PrologueA workman plays a vital role in an industry. While he is a key element for

the growth and development of the ‘industry’ by way of his services

rendered through manual, unskilled, skilled, technical, operational, clerical

or supervisory work for hire or reward, the later viz., ‘industry’ provides

the base by means of doing business, trade, undertaking, manufacture or

calling of employers including service, employment, handicraft, or

industrial operation or a vocation of the ‘workman’. While the former

performs as a resource pool that runs the functionaries of the later, the later

employs the former to smoothly accomplish its endeavor by making the

most out of the human factor.

However, in most cases there arises conflict of interest between both i.e.,

the workman and the industry. This fundamentally happens due to

contradictory roles played by both; individuals and institutions i.e.,

‘industry’. Although a number of issues may be involved to cause a

conflict, but factors like work culture, natural environment, corporate

governance including management , HR issues, labour union politics,

ethics in workplace, nonconductive company policies, exploitation,

financial status of the industry, etc., are predominant causes that often

roots a conflict between both.

Nevertheless, it is often found that in majority of the cases a conflict arise

due to wrong policies of the employers, the management and improper

handling of the Human Resource System by the forerunners of the

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industry. Sometimes, even greed of the industry owners become the prime

cause. In such a case the real prey is the ‘workman’.

Basically a ‘workman’ is completely dependent upon the industry and he

looks toward it during adversity. He is a part of the workforce employed by

the industry. He merely knows how to render his services towards the

growth and smooth running of the industry. However, the affluent section

including the managers and the owners predominantly attempts to exploit

his workmanship.

Albeit, the legal system has definitive Laws and Acts passed like- the

Labour Act, Workman’s Compensation Act, Workman’s Compensation

Rules, the Industrial Employment Act, the Minimum Wages Act, Payment

of Bonus Act, etc, in most of the cases the employer evade these

regulations for their vested interest by way of existing loopholes and

ignorance of the ‘workman’. These are unethical practices by the corporate

governance that runs the industry.

Other unethical practices like bad politics between the

management/employer and the union wherein a workman is made a

scapegoat to gratify a vested interest of the industry must be abolished

totally from the system. For example, dismissal of an employee from

service for misconducts even though the past record of the employee being

clean is a case of such victimization.

An industry with a good management system following excellent work

ethics will definitely handle this case as a HR issue through its HRD.

Dismissal of such an employee may be prevented with proper counseling.

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In terms of corporate fraud that has been taking place from time to time

where infringement of morality and ethical conduct leads to a closure of a

company, say for example Satyam Computers, the victim in which case is

both the industry and the workman, a proper intervention by the legal

system can revive or compensate its workforce/workmen for the wrong

doing of its possessor. However, such issues are quite complex and are

beyond the discussion of this paper.

Further, industries with inappropriate management which deliberately

attempts to exploit its workmen eventually end up with disputes. A dispute

with a workman occurs only when the there is a breach of law. And the law

is to be followed by both the employee as well as the employer. In this case

the workman and the industry.

Since law is not unjust, unjust practices by the industry towards its

workman must be considered unlawful. All case studies on Industrial

Disputes point its fingers towards the fact that majority of cases on

industrial disputes ends up where industry is found to be at fault.

Thus, whenever a workman is victimized for his ‘blood and sweat’ the

Industry must compensate for all his losses. Be it the management, the

employer or the industry,

Practitioners of such unlawful and unethical activities must be penalized.

His blood has to be born by industry.

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The Industrial Disputes Act, 1947DEFINITIONS :

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In this Act, unless there is anything repugnant in the subject or context, - (a) "appropriate Government" means - (i) in relation to any industrial disputes concerning any industry carried on by or under the authority of the Central Government or by a railway company or concerning any such controlled industry as may be specified in this behalf by the Central Government or in relation to an industrial dispute concerning Dock Labour Board established under section 5-A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), or the Industrial Finance Corporation of India Limited formed and registered under the Companies Act, 1956 (1 of 1956), or the Employees' State Insurance Corporation established under section 3 of the Employees' State Insurance Act, 1948 (34 of 1948), or the Board of Trustees constituted under section 3-A of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or the Central Board of Trustees and the State Boards of Trustees constituted under section 5-A and section 5-B, respectively, of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952), or the Life Insurance Corporation Act, 1956 (31 of 1956), or the Oil and Natural Gas Corporation Limited registered under the Companies Act, 1956 (1 of 1956), or the Deposit Insurance and Credit Insurance and Credit Guarantee Corporation established under section 3 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961), or the Central Warehousing Corporation established under section 3 of the Warehousing Corporations Act, 196 (58 of 1962), or the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963), or the Food Corporation of India established under section 3, or a Board of Management established for two or more contiguous States under section 16 of the Food Corporations Act, 1964 (37 of 1964), or the Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 (55 of 1994), or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976), or the Export Credit and Guarantee Corporation Limited or the Industrial Reconstruction Corporation of India Limited, or the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987) or the Banking Service Commission established under section 3 of the Banking Service Commission Act, 1975, or an air transport service, or a banking or an insurance company, a mine, an oil-field, a Cantonment Board or a major port, the Central Government; and

(ii) in relation to any other industrial dispute, the State Government;

(aa) "arbitrator" includes an umpire;

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(aaa) "average pay" means the average of the wages payable to a workman - (i) in the case of monthly paid workman, in the three complete calendar months,

(ii) in the case of weekly paid workman, in the four complete weeks,

(iii) in the case of daily paid workman, in the twelve full working days, preceding the date on which the average pay becomes payable if the workman had worked for three complete calendar months or four complete weeks or twelve full working days, as the case may be, and where such calculation cannot be made, the average pay shall be calculated as the average of the wages payable to a workman during the period he actually worked;

(b) "award" means an interim or a final determination of any industrial dispute or of any question relating thereto by any Labour Court, Industrial Tribunal or National Industrial Tribunal and includes an arbitration award made under section 10A;

(bb) "banking company" means a banking company as defined in section 5 of the Banking Companies Act, 1949 (10 of 1949), having branches or other establishments in more than one State, and includes the Export-Import Bank of India, the Industrial Reconstruction Bank of India; the Industrial Development Bank of India, the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989) the Reserve Bank of India, the State Bank of India, a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and any subsidiary bank, as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);

(c) "Board" means a Board of Conciliation constituted under this Act;

(cc) "closure" means the permanent closing down of a place of employment or part thereof;

(d) "conciliation officer" means a conciliation officer appointed under this Act;

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(e) "conciliation proceeding" means any proceeding held by a conciliation officer or Board under this Act;

(ee) "controlled industry" means any industry the control of which by the Union has been declared by any Central Act to be expedient in the public interest;

(f) "Court" means a Court of Inquiry constituted under this Act;

(g) "employer" means - (i) in relation to an industry carried on by or under the authority of any department of the Central Government or a State Government, the authority prescribed in this behalf, or where no authority is prescribed, the head of the department;

(ii) in relation to an industry carried on by or on behalf of a local authority, the chief executive officer of that authority;

(gg) 'executive', in relation to a trade union, means the body by whatever name called, to which the management of the affairs of the trade union is entrusted;

(h) (i) a person shall be deemed to be "independent" for the purpose of his appointment as the chairman or other member of a Board, Court or Tribunal, if he is unconnected with the industrial dispute referred to such Board, Court or Tribunal or with any industry directly affected by such dispute :

Provided that no person shall cease to be independent by reason only of the fact that he is a shareholder of an incorporated company which is connected with, or likely to be affected by, such industrial dispute; but in such a case, he shall disclose to the appropriate Government the nature and extent of the shares held by him in such company;

(j) "industry" means any systematic activity carried on by co-operation between an employer and his workmen (whether such workmen are employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not, - (i) any capital has been invested for the purpose of carrying on such activity; or

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(ii) such activity is carried on with a motive to make any gain or profit, and includes - (a) any activity of the Dock Labour Board established under section 5A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1949);

(b) any activity relating to the promotion of sales or business or both carried on by an establishment, but does not include - (1) any agricultural operation except where such agricultural operation is carried on in an integrated manner with any other activity (being any such activity as is referred to in the foregoing provisions of this clause) and such other activity is the predominant one.

