. It however, proceeded to issue a direction
to the management of the Claridge’s Hotel that from April 1,
1962, it should distribute 85 per cent of the service
charges collected by it among the workmen rateably according
to and on the basis of the basic wage drawn by’ each one of
them during the relevant year. That, in brief, is the
nature of the directions issued by the Tribunal in respect
of the demands which have been partially allowed.
The first point which Mr. Pathak for the employers has urged
before us is that the Tribunal was in error in dealing with
the two Hotels and eleven Restaurants together. The
argument is that the Hotels and Restaurants are not similar
in character
870
so as to justify the employees’ claims made against the two
sets of establishments to be tried together. Service in
Hotels is usually non-stop 24 hours’ service: in regard to
hotels, residence is provided for a number of employees, the
nature of the business is different and the nature and
extent of the expenses incurred are not also the same.
Therefore, it is urged that the Tribunal committed a basic
error in dealing with the two sets of establishments
together.
We are not impressed by this argument. It is significant
that the history of industrial adjudication in respect of
catering establishments in New Delhi shows that restaurants
and hotels have been grouped together for the purpose of one
adjudication in the past. It appears that in 1950, a
similar industrial dispute in respect of 14 catering
establishments was referred to Mr. Dulat; amongst them were
3 Hotels and 11 Restaurants. In fact, some of the Restau-
rants in the present proceedings were included in that
reference. Besides, there is no doubt that though the
nature of the service rendered by Hotels is in some
particulars different from that of the Restaurants, both the
establishments are constituents of a catering trade. In
fact, Mr. Nirula is the Secretary of the Association whose
membership is open to both Hotels and Restaurants. It will
be noticed that all the Restaurants included in the refe-
rence, except the Delhi Restaurant which is situated at
Karolbagh, work in Connaught Place, and Claridge’s Hotel is
situated in Aurangzeb Road which is also an important
locality. Thus, the situation of the Restaurants and the
Hotels which have been included in the present reference
shows that they are carrying on the same business in about
the same locality and it is desirable that terms and
conditions of service of the employees working in them
should, as far as possible, be uniform. Such uniformity is
not only conducive to peace and harmony amongst the
employees and their employers, but would be
871
helpful to the managements themselves because it would tend
to avoid migration of labour from one establishment to
another. It is true that it might have been possible to
classify these restaurants according to the extent of their
custom and their general financial position and standing in
the trade : but no material has been produced before the
Tribunal in that behalf and no attempt appears to have been
made to suggest to the Tribunal that it would either be po-
ssible or appropriate to make any such classification. That
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 15
is why we think Mr. Pathak is not justified in attacking the
award on the ground that in approaching the problem, it has
considered all the establishments together.
The next point which has been strenuously pressed before us
by Mr. Pathak on behalf of the employers is that in dealing
with the financial position of the managements, the Tribunal
has committed an error inasmuch as it has assumed that the
wine shops and the restaurants form part of the same
establishment. It appears that in several cases the same
employer conducts a restaurant and a wine shop; and the
argument is that in determining the terms and conditions of
service in these establishments, wine shops should have been
treated as separate units,-distinct from the restaurants.
The question as to whether industrial establishments owned
by the same managements constitute separate units or one
establishment has been considered by this Court on several
occasions. .-’Several factors are relevant in deciding this
question. But it is important to bear in mind that the
significance or importance of these relevant factors would
not be the same in each case; whether or not the two units
constitute one establishment or are really two separate and
independent units, must be decided on the facts of each case
Mr. Pathak contends that the Tribunal was in error in
holding that the restaurants cannot
872
exist without the wine shops and that there is functional
integrality between them. It may be conceded that the
observation of the Tribunal that there is functional
integrality between a restaurant and a wine shop and that
the restaurants cannot exist without wine shops is not
strictly accurate or correct. But the test of functional
integrality or the test whether one unit can exist without
the other though important in some cases, cannot be stressed
in every case without having regard to the relevant facts of
that case, and so, we are not prepared to accede to the
argument that the absence of functional integrality and the
fact that the two units can exist one without the other
necessarily show that where they exist they are necessarily
separate units and do not amount to one establishment. It
is hardly necessary to deal with this point elaborately
because this Court had occasion to examine this problem in
several decisions in the past, vide Associated Cement
Companies Ltd. v. Their Workmen (1); Pratap Press, etc. v.
