Laxmi Vishnu Textile Mills, Ltd. v. P.S Malavankar And Others

V.S Deshpande, J.:— This group of cases raises an important question as to the true interpretation of the words “twenty months' wages” in S. 4 (3) of the Payment of Gratuity Act of 1972 (hereinafter referred to as the Act), indicating the maximum amount of gratuity payable to any employee, engaged in factories or other establishments covered by S. 1 (3) of the Act. The petitioners are all employers, while the contesting respondents in all these cases are daily-rated workmen. They claimed gratuity from the employers on their retirement. Section 4 (1) (b) entitles every employee to gratuity on his retirement, on completion of continuous service for not less than five years. The word “continuous service” is defined in S. 2 (c) of the Act. Gratuity is payable under S. 4 (2) of the Act, at the rate of “fifteen days' wages” for every completed year of service on the basis of the last drawn wages. This rate applies to daily-rated and piece-rated workmen and others, excepting employees of a seasonal establishment to whom gratuity is payable at the rate of seven days' wages for each season. Subsection (3) of S. 4 then prescribes a ceiling for the amount of such gratuity. It reads as follows:

“4 (3) The amount of gratuity payable to an employee shall not exceed twenty months' wages.”

2. The rate of gratuity fixed under S. 4 (2) necessitates working out the quantum of daily wages of a workman without regard to whether he is paid on hourly, daily, weekly or monthly basis. The question of so working out daily wages in the case of daily-rated workman cannot present any difficulty as it is fixed and he is paid on that very basis. But a dispute still arose as to how many days the words “fifteen days” and “twenty months” should cover. The workmen worked out their claim for gratuity at the rate of actual fifteen days' wages for every completed of service, by multiplying the amount of their actual daily wages by fifteen and of “twenty months' wages,” in terms of S. 4 (3) by multiplying it by 600, treating each month of twenty months to be of thirty days.

3. The petitioners, on the other hand, contended that all workmen, without regard to the mode of payment of their wages, work only for twenty-six days in a month. Fifteen days' period is equivalent to half a month. In the case of monthly-rated workmen half a month's wages turn out actually to be those of thirteen days' wages. The Legislature could not have intended to fix different or higher rate of gratuity for daily-rated workmen and discriminate against monthly-rated workmen. Thus, a month must be equated with twenty-six days according to the petitioners, and fifteen days with half a month. This is how employers insisted on limiting yearly rate of gratuity at thirteen days' actual wages and maximum gratuity amount at 520 days' wages. (13 × 2 × 20).

4. The claim was tried by the Controlling Authority under S. 7 (4) of the Act. He rejected the contention of the employers, as to calculating gratuity rate at thirteen days instead of fifteen days' wages. He, however, accepted their contention as to the equation of twenty months' wages with 520 days' wages.

5. The employers did not, but the employees did challenge this order in appeal. The President of the Industrial Tribunal accepted their appeal and held that “twenty months' wages” in S. 4 (3) mean 600 days' wages. Hence this petition by the employers under Arts. 226 and 227 of the Constitution.

6. Sri Shrikrishna, learned advocate appearing for one of the petitioners, contends that when daily-rated workmen work and earn only for twenty-six days in a month, a month can be said to consist for them only of twenty-six days and month's wages virtually then mean twenty six days' wages. According to them, twenty months' wages also must be construed to mean 26 × 20 = 520 days. The Legislature must be, so contends Sri Shrikrishna, assumed to be aware of the basis of the mode of payment of wages to the daily-rated workmen and what a month's wages were for them. According to Sri Shrikrishna, the Legislature must be deemed to have intended, in view of this context, to calculate their twenty months' wages on the basis of twenty-six days in a month. There is no reason or basis to assume that, it is argued, the Legislature could have intended to take into account the wageless four days and convert his twenty-six days' month into that of thirty days.

7. It must be conceded that this contention is not entirely without some substance. It does accord with the realities of how a daily-rated workman works and earns in a month. It is not disputed that a daily-rated workman's wages are invariably equated with twenty-six days' wages for “notice pay” under S. 25F of the Industrial Disputes Act as also for calculating his overtime wages when the same are payable. This contention gets some strength when one takes into account the apparent discrimination to which a monthly-rated workman can be shown to have been subjected to, in this process. The daily-rated and monthly-rated workmen, both work for twenty-six days in a month. But the figure of daily wages of a monthly-rated workman is liable to be calculated by dividing the monthly wages by thirty days, including off and wage-less days, instead of by twenty-six working days. The quantum gets reduced consequently. No such reduction is possible in the daily wages of the daily-rated workman. Rather he gets advantage of two wageless days in the calculation of each completed year's gratuity, and four wageless days, per month in the maximum gratuity of twenty months' wages amount. Only question is how far all this is substantially true and relevant in the construction of Ss. 4 (2) and 4 (3).

