PETITIONER: REMINGTON RAND OF INDIA LTD. Vs. RESPONDENT: THE WORKMEN DATE OF JUDGMENT: 17/10/1969 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. SHELAT, J.M. RAMASWAMY, K. DUA, I.D. CITATION: 1970 AIR 1421 1970 SCR (2) 935 1969 SCC (3) 913 CITATOR INFO : RF 1973 SC2344 (3) ACT: Industrial Dispute-Medical, benefit-Company's Scheme for Calcutta employees whether applicable to Madras region- Gratuity-Qualifying period for workmen guilty of misconduct- Whether gratuity should be payable to workmen guilty of violence, riotous behaviour etc. HEADNOTE: An industrial dispute between the appellant company and its workmen relating,. inter alia, to bonus, medical benefits anti gratuity was, referred by the State Government of. Madras on April 6, 1965 to the Industrial Tribunal for adjudication. The. Tribunal awarded bonus at 2O,% of the consolidated wages as provided in the Payment of Bonus Act, 1965. As to medical benefit& the Tribunal diverted that the company should pay the- cost of medicines prescribed by the company's doctor and the full cost of hospitalisation when it was. recomanded by the company's doctor. The Tribunal modified, the company'& gratuity scheme in accordance with the workmen's demands. The company appealed to, this Court against the award The question of bonus had to be considered, in, the light of this Courts decision in Japan Trading, Company's law. On the question. of medical benefits the Court had to consider whether the company's scheme for its Calcutta employees could be extended to Madras Region. In regard to gratuity the main questions for consideration were as, to, the qualifying, period for- payment of gratuity to workmen who were guilty of misconduct, and whether gratuity should be payable for workmen whose misconduct consisted of violence, riotous behaviour etc. HELD: (i) In View of this Court's decision in Jalian Trading Company's case the.Payment of Bonus Act, 1965 was not applicable in respect of the year in question, and the bonus payable had to be calculated in accordance with, the Full Bench, Formula. The award to that extent therefore had to be set aside and remanded, to the Tribunal for determining the bonus in accordance with the said Formula [937 E] Jalam Trading Co. v. Mill Mazdoor Union, [1967] 1 SC.R. 15, referred to. (ii) In the appellant company's earlier cases relating to its Bangalore, Hyderabad and Kerala Branched this Court had held that the Company's Calcutta scheme relating to medical benefit for its workmen was fair and reasonable and had made the said scheme applicable to these areas also. No substantial difference had been shown between these areas and the Madras region affecting the question of medical benefit. These areas and the no legitimate reason why the Calcutta scheme should not be applied to the workmen in the present case. [The Court framed an eight point scheme for medical benefit based on the Calcutta scheme] [939 A-940 C] Remington Rand of India v. The Workmen, C.A. Nos. 856/68 etc. dt. 10-12-1968, applied. (iii.) Once the principal, that gratuity is paid to ensure good conduct throughout the period that the workman serves his employer as laid drown 936 in Calcutta Insurance Co. some distinction in the matter of the qualifying period between cases of resignation and retirement on the one hand and dismissal for misconduct on the other becomes logically necessary. Such a distinction cannot legitimately be assailed as unreasonable. Similarly if the object underlying the scheme of gratuity is to secure industrial harmony and satisfaction among workmen it is impossible to equate cases of death, physical incapacity, retirement and resignation with cases of termination of service incurred on account of misconduct. Besides, a longer qualifying period in the latter cases would ensure restraint against wailful use of violence and force, neglect etc. [948 E] As laid down in Delhi Cloth & General Mills case that acts amounting to misconduct as defined in the standing orders, when they are made, or the model standing orders, where they are applicable differ in degree of gravity, nature and their impact on the discipline and the working of the concern, and that though grave in their nature all of them may not result in loss capable of being calculated in terms of money. Amongst, them there would be some which would forthwith disentitle the workman from retaining his employment and justifying his dismissal. For the reasons given in the Delhi Cloth & General Mills case it was necessary to modify the scheme of gratuity and to add in cl. 5 thereof a proviso that in cases where there has been termination of service on account of an employee found guilty of act or acts involving violence against the management or other employees or riotous or disorderly be- haviour in or near the company's premises, the company would be entitled to forfeit the gratuity which would otherwise be payable to the concerned workmen. Clause 5 should also be modified so as to introduce therein 15 years continuous service as the qualifying period for earning gratuity in cases when the service of an employee has been terminated on account of misconduct and that such gratuity should be payable at the rate prescribed in cl. 3(d) of the scheme. [948 G-949 D] Calcutta Insurance Co. Ltd. v. Their Workmen, [1967] 2 S.C.R. 596. and Delhi Cloth & General Mills Co. Ltd. v. The Workmen, [1969] 2 S.C.R. 307, applied. Garment Cleaning Works v. Its Workmen, [1962] 2 S.C.R. 711, Motipur Zamindari (P) Ltd. v. Workmen, [1965] 2 L.L.J. 139, Employees v. Reserve Bank of India, [1966] 1 S.C.R. 25, 58, Remington Rand of India Ltd. v.' Their Workmen, [1968] 1 L.L.J. 542, Remington Rand of India v. The Workmen, [1968] 1 S.C.R. 164, 168 and Indian Oxygen & Acetylene Co Ltd. case [1956] 1 L.L.J. 435, considered. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1551 of 1966.
