Holding

The 1956 settlement did not replace the pension right with gratuity; therefore, employees qualified for pension under the original Office Order.

Summary

ELD Parry (India) Ltd. retired several employees who claimed a pension (retiring allowance) under General Office Order No. 26, 1943. The 1956 settlement between the company and the employees' union allowed workers to choose either gratuity or, in lieu of gratuity, a retiring allowance, but did not expressly abolish the pension right. After the Payment of Gratuity Act, 1972 became statutory and the government denied an exemption, the employees filed applications under section 33‑C(2) of the Industrial Disputes Act, 1947, which the Labour Court allowed. The employer appealed through multiple writ petitions; the Madras High Court appellate bench held that the settlement did not substitute gratuity for pension and that the pension claim remained viable. The Supreme Court affirmed the High Court’s view, holding that the entitlement to pension persisted and dismissing the employer’s appeals.

Issues considered

Whether the 1956 settlement substituted gratuity for the retiring allowance (pension) provided under General Office Order No. 26, 1943.
Whether employees are entitled to pension under section 33‑C(2) of the Industrial Disputes Act, 1947 despite the settlement and the Payment of Gratuity Act, 1972.
Whether the Labour Court’s award of pension was justified.

Legislation cited

Industrial Disputes Act, 1947s. 33-C(2), s. 9-A
Payment of Gratuity Act, 1972

Subjects

pensionretiring allowancegratuityIndustrial Disputes ActPayment of Gratuity Actsettlementlabour courthigh courtSupreme Courtemployee rights

Judgment

GENERAL MANAGER, E.l.D. PARRY (INDIA} LTD.
A
v.
PRESIDING OFFICER, 2ND ADDL. LABOUR COURT,
MADRAS AND ORS.
~-
MAY 2, 1991
B
[RANGANATH MISRA, CJ, A.M. AHMADI AND
R.M. SAHAI, JJ.]

Industrial Disputes Act, 1947: Sections 9-A, 33-C(2) Payment of
Gratuity Act, 1972.

Labour Law-Company-General Office Order No. 26 dated
c
I. 12. 1943-Provision for 'Retiring Allowance' (Pension) and gratuity
-Memorandum of settlement between Company and workmen-
Employees given option under the settlement either for Gratuity or
Retiring allowance-Enforcement of Gratuity Act, 1972-Workers'
claim for retiring allowance (Pension) in addition to gratuity-Held D
settlement had not substituted gratuity for pension-'-Employees held
entitled to pension notwithstanding the settlement.
-.
The General Office Order No. 26 dated 1.12.1943 of the Appel-
lant-Company provided that employees with 30 years' service or more
would he eligible to receive "Retiring Allowance" (pension). The said E
office order also provided that all permanent employees who were in the
Company's service prior to 1.1.1947 and who do not qualify for retiring
allowance on retirement, will he eligible for gratuity on f'mally leaving
the Company's service subject to the prescribed conditions being fulf'd-
Ied. 1n 1956 a Memorandum of settlement was signed by the appellant-
company and the Employees' Union under which the employees in F
service prior to 1.1.47 were required to opt at the time of leaving service
either for gratuity or in lieu of the gratuity the ratiring allowance. Later
the Payment of Gratuity Act 1972 came into force md the payment of
gratuity became statutory. The employer and the Employees' Uuion
jointly applied to the Government for exemption from the provisions of
the statute which was refused. G

Some of the retiring employees of company f'ded applications
under Section 33-C(2) of the Industrial Disputes Act, 1947 before the
Labour Court claiming pension by alleging that payability of pension
was a condition of service and the employer had stopped it without any
justification. The Labour Court allowed the applications. Against the H

637
638 SUPREME COURT REPORTS [ 1991] 2 S.C.R.

A order of the Labour Court the employer preferred six writ petitions. In
the meantime the same dispute was referred to the Industrial Tribunal
and by an award the Tribunal answered the reference against the emp- ~
loyees. The Employees' Union challenged the award by filing a writ
petition in the High Court. All the writ petitions were heard by a
learned single judge of the High Court who allowed the writ petitions of
B the management against th<! order of the Labour Court and dismissed
the writ petition preferred by the Labour Union challenging the award
of the Tribunal. Writ appeals were carried against the single Judges'
decision. The Appellate Bench of the High Court held that gratuity
provided under the settlement was not a substitute of pension and the "'
claim of pension was available to employees notwithstanding the settle-
ment. Hence this appeal by the employer-company.
c
Dismissing the appeals, this Court,

