STRAW BOARD MFG. CO LTD v. THE WORKMEN

The chequered career of tliis lis and its zigzag climb up the pre cipice of justice contextually deserves brief narration. The order of reference was made early in 1958, the usual processual exercise be fore the Tribunal resulted in an award on May 1, 1958 where tribunal refused the relief bearing on gratuity. The. disappointed workers challenged the award before the High Court which ·set it aside in November 1963-too long a hibernation in the High Court for a labour dispute where prompt adjudication is the essence of industrial peace. Anyway, when the case came back to the tribunal, its deci sion took another six inscrutable years and, on October·31, 1969, a fresh award was made whereunder the tribunal framed a gratuity scheme and gave the guidelines thereof. This time the appellant mill straight came to the Supreme Court with the present appeal for which ·special leave was granted in a limited way, in the sense that it was confined to t)le question 'whether the correct principles on which gratuity should be payable have been followed in this case or not'.

It is a fact, though unfortunate, lhf!t this labour litigation arrived in this Court in 1970 but its final chapter is being written by this judg ment ·only in 1977. And it is noteworthy that the facts are brief, the legal issues small, the arguments brief and this judgment, but for general observations and traditional reference to rulings cited at the bar, could have been judiciously abbreviated . The main battle at the bar has been over the correct principles in a scheme of gratuity for factory workers and further whether those principles have been departed from under tht award as>ailed by the appellant. We may mention. at this stage, that •he Parliament has enacted the Payment of Gtdtuity Act, 1972, which has ·come into Section 4(5) of the said force with effect from September 16, 1972. Act gives an option to the workers to choose between the gratuity scheme under the award and the one under the statute.

Had the workers been represented before this Court it might have been possible for us finally to close this controversy or even produce a reasonable solution by discussion and negotiation and persuade them to opt for A B c D E F G H .' ~ I 94 SUPREME COURT REPORTS [1977] 3 S.C.R. A B c D ·1: F G H one or the other scheme. Early finality, credible certainty and mutu ally assented solutions, are the fiuer processes of conflict-resolutiou a pur·suit which baffles us here because of labour's absence. All that we can do, therefore, is to adjudicate upon the correctness or other wise of the principles which have gone into the gratuity scheme pre pared by the tribunal in the light of the rulings of this Court and the canons of industrial law. We now proceed to itemise the grounds of attack levelled by Shri I. N. Shroff' for the appellant and assay their worth in the light of the submissions in defence of the award made by Shri P. H. Parekh appearing as amicus curiae.

Even here we may place on record our appreciation of Shri Parekh's services to the Court and the fairness of Shri Shroff in making his points on behalf of the appelant. The only dispute, which has ramified into a few issues, relates to the gratuity scheme ihe tribunal has framed. Shri Parekh. is right in drawing our attention in limine to the financial insignificance, for the appellant, of the subject matter of this /is and the consequential dis inclination we must display to disturb the award. He has urged that the total annual impact on the industry by the implementation of the award is of _the order of Rs. 3,000 /- to a substan.tial part of which the management has no objection. What is more, the appell" ant is prosperous enough to distribute dividends aroun<l ?0% over the years. Further, since 1972 an obligatory statutory gratuity scheme has come into force with the result that the economic C<'nsequences of this litigation, even if the appellant loses are marginal or nil.

This makes us ponder whether, in matters of less than grave moment, this conrt should, as .Part of high judicial policy to arrest the tidal flow of unsubstan.tial litigation, turn away at the portals those who invoke our jurisdiction to examine every case where some legal principle has been wrongly decided, regardless of a sense of 'summit court' to pre perspective and the rare use of its empt a docket explosion and the injustice of delayed justice and in vest the High Courts and high tribunals with final le~al wisdom. The amplitude of Art. 136 is meant more for exceptional situations than to serve as hospitable basket to receive all challenges to seemingly erroneous judgments in the country. reserve power so as As stated earlier, we are confronted by an industrial dispute and are called upon to apply the principles of industrial jurisorudence with its primary concern for peace among the parties. contentment of the workers, the end product being increased production informed by distributive jus.tice.