Appeal by special leave from the Award dated February 28,
1966 of the Industrial Tribunal, Madras’in I. D. No. 21 of
1965.
H. R. Gokhale and D. N. Gupta, for the appellant.
M. K. Ramamurthi, Shyamala Pappu and vineet Kumar, for
the respondents.
The Judgment of the Court was delivered by
Shelat, J. On demands for revision of wage-scales, dearness
allowance, medical benefit, bonus for the year 1963-64,
gratuity
937
etc. having been made by the workmen of the appellant-
company in its Madras and the other branches in that region
and disputes thereabout having arisen between the company
and its said workmen, the Government of Madras referred them
by its notification dated April 6, 1965 for adjudication to
the Industrial Tribunal, Madras. The Tribunal granted some
and rejected the rest of the demands. Aggrieved by the
award the company filed this appeal under special leave
granted by this Court.
Though the award dealt with a number of demands counsel for
the appellant-company restricted its challenge against the
award on three subjects only. Consequently, we are,
concerned in this appeal with those three subjects only,
namely, bonus for the year 1963-64, medical benefits and
revision by the Tribunal of the company’s existing gratuity
scheme.
As regards the bonus, the company had already paid to the
workmen bonus at the rate of 4 months’ basic pay as against
the demand for the maximum bonus calculated in accordance
with the Payment of Bonus Act, 1965, and on consolidated as
against the basic wages. The Tribunal conceded that demand
and granted bonus at 209% of the consolidated wages. In
view, however, of this Court’s decision in Jalan Trading Co.
v. Mill Mazdoor Union,(1) Mr. Ramamurthi for the workman
conceded. that the Act cannot apply in respect of the year
in question and that the bonus payable for that year will
have to be calculated on the basis of the Full Bench Formula
as approved by this Court. The award to that extent,
therefore, has to be set aside and remanded to the Tribunal
for determining the bonus in accordance with the said
Formula.
On the question of medical facilities, the workmen’s demand
is contained in paras 27 to 31 of their statement of claim
filed before the Tribunal according to which the workmen
wanted the company to reimburse all medical expenses
incurred by them on production of bills therefore. In paras
27 and 28 of the statement, it was stated that the company
had a scheme for medical benefit for its workmen at Calcutta
made under the consent award of 1962 and that there was no
reason “why this amenity should be refused to the workmen in
this region”. Para 30 of the statement stated that there
was a discussion between the parties regarding this demand
when the company agreed to appoint a medical officer for
consultation by the workmen and also to meet the cost of
medicines upto Rs. 100 for a workman per year. This offer,
however, was rejected on three grounds: (1) that the
condition as to the ceiling was discriminatory, (2) that the
ceiling was too low and (3) that there was no warrant for
not extending the benefit to workmen of the branch offices
outside Madras.
(1) [1967] 1 S.C.R. 15.