Their Workmen(2); Pakshiraja Studios v. Its Workmen (3);
South India Millowners’ Association v. Coimbatore District
Textile Workers Union(4); Fine Knitting Co. Ltd. v.
Industrial Court (5) and D.C.M, Chemical Works v. lts
Workmen(6).
Let us then consider the relevant facts in the present
dispute. It is common ground that wherever the employer
runs a restaurant and a wine shop, the persons interested in
the trade are the same partners. The capital supplied to
both the units is the same. Prior to 1956, wine shops and
restaurants were not conducted separately, but after 1956
when partial prohibition was introduced in New Delhi, wine
shops had to be separated because wine cannot be sold in
restaurants. But it is significant that the licence for
running the wine shop is issued on the strength of the fact
that the management was running a wine shop before the
introduction of prohibition. In fact, LII licence to run
wine shops has been given in many
(1) (1960) 1 L.L.J. 1.
(3) (1961) 11 L.L.J.380
(5) (1962) 1 L.L.J. 275:
(2) (1960) 1 L.L..T. 497.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 15
(41 (1962) 1 L.L.L.J. 223.
(6) (1962) 1 L.L.J. 388.
873
cases to previous restaurants on condition that the wine
shops are run separately according to the prohibition rules.
It is true that many establishments keep separate accounts
and independant balancesheets for wine shops and restaurants
; but that clearly is not decisive because it may be that
the establishments want to determine from stage to stage
which line of business is yielding more profit. Ultimately,
the profits and losses are usually pooled, together. Thus,
generally stated, there is unity of ownership, unity of
finances, unity of management and unity of labour; employees
from the restaurant can be transferred to the wine shop and
vice versa. Besides, it is significant that in no case has
the establishment registered the wine shops and the
restaurants separately under:,. 5 of the Delhi Shops and
Establishments Act, 1954 (No. VII of 1954). In fact when
Mr. Nirula, the Secretary of the Employers’ Association, was
called upon to register his wine shop separately, he
protested and urged that separate registration of the
several departments was unnecessary; and that clearly
indicated that wine shop was treated by the establishment as
one of its departments and nothing more. The failure to
register a wine shop as a separate establishment is, in our
opinion, not consistent with the employers’ case that wine
shops are separate and independent units. Having regard to
all the facts to which we have just referred, we do not
think it would be possible to accept Mr. Pathak’s argument
that the Tribunal was in error in holding that the wine
shops and restaurants form part of the same industrial
establishments.