8. Dr. Kulkarni, the learned advocate for respondent-employees, on the other hand, contends that it can have no relevance whatsoever, in the matter of calculating the gratuity amounts payable under Ss. 4 (2) and 4 (3), as these only indicate a measure for such calculation without regard to whether workman works for the whole month or not. He also contends that the workmen for whose protection and benefit the Act is intended, are entitled to have a literal and liberal construction of the words so as to promote the intended object.

9. In common parlance a month is understood to mean thirty days. The Act does not contain any definition of the word to justify departure therefrom. Under S. 3 (35) of the General Clauses Act, 1897, it is to be reckoned according to British calendar under which a few months consist of thirty-one days, while others of thirty days and one month of twenty-eight days or twenty-nine days. This is why a month is taken to consist of thirty days for all practical purpose, though as emphasized by Sri Shrikrishna, the above wording of S. 3 (35) by itself does not strictly support such connotation. However, neither S. 3 (35) of the General Clauses Act nor the general understanding of its import, justify equating a month with twenty-six days. The employers' insistence before the trial Court to equate fifteen days with half month also accords with what is ordinarily understood to be its import for practical purpose.

10. Dr. Kulkarni also appears to be right in contending that the Act itself does not furnish any other context to justify any departure from what the word is ordinarily and literally assumed to mean. When S. 4 (2) fixes the rate of gratuity by reference to fifteen days' or seven days' wages, it only goes to indicate a measure for calculating the amount of gratuity. Having decided to arm a worker with a statutory right to claim gratuity proportionate to his period of service, the Legislature requires taking into account the wages of seven on fifteen days by way of measure, without indicating to reduce any such period of such seven or fifteen days by reference to any custom or practice or any fiction, and without regard to whether the worker actually works or earns on these days. The same is true of the reference to “twenty months' wages” in S. 4 (3) intended to indicate the measure of maximum gratuity so receivable. In the context of fifteen and seven days in S. 4 (2), the words “twenty months” in S. 4 (3) would denote the number of days which a month ordinarily is supposed to consist. This should be all the more so when a day's wage is made the basis for calculating the amount of gratuity. The words certainly can have no reference to the days during which an employee could or could not have actually worked or earned. In fact, the concepts of “continuous service” and “completed year of service” incorporated in S. 4 (2) of the Act themselves are artificial and are inclusive of the days on which the employee might not have worked at all. The rate of seven days' wages in the case of employee working in a seasonal establishment also further indicates that the contemplated measure has no reference to the days for which he actually works or earns. The concept of twenty months' wages by way of ceiling on gratuity amounts is indeed a measure of the same pattern necessitating its calculation by reference to the days, a month is supposed to contain and not by reference to days on which he could have worked and earned. In other words, the context and setting of S. 4 (3) does justify reliance on the literal meaning of the word “month” as understood in common parlance and not any departure, therefrom.

11. This also demonstrates how the rate of fifteen days' wages in S. 4 (2) could not have been construed to mean thirteen days' wages, for calculation of the gratuity amount for all the completed years of service, as was sought to be urged by the petitioners before the controlling authority. In the face of express and unambiguous mandate as to the method of calculation of gratuity, equating the same with half month and further to assume fifteen days' wages to mean thirteen days' actual wages is not possible without putting far-fetched and stretched construction on these words, and going through a process of involved reasoning. As the point is not pressed before us, it is unnecessary to pursue it beyond emphasizing how untenable it is. If the rate of fifteen days' wages under S. 4 (2) cannot be reduced to thirteen working days' wages, wages of twenty months covering 600 days also cannot be reduced to 520 days' wages. Approach underlying these two contentions is substantially the same and is untenable for the same reasons.

12. It is not disputed that the daily-rated workmen are entitled to the gratuity in the same way as the monthly-rated or weekly-rated workmen. Under the definition of the word “employee” under S. 2 (e), daily-rated workman is an employee in the same manner as any other employee drawing less than Rs. 1,000 monthly wages. An employee being a daily-rated workman in no way places him on any different basis from the other monthly-rated permanent workmen, as to security of service or statutory benefits available under several labour based legislations. It is only, in the mode of payment of wages, that these workmen differ. There is, therefore, no reason or basis to construe the word “twenty months' wages” differently for them from how the same is construed for the monthly paid work men. The basis of daily wages, in the context, cannot justify treating a month to be of twenty-fix days, when in case of others, it means of thirty days.