938
This demand is dealt with by the Tribunal in para 14 of the
award. It is clear therefrom that the union’s contention
before the Tribunal was that there was no reason why “this
amenity of medical facility which the company has granted to
its Calcutta workmen should be refused to the workmen of the
Madras region”. The contention thus clearly was that the
company having made a scheme for its Calcutta employees, it
was discriminatory to refuse such a scheme to its workmen in
Madras region. It is equally clear that the offer made by
the company and referred to in the statement of claim by the
workmen was rejected as it contained a ceiling which was not
in its Calcutta scheme, and it was, therefore, that its
offer was considered discriminatory. In view of these
contentions the Tribunal agreed that a scheme for medical
benefit for this region was called for. The Calcutta scheme
was not produced before the Tribunal and therefore the
Tribunal proceeded to frame its own scheme. The Tribunal
rejected the demand for reimbursement of all medical
expenses in respect of which bills would be produced as it
felt that such a provision would lead to abuses including
the obtaining of false bills. Instead, the Tribunal
directed that the company should pay the cost of such
medicines as are prescribed by the company’s doctor, if
supported by genuine bills, and should also pay all cost of
hospitalisation if and when it was recommended by the
company’s doctor.
Counsel for the company objected to this part of the award
on the grounds (1) that the Tribunal was not justified in
throwing on the company the entire burden of medical
expenses including the cost of hospitalisation even in cases
of major diseases which workmen might suffer or contact, (2)
that it was no part of the employer’s obligation to provide
for such expenses and that too to an unlimited degree, and
(3) that the award should have provided a ceiling both in
respect of the cost of medicines and of hospitalisation.
The argument was that the grievance of the workmen was that
denial of the medical amenity to them as the one given to
its Calcutta workmen was discriminatory, and therefore, if
the Tribunal decided to concede the demand, it should have
been on the same lines as the Calcutta scheme. Mr. Rama-
murthi, on the other hand, contended that (a) it was an
accepted principle that though a company may have an all
India organisation, it was not necessary that if should have
uniform conditions of service in all the regions and that,
therefore, merely because the company has a medical scheme
for its Calcutta office it did not follow that scheme must
also be applied to its workmen in Madras region, and (b)
that the scheme framed by the Tribunal was fair and should
not be interfered with in order only to bring it in line
with that of Calcutta.
939
In a recent decision concerning this very company and its,
workmen in Bangalore, Hyderabad and Kerala branches
(Remington Rand of India v. The Workmen)(1), this Court had
to consider this very question. The Tribunals in those
cases. had, as in this case, made schemes which imposed the
burden of medical facilities on the company without any
ceiling and extended therein such benefit to the family
members of the workmen also. In those cases, on our finding
the company’s Calcutta scheme to be fair and reasonable, we
substituted it for the schemes framed by the, respective
Tribunals. The Calcutta scheme is thus in operation in
those areas also. Counsel for the workmen has not shown to
us any substantial difference between those areas and the
Madras region affecting, the question of medical benefit.
We,, therefore, find no legitimate reason why the Calcutta
scheme should not be applied to these workmen. It is true
that medical benefit is excepted in that scheme for certain
diseases of a contagious and epidemic nature. That
presumably was done on the ground that for such diseases the
primary duty to give relief is of the State and not of the
employer. For the reasons given in that decision, we set
aside the directions given by the Tribunal in this. behalf
and substitute them by the following scheme :
1. When a workman during the course of his
duty requires medical attention, and where
such attention is given by the company’s
doctor (i.e. a doctor or doctors nominated by
the company including a doctor nominated as a
part-time doctor) and medicines are prescribed
by him, the cost of such prescription should
be borne by the company;
2. In the event of a workman falling sick
at his residence and the illness is other than
a venereal disease, leprosy, smallpox, typhoid
or cholera, he should be paid the cost of the
medicines prescribed;
3. Bills or cash vouchers pertaining to
such prescription should be produced for
counter signature of the company’s doctor
before payment is authorised;
4. Disease of a serious nature requiring
hospitalisation will be subject to
consideration by the company;
5. At the time of employment the company
will be entitled to get the prospective
employees examined by the company’s doctor and
their employment will be subject to being
found medically fit;
6. All company employees who are presently
employed or those employed in future will be
medically
(1) C.A. Nos. 856. 1475 and 2119 of 1968,
decided on December 10, 1968.
940
examined by the company’s doctor once a year
or at such other periodical intervals
determined by the company but the results of
such medical examinations will not be
prejudicial to the workmen’s employment;
7. In case a workman is found medically
unfit to continue in service, the company will
decide his case in consultation with the
union’s secretary; and
8. This scheme will come to an end as and
when the Employees’ State Insurance Scheme is
extended to the employees concerned.