Explanation : For the purposes of this sub-clause, "agricultural operation" does not include any activity carried on in a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951); or

(2) hospitals or dispensaries; or

(3) educational, scientific, research or training institutions; or

(4) institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic service; or

(5) khadi or village industries; or

(6) any activity of the Government relatable to the sovereign functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; or

(7) any domestic service; or

(8) any activity, being a profession practised by an individual or body of individuals, if the number of persons employed by the individuals or body of individuals in relation to such profession is less than ten; or

(9) any activity, being an activity carried on by a co-operative society or a club or any other like body of individuals, if the number of persons employed by the co-operative society, club or other like body of individuals in relation to such activity is less than ten;

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(k) "industrial dispute" means any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person;

(ka) "industrial establishment or undertaking" means an establishment or undertaking in which any industry is carried on :

Provided that where several activities are carried on in an establishment or undertaking and only one or some of such activities is or are an industry or industries, then, - (a) if any unit of such establishment or undertaking carrying on any activity, being an industry, is severable from the other unit or units of such establishment or undertaking, such unit shall be deemed to be a separate industrial establishment or undertaking;

(b) if the predominant activity or each of the predominant activities carried on in such establishment or undertaking or any unit thereof is an industry and the other activity or each of the other activities carried on in such establishment or undertaking or unit thereof is not severable from and is, for the purpose of carrying on, or aiding the carrying on of, such predominant activity or activities, the entire establishment or undertaking or, as the case may be, unit thereof shall be deemed to be an industrial establishment or undertaking;

(kk) "insurance company" means an insurance company as defined in section 2 of the Insurance Act, 1938 (4 of 1938), having branches or other establishments in more than one State;

(kka) "khadi" has the meaning assigned to it in clause (d) of section 2 of the Khadi and Village Industries Commission Act, 1956 (61 of 1956);

(kkb) "Labour Court" means a Labour Court constituted under section 7;

(kkk) "lay-off" (with its grammatical variations and cognate expressions) means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the break-down of machinery or natural calamity or for any other connected reason to give employment to a workman whose name is borne on the muster-rolls of his industrial establishment and who has not been retrenched;

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Explanation : Every workman whose name is borne on the muster-rolls of the industrial establishment and who presents himself for work at the establishment at the time appointed for the purpose during normal working hours on any day and is not given employment by the employer within two hours of his so presenting himself shall be deemed to have been laid off for that day within the meaning of this clause :

Provided that if the workman, instead of being given employment at the commencement of any shift for any day is asked to present himself for the purpose during the second half of the shift for the day and is given employment, then, he shall be deemed to have been laid off only for one half of that day :

Provided further that if he is not given any such employment even after so presenting himself, he shall not be deemed to have been laid off for the second half of the shift for the day and shall be entitled to full basic wages and dearness allowance for that part of the day;

(l) "lock-out" means the temporary closing of a place of employment or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him;

(la) "major-port" means a major port as defined in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);

(lb) "mine" means a mine as defined in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);

(ll) "National Tribunal" means a National Industrial Tribunal constituted under section 7B;

(lll) "office bearer", in relation to a trade union, includes any member of the executive thereof, but does not include an auditor;

(m) "prescribed" means prescribed by rules made under this Act;

(n) "public utility service" means - (i) any railway service or any transport service for the carriage of passengers or goods by air;

(ia) any service in, or in connection with the working of, any major port or dock;

(ii) any section of an industrial establishment, on the working of which the safety of the establishment or the workmen employed therein depends;

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(iii) any postal, telegraph or telephone service;

(iv) any industry which supplies power, light or water to the public;

(v) any system of public conservancy or sanitation;

(vi) any industry specified in the First Schedule which the appropriate Government may, if satisfied that public emergency or public interest so requires, by notification in the Official Gazette, declare to be a public utility service for the purposes of this Act, for such period as may be specified in the notification :

Provided that the period so specified shall not, in the first instance, exceed six months but may, by a like notification, be extended from time to time, by any period not exceeding six months, at any one time, if in the opinion of the appropriate Government, public emergency or public interest requires such extension;

(o) "railway company" means a railway company as defined in section 3 of the Indian Railways Act, 1890 (9 of 1890);

(oo) "retrenchment" means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include - (a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuating if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or

(bb) termination of the service of the workman as a result of the non-removal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or

(c) termination of the service of a workman on the ground of continued ill-health;

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(p) "settlement" means a settlement arrived at in the course of conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to an officer authorised in this behalf by the appropriate Government and the conciliation officer;

(q) "strike" means a cessation of work by a body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment;

(qq) "trade union" means a trade union registered under the Trade Unions Act, 1926 (16 of 1926);

(r) "Tribunal" means an Industrial Tribunal constituted under section 7-A and includes an Industrial Tribunal constituted before the 10th day of March, 1957, under this Act;

(ra) "unfair labour practice" means any of the practices specified in the Fifth Schedule;

(rb) "village industries" has the meaning assigned to it in clause (h) of section 2 of the Khadi and Village Industries Commission Act, 1956 (61 of 1956);

(rr) "wages" means all remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment, or of work done in such employment, and includes - (i) such allowances (including dearness allowance) as the workman is for the time being entitled to;

(ii) the value of any house accommodation, or of supply of light, water, medical attendance or other amenity or of any service or of any confessional supply of food grains or other articles;

(iii) any traveling concession;

(iv) any commission payable on the promotion of sales or business or both; but does not include - (a) any bonus;

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(b) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the workman under any law for the time being in force;

(c) any gratuity payable on the termination of his service;

(s) "workman" means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person - (i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or

(ii) who is employed in the police service or as an officer or other employee of a prison; or

(iii) who is employed mainly in a managerial or administrative capacity; or

(iv) who, being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.

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THE PAYMENT OF BONUS ACT, 1965

INTRODUCTION:

This is an Act intended to provide for payment of bonus to persons

employed in certain establishments and for matters connected therewith. It

came into force from September 25, 1965. It extends to whole of India. It

shall provide to: (a) every factory and (b) every other establishment in

which 20 or more persons are employed on any day during an accounting

year.

WHO IS ENTITLED TO BONUS?

Every employee of an establishment covered under the Act is entitled to

bonus from his employer in an accounting year provided he has worked in

that establishment for not less than 30 working days in the year on a salary

less than Rs. 3500 per month.

If an employee is prevented from working and subsequently reinstated in

service, employer’s statutory liability for bonus cannot be said to have

been lost. Nor can the employer refuse for such bonus. [ONGC vs. Sham

Kumar Sahegal [1995] 1 LLJ].

There are however, certain disqualifications of an employee to claim bonus

in an accounting year. An employee who has been dismissed from service

for

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(a) fraud; or

(b) riotous or violent behaviour while on the premises of the establishment;

or

(c) theft, misappropriation or sabotage of any property of the establishment

is not entitled for bonus.

An employee in the following cases is entitled to bonus:

A temporary workman is entitled to bonus on the basis of total

number of days worked by him.

An employee of a seasonal factory is entitled to proportionate

bonus and not the minimum bonus as prescribed under the

provisions of the Act.

A part time employee as a sweeper engaged on a regular basis is

entitled to bonus.

A retrenched employee is eligible to get bonus provided he has

worked for minimum qualified period.

A probationer is an employee and as such is entitled to bonus.

A dismissed employee reinstated with back wages is entitled to

bonus.

A piece-rated worker is entitled to bonus.

