Dalmia Cement (Bharat) Ltd., New Delhi vs Their Workmen And Anr.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 17 March, 1960

Coram: P.B. Gajendragadkar, K.C. Das Gupta

The Supreme Court of India recorded that the appeal arose from a reference concerning two disputes between Dalmia Cement (Bharat) Ltd., New Delhi and its workmen, decided on 17 March 1960. The judgment was authored by Justice K.C. Das Gupta, who sat on the bench together with Justice P.B. Gajendragadkar. The reference presented two questions: first, whether the management had departed from the established practice of encashment of privilege leave and, if so, what directions were necessary; second, whether subordinate staff should be granted leave facilities on the same basis as other staff members and, if so, what directions were required. The workmen contended that, from 1948 until shortly before the dispute arose, the company had consistently encashed privilege leave that remained credited to the workmen after retaining a balance of 30 days, and that this practice had, by implication, become part of the terms and conditions of service. The employer argued that encashment of privilege leave was governed by Rule 45 of the company’s rules, which permitted encashment only when privilege leave would lapse unless taken, was refused because of urgent work necessity, and the company could not grant such leave even after repeated fresh applications before the lapse date, allowing the employee to receive extra salary for the period of lapse. The employer further stated that, for several years after 1948, the company had, as a matter of grace, permitted encashment in circumstances beyond those specified in Rule 45, but that this concession was withdrawn in 1956 and that any subsequent allowance of encashment was not a matter of right. On the leave question, the workers asserted that there was no justification for discrimination between them and clerical staff, and that they should also receive 30 days of privilege leave, 12 days of casual leave and 12 days of sick leave, the same entitlements enjoyed by clerical employees. The Tribunal ruled in favour of the workmen on both points. Regarding encashment, the Tribunal found: “that there has been a continued and uninterrupted practice ever since 1948 for encashment of privilege leave, as claimed by the workmen for the purposes mentioned in Ex. W/4, that such encashment of privilege leave has ripened into a condition of service that the management departed from such practice in 1957 without lawful reasons, and that the workmen are entitled to encashment of privilege leave provided the purposes for such encashment are purchase of bicycles, incurring of expenditure on ceremonial occasions, expenditure on marriage, payment of insurance premia, payment of building loans, sickness of the employees and their”. The Tribunal further held that there was no reason for discrimination between clerical staff and subordinate staff, and that the subordinate workmen were also entitled to privilege, casual and sick leave in the same manner as the clerical staff. The employer challenged these orders and preferred the present appeal. The Court observed that the question of whether encashment of leave had been allowed since 1948 in the manner alleged was a factual issue, and that, after considering all material, there was clear evidence of a continuous and uninterrupted practice since 1948 of allowing encashment for the specific purposes set out in the award, including the oral testimony of A.L. Talwar, the workmen’s first witness, confirming such a practice.

In this case the Tribunal had recorded that the practice of encashing privilege leave had been continuously followed since 1948 for a variety of purposes. The purposes listed included the purchase of bicycles, payment of expenses for ceremonial occasions, marriage expenditures, insurance premiums, building loans, treatment of sickness of the employee and his dependents, additions and alterations in buildings, purchase of land, payment of private tuition fees, purchase of sewing machines, and for litigation in which an employee might become involved. The Tribunal also held that there was no justification for any discrimination between the clerical staff and the subordinate staff, and consequently the workmen who belonged to the subordinate staff were entitled to privilege leave, casual leave and sick leave on the same terms as the clerical staff.

