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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • Payment of Gratuity Act, 1972, and West Bengal Gratuity Rules, 1973.
  • S. 4(2) of the Payment of Gratuity Act, 1972,
  • S. 4 of the Payment of Gratuity Act, 1972,
  • GENERAL CLAUSES ACT
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • Payment of Gratuity Act, 1972, and West Bengal Gratuity Rules, 1973.
  • S. 4(2) of the Payment of Gratuity Act, 1972,
  • S. 4 of the Payment of Gratuity Act, 1972,
  • GENERAL CLAUSES ACT
Smart Summary

Factual and Procedural Background

The petitioner operates a jute factory in Hazinagar, 24-Parganas, West Bengal, manufacturing and selling jute goods. A tripartite settlement dated 7 May 1972 fixed wages and dearness allowance of workmen in West Bengal jute mills on a monthly basis. Some workmen in the petitioner's mill were paid wages monthly on the settlement's monthly wage rate, while other workmen for convenience were paid weekly, but those weekly payments were calculated on the basis of the monthly wages fixed by the settlement (monthly wages being prescribed on the basis of twenty-six working days or 208 hours per month). The dispute concerns computation of gratuity under Section 4 of the Payment of Gratuity Act, 1972.

The petitioner paid gratuity to certain weekly-paid, time-rated workmen (respondents 4 to 7) on the basis of what the petitioner considered to be the correct formula (treating "fifteen days' wages" in a specified manner). Those four respondents complained to the Controlling Authority. By order dated 21 December 1973 the Controlling Authority directed further gratuity payments to each respondent (specified amounts for respondents 4–7 were ordered). The petitioner appealed to the Appellate Authority constituted under the Act; the Appellate Authority dismissed the appeals by order dated 4 April 1975. The petitioner challenged that appellate order before this Court under Article 226 of the Constitution.

Legal Issues Presented

  1. Whether the view adopted by the Appellate Authority as to the method of computing "fifteen days' wages" under Section 4(2) of the Payment of Gratuity Act, 1972 is an error of law warranting interference under Article 226 of the Constitution.
  2. Whether "fifteen days' wages" should be taken as equivalent to one half of a month (on the petitioner’s construction) for both monthly-paid and weekly-paid time-rated workmen, thereby requiring a particular method of computation for weekly paid time-rated employees.
  3. Whether the Appellate Authority was in error in being guided by or referring to the Ministry of Labour's communication (dated 12 March 1974) when deciding the appeals.

Arguments of the Parties

Petitioner's Arguments

  • The Act must be construed harmoniously and the Legislature could not have intended to discriminate between weekly-paid time-rated workmen, monthly-paid time-rated workmen, and piece-rated workmen.
  • The maximum period for the statutory computation is a month; therefore "fifteen days' wages" should be construed as one half of a month and the gratuity for each year should be half a month's wages for monthly-paid workmen.
  • For piece-rated employees the proviso to Section 4(2) prescribes computing daily wages as the average total wages for three months divided by the number of days in that period; by analogy, a time-rated weekly-paid workman should have gratuity calculated on what he earned during the actual average period of fifteen days.
  • On that basis the petitioner had paid gratuities to respondents 4–7 and contended those payments were correct; the Controlling Authority's order granting additional sums and the Appellate Authority's dismissal of the petitioner's appeals were challenged before the Court.
  • The petitioner also contended that the Appellate Authority was in error in being guided by the Ministry of Labour's communication of 12 March 1974.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court framed the core inquiry as whether the Appellate Authority's view constituted an error of law requiring judicial interference under Article 226.

The Court analyzed the construction of "fifteen days' wages" in Section 4(2). It observed that to determine fifteen days' wages it is necessary to determine one day's wage, and that the formula adopted by the Appellate Authority for computing daily and thereby fifteen days' wages was a "possible" construction of the statute.

The Court emphasized that it is not necessary to compute fifteen days' wages by determining what one would actually have earned during any specific fifteen-day period; rather the Appellate Authority's method of calculation was within the range of reasonable interpretations and therefore could not be characterized as perverse or an error of law warranting intervention under Article 226.