That takes us to the question about the financial position
of the different establishments. The Tribunal has carefully
examined the relevant balancesheets and considered the
profit and loss position of each establishment for the three
years in respect of which bonus was claimed; they are 1956-
57, 57-58 and 58-59. In constructing a wage structure,
industrial
874
adjudication has undoubtedly to take into account the
overall financial position of the employer because a scheme
of wage structure including scales of increment is a long-
term scheme and before it is framed the Tribunal must be
satisfied that the burden imposed by the scheme would not be
beyond the means of the employer. In regard to the minimum
wage, no such consideration arises because it is the duty of
an industrial employer to pay the basic minimum to his
employees. But when a wage structure is constructed and it
provides for increments, the financial position of the
employer has to be borne in mind. The Tribunal has
recognised this. principle and on examining the accounts
produced before it, it has come to the conclusion that the
establishments in question have shown uniform prosperity and
all of them, except the Delhi Restaurant, can be properly
characterised as established concerns. Besides, it has
referred to the fact that in the Delhi region, there are
various establishments which have pay scales for workmen,
though, except for the award made by Mr. Dulat, there were
no previous instances of pay scales having been introduced
in restaurants in the awards or settlements cited before the
Tribunal. It was, however, urged before the Tribunal and
the same plea has been repeated before us that the
possibility of the introduction of total prohibition in New
Delhi should have been borne in mind in considering the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 15
problem of wage structure in the present proceedings. We do
not think that the award made by the Tribunal in this case
can be validly attached on the ground that the Tribunal
refused to attach due importance to the apprehension
expressed before it by the employers that total pro-
hibitition may soon be introduced in New Delhi -and that may
impair the prosperity of the trade. The Tribunal has
noticed that even after the partial introduction of
prohibition, the profits of the trade have not shown any
adverse effect. On the contrary they show an upward
tendency, and the Tribunal
875
was not satisfied that there was any evidence adduced before
it to justify the contention that in the very near future
total prohibition would be introduced in New Delhi. It was
urged by the employees that all indications pointed to the
fact that total prohibition may not be introduced in New
Delhi and the Tribunal thought, and we think rightly, that
it would be idle to speculate in this matter; if in course
of time, total prohibition is introduced and it materially
affects the prosperity of the trade, it would be open to the
employers to raise a dispute for the reduction in the wage
structure and in case they are able to show that as a result
of the introduction of total prohibition their financial
position is weakened to such an extent that they cannot bear
the burden of the wage structure directed by the present
award, the matter may have to be examined on the merits.
Therefore, we do not think that the hypothetical
consideration that total prohibition may be introduced in
the near future, can play any part in the decision of the
wage problem in the present proceedings.
That takes us to the question about bonus. The main point
which Mr. Pathak raised in regard to bonus was that the
Tribunal was in error in reducing the amount of remuneration
claimed by the employers for the different partners who took
active part in running and supervising the management of
their respective establishments. It appears that whereas
each partner claimed a thousand rupees per month, the
Tribunal has reduced it to Rs. 500/-, and in one case it has
ordered that Rs. 500/p. m. should be paid to three partners
together. The argument is that this interference is wholly
unjustified. In dealing with this contention it is
necessary to emphasise that when this Court entertains
appeals in industrial matters under Art. 136 of the
Constitution, it does not act as a Court of Appeal on facts.
It is only where
876
general questions of law are raised that this Court feels
called upon to pronounce its decisions on them for the
guidance of industrial adjudication in this country. The
decisions of Industrial Tribunals on questions of fact and
their conclusions in matters within their discretion are not
usually revised by this Court under Art. 136. Besides, the
claim made by the employers by way of remuneration to the
partners has not been properly established by adequate
evidence. That is the conclusion of the Tribunal, and on
the record it seems to be well founded. It also appears
that in some cases, the amounts of remuneration claimed are
not debited in the books of account; but the present claim
is made for the purpose of working the Full Bench Formula.
Therefore, on a question of this kind, we do not think Mr.
Pathak is justified in making a grievance before us under
Art. 136.
The learned Attorney-General for the employees characterises
the award in respect of bonus as inadequate and contends
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 15
that larger amounts should have been allowed, and he argues
that the calculations made by the Tribunal in respect of
income-tax claimed by the employers as a prior charge are
obviously inconsistent with the recent decision of this
Court in the case of Tulsidas Khimji v. Their Workmen. (1)
In that case., the majority decision was that a firm is not
a legal person within the meaning of Industrial Disputes
Act. It is the partners of the firm who are the employers.
It is that fact that has to be taken into account in
considering the question of income-tax, even in other
matters like remuneration, etc., that is to say, the amount
of tax payable by each partner, qua the business of the
firm, irrespective of their other sources of income or loss,
because notional is quite different from the actual, though
not wholly dissociated from it. Mr. Pathak has conceded
that the calculations made by
(1)(1962) 1 L.L.J. 435, 441.