Law, especially Labour Law, is the art of economic order sustained by social justice. It aims at pra)\Jllatic It believes in relativity and success, but is guided by value-realities. rejects absolutes. The recent constitutional amendment (Art. 43A) which empha"sizes the workers' role in production as oartners in the process, read in the light of the earlier accent on workers' riohts and social justice, gives a new status and sensitivity to inrlustrial juris prudence in our 'socialist republic'. This social ph; Josoohv must inform interpretation and adjudication, a caveat needed because pre cedents become time-barred when societal ethos progresses. We .! STRAW BOARD v. WORKMEN (Krishna Iyer, J.) • 95 arc not called upon to interpret an Act since, in this area of law, the Payment of Gratuity Act came in on a later date. Judge-made l;>w rules the roost. Even so, are we fattered by inflexible norms hallow ed by dated decisions ? Not in this jurisdiction. 'The golden rule' 1n a rapidly changing system, 'is that there are no golden rules'.

We should \le guided by realistic judicial responses to societal problems. against the back drop of the new, radical values implied in 'social justice' to labour, the production backbone of the nation, adjusted to the environs of the particular industry and its economics and kindered circum·stances. The dynamics of labour law, rather than the bonded of old-time case-law answers questions of current justice. Cardozo had cautioned in his 'The Nature of the Judicial Process' : "That court best serves the law which recognizes that the rules of law which grew up on a remote generation may, in the fullness of experience, by found to serve another gen eration badly, and which discards the old rule when it finds that another rule of law represents what should be accord ing to the established and settled judgment of society, and no considerable property rights have become .\ested >n re It is thus great writers upon the liance upon the old rule. common law have discovered the source and method of its It growth. and in its growth found its health and is not and i• should not be stationary.

Change of this charac. ter should not be left to the legislature. If judges have woe fullv misinterpreted the mores of their day, or if the mores of their day are no longer those of ours, they ought not to tie, in helpless submission, the hands of their successors. " life. (Cardozo : The Nature of the Judicial Process : Yale University Press: pp. 151-152). A B c D E F Indeed, we are stating no new proposition since the. profusion of decisions assiduously presented before us states, in 'sum, that each case has to be decided on the updated justice of the fact-situations therein and the only law that we can reasonably discern from ruling's we have read is that there is no law but only iustice, depen- dent on a variety of socio-economic variables, that the tribunal's award, if his performance is not perverse in the process or the end product. must be left well alone by this Court even if some juristic failing or factual peccadillo can be discovered.

A quest for error and an in clination for correction, frequently exercised by higher Courts will G do donble injury. It will delay the finalitv of tribunal to nrnrlnce sati'sfactory results. industrial adiudicafon and thereby defeat the paramount 'jluroose of early re-adiustment. Judicial decentralizati<m claims its price and it mnst be naid by ignoring errors less than orave. Once this pers-· pective is clear, our non-interference with this award is just. More- over, an inr111strial tribunal must act on a legal horse 'sense; rather H than on inr; suc abstractions, on rugged fairness rather than on re- It is shop-floor ius•ice. not five-star lovel; ness. The fined Jega1; 0 ms. weaker qualify for protective order, in the over-al! view of the matter. It will take aw~y the necessary initiative oE • A B c D E F G H SUPREME COURT REPORTS U 977] 3 S·C.R. Gratuity for workers is no longer a gift but a right. a vague, humanitarian exprcssiqp of distributive justice to partners in production for long, meritorious service.

We have, therefore, adopt a broad and generou~ approach to the problems posed before us by Shri Shroff without being mechanistically precedent-bound or finically looked into evidence. It is Speaking_ geaerally, Shri Shroff focussed his fire-power firstly · on the qualifying period of five years for earning gratuity as against ten years sanctified in some earlier rulings and, ·secondly, on the basic wage, as contrasted with the 'consolid~ted' wage being treated as the base for the computation of gratuity. He did cite half-a-dozen of more cases of this court in support which, on closer scrutiny and studied in the light of other citations Shri Parekh emphasized, stand neutralized. The Tribunal ha·s itself referred to many rulings of this Court, noted the features of the industry in question, the hillh dividends and the low wages and reached a via media which we may regard as a prudent judicial resolution of the simple conflict.

