The Workmen Of The Bangalore Woollen,... vs The Management Of The Bangalore,...

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

Court: supreme-court

Case Number: Not extracted

Decision Date: Not extracted

Coram: P.B. Gajendragadkar, A.K. Sarkar, K.N. Wanchoo

The appeal is styled The Workmen of the Bangalore Woollen, Cotton and Silk Mills Co., Ltd. versus The Management of the Bangalore Woollen, Cotton and Silk Mills Co., Ltd., and the judgment was delivered on 25 January 1962 by the Supreme Court of India. The opinion was authored by Justice A. K. Sarkar, who sat on a Bench composed of Chief Justice P. B. Gajendragadkar, Justice A. K. Sarkar and Justice K. N. Wanchoo. The appellants in this proceeding are the workmen employed by the Bangalore Woollen, Cotton and Silk Mills Company, while the respondent is the Company itself. The factual backdrop begins in the year 1951 when a series of industrial disputes arose between the workmen and the Company. These disputes were referred for adjudication to an Industrial Tribunal appointed under the Industrial Disputes Act, 1947 (hereinafter “the principal Act”). One of the matters presented before the Tribunal concerned a claim by the workmen for a bonus calculated at the rate of one month’s wages for each completed year of service, to be paid to all long‑serving workers who had been discharged on the ground that they were no longer required. On 4 December 1952 the Tribunal issued an award rejecting the workmen’s claim, holding that the demand for a bonus was not justified in view of the amenities that the management had already provided to the employees. Dissatisfied with this decision, the workmen appealed to the Labour Appellate Tribunal. While the appeal was pending, the President promulgated Ordinance No. 5 of 1953, which amended the Industrial Disputes Act, 1947 by inserting new provisions that dealt with compensation for lay‑off and retrenchment. This Ordinance became effective on 24 October 1953. Subsequently, the parties to the dispute reached a settlement and filed a joint memorandum of compromise. The Labour Appellate Tribunal, on 18 December 1953, rendered orders disposing of the appeal in accordance with the terms of that compromise. Clause 5 of the memorandum, which was incorporated into the Tribunal’s award, read as follows: “The management agree to give Gratuity according to the terms of Ordinance No. 5 of 1953 (Central) as from 1‑1‑1953.” It is noteworthy that five days after the award was pronounced, Ordinance No. 5 of 1953 was repealed and replaced by Act XLIII of 1953.

Following the award dated 18 December 1953, a new controversy emerged concerning whether sixty workmen whose services with the Company had terminated for various reasons were entitled to receive payment under the terms of that award. Of the sixty individuals, thirty‑seven had been discharged on the grounds of old age and inefficiency, but no official medical enquiry into their health had been conducted. The Company complied with the award in respect of these thirty‑seven persons and paid them the prescribed sums; consequently, the dispute concerning them ceased to exist. This left twenty‑three workmen whose entitlement remained in question. Among these twenty‑three, one had been dismissed for misconduct, another had been discharged before 1 January 1953, four had voluntarily resigned, seven had died, and the remaining ten had been discharged on the basis of health reasons after a proper medical examination. The workmen asserted that all twenty‑three individuals were entitled to gratuity under the award of 18 December 1953. The Company, however, refused to accede to that contention, maintaining that the award did not create liability in respect of those particular workmen. This dispute formed the factual matrix for the proceedings now before the Court.

The Company declined to agree with the workmen’s claim that the twenty‑three persons listed in Annexure ‘A’ were entitled to gratuity under the award dated 18 December 1953. Consequently, on 1 August 1957 the Government of Mysore referred the matter to adjudication under the Industrial Disputes Act. The reference posed three specific questions: first, whether gratuity should be calculated according to Clause 5 of the Labour Appellate Tribunal’s decision of 18 December 1953 on the basis of Ordinance No 5 of 1953 or on the basis of Act 43 of 1953; second, which of the individuals identified in Annexure ‘A’ would be eligible for gratuity if the ordinance applied and which would be eligible if the act applied; and third, the precise quantum of gratuity, if any, to which each eligible person would be entitled. The reference therefore concerned exactly the same twenty‑three persons previously identified in Annexure ‘A’ of the order of reference.

