Case Note & Summary
The case originated from an industrial dispute between Remington Rand of India Limited and its workmen in the Madras region over demands for revision of wage scales, dearness allowance, medical benefits, bonus for the year 1963-64, and gratuity. The dispute was referred by the State Government of Madras to the Industrial Tribunal, Madras, by notification dated April 6, 1965. The workmen sought maximum bonus under the Payment of Bonus Act, 1965, reimbursement of all medical expenses, and modifications to the existing gratuity scheme. The company had already paid bonus at the rate of four months' basic pay but resisted the other demands. The Tribunal, in its award dated February 28, 1966, awarded bonus at 20% of consolidated wages calculated under the Payment of Bonus Act, 1965. On medical benefits, it directed the company to pay the cost of medicines prescribed by the company's doctor and full hospitalization costs when recommended by that doctor. On gratuity, the Tribunal modified the existing scheme in favour of the workmen. The company appealed to the Supreme Court by special leave, challenging only the findings on bonus, medical benefits, and gratuity. Before the Supreme Court, counsel for the workmen conceded that in view of Jalan Trading Co. v. Mill Mazdoor Union, the Payment of Bonus Act, 1965, did not apply to the year in question, and bonus would have to be calculated under the Full Bench Formula as approved by the Court. Consequently, the bonus portion of the award was set aside and remanded for recomputation. On medical benefits, the Court noted that in earlier proceedings involving the same company's branches at Bangalore, Hyderabad, and Kerala, the Calcutta medical scheme had been held fair and reasonable and was directed to be applied. The workmen could not demonstrate any substantial difference between those regions and the Madras region that would justify a departure. The Tribunal had framed a scheme without a ceiling, but the Supreme Court substituted it with the eight-point Calcutta scheme, which included a ceiling and excluded certain contagious diseases, recognizing that primary responsibility for such diseases lies with the State. Regarding gratuity, the core legal issues were the qualifying period for payment of gratuity to workmen dismissed for misconduct, and whether gratuity should be payable at all for misconduct involving violence, riotous behaviour, or disorderly conduct. The Court drew on the principles established in Calcutta Insurance Co. Ltd. v. Their Workmen and Delhi Cloth & General Mills Co. Ltd. v. The Workmen. Gratuity is intended to reward good conduct throughout the service period; therefore, a distinction between voluntary cessation of employment (resignation, retirement) and termination due to misconduct was necessary. A longer qualifying period for misconduct cases would deter wilful use of violence and negligence. Moreover, where termination resulted from acts involving violence against management or other employees, or riotous or disorderly behaviour in or near the premises, the employer should be entitled to forfeit gratuity entirely, as such acts strike at the root of industrial discipline and harmony. For other misconduct, a qualifying period of 15 years' continuous service was fixed, with gratuity payable at the rate provided in clause 3(d) of the scheme. Thus, the Supreme Court partly allowed the appeal, directed the bonus issue to be remanded, applied the Calcutta medical scheme with modifications, and altered the gratuity scheme to incorporate forfeiture in cases of violent or riotous misconduct and a 15-year qualifying period for other misconduct terminations.
Headnote
A) Labour Law - Bonus - Applicability of Payment of Bonus Act, 1965 - Payment of Bonus Act, 1965 - The Tribunal had awarded bonus at 20% of consolidated wages under the Payment of Bonus Act, 1965. However, this Court's decision in Jalan Trading Co. v. Mill Mazdoor Union held that the Act was not applicable for the year in question. The award to that extent was set aside and remanded to the Tribunal for computation of bonus in accordance with the Full Bench Formula. Held that bonus must be calculated accordingly. B) Labour Law - Medical Benefits - Application of Employer's Scheme to Different Regions - Industrial Disputes Act, 1947 - The company had a medical benefit scheme for its Calcutta employees. The workmen contended that the same scheme should be extended to the Madras region. In earlier cases involving the company's branches in Bangalore, Hyderabad and Kerala, this Court had held the Calcutta scheme fair and reasonable and applied it. No substantial difference was shown between those areas and the Madras region affecting medical benefits. Held that the Calcutta scheme should be applied to the workmen in the present case, and the Court framed an eight-point scheme for medical benefits. C) Labour Law - Gratuity - Distinction Between Dismissal for Misconduct and Other Termination - Industrial Disputes Act, 1947, Gratuity Scheme - Gratuity is paid to ensure good conduct throughout the period of service. A distinction between cases of resignation or retirement and dismissal for misconduct is logically necessary. In cases of termination of service for misconduct involving violence against management or other employees, or riotous or disorderly behaviour in or near the company's premises, the company is entitled to forfeit the gratuity. For termination for other misconduct, the qualifying period for gratuity shall be 15 years continuous service, payable at the rate prescribed in clause 3(d) of the scheme. Held that the gratuity scheme be modified accordingly.
Issue of Consideration
Whether the Payment of Bonus Act, 1965 applied to the year 1963-64; whether the company’s medical scheme for its Calcutta employees should be extended to the Madras region; and what should be the qualifying period for gratuity for workmen dismissed for misconduct and whether gratuity should be payable for misconduct involving violence, riotous behaviour etc.
Final Decision
Appeal allowed in part. Bonus portion of award set aside and remanded to Tribunal for computation under Full Bench Formula. Medical benefit scheme substituted with eight-point Calcutta scheme. Gratuity scheme modified: for termination due to misconduct involving violence, riotous or disorderly behaviour, company entitled to forfeit gratuity; for termination due to other misconduct, qualifying period of 15 years continuous service, with gratuity payable at rate in clause 3(d) of scheme.
Law Points
- Legal points not extracted
- Payment of Bonus Act
- 1965 not applicable for the year in question
- bonus to be calculated under Full Bench Formula
- medical benefit scheme found fair and reasonable for one region should be applied to another in absence of substantial differences
- gratuity is a reward for good conduct requiring distinction between dismissal for misconduct and other terminations
- gratuity may be forfeited for misconduct involving violence or riotous behaviour
- for other misconduct a 15-year qualifying period for gratuity is appropriate