An employee in the following cases is not entitled to bonus:

An apprentice is not entitled to bonus.

An employee employed through contractors on building

operation is not entitled to bonus.

An employee who is dismissed from service on the ground of

misconduct.

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PAYMENT OF MINIMUM BONUS (SECTION 10) :

Subject to the provisions of this Act, every employer shall be bound to

pay to every employee in respect of every accounting year, minimum

bonus which shall be 8.33% of the salary or wage earned by the

employee during the accounting year or Rs. 100, whichever is higher,

whether or not the employer has any allocable surplus in the accounting

year. But if the employee has not completed 15 years of age at the

beginning of the accounting year he will be entitled to a minimum

bonus which shall be 8.33% of the salary or wage during the accounting

year Rs. 60, whichever is higher.

Even if the employer suffers losses during the accounting year he is

bound to pay minimum bonus as prescribed by section 10 [State vs.

Sardar Dalip Singh Majilhia,1979,Lab. I.C.(913)(All)].

PAYMENT OF MAXIMUM BONUS (SECTION 11) :

Where in respect of any accounting year referred to in Section 10, the

allocable surplus exceeds the amount of minimum bonus payable to the

employees under that section, the employer shall, in lieu of such

minimum bonus, be bound to pay to every employee in respect of that

accounting year bonus which shall be an amount in proportion to the

salary or wage earned by the employee during the accounting year

subject to a maximum 20% of such salary or wage.

POWER OF EXEMPTION (SECTION 36) :

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Though the Act creates liability on the part of employer to pay the

minimum bonus and confers a right to the workmen, as mentioned in

Section 10, the obligation and right is subject to exemption under

Section 36.

There are two stages in Section 36.

The Government shall consider the financial position and other

relevant circumstances of an establishment or class of

establishment.

It should be of the opinion that it would not be in the public

interest to apply all or any of the provisions of the Act.

THE EMPLOYEES’ PROVIDENT FUNDS AND

MISCELLANEOUS PROVISIONS ACT, 1952

INTRODUCTION:

The Employee’s Provident Funds and Miscellaneous Provisions Act, 1952

(hereinafter referred to as ‘the Act’) extends to the whole of India except

the State of Jammu & Kashmir. It seeks to provide for the institution of

provident funds, family pension funds and deposit linked insurance funds

for employees in factories and other establishments. The Act is at present

applicable to 173 industries and classes of establishments of Schedule I.

Subject to the exceptions contained in Section 16, this Act applies to the

following entities, namely:

(a) every establishment which is a factory engaged in any industry

specified in Schedule I & in which 20 or more persons are employed ; and

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(b) any other establishment which employs 20 or more persons or class of

such establishments which the Central Government may, by notification in

Official Gazette specify in the behalf.

However, the Central Government may, after giving not less than 2 months

notice of its intention to do so, apply the provisions of this Act to any

establishment with less than 20 persons in the employment.

EMPLOYEES' PROVIDENT FUNDS SCHEME:   1. The Central Government may by notification in the Official Gazette

frame a Scheme to be called the Employees' Provident Funds Scheme for

the establishment of provident funds under this Act for employees or for

any class of employees and specify the establishments or class of

establishments to which the said Scheme shall apply and there shall be

established as soon as may be after the framing of the Scheme a Fund in

accordance with the provision of this Act and the Scheme.

2. The Fund shall vest in and be administered by the Central Board

constituted under section 5A.

EMPLOYEES' PENSION SCHEME :  1. The Central Government may by notification in the Official Gazette

frame a scheme to be called the Employees' Pension Scheme for the

purpose of providing for :

(a) superannuation pension retiring pension or permanent total disablement

pension to the employees of any establishment or class of establishments to

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which this Act applies; and 

(b) widow or widower's pension children pension of orphan pension

payable to the beneficiaries of such employees.

2. There shall be established as soon as may be framing of the Pension

Scheme a Pension Fund into which there shall be paid from time to time in

respect of every employee who is a member of the Pension Scheme :

(a) such sums from the employer's contribution under section 6 not

exceeding eight and one-third per cent of the basic wages dearness

allowance and retaining allowance if any of the concerned employees as

may specified in the Pension Scheme;

(b) such sums as are payable by the employers of exempted establishments

under sub-section (6) of section 17; 

(c) the net assets of the Employees' Family Pension Fund as on the date of

the establishment of the Pension Fund; 

(d) such sums as the Central Government may after due appropriation by

Parliament by law in this behalf specify.

3. On the establishment of the Pension Fund the Family Pension Scheme

(hereinafter referred to as the ceased scheme) shall cease to operate and all

assets of the ceased scheme shall vest in and shall stand transferred to and

all liabilities under the ceased scheme shall be enforceable against the

Pension Fund and the beneficiaries under the ceased scheme shall be

entitled to draw the benefits not less than the benefits they were entitled to

under the ceased scheme from the Pension Fund. 

4. The Pension Fund shall vest in and be administered by the Central Board

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in such manner as may be specified in the Pension Scheme.

5. Subject to the provisions of this Act the Pension Scheme may provide

for all or any of the matters specified in Schedule III.

6. The Pension Scheme may provide that all or any of its provisions shall

take effect either prospectively or retrospectively on such date as may be

specified in that behalf in that Scheme.

7. A Pension Fund Scheme framed shall be laid as soon as may be after it

is made before each House of Parliament while it is in session for a total

period of thirty days which may be comprised in one session or in two or

more successive sessions and if before the expiry of the session

immediately following the session or the successive sessions aforesaid both

Houses agree in making any modification in the scheme or both Houses

agree that the scheme should not be made the scheme shall thereafter have

effect only in such modified form or be of no effect as the case may be; so

however that any such modification or annulment shall be without

prejudice to the validity of anything previously done under that scheme".

EMPLOYEES' DEPOSIT LINKED INSURANCE SCHEME: 

1. The Central Government may by notification in the Official Gazette

frame a Scheme to be called the Employees' Deposit-linked Insurance

Scheme for the purpose of providing life insurance benefits to the

employees of any establishment or class of establishments to which this

Act applies.

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2. There shall be established as soon as may be after the framing of the

Insurance Scheme a Deposit-linked Insurance Fund into which shall be

paid by the employer from time to time in respect of every such employee

in relation to whom he is the employer such amount not being more than

one per cent of the aggregate of the basic wages dearness allowance and

retaining allowance (if any) for the time being payable in relation to such

employee as the Central Government may by notification in the Official

Gazette specify. 

3. The employer shall pay into the Insurance Fund such further sums of

money not exceeding one-fourth of the contribution which he is required to

make under sub-section (2) as the Central Government may from time to

time determine to meet all the expenses in connection with administration

of the Insurance Scheme other than the expenses towards the cost of any

benefits provided by or under that Scheme. 

4. The Insurance Fund shall vest in the Central Board and be administered

by it in such manner as may be specified in the Insurance Scheme.

5. The Insurance Scheme may provide for all or any of the matters

specified in Schedule IV. 

6. The Insurance Scheme may provide that any of its provisions shall take

effect either prospectively or retrospectively on such date as may be

specified in this behalf in that Scheme.

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EMPLOYEES' PROVIDENT FUNDS APPELLATE TRIBUNAL: 

1. The Central Government may by notification in the Official Gazette

constitute one or more Appellate Tribunals to be known as the Employees'

Provident Funds Appellate Tribunal to exercise the powers and discharge

the functions conferred on such Tribunal by this Act and every such

Tribunal shall have jurisdiction in respect of establishments situated in

such area as may be specified in the notification constituting the Tribunal.

2. A Tribunal shall consist of one person only to be appointed by the

Central Government.

3. A person shall not be qualified for appointment as the Presiding Officer

of a Tribunal (hereinafter referred to as the Presiding Officer) unless he is

or has been or is qualified to be a Judge of a High Court. 