The question of laying down any ceiling need not be con-
sidered as the company, we are told, is agreeable to extend
this scheme in this region.
The third item in respect of which the company challenges
the award is the revision made by the Tribunal of the
existing gratuity scheme. The workmen’s demand in this
respect was : (1) that the maximum limit of 15 months’
salary should be enhanced to 20 months’ salary, and (2) that
the provision in the existing scheme that no gratuity would
be payable to a workman dismissed on the ground of
misconduct should be substituted by a provision that even in
such cases gratuity should be payable but the company would
be entitled to deduct from such gratuity amount the amount
of financial loss, if any, resulting from such misconduct.
The Tribunal’s view was that these demands were reasonable
and accordingly made modifications in the existing scheme.
At first, Mr. Gokhale objected to this part of the award. first
ly on the ground that the Tribunal ought not to have
allowed gratuity even in cases of dismissal for misconduct,
and secondly, that the qualifying period in the case of
termination of service by the company otherwise than for
misconduct should be 10 years and not the graded periods
from 5 to 15 years as provided in the award. On second
thoughts he did not press the second objection. and
therefore, nothing need be said about it. He, however,
contended that if gratuity even in cases of dismissal for
misconduct is to be made payable, a provision should be made
that it would be forfeited if the misconduct is a gross one
involving violence, riotous behaviour etc. and for the rest
of the cases, the qualifying period should be 15 years of
continuous service.
These objections involve a principle, and therefore, need
serious consideration. The principle invoked by Mr. Gokhale
is, firstly, that since gratuity is paid as a reward for
long and meritorious service it would be inconsistent with
that principle to award gratuity in cases of dismissal for
misconduct, for. such cases cannot be treated as cases of
meritorious service, and
941
secondly, the provision in such cases for deduction only of
financial loss resulting from misconduct committed by the
workman is neither proper nor consistent with the principle
on which gratuity is made payable by an employer. A workman
may be guilty of gross misconduct, such as riotous behaviour
or assault on a member of the staff. Such misconduct may
not result in any financial loss to the company, and
therefore, the workman would be paid full gratuity amount.
The contention was that it would be a serious anomaly that
while a workman, who has caused some damage to the company’s
property and is dismissed on the ground that he was guilty
of misconduct would have the gratuity amount payable to him
reduced to the extent of that damage, another workman, who,
for instance, assaults and causes injury, even a serious
injury, to another employee would, though liable to be
dismissed, be entitled to the full gratuity merely because
the misconduct of which he is guilty, though graver in
nature, does not result in pecuniary loss to the company.
In support of his contention, Mr. Gokhale leaned heavily on
two recent decisions of this Court in Calcutta Insurance
Co. Ltd. v. Their Workmen(1) and The Delhi Cloth &
General Mills Company Ltd. v. The Workmen(2). Relying on
these decisions, he urged, that in cases of dismissal for
misconduct, the qualifying period should not be as
prescribed by the Tribunal but must be 15 years of
continuous service. Mr. Ramamurthi, on the other hand,
contended that the principle that gratuity is a reward for
long and meritorious service and that for a single
misconduct after such service, such misconduct should not
result in deprivation of gratuity except to the extent of
the actual monetary loss caused to the employer has been
long accepted in industrial adjudication and should not be
abandoned, and that the two decisions relied on by Mr.
Gokhale should not be construed as having the cumulative
result of enhancing the qualifying period and also depriving
gratuity in cases of dismissal for misconduct. The first
decision, according to him, lays down an increase in the
qualifying period from 10 years, which generally used to be
the period for earning gratuity, to 15 years, and the second
lays down Certain exceptions to the accepted rule that
deduction of monetary loss resulting from misconduct was
sufficient. He argued that neither of the two decisions
lays down that both the consequences must follow where a
workman is dismissed for misconduct, even if such misconduct
has not resulted in any monetary loss to the employer.
In view of these contentions it becomes necessary for us to
examine the earlier decisions cited before us before we come
to
(1) [1967] 2 S.C.R. 596.
(2) [1969] 2 S.C.R. 307.
