K. Madhava Reddy, J.:— The short point that arises for consideration in this petition under Art. 226 of the Constitution is whether under S. 4 (2) of the Payment of Gratuity Act, 1972, gratuity payable, to a workman should be calculated on the basis of wages earned by a workman in a total number of fifteen working days or at wages payable to a workman in a consecutive period of fifteen days inclusive of Sundays. Among the several workers, who claimed to be entitled to the payment of gratuity, some were daily-rated workers and some were monthly-rated workers. With regard to the daily-rated workmen, the controlling authority held that their gratuity has to be calculated on the basis of their daily rate of wages last drawn by him for every completed year of service or part thereof in excess of six months and in regard to the monthly-rated workers, it held that whatever wages would have been earned by monthly-rated workmen in a consecutive period of fifteen days were to be taken as the basis for determining the gratuity payable to them and that included the intervening Sundays. In that view it held that the management had correctly calculated the gratuity payable to them. Both the management and the workmen preferred appeals to the appellate authority. The appellate authority dismissed the appeal preferred by the petitioner herein and allowed the appeal preferred by the management of the Vazir Sultan Tobacco Company, respondent 3 herein.

2. In order to determine this controversy it is necessary to read Sub-secs. (1) to (3) of S. 4 of the Act:

“4. 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 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.”

3. Gratuity is an amount payable to a workman who has completed a period of six months or more and it has to be calculated at the rate of wages last drawn by the employee concerned. The term “wages” has been defined in S. 2 (s) as under:

“‘wages’ means all emoluments which are earned by an employee while on duty or on Page: 581leave in accordance with the terms and conditions of his employment and which are paid or payable to him in cash and includes dearness allowance, but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.”

4. In view of this definition wages payable to an employee are primarily those earned by him while on duty. In accordance with the terms and conditions of his employment he may be entitled to certain leave. If that leave is taken by him in accordance with the terms and conditions of the employment, he would nonetheless be entitled to wages. A monthly-rated workman, having regard to the terms and conditions of the appointment, would be deemed to be on duty throughout the month, notwithstanding the fact that as per the terms and conditions of his employment he is entitled to one rest day on Sunday and also entitled to leave on days stipulated under the terms and conditions of employment. When once his wages are payable on the basis of monthly rate, any amount due to him by way of wages during the course of employment must be calculated accordingly, that is on a monthly rate. When S. 4 (2) directs that gratuity has to be paid at the rate of wages last drawn by the employee concerned, in the case of monthly-rated employees it must necessarily be calculated on the basis of monthly rate of wages. Sub-section (2) of S. 4 lays down that the basis for calculating the quantum of gratuity is the rate of wages last drawn by the employee. Therefore, if fifteen days' wages have to be calculated for the purpose of determining the amount of gratuity payable to him, it is the monthly rate of wages that has to be taken as the basis and not the daily rate of wages. It is common practice and almost an invariable rule and also not disputed in the instant case, that monthly-rated employee is paid his wages at the end of the month which necessarily includes at least four Sundays. Notwithstanding these rest days or holidays, the employee would be deemed to have been on duty for the entire period of one mouth. Therefore, if his wages for a period of fifteen days in a month have to be calculated, wages for that period would be half of what was payable to that employee for the whole of that month. On the wording of Sub-sec. (2) of S. 4, there is no basis for calculating what the monthly-rated employee would earn if he were to be paid at the daily rate of wages. In that event, in one month there may be four rest days and in another month there may be five rest days and in yet another month there may be more than five days of rest, having regard to the other public holidays admissible under the terms of employment. Nonetheless the wages of the monthly-rate worker would not vary in any month. If, for the purpose of calculating the gratuity of a monthly-rated employee, wages earned by him on a single day were to be calculated, the rate would vary from month to month. If a monthly-rated employee were to retire in the month of February with more number of rest days and holidays he would get more gratuity than a monthly-rated worker retiring in a month of thirty-one days, say March, with less number of rest days and holidays. The rate of wages of a monthly-rated worker drawing the same monthly wage, but retiring on different months, would vary and his gratuity also varies, even, if the length of service be the same: it would have no relation to monthly rate of wages earned by him. That does not appear to be the intention of the Legislature. In laying down that gratuity should be calculated at the rate fifteen days' wages based on the rate of wages last drawn by the employee concerned, the Legislature has not only laid down that the gratuity should be paid “at the rate of fifteen days, wages” but also that it should be “based on the rate of wages last drawn by the employee concerned.” The fifteen days' wages have to be calculated at the rate of wages drawn by the employee, which in the case of appellants is a monthly rate and not a daily rate. A month being a period of thirty days inclusive of rest days and holidays, if wages have to be calculated the monthly rate, fifteen days' wages would be what an employee would earn within a period of fifteen days and not in fifteen working days.