The Court further noted the purposive aspect of the statute: being beneficial social legislation it should, if possible, be construed in favour of its intended beneficiaries. The petitioner's contention—that a different construction was required to avoid discrimination—was rejected on the ground that the alternative construction advanced by the petitioner would not give benefit to other workmen and would in fact deprive the weekly-paid time-rated workmen of the benefit claimed by the petitioner. The existence of potential differences in outcome between classes of workers did not, in the Court's view, render the Appellate Authority's construction impermissible.

Regarding the Ministry of Labour's communication (12 March 1974), the Court observed that the Deputy Secretary's letter did not prescribe a specific computational method for fifteen days' wages but emphasized that gratuity should be paid at the rate of fifteen days' wages as provided in the Act. The Appellate Authority had not based its decision solely on that clarification; rather, the Appellate Authority reached its own independent conclusion and only referred to the Ministry's clarification in support of that conclusion.

On the totality of these considerations the Court concluded that the Appellate Authority's view was a permissible construction of the statute and did not contain an error of law deserving corrective relief under Article 226.

Holding and Implications

DISMISSED: The petition under Article 226 challenging the Appellate Authority's order dated 4 April 1975 was dismissed.

Direct effects on the parties:

  • The challenge to the Appellate Authority's order fails and the appellate order stands.
  • Rule nisi is discharged and any interim order then in force is vacated.
  • There will be no order as to costs.
  • The stay that had been sought was refused.

Implications for precedent and broader law:
The opinion does not purport to lay down a novel rule of law or to cite judicial precedents; it upholds the Appellate Authority's interpretation as a permissible construction of the statute and therefore does not establish a binding new precedent beyond affirming that the challenged computation method was not an error of law in the circumstances of this case.

    Hukum Chand Jute Mills, Ltd. v. State Of West Bengal And Others

    1. The subject matter of challenge in this application is the order, dated 4 April, 1975, passed by Appellate Authority constituted under the Payment of Gratuity Act, 1972, and West Bengal Gratuity Rules, 1973. The petitioner carries on business of manufacture and sale of jute and jute goods. For the aforesaid purpose the petitioner owns and operates a factory at Hazinagar, in the district of 24-Parganas, West Bengal. It is the case of the petitioner that there was a tripartite settlement on 7 May, 1972, whereunder the wages and dearness allowances of the workmen in all jute mills in West Bengal including the workmen of the petitioners jute mill had been fixed on monthly basis. The petitioner further states that only a section of workmen were paid their wages monthly on the basis of wages per month described in the settlement and other workmen for their own convenience were paid wages every week on the earnings of a full week based on monthly wages prescribed in the settlement. The workmen were paid weekly according to full week's earning either on time-rated or piece-rated basis. In the premises, although a section of workmen in the petitioner's said mill were paid monthly and others were paid weekly, wages of workmen under the terms of settlement were fixed on the basis of monthly wages and where weekly wages were paid these were calculated on the basis of the wages prescribed for a month. Wages had been prescribed on the basis of twenty-six working days or work for 208 hours in a month. Section 4 of the Act deals with conditions and methods of payment of gratuity. The material portion of S. 4 of the Payment of Gratuity Act, 1972, provides as follows:

    “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 or disease.

    Provided that the completion of continuous service of five years shall not be necessary 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.

    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 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.

    (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-sec. (1),—

    (a) the gratuity of an employee, whose services have been terminated for any act, wilful 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 shall be wholly 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

    (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.”

    Sub-section (s) of S. 2 defines wages as follows:

    “Wages means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and other allowance.”

    The term “month,” however, has not been defined. Under the General Clauses Act, however, the month means thirty days.