MODE OF RECOVERY OF MONEYS DUE FROM EMPLOYERS:  

Any amount due :

(a) from the employer in relation to an establishment to which any Scheme

or the Insurance Scheme applies in respect of any contribution payable to

the Fund or as the case may be the Insurance Fund damages recoverable

under section 14B accumulations required to be transferred under sub-

section (2) of section 15 or under sub-section (5) of section 17 or any

charges payable by him under any other provision of this Act or of any

provision of the Scheme or the Insurance Scheme; or

(b) from the employer in relation to an exempted establishment in respect

of any damages recoverable under section 14B or any charges payable by

him to the appropriate Government under any provision of this Act or

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under any of the conditions specified under section 17 or in respect of the

contribution payable by him towards the Pension Scheme or the Insurance

Scheme under the said section 17 may if the amount is in arrears be

recovered in the manner specified in sections 8B to 8G.

POWER OF CENTRAL GOVERNMENT TO GIVE DIRECTIONS:

The Central Government may from time to time give such directions to the

Central Board as it may think fit for the efficient administration of this Act

and when any such direction is given the Central Board shall comply with

such direction.

POWER TO REMOVE DIFFICULTIES: 

1. If any difficulty arises in giving effect to the provisions of this Act as

amended by the Employees' Provident Funds and Miscellaneous Provisions

(Amendment) Act 1988 the Central Government may by order published

of the Official Gazette make such provisions not inconsistent with the

provisions of this Act as appear to it to be necessary or expedient for the

removal of the difficulty.

Provided that no such order shall be made after the expiry of a period of

three year from the date on which the said Amendment Act receives the

assent of the President.

(2) Every order made under this section shall as soon as may be after it is

made be laid before each House of Parliament.

THE PAYMENT OF GRATUITY ACT, 1972

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INTRODUCTION:

The Payment of Gratuity Act, 1972 extends to the whole of India :

Provided that in so far as it relates to plantations or ports, it shall not

extend to the State of Jammu and Kashmir.

It shall apply to –

(a) every factory, mine, oilfield, plantation, port and railway company;

(b) every shop or establishment within the meaning of any law for the time

being in force in relation to shops and establishments in a State, in which

ten or more persons are employed, or were employed, on any day of the

preceding twelve months;

(c) such other establishments or class of establishments, in which ten or

more employees are employed, or were employed, on any day of the

preceding twelve months, as the Central Government may, by notification,

specify in this behalf.

A shop or establishment to which this Act has become applicable shall

continue to be governed by this Act notwithstanding that the number of

persons employed therein at any time after it has become so applicable

falls below ten.

CONTINUOUS SERVICE:

For the purposes of this Act, -

1. an employee shall be said to be in continuous service for a period if he

has, for that period, been in uninterrupted service, including service which

may be interrupted on account of sickness, accident, leave, absence from

duty without leave (not being absence in respect of which an order treating

the absence as break in service has been passed in accordance with the

standing order, rules or regulations governing the employees of the

2460

establishment), lay off, strike or a lock-out or cessation of work not due to

any fault of the employee, whether such uninterrupted or interrupted

service was rendered before or after the commencement of this Act.

2. where an employee (not being an employee employed in a seasonal

establishment) is not in continuous service, for any period of one year or

six months, he shall be deemed to be in continuous service under the

employer - (a) for the said period of one year, if the employee during the

period of twelve calendar months preceding the date with reference to

which calculation is to be made, has actually worked under the employer

for not less than - (i) one hundred and ninety days, in the case of an

employee employed below the ground in a mine or in an establishment

which works for less than six days in a week; and (ii) two hundred and

forty days, in any other case;

(b) for the said period of six months, if the employee during the period of

six calendar months preceding the date with reference to which the

calculation is to be made, has actually worked under the employer for not

less than - (i) ninety-five days, in the case of an employee employed below

the ground in a mine or in an establishment which works for less than six

days in a week; and

(ii) one hundred and twenty days, in any other case;

Explanation : For the purpose of clause (2), the number of days on which

an employee has actually worked under an employer shall include the days

on which - (i) he has been laid-off under an agreement or as permitted by

standing orders made under the Industrial Employment (Standing Order's)

Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of

1947), or under any other law applicable to the establishment;

2560

(ii) he has been on leave with full wages, earned in the previous year;

(iii) he has been absent due to temporary disablement caused by accident

arising out of and in the course of his employment; and

(iv) in the case of a female, she has been on maternity leave; so, however,

that the total period of such maternity leave does not exceed twelve weeks.

3. where an employee employed in a seasonal establishment, is not in

continuous service within the meaning of clause (1), for any period of one

year or six months, he shall be deemed to be in continuous service under

the employer for such period if he has actually worked for not less than

seventy-five per cent of the number of days on which the establishment

was in operation during such period.

CONTROLLING AUTHORITY:

The appropriate Government may, by notification, appoint any officer to be

a controlling authority, who shall be responsible for the administration of

this Act and different controlling authorities may be appointed for different

areas.

PAYMENT OF GRATUITY:

1. Gratuity shall be payable to an employee on the termination of his

employment after he has rendered continuous service for not less than five

years, -

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease : Provided that

the completion of continuous service of five years shall not be necessary

2660

where the termination of the employment of any employee is due to death

or disablement :

Provided further that in the case of death of the employee, gratuity payable

to him shall be paid to his nominee or, if no nomination has been made, to

his heirs, and where any such nominees or heirs is a minor, the share of

such minor, shall be deposited with the controlling authority who shall

invest the same for the benefit of such minor in such bank or other

financial institution, as may be prescribed, until such minor attains

majority.

Explanation: For the purposes of this section, disablement means such

disablement as incapacitates an employee for the work which he was

capable of performing before the accident or disease resulting in such

disablement.

2. 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 who is employed in a

seasonal establishment and who is not so employed throughout the year,

the employer shall pay the gratuity at the rate of seven days' wages for each

season.

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Explanation: In the case of a monthly rated employee, the fifteen days'

wages shall be calculated by dividing the monthly rate of wages last drawn

by him by twenty-six and multiplying the quotient by fifteen.

3. The amount of gratuity payable to an employee shall not exceed three

lakhs and fifty thousand rupees.

4. For the purpose of computing the gratuity payable to an employee who

is employed, after his disablement, on reduced wages, his wages for the

period preceding his disablement shall be taken to be the wages received

by him during that period, and his wages for the period subsequent to his

disablement shall be taken to be the wages as so reduced.

5. Nothing in this section shall affect the right of an employee to receive

better terms of gratuity under any award or agreement or contract with the

employer.

6. Notwithstanding anything contained in sub-section (1), -

(a) the gratuity of an employee, whose services have been terminated for

any act, willful omission or negligence causing any damage or loss to, or

destruction of, property belonging to the employer, shall be forfeited to the

extent of the damage or loss so caused.

(b) the gratuity payable to an employee may be wholly or partially forfeited

- (i) if the services of such employee have been terminated for his riotous

or disorderly conduct or any other act of violence on his part, or

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(ii) if the services of such employee have been terminated for any act

which constitutes an offence involving moral turpitude, provided that such

offence is committed by him in the course of his employment.

POWER TO EXEMPT :

1. The appropriate Government may, by notification, and subject to such

conditions as may be specified in the notification, exempt any

establishment, factory, mine, oilfield, plantation, port, railway company or

shop to which this Act applies from the operation of the provisions of this

Act if, in the opinion of the appropriate Government, the employees in

such establishment, factory, mine, oilfield, plantation, port, railway

company or shop are in receipt of gratuity or pensionary benefits not less

favourable than the benefits conferred under this Act.