942
the cases of Calcutta Insurance Co. Ltd.(1) and the Delhi
Cloth & General Mills Co. Ltd.(2).
The question as, to whether gratuity should be, payable even
though the concerned workman is dismissed for misconduct
appears to have been raised for the first time is The
Garment Cleaning Works v. Its Workmen(3). The objection
there raised related to cl. 4 of the gratuity scheme: framed
by the Tribuml which provided that even if a workman was
dismissed or discharged for misconduct, gratuity would still
be payable except that if such a misconduct resulted in
financial loss, to- the works, gratuity should be paid
after, deducting such loss. The contention urged by
counsel, but which failed,, was that such a clause was,
inconsistent with the principle on, which gratuity claims
were based, namely, that they were in the nature of retiral
benefit based’ on. long and meritorious, service.
Therefore, if a workman was guilty of misconduct and was
dismissed or discharged, it would be a blot on his long and
meritorious service and in such a case it would not be open
to him to claim gratuity. This was a general argument and
was repelled as such is clear from what the Court said at
page 715 of the Report :
“On principle, if gratuity is earned by an
employee for long and meritorious service it
is, difficult to understand why the benefit
thus earned by long and meritorious service
should not be available to the employee even
though at the end of such service he may have
been found guilty of misconduct which entails
his dismissal. Grautuity is not paid to the
employee gratuitously or merely as a matter of
boon. It is paid to him for the service
rendered by him to the employer, and when it
is once earned it is difficult to understand
why it. should neceasarily be denied to him
whatever may be, the nature of misconuct for
his dismissal-Therefore we do, not. think that
it would be possible to accede to the general
argument that in all cases where the &mice of
an employee is terminated for misconduct
gratuity should riot be paid to him.”
The words “why it should necessarily be denied to him
whatever may be the nature of misconduct occurring in the
earlier part of the passage and the words “general argument
that in all cases where the service of an employee is
terminated for misconduct gratuity should not be paid” and
the reference by the Court to certain awards made by
tribunals where simple misconduct was distinguished from
grave misconduct and forfeiture of gratuity
(1)[1967] 2 S.C.R. 596. (2) [1969] 2 S.C.R. 307.
(3) [1962] 2 S.C.R. 711.
943
was provided for the letter occurring after this passage
clearly
show firstly that the Court was dealing with and repelled
the general proposition that without any distinction between
simple and gross misconduct there should be forfeiture in
all cases of dismissal for misconduct of whatsoever nature,
and secondly, that though the Court approved the scheme
which provided that gratuity should be paid after deducting
financial loss resulting from the workman’s misconduct, the
Court did not lay down any principle that gratuity should be
paid in cases of grave misconduct involving even violence
which though it may not result in financial damage may yet
be more serious than the one which results in monetary loss.
The decision thus is not an authority for the proposition
that even if a workman were guilty of misconduct, such as
riotous behaviour or an assault on another employee, in-
dustrial adjudication should not countenance a provision for
forfeiture of gratuity in such cases merely because it does
not result in monetary loss or that such a provision would
be inconsistent with the principle that gratuity is not a
boon or a gratuitous payment but one which is earned for
long and meritorious service.
In Motipur Zamindari (P) Ltd. vs. Workmen(1) the only
question considered was whether the award was justified in
providing forfeiture of gratuity in a case where the
misconduct involved moral turpitude. The Court following
Garment Cleaning Works ( 2 ) directed that instead of
forfeiture, the clause should provide deduction of the
amount of monetary loss, if any, caused by such misconduct.
It is clear that no one canvassed the question as to whether
a provision in a gratuity scheme that a workman should
forfeit gratuity in the event of his committing misconduct
involving violence or riotous behaviour within or around the
works premises would be justified or not. Nor was it con-
sidered whether it would be anomalous to provide for
exaction of compensation from gratuity amount in case of
misconduct involving moral turpitude while not making any provi
sion against misconduct, such as the use of violence
or force, which though not resulting in monetary loss, yet
is unquestionably of a graver nature. The case of
Employees v. Reserve Bank of India(3) was again a case
wherethere was a general clause in the gratuity scheme
providing forfeiture in cases of dismissal for misconduct
whatsoever and where in view of the decision in Garment
Cleaning Works (2 )” the Bank conceded to:substitute the
rule by providing deduction from gratuity the amount of
monetary loss occasioned by the misconduct for which
dismissal is ordered. Thus, in none of the cases cited
before us the question as to; what should be the minimum
qualifying period in cases of dismissal
(1) [1965] 2 L.L.J. 139. (2)[1962].2 S.CR.,711.