13. It was also suggested that a monthly, rated workman is placed at some disadvantage by our above interpretation under which the quantum of his daily wages gets reduced and results in the reduction of his quantum of gratuity as against the daily-rated workmen's advantage in not only not being subjected to such reduction, but being enabled to get his wageless days being included in the calculation of its quantum. A close scrutiny will expose how superficial and distorted such view can be. Firstly, daily or monthly basis of wages is merely a mode of payment depending on the term of the contract of service. Each such contract has its advantages and disadvantages. It is practically impossible to assume that, merely this mode can make any difference of substance in the overall quantum of daily wages for the same work in the same factory of such workers in view of the protection of labour laws and workers' unions. Mere mode of payment cannot make the basis of wages to be discriminatory. In fact, no attempt was made to so demonstrate before us. Once any inequality or discrimination is ruled out from the basis of this mode of payment, no such discrimination can whatsoever be traced in the quantum of gratuity computed in terms of our interpretation of the words “fifteen days' wages” or “‘twenty months’ wages.” This will be still more clear if it is borne in mind that “daily wages” of a worker in the ultimate analysis turn out to be the basis of the quantum of gratuity. This interpretation rather eliminates the discrimination implicit in calculating a month to be of twenty-six days for one set of workmen and of thirty days for another set of workmen for no relevant reason.

14. Dr. Kulkarni drew our attention to the recent judgment of the Supreme Court in the case of Shah (B.) v. Labour Court, Coimbatore [1977-II L.L.N 606]. Under S. 5 of the Maternity Benefit Act of 1961, a woman worker is entitled to the maternity benefit, including right to remain absent during the period of two weeks preceding the date of delivery and six weeks following that date, and get wages for the said period. A question arose whether such benefit could also cover wages for non-working days such as Sundays falling during this period of absence, on which she never works or earns. A Full Bench of the Kerala High Court had earlier answered the question in the negative in its judgment in the case of Malayalam of Plantations, Ltd., Cochin v. Inspector of Plantations, Mundakayam [1975-I L.L.N 341]. Their Lordships, however, answered the question in the affirmative. The learned Judges held that “the term ‘week’ has to be taken to signify a cycle of seven days including wageless Sundays.” In the absence of any identity either in the scheme or the wording of the section, the ratio of this judgment can have no direct relevance in the case before us. Both legislations are, however, intended for the benefit of the workmen and call for liberal interpretation in their favour to the permissible extent. The construction of the word “week” under Ss. 5 (1) and 5 (3) of the Maternity Benefit Act by the Supreme Court as signifying cycle of seven days, including Sunday or wageless days may indirectly lend some moral support to us in interpreting “twenty months' wages” signifying the cycle of thirty days, inclusive of wageless days on which the worker is not called upon to work and earn. But we have already indicated how this aspect has no relevance in the context. The Madras and Andhra Pradesh High Courts, in cases relied on by Sri Shrikrishna before the Industrial Court, referred to in its judgment, and also before us did rely on the ratio of the Kerala High Court judgment in the case of Malayalam Plantations, Ltd. (vide supra). The learned Judges therein sought to restrict “twenty months” wages' in S. 4 (3) of the Act to the wages of 520 working days therein on the basis of the ratio of the said case. In view of the express overruling of the Kerala view by the Supreme Court, the authority of these judgments relied on by Sri Shrikrishna can be deemed to have been shaken. To this extent the above judgment of the Supreme Court can be said to be relevant. The construction of S. 25 F of the Industrial Disputes Act in Madras case, however, stands on a different footing.

15. Sri Shrikrishna relied on certain observations made by the Supreme Court in the case of Delhi Cloth and General Mills, Ltd. v. Their workmen [A.I.R 1967 S.C 469]. The same do support him. It shall also have to be conceded that the scheme of gratuity made applicable to the said mills is not in substance different from the one incorporated in the statute now. However, question posed before us was not specifically raised before the Supreme Court in that case nor had it fallen for consideration otherwise. Observations on the face of them are indeed obiter. The interpretation placed by the Industrial Tribunal on S. 4 (3) of the Act appears to us to be correct. Sri Shetye and Sri Bhogani, the learned advocates in the other petitions, supported the contentions of Sri Shrikrishna. The impugned orders in the all these petitions, therefore, do not call for any interference.

16. Rules are accordingly liable to be discharged.

17. Rules discharged. No order as to cost.

18. Sri Bhogani, the learned advocate appearing for the petitioners in Special Civil Applications Nos. 573 to 575 of 1978, makes an oral application for leave to appeal to the Supreme Court.

19. Leave refused.