2. The appropriate Government may, by notification and subject to such

conditions as may be specified in the notification, exempt any employee or

class of employees employed in any establishment, factory, mine, oilfield,

plantation, port, railway company or shop to which this Act applies from

the operation of the provisions of this Act, if, in the opinion of the

appropriate Government, such employee or class of employees are in

receipt of gratuity or pensionary benefits not less favourable than the

benefits conferred under this Act.

3. A notification issued under sub-section (1) or sub-section (2) may be

issued retrospectively a date not earlier than the date of commencement of

this Act, but no such notification shall be issued so as to prejudicially

affect the interests of any person.

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RECOVERY OF GRATUITY:

If the amount of gratuity payable under this Act is not paid by the

employer, within the prescribed time, to the person entitled thereto, the

controlling authority shall, on an application made to it in this behalf by the

aggrieved person, issue a certificate for that amount to the Collector, who

shall recover the same, together with compound interest thereon at such

rate as the Central Government may, by notification, specify, from the date

of expiry of the prescribed time, as arrears of land revenue and pay the

same to the person entitled thereto.

Provided that the controlling authority shall, before issuing a certificate

under this section, give the employer a reasonable opportunity of showing

cause against the issue of such certificate.

Provided further that the amount of interest payable under this section

shall, in no case exceed the amount of gratuity payable under this Act.

PENALTIES:

1. Whoever, for the purpose of avoiding any payment to be made by

himself under this Act or of enabling any other person to avoid such

payment, knowingly makes or causes to be made any false statement or

false representation shall be punishable with imprisonment for a term

which may extend to six months, or with fine which may extend to ten

thousand rupees or with both.

2. An employer who contravenes, or makes default in complying with, any

of the provisions of this Act or any rule or order made thereunder shall be

punishable with imprisonment for a term which shall not be less than three

3060

months but which may extend to one year, or with fine which shall not be

less than ten thousand rupees but which may extend to twenty thousand

rupees, or with both.

Provided that where the offence relates to non-payment of any gratuity

payable under this Act, the employer shall be punishable with

imprisonment for a term which shall not be less than six months but which

may extend to two years unless the court trying the offence, for reasons to

be recorded by it in writing, is of opinion that a lesser term of

imprisonment or the imposition of a fine would meet the ends of justice.

PROTECTION OF ACTION TAKEN IN GOOD FAITH:

No suit or other legal proceeding shall lie against the controlling authority

or any other person in respect of anything which is in good faith done or

intended to be done under this Act or any rule or order made thereunder.

PROTECTION OF GRATUITY:

No gratuity payable under this Act and no gratuity payable to an employee

employed in any establishment, factory, mine, oilfield, plantation, port,

railway company or shop exempted under section 5 shall be liable to

attachment in execution of any decree or order of any civil, revenue or

criminal court. 

ACT TO OVERRIDE OTHER ENACTMENTS, ETC.:

The provisions of this Act or any rule made thereunder shall have effect

notwithstanding anything inconsistent therewith contained in any

enactment other than this Act or in any instrument or contract having effect

by virtue of any enactment other than this Act.

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POWER TO MAKE RULES:

1. The appropriate Government may, by notification make rules for the

purpose of carrying out the provisions of this Act.

2. Every rule made by the Central Government under this Act shall be laid,

as soon as may be after it is made, before each House of Parliament while

it is in session, for a total period of thirty days which may be comprised in

one session or in two or more successive sessions, and if, before the expiry

of the session immediately following the session or the successive sessions

aforesaid, both Houses agree in making any modification in the rule or

both Houses agree that the rule should not be made, the rule shall,

thereafter, have effect only in such modified form or be of no effect as the

case may be; so, however, that any such modification or annulment shall

be without prejudice to the validity of anything previously done under that

rule.

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CASE LAW INDEXCASE LAW INDEX

Guru Jambheshwar University ... vs Dharam Pal on 17 January, 2007

CASE NO.: Appeal (civil) 252 of 2007

Management of India Hume Pipe Co. Ltd. v/s K. Palaniswami

and Anr. on 14/12/1966

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Case Study-1

Guru Jambheshwar University ... vs Dharam Pal on 17 January, 2007

CASE NO.: Appeal (civil) 252 of 2007

JUDGE: G. P. MATHUR, J.

PETITIONER: Guru Jambheshwar University through Registrar

RESPONDENT: Dharam Pal

DATE OF JUDGMENT: 17/01/2007

BENCH: G.P. Mathur & Dalveer Bhandari

JUDGMENT: J U D G M E N T Arising out of Special Leave Petition

(Civil) No.15566 of 2005.

1. Leave granted.

2. This appeal, by special leave, has been preferred against the

judgment and order dated 21.3.2005 of a Division Bench of High

Court of Punjab and Haryana, whereby the writ petition filed by the

appellant challenging the award dated 9.11.2004 of the Industrial

Tribunal-cum-Labour Court, Hisar, was summarily dismissed.

3. The respondent Dharam Pal issued a notice dated 20.1.199 8 under

Section 2A of the Industrial Disputes Act, 1947 (hereinafter referred

3460

to as 'the Act') alleging that he was employed as an unskilled

workman by the appellant Guru Jambheshwar University, Hisar, on

2.10.1995, but his services were illegally terminated on 15.1.1998.

As the conciliation proceedings could not fructify, the Government

of Haryana referred the dispute under Section 10(1) of the Act for

adjudication by the Industrial Tribunal-cum-Labour Court, Hisar

(hereinafter referred to as 'the Labour Court") regarding the validity

of the termination of services of the respondent Dharam Pal and the

relief which he was entitled to get in case the termination order was

found to be illegal.

4. The respondent in his claim statement pleaded, inter alia, that he was

appointed as unskilled workman on the post of Mali (gardener) in

the University by a verbal order dated 2.10.1995; that he was

removed from service on 2.7.1997 but subsequently he was taken

back on duty on 15.10.1997; that he was illegally removed from the

service of the University on 15.1.1998; that the University was

paying wages of Rs.1638/- per month before his removal from

service; that the University had regular work and persons junior to

him had been retained in service and had been regularized; that the

University was forcing the workman to work on contract basis

despite the fact that there is work of regular nature; that the

University was adopting unfair labour practice and that his

retrenchment was illegal as neither any notice was given nor any

compensation was paid to him at the time of his retrenchment.

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5. The Registrar of the University filed a reply on the grounds, inter

alia, that the respondent was engaged as Mali on daily wages on

2.12.1995 and not on 2.10.1995, as claimed by him; that he was

appointed for doing specific job of Mali in the Farming/Horticulture

Wing of the University; that the Government of Haryana on the basis

of the orders passed in CWP No.4522 of 1994 (Kulbhushan v.State

of Haryana) by the High Court had issued instructions to the

University vide letter No.12/5-96/Ad.I(5) dated 17.1.1996 that no

appointment on daily wage basis should be made and all

appointments should be made on contract basis; that in accordance

with the instructions all existing employees in the University who

were working on daily wage basis were put on contract basis; that

the respondent and some other employees engaged on contract basis

had been appointed without following any procedure; that

meanwhile the University advertised the post of

Mali for making regular appointments in order to comply with the

requirements of Articles 14 and 16 of the Constitution; that the

respondent also applied for the said post of Mali and appeared in

interview but he was not selected yet he was allowed to continue;

that consequent upon the closure of the farming operations in the

University and cessation of other seasonal work, the respondent was

given one month's notice vide University letter no.485-500 dated

15.12.1997; that on completion of one month, the services of the

respondent were retrenched vide order dated 15.1.1998; that a

cheque bearing no.416869 dated 15.1.1998 was also given to the

respondent in compliance of Section 25F(b) of the Act as

retrenchment compensation; that as there was some work in the

3660

University all the employees who were retrenched earlier were

called but the respondent did not turn up for duty though 14 other

employees reported for duty and were engaged and a letter in this

regard was sent to the Labour and Conciliation Officer, Hisar on

21.5.1998. It was specifically pleaded that the services of the

respondent were retrenched after duly complying with the provisions

of Section 25F of the Act and that in the regular selection held for

the post of Mali the respondent was not selected by the selection

committee.