(3) [1966] 1 S.C.R. 25, at 58.
944
for misconduct and the question as to whether a provision
for forfeiture of gratuity in the event of such dismissal
having been ordered for misconduct involving violence were
either canvassed or considered. On the other hand, in a
recent decision between this very company and its workmen in
Bangalore region (Remington Rand of India Ltd. v. Their
Workmen)(1), the gratuity scheme made by the Tribunal
provided for a qualifying period in cases of termination of
service otherwise than for misconduct, but no qualifying
period was provided for cases where termination of service
was by way of punishment for misconduct. This Court
accepted the objection of the company on the ground of this
omission and laid down the qualifying period of 15 years’
service in such cases. In this decision the Court followed
the earlier decision in Calcutta Insurance Co.(2) In another
such case (Remington Rand of India vs. The Workmen(3),
where the dispute concerned the workmen of the company in
Kerala region 15 years service was provided as the
qualifying period in cases of dismissal for misconduct.
In the case of Calcutta Insurance Co.(2) on a contention
having been raised that the qualifying period for earning
gratuity in cases of retirement and resignation should be 15
years’ service and that no gratuity should be payable in
cases of dismissal for misconduct, the Court examined the
earlier decisions commencing from the Indian Oxygen &
Acetylene Co. Ltd.(4) to the case of Garment Cleaning
Works(5) ‘and registered its demurrer against the
observation made in the latter case that as gratuity was
earned by an employee for long and meritorious service, it
should consequently be available to him even though at the
end of such service he may have been found guilty of
misconduct entailing his dismissal. In so doing the Court
at page 608 of the Report remarked :
“In principle, it is difficult to concur in
the above opinion. Gratuity cannot be put on
the same level as wages. We are inclined to
think that it is paid to a workman to ensure
good conduct throughout the period he serves
the employer. “Long and meritorious service”
must mean long and unbroken period of service
meritorious to the end. As the period of
service must be unbroken, so must the
continuity of meritorious service be a
condition for entitling the workman to
gratuity. if a workman commits such misconduct
as causes financial loss to his employer, the
employer would under the general law
have a
right of action against the employee for
(1) [19681 1 L.L.J. 542. (2) [1967]
2 S.C.R. 596.
(3) [1968] 1 S.C.R. 164, at 168. (4) (1956]
1 L.L.J. 435.
(5) [1962] 2 S.C.R. 711.
945
the loss caused and making a provision for
withholding payment of gratuity where such
loss caused to the employer does not seem to
aid to the harmonious employment of laborers
or workmen. Further, the misconduct may be
such as to undermine the discipline in the
workers a case in which it would be extremely
difficult to assess the financial loss to the
employer.”
Continuity, in other words, must govern both the service and
its, character of meritoriousness. The Court further
observed that a mere provision in a gratuity scheme enabling
an employer to, deduct from the gratuity amount the actual
loss caused as a. result of misconduct for which the workmen
incurs the punishment of dismissal or discharge cannot
subserve industrial peace and harmony, firstly, because an
employer even without such a. provision has under the law
the right of action for claiming damages, a right not taken
away by industrial law, and secondly,. because a misconduct
resulting in dismissal may be such as may undermine
discipline in the workmen, in which case it would be
extremely difficult to assess the financial loss. As
regards the qualifying period, the Court laid down 10 years
service in cases, of resignation or retirement and
“following the principles laid down in the former decisions
of this Court” provided 15 years’ service for qualifying for
gratuity in cases of dismissal for mis-conduct.
In the case of Delhi Cloth & General Mills Co. Ltd. (1) an
objection was raised on behalf of the workmen to cl. 3 of
the gratuity scheme framed by the Tribunal. That clause
provided as follows :
“On termination of service on any ground
whatsoever except on the ground of misconduct
as in cl. 1 (a) and 1 (b) above.”