On 6 March 1958 the Tribunal issued its award. In substance the Tribunal held that the workmen were not entitled to any gratuity under the terms of Ordinance No 5 of 1953, but that they were entitled to gratuity under the scheme that was then in force in the Company’s works, the rate of such gratuity being that prescribed in the ordinance. The workmen have filed the present appeal against that award. It is not contested that, apart from the individual who was dismissed for misconduct, the Company had already paid gratuity to the remaining workmen in accordance with its own gratuity scheme; where a workman had died, the gratuity had been paid to his legal representatives. The claim that formed the basis of the award now under appeal was for an additional payment beyond what had already been provided under the Company’s gratuity scheme.

The central issue before the appellate authority is the proper construction of the award of 18 December 1953. Counsel for the workmen, Mr Jha, based his argument on the definition of “retrenchment” that had been inserted into the principal Act by Ordinance 5 of 1953. That definition reads: “retrenchment means the termination of service of a workman for any reason whatsoever otherwise than as a punishment inflicted by way of disciplinary action” (see Section 2(00) of the principal Act). Section 25‑E, also introduced by the ordinance, provides for the payment of a gratuity or compensation in cases of retrenchment. Mr Jha contended that because “retrenchment” was defined as termination for any reason other than disciplinary punishment, every workman whose service had been terminated – except the one dismissed for disciplinary misconduct – should be eligible for the compensation prescribed in Section 25‑E, as reflected in the award. Even assuming Mr Jha’s interpretation to be correct, thirteen of the twenty‑three persons would still not qualify for any gratuity under the award. As previously noted, one of the twenty‑three individuals was removed for misconduct, which constitutes a disciplinary termination and therefore falls outside the definition of retrenchment. The remaining twelve individuals would require further analysis to determine their eligibility under the award.

The evidence demonstrated that several workmen had been dismissed prior to the award’s effective date of 1 January 1953, and consequently the award did not apply to them. Thus that particular employee was excluded from receiving any benefit that the award was intended to provide under its terms. Additionally, seven of the workmen had died and four had voluntarily resigned, bringing the total of those not retrenched to eleven. Because death or resignation does not constitute a termination of service for retrenchment, those eleven individuals were excluded from the definition of retrenched workmen. Consequently only ten workmen remained whose dismissals were recorded as being on the ground of ill health by the employer. According to the court’s understanding of Mr Jha’s position, he conceded that his claim could be pursued solely on behalf of those ten health‑related dismissals. These ten individuals therefore formed the sole group of workmen whose entitlement to gratuity under the award required detailed legal examination. The court noted that the award expressly limited its coverage to dismissals occurring on or after the specified commencement date, reinforcing the exclusion of earlier terminations. Thus the factual matrix established that only the ten health‑related discharges remained viable for consideration under the statutory scheme.

The next issue for determination concerned whether the ten workmen discharged on medical grounds could be classified as retrenched within the meaning of the statutory definition. The court concluded that they could not be treated as retrenched because the award must be read in the context of the industrial dispute that gave rise to it. That dispute, as recorded, involved a claim for bonus payments to employees who were dismissed on the ground that they were no longer required by the employer. Consequently the award was intended to address situations where surplus workers, though physically fit, could be let go because their positions were redundant. From this interpretation the court inferred that the company, by accepting the award, agreed to pay gratuity only to those dismissed on the basis that their services were no longer needed. It therefore concluded that the ten workers who were removed because of medical unfitness did not fall within the category contemplated by the award. Their discharge was due to an inability to perform the duties for which they had been hired, not because the employer deemed their positions superfluous. Hence the reason for termination was health‑related incapacity, which the court held did not meet the definition of retrenchment that required a terminable but otherwise viable service. Mr Jha argued that the award should be construed independently, asserting that it obligated the company to pay gratuity under the Ordinance to all persons whose service ended by retrenchment as defined. The court rejected that position, observing that the definition of retrenchment describes a termination of service only where the service could have continued if not for the employer’s decision. When a worker’s health prevents continuation of duties, the contract of service itself ends, and such an ending does not satisfy the statutory notion of retrenchment. Accordingly the court found that the award could not be read to extend gratuity to the ten medically discharged employees. This reasoning aligned with the purpose of Section 25‑G, which envisioned re‑employment opportunities for genuinely retrenched workers, a scenario not applicable to those unfit for work.