6. The parties adduced oral and documentary evidence in support of

their case before the Labour Court. The Labour Court held that the

instructions issued by the Government showed that the monthly

wages of unskilled Mali were Rs.1642/-. The respondent had been

appointed on 2.12.1995 and his services were terminated on

15.1.1998 and thus he had completed two years and one month of

service on the date when he was retrenched from service. He was

thus required to be paid 15 days' average pay for completion of the

first year of service and 15 days' average pay for completion of

second year of service as retrenchment compensation. It was further

held that in order to calculate the retrenchment compensation, the

legal requirement was to divide average monthly wage by 26 and not

by 30, as a worker ordinarily gets four weekly holidays and has to

work only on 26 days in a month. For holding so, the Labour Court

relied upon some decisions of the High Courts and also a decision of

this Court in Jeevanlal (1929) Ltd. V. Appellate Authority under the

Payment of Gratuity Act and Ors. (1984) Lab IC 1458. After holding

3760

so, it was held that one day's average pay of the respondent would be

Rs.63.15 (Rs.1642/26) and thus the compliance of Section 25F(b)

required payment of Rs.63.15x15x 2 = Rs.1,894.50. It was

accordingly held that the retrenchment compensation of Rs.1642/-

paid by the University to the respondent fell short of the amount

which was required to be paid under law and, therefore, there was

non- compliance of Section 25F(b) of the Act which rendered the

retrenchment of the respondent as illegal. It was further held that the

University had not produced any evidence to show that the

respondent had been gainfully employed after termination of his

service, but looking to the fact that he was engaged in a job which

did not require any qualification, it could not be held that he

remained totally out of job during the intervening period and,

therefore, he was entitled to 50% back wages. The Labour Court,

accordingly, gave an Award directing that the respondent be

reinstated with continuity in service and all other consequent service

benefits along with 50% back wages from the date of issuance of

demand notice dated 21.1.1998 till publication of the Award and full

wages thereafter till his reinstatement.

7. The question which requires consideration is whether the Labour

Court was correct in holding that one day's average pay of the

respondent should becalculated by dividing his monthly salary of

Rs.1642/- by 26 and the quotient so arrived at should be multiplied

by 30 (15 x 2) as he had worked for two years and one month.

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8. Sections 2(aaa) and 25F of the Industrial Disputes Act, 1947 read as

under:-

2(aaa) "average pay" means the average of the wages payable to a

workman--

(i) in the case of monthly paid workman, in the three complete

calendar months,

ii) in the case of weekly paid workman, in the four complete

weeks,

iii) in the case of daily paid workman, in the twelve full working

days, preceding the date on which the average pay becomes

payable if the workman had worked for three complete

calendar months or four complete weeks or twelve full

working days, as the case may be, and where such calculation

cannot be made, the average pay shall be calculated as the

average of the wages payable to a workman during the

period he actually worked. 25F. Conditions precedent to

retrenchment of workmen.-

No workman employed in any industry who has been in continuous service

for not less than one year under an employer shall be retrenched by that

employer until--

(a) the workman has been given one month's notice in writing

indicating the reasons for retrenchment and the period of

notice has expired, or the workman

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has been paid in lieu of such notice, wages for the period of

the notice:

(b) the workman has been paid, at the time of retrenchment,

compensation which

shall be equivalent to fifteen days' average pay for every

completed year of

continuous service or any part thereof in excess of six months;

and

(c) notice in the prescribed manner is served on the appropriate

Government or

such authority as may be specified by the appropriate

Government by notification

in the Official Gazette.

Sub-section (b) of Section 25F requires payment of retrenchment

compensation to a workman which shall be equivalent to 15 days' average

pay for every completed year of continuous service or any part thereof in

excess of six months. Average pay has been defined in Section 2(aaa) of

the Act and, therefore, average pay has to be determined strictly in

accordance with the aforesaid provision and not on the basis of some

hypothetical calculation. Section 2(aaa) contemplates four different kinds

of wage period for payment of wages. Clause (i) speaks of monthly paid

workman and here the average wage has to be calculated by arriving at the

average or mean of three complete calendar months. Clause (ii) refers to

weekly paid workman where the average pay would be the average or

4060

mean of four complete weeks. Clause (iii) deals with daily wage workman

and in this case the average pay would be the average or mean of wages in

twelve full working days. The fourth category would be a case where it is

not covered by any of the sub-clauses (i), (ii) or (iii) and in this case the

average pay shall be calculated as the average of the wages payable to a

workman during the period he had actually worked.

9. The language used in Section 2(aaa) is absolutely plain and clear and

there is not the slightest ambiguity in the same. It is well settled

principle that the words of a Statute are first understood in their

natural, ordinary or popular sense and phrases and sentences are

construed according to their grammatical meaning, unless that leads

to some absurdity or there is something in the context or in the

object of the statute to suggest to the contrary. The true way is to

take the words as the legislature have given them, and to take the

meaning which the words given naturally imply, unless where the

construction of those words is, either by the preamble or by the

context of the words in question, controlled or altered. As is often

said the golden rule is that the words of a statute must prima facie be

given their ordinary meaning and natural and ordinary meaning of

the words should not be departed from unless it can be shown that

the legal context in which the words are used requires a different

meaning. (See Principles of Statutory Interpretation by Justice G.P.

Singh Ninth Edition2004 pg.78-79).

4160

10. In the demand notice served by the respondent upon the University

under Section 2-A of the Act on 20.1.1998, it was stated "that the

University was paying him Rs.1638/- per month before removal."

Again in para 2 of the claim statement which was filed by the

respondent before the Labour Court, wherein he described himself as

petitioner, it was stated "that the University was paying the

petitioner Rs.1.638/- per month before the removal." In the reply, it

is also the specific case of the University that the respondent was

being paid on monthly basis at the rate of Rs.1642/- per month.

Therefore, there is no dispute that the respondent was being paid

wages on monthly basis though there is slight difference in the actual

amount which was being paid to him. The Labour Court has

recorded a finding that a cheque for Rs.1642/- was given by the

University to the respondent as retrenchment compensation. Since

the respondent was being paid wages on monthly basis, his average

pay has to be calculated in accordance with the formula given in

clause (i) of Section 2(aaa) of the Act which would mean the sum

total of wages paid to him in three complete calendar months

immediately preceding his retrenchment and dividing the said

amount by three.

The respondent was being paid wages amounting to Rs.1642/- per

month in immediately three preceding months before his

retrenchment. Therefore, the "average pay" in accordance with

Section 2(aaa)(i) would come to Rs.1642/-. The respondent had

worked for two years and one month and, therefore, he was entitled

to thirty (15 x 2) days of average pay by way of trenchment

4260

compensation in order to comply with requirement of Section 25F(b)

of the Act. The "average pay" of the respondent being Rs.1642/- per

month and he being entitled to 30 days' average pay by way of

retrenchment compensation, he was required to be paid Rs.1642/- as

retrenchment compensation. The University gave him a cheque for

Rs.1642/- at the time of his retrenchment and, therefore, there was

full compliance of Section 25F(b) of the Act.

11. The Labour Court has basically relied upon a decision of this Court

rendered in Jeevanlal (1929) Ltd. V. Appellate Authority under the

Payment of Gratuity Act and Ors. (1984) Lab IC 1458 for coming to

the conclusion that the respondent's average pay has to be calculated

on per day basis by dividing the monthly salary drawn by him by 26

and the quotient so arrived at should be multiplied by 30 in order to

determine the retrenchment compensation under Section 25F(b) of

the Act. It, therefore, becomes necessary to consider the aforesaid

decision in detail. The issue involved in the said case related to

payment of gratuity. Section 2(s) and sub-sections (1), (2) and (3) of

Section 4 of Payment of Gratuity Act at the relevant time read as

under :- "2(s) "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 allowances."