877
the Tribunal in dealing with the question of incometax in
the working of the formula must now be regarded as erroneous
and that would clearly negative his plea that the bonus
should not have been awarded or the amount awarded should
have been less. It is true that the employees claim
additional bonus on this ground; but we are not satisfied
that the difference made by a fresh calculation of the
income-tax according to the decision of this Court would
justify any addition to the amount already awarded by the
Tribunal by way of bonus for the respective years in
question.
The next question to consider is about the wage structure.
As we have already pointed out, the employers conceded that
the wage packet in the case of Hotels should be Rs. 70/-
p.m. including service charges and in the case of
Restaurants should be Rs. 60/-, and the Tribunal has fixed
the minimum content of the wage packet at Rs. 65/- p.m. We
see no reason to interfere with this decision. The Tribunal
has fixed Rs. 35/- as a flat rate for dearness allowance and
has provided for appropriate deductions from the said amount
for amenities like food, residence and tea which the
employers provide to some of their employees. We see no
reason to interfere with this part of the award as well.
The categories of workers into unskilled, semi-skilled and
skilled also appear to us to be fully justified, and on the
material adduced on the record, no case has been made out
against the said categories either.
The main controversy in respect of the wage structure has
centered round the problem of Dearness Allowance qua the
waiters. Mr. Pathak has strenously contended that no D.A.
should be paid to the waiters at all, because, he argues,
each one of them gets Rs. 50/- to Rs. 60/- p.m. by way of
tips in each one of these establishments. The Tribunal has
taken the view that the tips earned by the waiters
878
must be excluded from consideration in dealing with the
question of D.A., and in support of this view it has
referred to a decision of this Court in the case of State
Bank of India v. Their Workmen (1). Mr. Pathak contends
that the Tribunal was obviously in error in relying upon
this decision in support of its conclusion on the question
of tips. This contention is well-founded. In the case of
State Bank of India this Court was considering the question
as to whether bonus could be said to be a part of
remuneration within the meaning of that term under ss. 2 and
10 (1) (b) (2) of the Banking Companies Act, 1949 (unamended
by Act XCV of 1956), and the decision was that in s. 10 the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 15
word " remuneration" has been used in its widest sense, and
in that sense, it would undoubtedly include the profit
bonus. It appears that in the course of discussion of the
bar, the decision in the case of Mrottaslav v. Regent Street
Florida Restaurant (2) was cited, and so, it had to be
incidentally considered. That decision was in regard to
tips and it held that when a customer gives a tip to a
waiter, the money becomes the property of the latter. It
was observed by this Court that the English decision itself
showed that the word ""remuneration must be given its
meaning with reference to the context in which the word
occurs in the statute and that the said decision would not
justify cutting down the amplitude of the expression used by
the relevant provision of the Banking statute with which the
Court was concerned. It is hardly necessary to point out
that this decision cannot be cited as relevant in
determining the question as to whether tips paid to waiters
in hotels and restaurants should not be taken into account
in dealing with the problem of D.A. On the other hand, it
does appear that in Workmen of M/s. A. Fingo’s Ltd. v. M/s.
A. Fingo’s Ltd., (3) the Labour Appellate Tribunal confirmed
the award passed by the original Tribunal by which Rs. 15/-
had been orderd to be deducted from the D.A. payable to boys
and butlers. It was found in
(1) (1959) 11 L.L.J. 205. (2) (1951) 2 K.B. 277.
(3) (1953) L.A.C. 480.
879
that case on uncontradicted evidence that the value of the
tips received by the boys and butlers would be about Rs.
15/- or so per head per month. Mr. Pathak contends that in
the light -of this precedent, the Tribunal should have
considered the amount of tips which waiters receive in
hotels and restaurants and should not have directed D.A. to
be paid to them at the flat rate of Rs. 35/- p.m.