HELD: The 1956 settlement between. the parties does not provide
for payment of pension except to pre-1947 employees and making the
D benefit liable to exercise of option under clause 6(d) of the settlement.
The retiral benefit (pension) was payable to all qualified employees as a ' -
matter of practice. If under the settlement that was not done away with,
the benefit arising out of General Office Order No. 26 would still be
available and gratuity contemplated under the settlement would not be
a substitute of the retiral benefit of pension. The Appellate Bench of the
E High Court was right in holding that the entitlement to pension had not
been substituted by the settlement of 1956 and, therefore, the claim to
pension subject to qualification being satisfied was available to be
maintained notwithstanding the settlement of 1956. The High Court
rightly came to the conclusion that the Labour Court bad justif'mbly
worked out the dues and the claim petitions under section 33-C(2) of the
F 1947 Act. [641C-D, 642C-D]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
1450-1458 of 1990.

From the Judgment and Order dated 21.11.1988 of the Madras i.
G High Court in W.A. Nos. 864 to 870 of 1988 and W.P. Nos. 1600 and
1601of1986.

Narayanswamy, N. Balasubramaniam and A.T.M. Sampath for
the Appellant.

H M. Ramamurthy, Mrs. C. Ramamurth~_, M.A. Krishnamoorthy,
E.l.D. v. LABOUR COURT, MADRAS [RANGANATH MISRA, CJ.) 639

for the Respondents. A
>- · R.C. Paul appeared in person.

The Judgment of the Court was delivered by

RANGANATH MISRA, CJ. These are appeals by special leave B
and are directed against a common judgment of the Madras High
Court delivered in a group of writ appeals and a writ petition.

E.l.D. Parry (India) Ltd. (hereinafter referred to as 'the
employer') has one of its units located at Ranipet in Tamil Nadu State
where sanitary-ware, super phosphate and insecticides are manufac-
tured. Some of its retiring employees filed applications under section
c
33-C(2) of the Industrial Disputes Act, 1947 (' 1947 Act' for short)
before the Labour Court at Madras claiming pension by alleging that
payability of pension was a condition of service and the employer had
stopped it without any justification and without giving notice under
section 9-A of the 1947 Act. The Presiding Officer of the 2nd Addi- D
tional Labour Court, Madras, allowed the same by his order dated
30th May, 1983, after computing the amounts. The employer preferred
six writ petitions. Jn the meantime the same dispute had been refer-
red to the Industrial Tribunal and it answered the-reference against the
employees_ by award dated 13th February, 1985. The award was
assailed before the High Court by the Union by filing of the seventh E
writ petition. All the seven writ petitions were heard by a learned
..... Single Judge who allowed the writ petitions of the management against
the order of the Labour Court and dismissed the writ petition prefer-
red by the labour union challenging the award of the Industrial Tri-
bunal. Writ appeals were carried against the Singie Judge's decision.
F
The main controversy before the Division Bench was as to
whether pension, or as is referred to by the parties, "retiring allo-
wance" was payable to the employees. This dispute has a historical
backdrop to which we may now advert. Under General Office Order
~ No. 26 dated !st December, 1943 "retiring allowances" were provided
for. The Office Order provided that normally only employees with G
thirty years' service or more would be eligible to receive "Retiring
Allowance". The Board reserved the right to alter the scale of "retir-
ing allowance" either generally or in respect of individual employees
and had the authority to sanction 'retiring allowance' when first
granted and subsequent payment became a routine matter subject to
annual review. H
640 SUPREME COURT REPORTS [1991] 2 S.C.R.

Gratuities were also provided under the Office Order by saying
A
that all permanent employees (other than workers who qualify for
gratuities as per Factory Certified Standing Order) who were in the .....
Company's service prior to 1.1.1947 and who do not qualify for Retir- ......
ing Allowance on retirement, will be eligible for gratuity on finally
leaving the Company's service subject to one or other of the pre-
B scribed conditions being fulfilled. In all four alternatives were pro-
vided. Clause (4) indicated that employees recruited on or after
I. I. 1947 would not be entitled to any gratuity.

There was a Memorandum of Settlement between the parties
which may be referred to as the settlement of 1956. Clause (6) thereof
related to gratuity and provided:
c
"Gratuity shall in future be payable by the company in
accordance with the following rules:

(a)(i) Where, irrespective of the length of his past service,
D an employee dies in service, or is retired on a medical
certificate acceptable to the company, or is retired by the
company on reaching the age of superannuation, he shall
be entitled to gratuity calculated at the rate of one month's
basic salary for each completed year of service, and pro
rata for any partly completed year of service, subject to a
E maximum of 15 months' basic salary if his service is less
than 30 years, together with half of one. month's basic
salary for each completed year of service in excess of 30
years and pro rata for any partly completed year of service
in excess of 30 years .............. .