5. It was, however, argued by Sri Siyarama Sastry, the learned counsel for the petitioners, that the monthly-rated employees are paid wages calculated at Rs. 1.77 per day for a total period of twenty-six days. It was also asserted that the deductions for absence from duty shall also be calculated on the basis of two hundred Page: 582and eight hours or twenty-six days per month and additional wages are payable to workmen for their work on Sundays, festival days and overtime. Having regard to the fact that the monthly-rated workmen are also paid wages calculated at the daily rate of wages for twenty-six days, Sri Sastry, the learned counsel for the petitioners, contends that in calculating the fifteen days' wages, which has to be paid by way of gratuity to workmen under S. 4 (2), the same basis should be adopted. The appellants do not dispute that the calculation of their monthly rates of wages is made on the above basis. This contention, however, in our view, ignores the specific wording of S. 4 (2) of the Act which lays down that fifteen days' wages should be calculated based on the rate of wages last drawn by the employee concerned. How the monthly rate of wages payable to a monthly worker is arrived at is not relevant for the calculation of the gratuity payable. What is relevant is the rate at which the wages are paid and not how that rate is arrived at. May be the monthly rate of wages is arrived at by multiplying the wages payable to a daily-rate worker by twenty-six which is the average number of working days in a month. But, thereby a monthly-rated employee does not become a daily rated worker; nor can the monthly-rated workman be deemed to have been paid daily wages for twenty six working days. When the basis to be adopted under S. 4 (2) is the rate of wages last drawn by the employee and when it is conceded that the petitioners are all monthly-rated workers, there is no warrant for calculating the amount which a monthly-rated worker would be deemed to have earned per day and then to proceed to calculate fifteen days' wages on that basis for the purpose of arriving at the gratuity payable to him. The rate of wages in the case of monthly-rated workmen, in our view, is the amount payable to a workman at the end of the month irrespective of the number of working days and holidays and it is that rate of wages that must determine the amount payable by way of gratuity. Any provision made under the standing orders for determining the monthly rate of wages or the rate at which the employee is to be paid for working on Sundays or festival days or overtime or the rate at which an employee's wages should be deducted for his absence from duty, cannot be the basis for determining the gratuity payable to him. While the amounts payable to an employee for working on Sundays or festival days and overtime and for deducting his wages for absence from duty is governed by the terms and conditions of service as stipulated under the agreement between the employer and the employee or under the standing orders, if any, the amount of gratuity payable to an employee is to be determined as laid down under S. 4 (2) of the Act. That provision does not authorize the calculation of the gratuity at a rate other than the rate of wages last drawn by the employee, and the rate of wages in respect of a monthly-rated employee cannot be other than the amount payable to him at the end of the month.

6. Our learned brother Ramachandra Raju, J., dealing with the same point with which we are presently concerned in Associated Cement Company, Ltd., Kistna Cement Works, Kistna v. Appellate Authority under Payment of Gratuity Act (Regional Assistant Commissioner of Labour, Guntur) [1976-I L.L.N 229], held in Paras. 2 and 3 at pages 231 and 232:

“… While Sub-sec. (2) of S. 4 lays down that an employee shall be paid gratuity at the rate of fifteen days' wages per year of service, the very next sub-section of the same section, i.e, S. 4 (3) of the Act lays down that the gratuity shall not exceed twenty months' wages … Since a month is generally considered to consist of thirty days, fifteen days, when related to this figure can only mean half of it or half a month…

… By a reading of the two provisions together, my opinion, there is no escaping of the conclusion that when the Legislature mentioned fifteen days' wages based on the rate of wages for each year in Sub-sec. (2) of S. 4 it only means half a month's wage, i.e, the wages the employee was drawing by working half a month prior to the termination of his employment and that would come to thirteen times the wages based on the rate of wages … If really Legislature intended it to be fifteen times the daily wages, it would have mentioned it so clearly in the section…”

We find ourselves in agreement with the above view.

7. In view of the foregoing discussion, we hold that fifteen days' wages referred to in Sub-sec. (2) of S. 4 indicates the period for which wages have to be calculated. If the employee is a monthly-rated worker, the gratuity payable to him would have to be calculated at half his monthly rate of wages, i.e, the wages he would have earned in a consecutive period of fifteen days and not fifteen times the daily wages, for every completed year of service or part thereof exceeding six months. The gratuity so payable, however shall not exceed twenty months' wages as stipulated in Sub-sec. (3) of S. 4 of the Act. That is the view taken by the appellate authority. Consequently no interference is called for.

8. The writ petition, therefore, fails and is accordingly dismissed, but in the circumstances without costs.