The flavour of the social milleu, the raw realities of industrial conditions and. the locale and life-style out there, are sensed by the tribunal better than a dis tant court of last resort primarily specialising in declaration of law. So we are loathe to upset the scheme unless the tribun!ll is grievously or egregiously in error. Shri Shroff staked his case on case-law alone and culled passa~es which upheld basic wages as basi~ and ten-year service for eligibility. Even here, we must mention that the basic wage at the relevant time (revised subsequently) was in the miserable range of Rs. 20/- per mcnsem and to calculate jlrafuity on this pitiful rate, when after 'long and meritorious service' the worker bids farewell to his labour life in the industry, is to be callous to basic justice. The Human Today cannot be held captive by the less-than-human Yesterday in a crucial area of social justice.

So viewed, we are con strained to negative the two preliminary contentions urned bv Shri Sl1roff while agreeing with him on the smaller points of clarification sought. · We reproduce, at this stage, the decrcta! part of the award : "The award, therefore, is that the employers should be required to frame a scheme of gratuity for t]Jeir workmen. The details of the gratuity 'scheme are as under : - (a) On death of a work1nan while in contini.:ous service or on attainment of the age of superannuation or on retiren1ent or resignation dve to continued ill health or on being incapicitated, 15 days wages for each con1pleted year of service subject io a maxi mu111of15 n1onths. STRAW BOARD v. WORKMEN (Krishna Iyer, J.) 97 (b) On voluntary abandoment of ser: vice by a workn1an in case not fall: ing under (a) or termination of ser vice by e1nployers. J 5 days wages for each completed year of continous service subject to the condition that no gratuity will be payable on a total service of less than 5 years, But this con- Cition will not apply in case of resignation or discharge on the g1ounds of physical disablement or incapacity, (i) For the purposes of gratuity of a period of six months or over shall be reckoned as 'one year' while a period less than 6 months will be ignored.

(ii) Gratuity shall be payable to the nominee of the workman in case of his death or to his legal heirs, if no one has been nominated by the workman this behalf. (iii) 'Wages' shall mean and include ba'sic wages and dear food allowance but shall not include bonus. (iv) Gratuity will not be allowed to a workman in case of a serious misconduct committed by him such as insubordination, acts involving moral turpitude, etc. In case of damage to the property of emp loyers or financial loss, the amount to the extent of loss shall be liable to be deducted from the amount of the gratuity. (v) The ba·sis of payment of gratuity shall be aver age earnings of a workman during years. " the last One. of the leading cases both sides referred to is the Delhi Cloth Jn this de_cision & General Mills Co .. v. Workmen & Ors. (') court did make the point : , "That gratuity is not in its present day concept merely a gift made by the employer in his own discretion.

The workmen have in course of time acquired a right to gratuity on determination of employment provided the employer can afford, having regard to his financial conditions to pay it. " c I> F Shah, J, speaking for the Court, also emphasized what we have already adverted to : G "We consider it right to observe that in adjudication of industrial disputes settled legal principles have little play; the awards made by industrial tribunals are often the result of ad hoc determination of di~puted questions, and each determination of determination for.ms a precedent other dispute. An attempt to search for principle from the law built up on those precedents is a futile exercise. To the H (I) fl 969\ 2 S.C.R. 307. A 8 D E 111 H 98 SUPREME COURT REPORTS U 9771 3 s.c.R. Courts accustomed to apply settled principles to facts deter mined by the application of the judicial process, an essay into the unsurveyed expenses of the law of industrial rela tions with neither a compass nor a guide, but only the pil lars of precedents is a disheartening experience.