Cl. 1 (a) and 1 (b) provided for payment of
gratuity in the eventof the death of an
employee while in service or on his being
physically and mentally incapacitated for
further service and’ laid down the rates and
the qualifying periods as follows :
(a) After 5 years continuous service and
less than 10 years’ service-12 days’ wages for
each completed year of service
(b) After continuous service of 10 years-15
days’ wages for each completed year of
service.
The effect of cl. 3, therefore, was that in case of
termination of service an employee would be entitled to get
gratuity at the above
(1) C.A. Nos.2168, 2569 of 1966 and 76, 123 and 560 of
1967, decided on September 27, 1968.
946
rates if he had put in service for the aforesaid periods,
but would forfeit it if the termination was due to any
misonduct committed by him. The objection was that this
provision was inconsistent with the decisions so far given
by this Court, that according to those decisions the only
provision permissible to the Tribunal was to enable Ox
employer to deduct actual monetary loss arising from
misconduct, and that therefore, the mere fact that a work-
man’s service was terminated for misconduct was no ground
for depriving him altogether of gratuity earned by him as a
result of his long and meritorious service, until the date,
when he commits such misconduct. In examining, the validity
of this contention the Court analysed the previous decisions
and pointed out that none of them laid down a general
principle, that an industrial tribunal cannot _justifiably
provide that an employer need not be made to pay gratuity
even where, the workman had incurred termination of service
on account of his having committed misconduct, not merely
technical but of a grave character. The Court observed that
in some decisions this Court, no doubt, had held that the
fact that dismissal of a workman on account of his having
committed misconduct need not entail forfeiture and that it
would be sufficient to forfeit partially the gratuity
payable to him to the extent of monetary loss caused to the
employer. But then no decision had laid down as a principle
that a provision for such forfeiture cannot be justified,
however grave the misconduct may be, provided it had not
caused monetary loss. The Court noticed that the trend in
the earlier decisions was to deny gratuity in all cases
where the, workman’s service was terminated for misconduct
but that in later years in cases such as the Garment
Cleaning Works(1) “a less rigid approach” was adopted. The
Court then observed:
“A bare perusal of the Schedule (Model
Standing Orders) shows that the expression
“misconduct’ covers a large area of human
conduct. On the one hand arc the habitual
late attendance, habitual negligence and
neglect of work on the other hand are riotous
or disorderly behaviour during working hours
at the establishment or any act subversive of
discipline, wilful insubordination or
disobedience. Misconduct falling under
several of these latter heads of misconduct
may involve no direct loss or damage to the
employer, but would render the functioning of
the establishment impossible or extremely
hazardous. For instance, assault on the
manager of an establishment may not directly
involve the, employer in any loss or damage,
which could be equated in terms of money, but
it would render the working of the
establishment impossible. One may also
(1) [1962] 2 S.C.R. 711.
947
envisage several acts of misconduct not
directly involving the establishment in any
loss, but which are destructive of discipline
and cannot be tolerated. In none of the cases
cited any detailed examination of what mis-
conduct would or would not involve to the
employer loss capable of being compensated in
terms of money was made. It was broadly
stated in the cases which have come before
this Court that notwithstanding dismissal for
misconduct a workman will be entitled to
gratuity after deducting the loss occasioned
to the employer. If the cases cited do not
enunciate any broad principle we think that in
the application of those cases as precedents a
distinction should be made between technical
misconduct which leaves no trail of.
indiscipline, misconduct resulting in damage
to the employer’s property, which may be
compensated by forfeiture of gratuity or part
thereof, and serious misconduct which though
not directly causing damage,, such as acts of
violence against the management or other
employees or riotous or disorderly behaviour,
in or near the place of employment is
conducive to grave indiscipline. The first
should involve no forfeiture: the second may
involve forfeiture of an amount equal to the
loss directly suffered by the employer in
consequence of the misconduct and the third
may entail forfeiture of gratuity due to the
workmen. The precedents of this Court, e.g.,
Wenger & Co. v. Its Workmen [1963(2) L.L.J.
388], Remington Rand of India Ltd.’s case
[1968(1) L.L.J. 542] and Motipur Zamindari (P)
Ltd.’s case [1965(2) L.L.J. 139] do not compel
us to hold that no misconduct however grave
may be visited with forfeiture of gratuity.
