Supreme Court of India
GURU JAMBHESHWAR UNIVERSITY, HISARversusDHARAM PAL
- Citation
- 2007 INSC 62
- Decided
- 17 January 2007
- Disposal
- Appeal(s) allowed
- Bench
- G P MATHUR
Holding
For a monthly‑paid workman, "average pay" under Section 2(aaa) must be computed as the total wages of the three preceding calendar months divided by three, and the 26‑day principle does not apply to Section 25F(b); therefore the University had paid the correct retrenchment compensation.
Summary
Guru Jambheshwar University terminated the services of Dharam Pal, an unskilled workman paid on a monthly basis, after closing its farming operations. The workman claimed that the retrenchment compensation paid under Section 25F(b) of the Industrial Disputes Act, 1947 was insufficient because the Labour Court had calculated his daily average pay by dividing the monthly wage by 26 days. The University appealed, arguing that the statute defines "average pay" for a monthly‑paid workman as the total wages of the three preceding calendar months divided by three, and that the 26‑day rule, which stems from the Payment of Gratuity Act, does not apply to Section 25F(b). The Supreme Court examined the language of Section 2(aaa) and held that the plain meaning requires the three‑month average, rejecting the Labour Court's method. Consequently, the Court found that the University had paid the correct amount of compensation and set aside both the Labour Court award and the High Court order. The appeal was allowed.
Issues considered
- The method of calculating "average pay" for a monthly‑paid workman under Section 2(aaa) of the Industrial Disputes Act, 1947 for the purpose of retrenchment compensation under Section 25F(b).
- Whether the principle of "twenty‑six working days" derived from the Payment of Gratuity Act can be imported to determine retrenchment compensation under Section 25F(b).
- Whether the University complied with the statutory requirement of Section 25F(b) in the amount of compensation paid to the workman.
- Whether the award of the Labour Court and the dismissal of the writ petition by the High Court were legally correct.
Legislation cited
- Industrial Disputes Act, 1947s. 25-F, s. 2(aaa)
- Payment of Gratuity Acts. 2(s), s. 4(2)
Subjects
retrenchment compensationaverage payIndustrial Disputes Actstatutory interpretationtwenty‑six working daysmonthly wageslabour lawtermination of service
Judgment
GURU JAMBHESHWAR UNIVERSITY, HISAR A
v.
DHARAMPAL
JANUARY 17,2007
[G.P. MATHUR AND DALVEER BHANDARI, JJ.] B
Labour Laws:
Industrial Disputes Act, 1947: Sections 2(aaa) and 25-F.
Workman-Termination of services-Retrenchment compensation- c
Method of calculation-Principle of "twenty-six working days"-
Applicability of-Services of an unskilled workman employed on monthly
wages terminated due to closure of farming operations-Retrenchment
compensation paid in terms of S. 25-F-Labour Court calculated the
compensation on the basis of the average pay for 26 days and held D
that the retrenchment fell short of the amount required to be paid under
I S. · ,25-F-Accordingly, the Labour Court directed reinstatement of the
workman with 50% back wages and continuity of service-High Court
summarily dismissed the writ petition filed by the employer-Correctness
of-Held: Since the workman was employed on monthly wages, his average E
pay has to be calculated in accordance with the formula given in Section
2(aaa)(i)-Thus, the average pay would be total wages in preceding three
months divided by three-The principle of "twenty six working days" for
determining the compensation under S. 25-F(b) is not applicable-Hence,
retrenchment compensation is in full compliance of S. 25-F(b)-High
Court judgment and Labour Court award set aside.
F
Interpretation Statutes:
Principles of interpretation-Literal Rule-Held: The words of a
statute must prima facie be given their ordinary, natural and grammatical G
meaning, unless that leads to some absurdity-The language used in
Section 2(aaa) of the Industrial Disputes Act, 1947 is absolutely plain and
clear and there is not the slightest ambiguity in the same.
Words & Phrases: H
993
994 SUPREME COURT REPORTS (2007] 1 S.C.R.
A "Average pay"-Meaning of-In the context of Section 2(aaa) of the --1-
Industrial Disputes Act, 1947. ...
:r-
~
The respondent was appointed as an unskilled workman on.the ~ost •,_
of Mali (gardener) on a contract basis by the appellant-University. The
respondent's services were terminated consequent upon the closure of the
B
farming operations in the University and cessation of other seasonal work.