The learned Attorney-General has supported the finding of
the Tribunal and has referred to an earlier award passed by
the same Tribunal in an industrial dispute between the
Management of the Marina Hotel and its workmen in 1958 where
the Tribunal refused to consider the tips in dealing with
the problem of wage structure including D.A. The said
Tribunal took the same view when it pronounced its award in
an industrial dispute between the management of the Hotel
Ambassador and its employees in 1960. The learned Attorney-
General also suggested that the compromise award between the
Swiss Hotel and its employees reached on December 31, 1959,
would tend to support his case that tips may not be taken
into account in dealing with the question of D. A.
The question thus raised before us needs to be carefully
examined. The employees contend that the basis of D.A. is
that the employer should make a suitable addition to the
amount of basic wage in order to neutralise the rise in the
cost of living and it is not open to him to contend that he
is absolved from his liability to provide for either partial
or complete neutralisation of the rise in the cost of living
because his customers pay tips to his employees. Tips are
paid not by the employer but by the customers and they are
paid not only for the service received in the restaurant or
the hotel, but for the promptness shown by the waiter and
his smartness and efficiency. Besides it is urged that the
880
amount of tips is variable and uncertain and so, it would be
unreasonable to take such an uncertain and indefinite factor
into account in fixing the amount of D. A.
On the other hand, the employers contend that tips are paid
as a matter of conventional requirement in all restaurants
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 15
and hotels and they are paid not so much to the. waiters as
individuals but as waiters working in a particular
establishment. The tips thus received by the employees are
incidental to their work as waiters and cannot be completely
dissociated from it. In theory and in law, it may be true
that the tips received by the waiters become their property,
but they are received by them as an incident of their
employment and so, it would be unreasonable not to take them
into account in fixing the D. A.
In our opinion, in dealing with this question, it would not
be appropriate to adopt an academic or a doctrinaire
approach. In considering the problem of wage structure in
regard to hotels and restaurants, industrial adjudication
has necessarily to adopt a pragmatic approach and in fixing
the wage structure and the D. A., it has to take care to see
that the legitimate demand of the employees is met without
doing injustice to the employer and without acting unfairly
by him. If the object of D. A. is to neutralise the rise in
the cost of living, it would be purely doctrinaire to ignore
altogether the fact that as waiters working in their
respective establishments they invariably get some amount of
tips from the customer , and so, we think it would not be
right to treat the tips received by the waiters as being
wholly irrelevant to the decision of the question about the
matter of D. A. Similarly, it would not be right to make a
calculation about the tips received and treat the said
amount as a substitute, either whole or partial, for the D.
A. itself. All that we can do is
881
to bear in mind the fact that tips are received and make
some suitable adjustment in that behalf It would, of course,
not be right to treat these tips as substantially amounting
to payments made by or on behalf of the employers for if
that were so, logically, it may be open to the employers’ to
say that the said tips may be taken into account even while
fixing a basic wage. That clearly is not and cannot be the
employers case. It is true that the amount of tips may vary
and in that sense be uncertain. But if evidence adduced by
the parties satisfactorily proves that each waiter would
invariably receive a certain amount of tips in the minimum,
it would not be unfair or un just to take such a minimum
amount into account in determining the quantum of D. A. at a
flat rate. Such an approach, we think, would do no
injustice to the employees’ claim for D. A. and would be
fair to the employers as well.
We have, therefore, examined the evidence to find out what
amount can be reasonably taken to be the minimum which a
waiter is bound to get in each one of the establishments
before us. As often happens, the witnesses examined by the
managements have made overstatements on the point and
witnesses examined by the Union have made understatements.
According to the former set of witnesses, more than Rs. 60/-
are received by the waiter by way of tips every month,
whereas according to the latter, between Rs. 10/- to Rs.