The Court explained that a termination of service does not occur when the contract of service itself ends because the employee lacks the physical fitness required by that contract; in such cases the contract is terminated, not the service. Consequently, when a workman is dismissed on the ground of ill‑health, the dismissal is attributable to his inability to perform the duties he had undertaken, and the contractual relationship therefore ends by its own nature. The Court further observed that this understanding of the term “retrenchment” is reinforced by Section 25‑G of the Act, which provides that if any workmen are retrenched and the employer intends to employ a new person, the retrenched workmen must be given an opportunity to apply for re‑employment and must be given preference over other candidates. The provision clearly presupposes that a workman whose services have been terminated because of physical unfitness or ill‑health would not be contemplated for re‑employment, since his physical condition prevents him from performing the work to which he was originally assigned, and therefore there is no basis for inviting such a person to resume the same work. If the individual is incapable of performing the duties, the employer cannot logically offer him the same employment again. Accordingly, the Court concluded that a person dismissed on grounds of physical unfitness cannot be classified as “retrenched” within the meaning of the Act as amended by the Ordinance. On this basis, the Court held that the ten workmen who had been discharged because of health reasons—an issue on which there was no dispute—were not entitled to any payment under Ordinance No. 5 of 1953. The Court noted that counsel for the petitioner argued that the Company had paid gratuity to thirty‑seven workmen dismissed on health grounds and that it was discriminatory not to extend the same payment to the ten similarly situated workmen. However, the Court clarified that the issue before it was the construction of the award, not a claim of discrimination. Moreover, the Company had asserted that it was unable, for reasons it did not specify, to establish that the thirty‑seven men were medically unfit; therefore, their dismissals amounted to terminations of service by the Company, making them eligible for payment under the award. In contrast, the Company could demonstrate that the ten workmen in the present dispute were physically unfit to perform their duties, a fact that was not contested. Thus, the two groups of workmen were in fundamentally different situations, and no question of discrimination arose. Accordingly, the Court found the claim of the workmen in this case to be without merit. The Court also observed that a question had been raised before the Tribunal regarding whether, after the repeal of the Ordinance by an Act, gratuity should be calculated under the Ordinance or under the Act; this issue was noted but not decided, as it was not pleaded by the workmen that their position would be any better under the Ordinance than under the Act.

In the proceeding, the Company maintained that the statutory Act was the governing law for the dispute, while the workmen asserted that the earlier Ordinance should control the determination of their rights. The Court observed that it was not required to resolve the precise issue of which instrument—Act or Ordinance—applied, because the workmen had not argued that their legal position would be improved if the Ordinance were applied instead of the Act. Moreover, the Court held that even assuming the Ordinance were the applicable source, the workmen’s claim could not be sustained, as the factual and legal foundations for the claim were insufficient under that Ordinance. The Court further noted that the procedural record did not contain any evidence showing that the Ordinance provided any additional benefit to the workmen beyond what the Act already offered, and that the workmen had not produced any documentary or testimonial support that would persuade the Court to prefer the Ordinance as the controlling instrument. Because the essential elements of their claim were missing, the Court found no basis for granting any relief. Consequently, the Court concluded that the appeal lacked merit. Accordingly, the Court ordered that the appeal be dismissed and that the costs of the proceedings be awarded against the appellant, reflecting the unsuccessful nature of the appeal.