In our _judgment, the rule set out by this
Court in Wenger & Co.’s case and Motipur
Zamindari (P) Ltd.’s case applies only to
those cases where there has be-en by actions
wailful or negligent any loss occasioned to
the property of the employer and the miscon-
duct does not involve acts of violence against
the management or other employees, or riotous
or disorderly behaviour in or near the place
of employment. In these exceptional cases-the
third class of cases the employer may exercise
the right to forfeit gratuity; to hold
otherwise would be to put a premium upon con-
duct destructive of maintenance of discipline."
In this view, the Court modified cl. 3 of the scheme by
adding an explanation, the effect of which was that though
the employer could not deprive the workman of the gratuity
in all cases of misconduct, he could do so where it
consisted of acts involving violence against the management
or other ’employees or riotous
5Sup.Cl/70-15
948
or disorderly behaviour in or near the place of employment
and also gave right to the employer to deduct from gratuity
such amount of loss as is occasioned by the workman’s
misconduct. We may mention that the Court did not alter the
qualifying period in cases of misconduct since no objection
appears to have been raised on that ground.
As against the contention that a provision in accordance
with these two decisions should be introduced in the scheme
under examination, Mr. Ramamurthi submitted that the two
decisions should not be construed as if they laid down
principles which should have the cumulative effect, firstly,
as to the qualifying period, and secondly, as to deprivation
of gratuity in cases specified in the Delhi Cloth & General
Mills case(1). It is true that this decision does not lay
down that the qualifying period in cases of misconduct
should be 15 years as was held in Calcutta Insurance
Company(2). But, as aforesaid, that was because that ques-
tion was not raised, while in the Calcutta Insurance Co.
case(2) it was expressly raised and the Court laid down that
in such cases it would be proper to provide 15 years
continuous service as a criterion.
Once the principle that gratuity is paid to ensure good con-
duct throughout the period that the workman serves his
employer is accepted as laid down in Calcutta Insurance
Co.(2) some distinction in the matter of the qualifying
period between cases of resignation and retirement on the
one hand and dismissal for misconduct on the other becomes
logically necessary. Such a distinction cannot legitimately
be assailed as unreasonable. Similarly, if the object
underlying schemes of gratuity is to secure industrial
harmony and satisfaction among workmen it is impossible to
equate cases of death, physical incapacity, retirement and
resignation with cases of termination of service incurred on
account of misconduct. Besides, a longer qualifying period
in the latter cases would ensure restraint against wailful
use of violence and force neglect etc. No serious argument
was advanced that such a distinction would not be
reasonable. The objection was against the insertion of both
and not against the merit of such distinction.
As regards the clause as to misconduct, it is not possible
to disagree with the proposition laid down in the Delhi
Cloth & General Mills case(-) that acts amounting to
misconduct as defined in the standing orders, where they are
made, or the model standing orders, where they are
applicable, differ in degree of
(1) 11969] 2 S.C.R. 307.
(2) (19671 2 S.C.R. 596.
949
gravity, nature and their impact on the discipline and the
working of the concern, and that though grave in their
nature and results, all of them may not result in loss
capable of being calculated in terms of money. Amongst them
there would be some which would forthwith disentitle the
workman from retaining his employment and justifying his
dismissal. For the reasons given in the Delhi Cloth &
General Mills’ case(1) with which we, with respect, concur,
we must agree with counsel for the company that it is
necessary to modify the scheme and to add in cl. 5 thereof a
proviso that in cases where there has been termination of
service on account of an employee found guilty of act or
acts involving violence against the management or other
employees or riotous or disorderly behaviour in or near the
company’s premises, the company would be entitled to forfeit
the gratuity which would otherwise be payable to the
concerned workman. Cl. 5 should also be modified so as to
introduce therein 15 years continuous service as the
qualifying period for earning gratuity in cases where the
service of the employee has been terminated on account of
misconduct and that such gratuity should be payable at the
rate prescribed in cl. 3(d) of the scheme.
The appeal is allowed and the award is set aside to the
extent aforesaid. The gratuity scheme and the scheme for
medical benefit, as revised by the Tribunal, are modified as
stated above. So far as the question of hours is concerned,
that question is remanded to the Tribunal to decide it in
accordance with the observations made hereinabove. The
Tribunal will give liberty to the parties to adduce for that
purpose such further evidence as they think necessary.
There will be no order as to costs.
Y.P. Appeal allowed.
950