15/are received per month. Some employers claimed that if
their waiters were sent out for service, they themselves
compensated the waiters for the loss of their tips caused by
outside service and paid appropriate amounts to them in that
behalf, and in support of this claim, evidence, documentary
and oral, was adduced. We are satisfied that the said
evidence is not reliable and the claim, based on it is
untenable. Tips. are paid by the customers and not by
employers in any case. It is commonground that
882
since the introduction of prohibition, tips paid to the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 15
employees in the restaurants and hotels have gone down. But
it seems to us that there is no difficulty whatever in
holding that each one of the waiters gets at least Rs. 10/-
p. in. by way of tips. This conclusion may amount to an
under estimate in regard to some of the establishments
before us because it is likely that waiters employed in the
more prosperous establishments must be receiving by way of
tips amounts very much larger than Rs. 10/- p. in., but in
the absence of adequate and satisfactory evidence in respect
of each one of the establishments with which we are
concerned, it would not be safe or advisable to make a
definite finding that more than Rs. 10/- are received by
waiters in each one of these establishments. That being the
state of evidence adduced by the employers in the present
proceedings, we would content ourselves with accepting the
principle that in fixing D. A., a reasonable deduction may
be made in respect of waiters on the ground that they
receive a certain amount of minimum tips from the customers
every day. We are, therefore, inclined to think that in the
case waiters who receive tips, it would not be unfair or
unjust to direct that a deduction of Rs. 10/should be made
from Rs. 35/- per month. In the case of waiters who receive
food, tea and accommodation from their employers, Rs. 27/-
p. in. are already ordered to be deducted from the D. A. In
respect of these waiters, we direct that only Rs. 8/should
be further deducted on account of tips because we have no
doubt that Do deduction can be made on account of these
considerations from the basic wage.
That takes us to the question of the gratuity scheme framed
by the Tribunal. Mr. Pathak no doubt attempted to argue
that in view of the fact that Employees’ Provident Fund
Scheme has already been introduced in these establishments,
it would
883
not be right to burden the employers with the additional
liability of the gratuity scheme. This argument has been
considered by this Court on severaloccasions and
has been consistently rejected. The object intended to be
achieved by the Provident Fund Scheme is not the same as the
object of the Gratuity Scheme and in any case, where the
financial position of the employer justifies the in-
troduction of both benefits, there is no reason why ,the
employees should not get the benefit of both the P. F.
Scheme and the Gratuity Scheme, vide Bhuratkhand Textile
Manufacturing Co. Ltd. v. Textile Labour Association,
Ahmedabad, (1) and Garment Cleaning Works v. Its Workmen
(2). Besides, in dealing with the financial obligation
involved by the introduction of a gratuity scheme, it is
necessary to bear in mind that the magnitude of the
theoretical impact does not matter so much as the extent of
the Actual impact of the scheme. As has been pointed out by
this Court in Bharatkhand Textile Mafg. Co. Ltd. (1) there
are two ways of looking at the problem of the burden imposed
by the gratuity scheme. One is to capitalise the burden on
actuarial basis and that would naturally show theoretically
that the burden would be very heavy; the other is to look at
the scheme in its practical aspect and this would show that,
speaking broadly, no more than 3 to 4 per cent of the
employees retire every year. It is desirable that in
assessing the impact of the gratuity scheme on the financial
position of the employer, this practical approach should be
taken into account. Thus considered, we see no reason to
accept Mr. Pathak’s argument that the financial position of
the employers would be unable to bear the practical burden
which the gratuity scheme would impose on them, vide Sone
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 15
Valley Portland Cement Co. v. Its Workmen(3).
Turning then to the merits of the scheme, we are satisfied
that some modifications must be made.
(1) (1950) II L.L.J. 21. (2) (1962) 1 S.C.R. 771.
(3) [1962] 1 L.L.J. 218.
884
The scheme made by the Tribunal provides as under:
For service of less than
two years. Nil.
For continuous service of Fifteen day’s basic pay
two years and more, on for every year of completed
termination of service of service subject to a maximum
the workman for whatever of twelve month’s pay.
reason except by way of
dismissal for misconduct,
involving moral turpitude.