Against these findings the employer filed the present appeal. The Court noted that the question of whether leave had indeed been encashed in the manner alleged since 1948 was primarily a factual issue. After reviewing all the material, the Court found no basis for interfering with the Tribunal’s decision. The evidence showed a continuous and uninterrupted practice of allowing encashment for the purposes specified in the award. First, the workmen’s witness A. L. Talwar, identified as workmen’s witness No. 1, gave oral testimony confirming that such a practice existed. The management was asked to produce the applications for encashment of leave and the corresponding orders for the years 1948 to 1957. The management could not produce applications for the years 1948 to 1953, stating that they were difficult to trace, but did produce documents for the period 1954 to 1957. Exhibit W‑4 summarized the orders made on those applications for the years 1954, 1955 and 1956, showing that 21 applications were allowed in 1954, 28 in 1955 and 30 in 1956. No record indicated that any application shown in Exhibit W‑4 had been refused during those years. Further, Exhibit M‑1 (W.W. 1) contained several applications for encashment together with the orders, and each order demonstrated that encashment was permitted in every case. The appellant relied on the fact that in several of these applications the workmen‑respondents described their request as a prayer rather than a right. The Court held that if the workmen had truly admitted a lack of right, such an admission would have been made under pressure, because otherwise the encashment might not have been granted. Moreover, there was no evidence that any application between 1948 and 1955 contained a statement that the prayer was not made as a matter of right. Had any such statement existed, the management would have produced it before the Tribunal. In view of this state of the evidence, the Tribunal was correct in concluding that a continuous and uninterrupted practice of encashing privilege leave had existed from 1948 onward.

The Court observed that the Tribunal had correctly identified the purpose of the encashment as set out in Exhibit W‑4 and, because that practice had been long‑standing and continuous, the Tribunal rightly concluded that the encashment of privilege leave had become a condition of service; consequently, the management’s refusal in 1957 to honour certain applications was without lawful justification and the Tribunal’s award on that dispute was affirmed. The Court next turned to the question of leave, noting that the clerical staff enjoyed considerably better leave facilities than the subordinate staff, with clerks receiving thirty days of privilege leave, twelve days of sick leave and twelve days of casual leave each year, while the subordinate staff received only fifteen days of privilege leave and twelve days each of sick and casual leave. The Tribunal had accepted the workmen’s contention that such discrimination was unjustified. In assessing this issue the Court examined Section 22 of the Delhi Shops and Establishments Act, 1954, which provides that after twelve months of continuous service every employee is entitled to privilege leave of not less than fifteen days with full wages, that sick or casual leave with wages may be granted for a total period not exceeding twelve days in a year, that privilege leave may be accumulated after a continuous period of four months at a rate of at least five days per completed period, and that a watchman or caretaker with one year of continuous service is entitled to not less than thirty days of privilege leave; furthermore, if an employee entitled to privilege leave under clause (a) is discharged before taking it, or if he applies for leave and is refused and subsequently quits, the employer must pay full wages for the leave due. The Court held that the statutory minimum of fifteen days of privilege leave did not prevent the Tribunal from awarding the thirty days enjoyed by the clerical staff, and therefore it saw no reason to interfere with the Tribunal’s decision on that point. However, regarding sick and casual leave, the Court noted that Section 22 expressly fixed a maximum total of twelve days for such leave with full wages, a legislative directive that a Tribunal could not disregard; consequently, the Court found that the Tribunal had acted unlawfully by directing the grant of sick and casual leave in excess of this statutory ceiling.

The Court noted that Section 22 of the relevant statute expressly limits the aggregate number of casual leave days and sick leave days that may be granted in any one calendar year to a total of twelve days. In light of this statutory ceiling, the Court concluded that the Tribunal’s award contained a provision which directed the grant of casual leave and sick leave in quantities that exceeded the twelve‑day maximum. Because such a direction contravenes the clear limitation imposed by Section 22, the Court determined that the portion of the award authorising more than twelve days of combined casual and sick leave could not be upheld. Accordingly, the Court set aside that specific part of the Tribunal’s award, thereby removing the provision that allowed the employees to receive casual and sick leave beyond the statutory limit. The Court further explained that the remainder of the Tribunal’s award, which was not inconsistent with the statutory provision, would remain in force. Having corrected the error, the Court held that the appeal was allowed in part. The partial allowance of the appeal resulted in the modification of the Tribunal’s award as described, that is, the elimination of the excessive casual and sick leave entitlement while leaving the other terms of the award unchanged. Finally, the Court observed that no order as to costs would be made, meaning that each party would bear its own costs in the proceedings.