    2. It is the case of the petitioner that in the case of monthly — paid workmen the average month being of thirty days, fifteen days' wages for each year of service should be equivalent to half a month's wages. In the case of piece-rated workmen, according to the petitioner, the proviso to Sub-sec. (2) of S. 4 enjoins total wages excluding overtime wages earned by the workman during a period of three calendar months immediately preceding the termination of his employment is to be divided by the number of days in that period of three months and multiplied by fifteen. According to the petitioner, in harmony with the above provision regarding computation of gratuity to piece-rated workmen, the gratuity to a time-rated weekly paid workman should also be calculated on the basis of what he had earned during the actual average period of fifteen days. On that basis the petitioner had paid gratuities to respondents 4 to 7 on superannuation after coming into operation of the said Act. The said respondents were weekly paid time-rated workmen whose wages were fixed on the monthly basis and their weekly earnings were computed in the manner described before. These four respondents being aggrieved by the payments, made complaints before the Controlling Authority under the Act and the Controlling Authority directed by the order, dated 21 December, 1973, that respondent 4 was entitled to a further sum of Rs. 984.45 as gratuity and respondent 5 was entitled to receive a further sum of Rs. 781.37 and respondent 6 was entitled to receive a further sum of Rs. 422.95 and respondent 7 was entitled to receive a further sum of Rs. 1,036.80 as gratuity. Being aggrieved by the aforesaid order, the petitioner preferred appeals before the Appellate Authority and the Appellate Authority has dismissed the said appeals and the petitioner has moved this Court under Art. 226 of the Constitution challenging the said order.

    3. The question is whether the view taken by the Appellate Authority amounts to an error of law which calls for interference in this application under Art. 226 of the Constitution. Counsel for the petitioner contended that the Act had to be construed harmoniously and the Legislature could not have intended to discriminate between weekly paid time-rated workmen and monthly paid time-rated workmen and piece-rated workmen. The maximum was a month and fifteen days should be construed to mean half of a month. In my opinion, in order to determine the fifteen days' wages it was necessary to determine one day's wage and in order to do that the formula followed by the Appellate Authority, in my opinion, is a possible one. It is not necessary in order to find out fifteen days' wages to find out what one would have earned during fifteen days or in course of fifteen days. In the aforesaid view of the matter, I am of the opinion that this view is a possible view and it cannot be said that such a view is perverse or it contains any error of law to be rectified in an application under Art. 226. Furthermore, it is a beneficial piece of social legislation and should be construed, if possible, in favour of those for whose benefit it is intended. The argument that such a construction might not ensure such benefit equally to all those who would be affected is not relevant. In such a situation no question of discrimination against any one arises. The construction canvassed for by the petitioner would not have ensured any benefit to other workmen but would have deprived weekly paid time-rated workmen of same benefit. The fact that the view taken might lead to certain discrimination between the two classes or categories of workmen is not decisive on the question.

    4. It was then contended that the Appellate Authority was in error in being guided by the communication of the Ministry of Labour, dated 12 March, 1974. All that he has observed, however, is that he was inclined to agree with the clarification issued by the Ministry of Labour. That document contained the following statements:

    “I am directed to say that the question of calculating gratuity payable under S. 4(2) of the Payment of Gratuity Act, 1972, was raised inter alia at the meeting of the Consultative Committee of Parliament for the Ministry of Labour held on 25 January, 1974. It was mentioned that although S. 4(2) of the Act provides for payment of gratuity at the rate of fifteen days' wages for every completed year of service, gratuity is not paid by some employers at this rate as they calculate the rate of wages for purposes of gratuity on the basis of thirty days in a month instead of twenty-six working days with the result that the workers lose two days' salary as gratuity for every year of service. I am to clarify that gratuity should be paid at the rate of fifteen days' wages for each year of service as laid down in the Act.”

    5. In my opinion, in this case the Deputy Secretary was not giving any instruction as to how fifteen days' wages for each year would have to be computed. What he was emphasizing was that gratuity, should be paid at the rate of fifteen days' wages for each year of service. Furthermore, the Appellate Authority has not based its decision on that clarification. He has for the reasons mentioned in the order come to his own independent conclusion. He has only referred to the clarification in aid of his views.

    6. In the aforesaid view of the matter, I am unable to uphold the challenge to the order in this application under Art. 226. This application, therefore, fails and is accordingly dismissed. Rule nisi is discharged. Interim order, if any, is vacated.

    7. There will be no order as to cost.

    8. Stay asked for is refused.

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    Hukum Chand Jute Mills, Ltd. v. State Of West Bengal And Others
    (Feb 16, 1976)