The first criticism which Mr. Pathak has made against this
provision is that the clause about misconduct involving
moral turpitude is unusual and would create complications.
This position is not disputed by the learned Attorney-
General. We would, therefore, delete the words "involving
moral turpitude" from the said provision. The second
criticism made by Mr. Pathak against the provision is that
the limit of two years imposed by the provision is unduly
liberal. We think this criticism also is well-founded.
Besides, a distinction must be made between the termination
of service caused by the employer and the termination
resulting from the resignation given by the employee. We
would, therefore, provide that for terminationof service
caused by the employer, the minimumperiod of service
for payment of gratuity should befive years,and in regard
to this category of terminationof service, we would like
to add that if the termination is the result of misconduct
which has caused financial loss to the employer, that loss
should be first compensated from the gratuity payable to the
employee and the balance, if any, should be paid to him-.
In regard to resignation, we would like to provide that if
the employee resigns, he would be entitled to get gratuity
only if he has completed ten years’ service or more. The
rate prescribed by the Tribunal for the payment
885
of gratuity and the ceiling placed by it in that behalf
would remain the same.
There is one more point which still remains to be
considered, and that is in regard to the claim for a share
in the service charges in respect of the Claridge’s Hotel.
We have already indicated the nature of the directions
issued by the Tribunal in that behalf. The Tribunal has
held that no direction need be issued in respect of the
employees’ claim for a share in the service charges for a
period prior to the date of the award. It has, however,
purported to issue a direction in respect of the division of
the service charges in future, and Mr. Pathak contends that
this direction is outside the jurisdiction of the Tribunal
because this was not a matter referred to it for its
adjudication. Paragraph I (d) of the reference clearly
supports Mr. Pathak’s contention. This clause is worded
thus :
"Are the workmen entitled to share the service
charges collected previously by different
managements up to the date of reference of
this dispute ? if so, what should be the per-
centage and what directions are necessary in
this respect ?"
It is plain that the claim which has been referred to the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 15
Tribunal for adjudication does not cover a period subsequent
to the date of reference. This position is not disputed.
We must accordingly set aside the direction issued by the
Tribunal in respect of the division of service charges in
future.
Mr. Pathak no doubt attempted to argue that the directions
given by the award in respect of uniforms and holidays
should be revised. We are not impressed by Mr. Pathak’s
argument on these points. These are matters of detail which
it was for the Tribunal to consider on the merits and the
grievance made by Mr. Pathak raises no question of law
886
on which we can interfere with the decision of the Tribunal.
The last point urged by Mr. Pathak is in regard to what he
characterised as retrospective operation of the award. It
appears that the present demands were made by the employees
on October 1, 1958 and the references were made on September
9, 1959 and December 12, 1959 respectively. Tile award was
pronounced on March 16, 1962 and it has directed that its
directions should take effect from January 1, 1961.
Technically -speaking, this direction cannot be said to be
retrospective because it takes effect from a date subsequent
to the date of the reference. Under s. 17A(4) or the
Industrial Disputes Act, 1947 (No. 14 of 1947), it is open
to the Industrial Tribunal to name the date from which it
should come into operation, and in cases where the Indus-
trial Tribunal thinks that it is fair and just that its
award should come into force from a date prior to the date
of reference, it is authorised to issue such a direction.
When such a direction is issued, it may be said
appropriately that the award takes effect retrospective
Apart from this technical aspect of the matter’, if in the
circumstances of this case, the Tribunal held that the Award
should take effect not from the date of reference but from a
later date which was January 1, 1951, we see no reason why
we should interfere with its direction.
The result is, the appeals preferred by the employers
partially succeed inasmuch as the provisions made by the
award in respect of dearness allowance, Gratuity and future
distribution of service charges have been modified. The
appeals preferred by the employees fail and are dismissed.
There would be no order as to costs.
C.A. Nos. 609-610 of 1962 allowed in part.
C.A. Nos. 622 623 of 1962 dismissed,
887