F (d) Employees in service prior to Ist January, 1947 may
opt, at the time of leaving service, either for:

(i) Gratuity calculated in accordance with these rules
or in accordance with the current provisions of General
Office Order No. 26, whichever he prefers, or ~

G
(ii) in lieu of gratuity, a retiring allowance calculated
in accordance with the current provisions of General Office
Order No. 26."

This settlement as a fact incorporated the relevant part of the Office
H Order.
E.l.D. v. LABOUR COURT. MADRAS [RANGANATll MISRA, CJ.} 641

The .Payment of Gratuity Act came into force with effect from
A
September, 1972 and payment of gratuity became statutory. When
·:\,,,. that Act came into force, the Employer and the Employees' Union
·~- jointly applied to the Government for exemption from the provisions
of the statute. The exemption was, however, not granted. Payability of
gratuity is no longer in dispute. What is challenged is the claim of the
workmen to retiring allowance (pension) under Office Order No. 26. B
The stand of the employees has been that the retiring allowance under
General Office Order No. 26 has not been substituted by the 1956
settlement and they are, subject to being qualified, entitled to the
_, benefit of pension and the statutory advantage of gratuity. It is a fact
that the settlement does not provide for payment of pension except to
pre-1947 employees and making the benefit liable to exercise of option
under clause 6(d) above. It is not in dispute that the retiral benefit c
(pension) was payable to all qualified employees as a matter of
practice. If under the settlement that was not done away with, the
benefit arising out of General Office Order No. 26 would still be
available and gratuity contemplated under the settlement would not be
a substitute of the retiral benefit of pension. D
-.,
The Appellate Bench of the High Court has found that gratuity
provided under the settlement was not a substitute of pension. Mr.
N arayanaswamy, learned senior counsel appearing in support of the
appeals took us through the various documents and placed the matter
at considerable length and with lucidity. He even relied on what he E
described as the prevailing practice between 1956 and 1972-the
settlement and the Gratuity Act-when no retiral benefit was either
,, .. claimed or paid. We have, however, not been able to see any defect in
the reasoning of the Division Bench decision of the High Court where
it has ultimately come to the conclusion that the settlement had not
substituted gratuity for pension. We find that by way of an interim F
measure this Court by an order dated 5th May, 1989 had directed the
employer to pay the pension to the employees in accordance with the
order of the High Court with effect from Ist May, 1989 and that from
the record appears to have been paid.

~ A petition had been filed in this Court on 23rd April; 1990 by the G
employer for modification of the condition indicated in the order
granting special leave and we had heard counsel for both the sides on
-;- the said petition. We had made it clear at the hearing of the petition
for modification of the order granting special leave that the question as
to payability of retirement benefit after the 1956 settlement would be
examined. The total number of employees involved in this dispute was -H
642 SUPREME COURT REPORTS [ 1991) 2 S.C.R.

A about 347. Many of them had not only retired but had also died and in
respect of those who were dead it would be a question of the benefits
,up to the date of death of the respective employees to be paid to their
legal representatives. Mr. Narayanaswamy had emphatically conten-
ded that what was being decided was not a claim of 347 employees but
it had its repercussion on the industrial peace between the employer
B and the employee at other places. We would like to make it clear that
we have gone into the question confined to the claim of the employees
of the Ranipet factory and not the liability of the employer generally.
Besides, Mr. Narayanaswamy had also told us at the hearing that there
are special features in the arrangement in regard to employees
elsewhere.
c
We are satisfied that the Appellate Bench of the High Court was
right in holding that the entitlement to pension had not been sub-
stituted by the settlement of 1956 and, therefore, the claim to pension
subject to qualification being satisfied was available to be maintained
notwithstanding the settlement of 1956, The High Court rightly came
D to the conclusion that the Labour Court had justifiably worked out the
_dues and the claim petitions under section 33-C(2) of the 1947 Act. We
uphold the judgment of the High Court and dismiss these appeals. The
employees had asked for award of interest on their dues. The chal-
lenge of the employer was not groundless ancj we do not think in the
facts of these cases the employees or their legal representatives would
E be entitled to interest. We hope and trust that the employer would now
liquidate its liability without delay by satisfying the orders of the
Labour Court and the claims of the workmen or their legal representa-
tives as and when made.

A sum of Rs.10,000 had been given by the employer to Sri Pant
F for the Union to contest these matters and he has been paid the
amount under this Court's order. No order for further costs.

T.N.A. Appeals dismissed.