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"4(1) : Gratuity shall be payable to an employee on the termination

of his employment after he has rendered continuous service for not

less than five years:

(a) on his superannuation; or

(b) on his retirement or resignation; or

(c) on his death or disablement due to accident of disease.

Provided that the completion of five years shall not be necessary where

thetermination of the employment of any employee is due to death or

disablement:

Provided further that in the case of death of the employee, gratuity payable

to him shall be paid to his nominee or, if no nomination has been made; to

his heirs.

Explanation - For the purpose of this section, disablement means such

disablement as incapacitates an employee for the work which he was

capable of performing before the accident or disease resulting in such

disablement.

(2) 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 :

4460

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.

(3) The amount of gratuity payable to an employee shall not exceed

twenty months' wages."

While interpreting the aforesaid provisions, the Court held as under in para

10 of the reports :

10. In dealing with interpretation of sub-sections (2) and (3) of Section 4

of the Act, we must keep in view the scheme of the Act. Sub-section

(1) of Section 4 of the Act incorporates the concept of gratuity being

a reward for long, continuous and meritorious service. Sub-section

(2) of Section 4 of the Act provides for payment of gratuity at the

rate of "fifteen days' wages" based on the rate of wages last drawn

by the employee concerned for every completed year of service. The

legislative intent is obvious. Had the legislature stopped with the

words "fifteen days' wages", occurring in sub-section (2) of Section

4 of the Act, there was something to be said for the submission

4560

advanced by the learned counsel for the appellants based upon the

decision of the learned single Judge of the Andhra Pradesh High

Court in Associated Cement's case (1976) Lab IC 926) which was

later approved by a Division Bench of the Court in Swamy's case

(1978 Lab IC 1285). But the legislature did not stop with the words

"fifteen days' wages" in sub-section (2) of Section 4 of this Act. The

words "fifteen days' wages" are preceded by the words "at the rate

of" and qualified by the words "based on the rate of wages last

drawn" by the employee concerned. The emphasis is not on what an

employee would have earned in the course of fifteen days during the

month when his employment was last terminated, but on the rate of

fifteen days' wages for every completed year of service based on the

rate of wages last drawn by the employee concerned. The word 'rate'

appears twice in sub-section (2) of Section 4 and it necessarily

nvolves the concept of actual working days. In Digvijay Woollen

Mills' case (AIR 1980 SC 1944) the Court rightly observed that

although a month is understood to consist of 30 days, gratuity

payable under the Act treating the monthly wages as wages for 26

working days is not new or unknown."

(emphasis supplied)

Paragraph 12 of the reports is also relevant and the same is being

reproduced

below :

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12. It is not correct to say that the decision in Shri Digvijay Woollen

Mills' case (AIR 1980 SC 1944) does not lay down any principle.

Gupta, J. speaking for the Court set out the following passage from

the judgment of the Gujarat High Court in Shri Digvijay Woollen

Mills' case (para 4) : "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 utilized

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 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 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 ribunals

in the country have always followed this pattern of fixation of wages by

this method of 26 working days."

And then observed :

"The view expressed in the extract quoted above appears to be legitimate

and reasonable."

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The learned Judge then went on to say:

"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 Gujarat High Court cannot be called

perverse."

He further observed that it was not necessary to consider whether another

view was possible and declined to interfere under Article 136 in a matter

where the High Court had taken a view favorable to the employees and the

view taken could not be said to be in any way unreasonable and perverse,

and then added :

"Incidentally, to indicate that treating monthly wages as wages for 26

working days is not anything unique or unknown."

12. It may be noted that Section 4(2) of the Payment of Gratuity Act

uses the expression "the employer shall pay gratuity to an employee

at the rate of fifteen days' wages based on the rates of ages last

drawn by the employee." On account of the language used in Section

4(2) it becomes necessary to find out the rate of wages which

necessarily involves the concept of actual working days.

It was on the basis of the aforesaid language of the provisions under the

Payment of Gratuity Act that this Court in the case of Jeevanlal (supra)

observed that "although a month is understood to consist of 30 days,

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gratuity payable under the Payment of Gratuity Act treating the monthly

ages as wages for 26 days is not new or unknown."

13. The principle laid down in the case of Jeevanlal (supra) and Shri

Digvijay Woollen Mills Ltd. v. M.P. Butch AIR 1980 SC 1944 can

have no application for determining the retrenchment compensation

under Section 25F(b) of the Act as the word "average pay" occurring

herein has been defined in Section 2(aaa) of the Act. The concept of

26 working days was evolved having regard to the definition of the

word "wages" as given in Section 2(s) of Payment of Gratuity Act,

which uses the expression "all emoluments which are earned by an

employee while on duty or on leave." Therefore, there is no warrant

or justification for importing the principle of 26 working days for

determining the compensation which is payable in terms of Section

25F(b) of the Act.

14. There is another important feature which deserves notice.

Subsequent to the decision of this Court in Jeevanlal (supra) an

explanation has been added after second proviso to Section 4(2) of

the Payment of Gratuity Act, by Act No.22 of 1987, which reads as

under:-

"Explanation: - In the case of a monthly rated employee, the fifteen days'

wages shall be calculated by dividing the monthly rate of wages last drawn

by him by twenty-six and multiplying the quotient by fifteen."

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By adding the explanation, the legislature has brought the statute in line

with the principle laid down in the case of Jeevanlal (supra) and has given

statutory recognition to the principle evolved, viz. that in case of monthly

rated employee the fifteen days' wages shall be calculated by dividing the

monthly rate of wages by twenty six and multiplying the quotient by

fifteen. But, no such amendment has been made in the Industrial Disputes

Act. If the legislature wanted that for the purposes of Section 25F(b) also

the average pay had to be determined by dividing the monthly wages by

twenty-six, a similar amendment could have been made. But the legislature

has chosen not to do so. This is an additional reason for holding that the

principle of "twenty-six working days" is not to be applied for determining

the retrenchment compensation under Section 25F(b) of the Act.

15. We are, therefore, of the opinion that the view taken by the Labour

Court is clearly erroneous in law and has to be set aside. The High

Court did not go into the question at all and summarily dismissed the

writ petition by a one line order observing that the compensation

offered to the workman was short of the amount actually due.

16.For the reasons discussed above, the appeal is allowed. The order

dated 21.3.2005 passed by the High Court and the award of the

Labour Court dated 9.11.2004 are set aside. It is held that the

University had paid the retrenchment compensation to the

respondent Dharam Pal in accordance with law and there is no

infirmity in the order passed whereby his services were terminated.

No costs.

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Case Study-2

Management of India Hume Pipe Co. Ltd. v/s K. Palaniswami and

Anr. on 14/12/1966

JUDGMENT: M. Anantanarayanan, C.J.

1. This appeal by the employer, the Management of M/s India Hume

Pipe Co.,Ltd. raised a question of considerable interest, upon which

there appeared a paucity of authorities in the Industrial Law, both of

this country and of such advanced countries as the United States or

the United Kingdom. The actual issue involved arises, with reference

to the application of the definition in Section 2(aaa) of the Industrial

Disputes Act, of the expression "average pay", as meaning the

average of the wages payable to a workman.

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2 The situation in which the issue arose before Srinivasan J. in W. P.

No. 568 of 1964 (the judgment in which is reported in Palaniswami

v. India Hume Pipe Co., 1965-2 Lab LJ 541 (Mad), is not in dispute.

The company, which is the appellant before us, closed down on 30th

June 1963. 47 workmen were retrenched, consequent on the closure,

and they admittedly became entitled to retrenchment compensation

under Section 25(F) of the Industrial Disputes Act. Section 25(F)(b),

uses the expression "equivalent to fifteen days' average pay for every

completed year of continuous service", and the question before the

learned Judge was how average pay was to be computed, on the facts

and under Industrial law.