The Cons titution has however invested this Court with the power to sit in aP.peal over the awards of Industrial Tribunals which are, it is said, founded on the somewhat hazy background of maintenance of industrial peace, which ·secures the pros· perity of the industry and the improvement of the crndi tions of workmen employed in the industry, "nd in absence of principles, precedents mav have to be adopted as guides-somewhat some reason able degree of uniformity of harmony in the process. " reluctantly to secure • Several decisions which were referred to at the bar have been touched upon in the above case. At the end of the consideration of these cases, the Court made two pregnant observations which we extract : "We may repeat that in matters relating to the grant of gratuity and even generally in the settlement of disputes arising out of indu~trial relations, there are no fixed prin ciples, on the application of which the problems arising be fore the Tribunal or the Courts may be determined and often precedents of cases determined ad hoc are utilised It would in the cir to build up claims or to resist them. cumstances be futile to attempt to reduce the grounds of the the Labour decisions given by the Industrial Tribunals, Appellate Tribunals and the High Courts to the dimensions of any recognised principle.

" x x x x x "It is not easy to extract any principle from these cases; as precedents _!hey are conflicting. " These cautionary signals guide us too in the instant case. It is true that on account of the peculiar circumstances affecting the textile industry in the whole country the Court felt that Tribunal was in error in relating gratuity to the consolidated wage in stead of the basic wage. The emphasis in the ruling is on the facts and circumstances affecting the particular industry and the promo tion of industrial peace in that field. Rightly, if we may say ·so with respect, did the Court high-li~ht the view that determination of gra •tuity is bot based 011 any definite rules and each case must depend upon the prosperity of the concern, needs of the ·.vork.men and the prevailing economic conditions, examined auxiliary benefits which the workmen may get on determination of In short, the core of the matter is the totally of the employment. '.circumstances and the stage of evolution of industrial relations at a given time.

What hefd good a decade ago may be given the go by ' years later. light of STRAW BOARD v. WORKMEN (Krishna Iyer, J.) 99 Another leading case on the question of gratuity is the British Paints(') where, after referring to the special features of the parti cular industry and the other benefit schemes enjoyed by the emp loyees, the Court referred to May & Baker whei;e basic wages were treated as the basis and British India Corporation where 'gross salary i.e. basic wages plus dearness allowance' was held to be !ht> basis. It ~ay be noted that in this case the minimum qualifying service for gratuity was held to be S years except in cases where termination resulted from resignation by the employee. B In Hydro-Engineers(') this Court apparen!ly upheld the contentions now urged before us by Shri Shroff but stressed that no bard and fast rule could be laid down and each case must be decided on its own C circumstances.

In Hindustan Antibiotics('), again, this Court highlighted relevant circumstances upon which the discretion of the Tribunal could play, viz., the stability of the concern, the profits made in the past, the futur~ prospects and capadty etc. This Court declined to disturb the gratuity scheme in that case even though the wages which D formed the basis of the gratuity included dearness allowance. In Bengal Chemical & Pharmaceutical Works Ltd., Calcutta('} a Bench of this Court entered the caveat which we have underscored in the earlier part of this judgment that : ''a free and liberal exercise of the power under Art. 136 may materially affect the fundamental basis of such deci sions, namely, quick solution to such disputes to achieve industrial peace. Though Art. 136 is couched in widest terms, it is necessary for this Court to exercise ifs discretion ary jurisdiction only in cases where awards are made in violation. of the principles of natural justice, causing subs tantial and grave injustice to parties or raises an important principle of industrial law requiring elucidation and final de cision by this Court and discloses such other exceptional or special circumstances which merit the consideration of this Court.n It was also mentioned, what is not oft remembered when interfering with awards, that the Industrial Disputes Act is "intended to be a self-contained one and it seeks to achieve social justice on the basis of collective ba1gaining, conciliation and arbitration.

Awards are given· on cir cumstances peculiar to each dispute and the tribunals are, to a large extent, free from the restrictions of technical con siderations imposed on courts. " (1) [1969] 2 S.C.R. 523. (2) [1969] 1 S.C.R. 156. (3) (1967] 1 S.C.R. 672. (4) [1959] Suppl. 2. S.C.R. 136. G H '· ' r I I ,r -I ~· 100 SUPREME COURT REPORTS [l 977J 3 S-C.R. .A This approach is what we earlier de"scribed as the hunch or horse sense. Even Gqziabad Engineering Co.,(') on which Shri Shroff heavily relied, accepts· the position that while gratuity usually related to the basic wage, a departure by relating it to consolidated wage may be made if there be some strong evidence or exceptional circumstance justifying that course. Iribunal"s Calcutta lllsurance Co. Ltd. (') also placed accent on the practical approach in industrial adjudication and did not interfere with the quali fying ·service of 5 years except in the case of resignation by the emp loyee where the qualifying period was raised to I 0 years.