3 Admittedly, the section which applies in Section 2(aaa) and, as we

earlier noted, this defines "average pay" as "the average of wages

payable to a workman". There are then three categories set forth, and

a residual category. The first is the case of 'a monthly paid workman'

the second, the case of 'a monthly paid workman' and the third, the

case of a 'a daily paid workman'. The residual category is that of

persons whose average pay cannot be calculated upon any of these

bases; in such cases, the pay is to be calculated as the average of the

wages payable to a workman during the period that he actually

worked.

4 It was contended by the learned counsel for the employer

organization (Sri Ratan), before the learned Judge, as before us, that

the residual clause must apply to the present case, as these workmen

were paid, by a practice extending for a long number of years, once

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every fortnight. But, indisputably, the determinate basis of the wages

was per diem; in other words, each of these workmen could claim to

be "a daily-rated worker". The learned Judge pointed out that the

learned counsel (Sri Ratan,) did not dispute that a wage period of

14days has been fixed, at no time. Before us also, the relevant

standing orders were referred to and scrutinised, and we can find no

such decision in that regard. All that has happened in these cases is

that wages have been determined per diem, but that, as a matter of

practice, the workmen were paid once every fortnight. Under those

circumstances, the learned Judge held that the residual clause did not

apply, nor could it be argued that these workmen were persons who

could be said to be either 'weekly paid' or 'monthly paid'. The

learned Judge finally summed up the discussion in the following

form:

"The result would be that the average pay in the instant case is really

equivalent to the daily wage of the worker". We have been at some

pains to scrutinise the available authorities, to see whether any light

is thrown in them upon the definition and categories in Section

2(aaa) of the Industrial Disputes Act. We are unable to find anything

which is directly in point, but we think that it can be made clear, by

virtue of a brief analysis, that, on the present facts, the decision of

the learned Judge (Srinivasan J.) is correct and that, indeed, it is the

only possible conclusion.

5 T.S.T. Co., Ltd. v. Perumal Naidu, AIR 1958 Mad 25, a decision of

the Bench consisting of Rajagopalan and Rajagopala Aiyangar JJ. is

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relevant, as showing that the learned Judges came to the conclusion

that where a remuneration was calculated on the basis of wage

periods extending over a month, such remuneration did not cease to

be 'wages' under the Payment of Wages Act 1936, merely because

the wage period was one month, and not a lesser period. The point

which is helpful here is that the learned Judges thought that the

concept of "wage period" logically implied some period of time, on

the basis of which, or in determine relation to which the

remuneration was specified. Our attention has been drawn to Section

4(1) of the Payment of Wages Act IV of 1936, and we find that the

periods "in respect of which such wages shall be payable" are to be

the "wage periods" specified in that section. Our attention has also

been drawn to the Minimum Wages Act XI of 1948 and to Section

3(3)(b), which refers to minimum wages which may be fixed 'by the

hour, by the day or by any larger wage period".

6 We think that there is an essential difference, between a period by

which the wages are paid, and the intervals at which the actual

payments are made. It is conceivable, for instance, that even in the

case of an employee whose wage period is one month, and there is a

determine wage on that basis, in actual practice, he is receiving the

accumulated wages once every quarter. That may be a matter of

mutual convenience, and, obviously, the "wage period", in its

essential sense, can differ from the actual occasions of payments or

the intervals separating them. This view of the implications of the

definition in Section 2(aaa) of the Act can, we think, be justified, by

bringing out the features inherent on the concept of 'average pay'.

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7 Sri Ratan argues that we must have regard only to the strict and

literal meaning of the words of the statute; according to hi, "daily

paid workmen" simply implies workmen who are paid per diem, in

actual fact. The workmen in the present case were receiving their

wages once every fortnight, and they do not fall into any of the three

categories of Section 2(aaa). They fall, it is claimed, only into the

residual category. But, as the learned Judge (Srinivasan J.) has

shown, this mode of calculation may involve considerable hardship

to several of these workmen, who have been in employment for long

periods, and whose wages have hence accelerated from low levels to

higher levels. We do not think that we can accept the contention of

the learned counsel, as it is indefensible. As we have earlier stressed,

the question is not whether theactual occasions of payment were at

fortnightly intervals, but whether the determinate basis of the wage

was a 'wage period' of a day, or a longer period. In the present case,

there was simply no wage determination on the basis of a fortnight,

and this is not disputed. The 'wage period' was the day, the

determinate basis was that and all that has happened is that the

employer added up the totals of the daily wage each fortnight, and

paid his workmen. The issue is not materially different because of

leave rules, which enabled the employees to earn wages, even when

they were absent on leave, and here also we must overrule the

contention of the learned counsel for the appellant organisation. In

Stroud's Judicial Dictionary, under the word "Paid" we find an

illuminating note based on Gether v. Capper, (1855) 15 CB 701, to

the effect that the word "paid" should be read as meaning

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"contracted to be paid". In the present case, the workmen contracted

with the employer and the employer contracted with them, to pay

wages per diem.

8 We have referred to other treatises upon the specific concept of

Wages, such as Kothari on "Wages, Dearness allowance and Bonus"

and Rothenberg on "Labour Relations" 1940, but we regret that we

have not been able to find any reference to this particular aspect of

the concept of "average pay". But whatever might be the case with

regard to some other situation in which there is a 'wage period', in

the true sense of a period for which wages have been determined on

the basis of that interval of time, in the present case, it appears to be

indisputable that the wage period was only the day and that wages

were rated by the day. Consequently, we confirm the decision of the

learned Judge (Srinivasan J.) in this respect and dismiss the appeal.

The first respondent will have costs in this appeal Rs. 100.

9. Appeal dismissed.

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Bibliography The Industrial Disputes Act, 1947 with exclusive notes by S.D Puri,

Advocate, Publisher:Snow White Pulications, Mumbai

Law, Ethics and Communication, Author and publisher: Board of

Studies The Institute of Chartered Accountants of India

REFERENCE WEBSITES

www.manupatra.com www.legalpandit.com www.supreemcourt.com www.indiankanoon.org

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EPILOGUEThe main findings about the subject are astounding. Within this project

conflicts between various industries and the workman is studied upon

keenly.

However, one of the important element of this project was to investigate

and discuss about the scope and limitations of the ‘management’ and

‘worker’ relationship seen through the kaleidoscope of a management

student.

In addition, scrutinizing- all kinds of relationship between a workman and

the industry, managerial responsibility of industries and institutions

appointing workman, their disputes and behavioral pattern, within the light

of the principles incorporated within the Legal Frame of Reference, few

conclusions are drawn apparently.

Although the main objective was to learn to what extent companies are

able to implement the principles of the legal system with reference to

definitive Laws and Acts like- Industrial Dispute Act, the Labour Act,

Workman’s Compensation Act, Workman’s Compensation Rules, the

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Industrial Employment Act, the Minimum Wages Act, Payment of Bonus

Act, etc., the concluding result may be as follows:

Unethical Practices are practiced by managements or the governing

‘corporate bodies’ of the industry at the cost of the workman’s

blood.

Sometimes, an industry with inappropriate management

deliberately attempts to exploit its workmen eventually ending up

in disputes.

Disputes like salaries, wages, bonuses etc becomes the main cause

of conflict between the industry and the workman. This often ends

up with the ‘blood’ of the work man eventually resulting in his

elimination/exit.

Lack of communication between the management and the

workman also results a conflict between the both where the

workman ends up as the looser.

However, it is necessary to maintain a certain level of cautiousness with

respect to the above conclusions, since these conclusions are based upon

the findings with respect to a limited amount of case studies and

investigations. The findings are not at all contradictory as they are based on

real legal battle through a court of law.

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