This survey of the cosmos of case-Jaw can expand, but no service will be rendered by that exercise. All that we need say is that there is nothing fundamentally fiawsome in the 5-year period being fix·~d as qualifying service. The real reason why some case:s like British P~ints required a qualifying period of 10 years was that a longer minimum period for earning gratuity in the case of voluntary retirement or re signation would ensure that workmen do not leave one concern for another after putting in the short minimum service qualifying for gra tuity. We think that current conditions must control the tribunal's con science in finalizing the terms of the gratuity scheme. Taking things as · they are, in our country pre·sently there is unemployment at the level of workers-that being the category we are conoernecl with. Colossal unemployment means that the worker will not leave his employment In an economic merely because he has qualified himself for 1,Cratuity. situation where there is a glut of labour in the market and unemploy ment stares the working class in the face it is theoretical to contend that employees will hop from industry to industry unless the qualify ing period for earning gratuity is raised to 10 years.

The tribunal was realistic in fixing 5 years as the period of eligibility. Our industrial realities do not provide for easy mobility of labour. What is more, the sense of national consciousne·ss in this field is reflect ed in the Payment of Gratuity Act which fixes a period of 5 years as the qualifying period for earning gratuity. Decisions have been brought to our notice some of which refer to basic wages and others to consolidated wages as the foundation for computation of gratuity. These are matters of discretion and the "feel" of the circumstances prevalent in the industry by the Tribunal and, unless it has gone haywire in the exercise of its discretion award should stand. We see that in the Payment of Gratuity Act also, not basic wages hut 'gross wages inclusive of dearness allowance' have been taken as the basis. This, incidentally, reflects the industrial sense in the country which has been crystallised into legislation.

(1) 11970] I S.C.R. 622. (2) I 1967] 2 S.C.R. 596. H \ ... ' ' I STRAW BOARD v. WORKMEN (Krishna Iyer, !.) I 0 I All things considered, we are disinclineJ to alter tb" award on the two critical is~sues on which it was challenged. However, there arc certain minor clarifications which will eliminate ambiguity and, on that, both sides are agreed. A We clarify that wages will mean and include basic wages and dear- ness allowance and nothing else. This corresponds to Sec. 2 ( s) of the B Act. Likewise, we declare that qualifying service is continuous service (counted with reference to completed years) as defined in Sec. 2 ( c). We hold that the award will operate as d'rected therein i.e. from the date of reference of the dispute. Both sides agree, in their statement of the case, that in clause (a) of the award the expression 'due to continued ill-health or on being incapacitated' governs only resignation although we feel on compassionate grounds it shou.

Jd govern both situations. The C In regard to the ambiguity must be resolved in favour of the workers. other conflicts of construction possible, as set out in grounds 7 and 8 of the appellant's statement of case, we resolve them in favour of the workmen, abandonment of service being too recondite and the amount involved too trivial for variation by this Court. Shri I. N. Shroff fairly stated that the Court may make an order regarding costs. We direct that the appellant do pay the respondents costs which we quantify at Rs. 2000/-. Out of this sum Rs. 1000/ will be paid direct to Shri Parekh who has assisted the Court on behalf of the workers and the balance of Rs. 1000/- shall be drawn by the present President of the Respondent Union. Our parting thought is that negotiating settlements should be vigorously and systematically pursued even by tribunals since litigation, escalating from deck to deck This must be a upto this Court, defeats both, whoever wins or loses. sobering influence on Labour and Management and agencies of confiict resolutions. That is a legal beacon that can brighten the dark tunnel of industrial conflict and promote national production cheered by shared wealth. D E P.B.R.