The respondent was given retrenchment compensation in terms of Section
25-F(b) of the Industrial Disputes Act, 1947. '1
)
The industrial dispute raised by the respondent was referred under '
l-'
c Section 10(1) of the Act for adjudication by the Industrial Tribunal-cum-
Labour Court. The Labour Court held that one day's average pay of the
respondent should be calculated by dividing his monthly salary by 26 and
the quotient so arrived at should be multiplied by 30 (15x2) as he had
worked for two years and one month. The Labour Court further held that
D the retrenchment compensation paid to the respondent fell short of the
amount which was to be paid under Section 25-F(b) of the Act. Accordingly, ~
the Labour Court gave an award directing that the respondent be reinstated
with continuity in service and all other consequent service b~nefits along
' 'y
r.
with 50% back wages from the date of demand notice. The High Court l
E
summarily dismissed the writ petition filed by the appellant. Hence the
appeal r
I-
Allowing the appeal, the Court
HELD: 1. The language used in Section 2(aaa) of the Industrial
F Disputes Act, 1947 is absolutely plain and clear and there: is not the
slightest ambiguity in the same. It is a well settled principle that the words '><
of a Statute are first understood in their natural, ordinary or popular sense
and phrases and:sentences are construed according to their grammatical
meaning, unless that leads to some absurdity or there is something in the
context or' in' the object of the statute to suggest tO the contrary. The true
G
. way is to take the words as the legislature has given them, and to take the
meaning which the. words given naturally i~ply, unless Wh~re the
construction of those words is; either by the preambie or by the cijfitext of
'\-
· the words in question, controlied or altered. As is often said the golden rule 'T
is that the. words of a stat~te. must prima facie be given their ordinary
H
GURU JAMBHESHWAR UNIVERSITY, HISAR v. DHARAM PAL 9<)5
meaning and natural and ordinary meaning of the words should not be A
departed from unless it can be shown that the legal context in which the
words are used requires a different meaning.
[Para 9] [1000-F-H, 1001-A)
Justice G.P. Singh: "Principles of Statutory Interpretations" 9th
Edn., 2004 pp. 78-79, referred to. B
2. Since the respondent was being paid wages on a monthly basis, his
average pay has to be calculated in accordance with the formula given in
Section 2(aaa)(i) of the Act which would mean the sum total of wages paid
to him in three complete calendar months immediately preceding his C
retrenchment and dividing the said amount by three. Therefore, the
retrenchment compensation paid by the University was in full compliance
of Section 25-F(b) of the Act. [Para 10] [1001-D-F)
3. The principle laid down in the cases of Jeevanlal and Digvijay Mills
can have no application for determining the retrenchment compensation D
,· under Section 25-F(b) of the Act as the word "average pay" occurring
f therein has been defined in Section 2(aaa) of the Act. The concept of 26
working days was evolved having regard to the definition of the word
"wages" as given in ~ion 2(s) of the Payment of Gratuity Act, which
uses the expression "all emoluments which are earned by an employee
while on duty or on leave." Therefore, there is no warrant or justification
E
for importing the principle of 26 working days for determining the
compensation which is payable in terms of Section 25-F(b) of the Act.
[Para 13) [1005-F-H]
Jeevanlal (1929) Ltd v. Appellate Authority, (1984) Lab IC 1458 and F
Shri Digvijay Woollen Mills Ltd. v. MP. Butch, AIR (1980) SC 1944, held
inapplicable.
4. By adding the explanation after the second proviso to Section 4(2)
ofthe Payment of Gratuity Act, by Act No. 22 of 1987, the legislature has
brought the statute in line with the principle laid down in the case of G
Jeevanlal and has given statutory recognition to the principle evolved, viz.
that in the case of monthly rated employee the fifteen days' wages shall be
calculated by dividing the monthly rate of wages by tw'enty six and multiplying
the quotient by fifteen. But, no such amendment has been made in the
Industrial Disputes Act. Ifthe legislature wanted that for the purposes of H
·'r
I
9% SUPREME COURT REPORTS [2007] l S.C.R.
A Section 25-F(b) also the average pay had to be determined by dividing the
monthly wages by twenty-six, a_ similar amendment could have been made.
But the legislature has chosen not to do so. This is an additional reason
for holding that the principle of "twenty-six working days" is not to be
applied for determining the retrenchment compensation under Section
25-F(b) of the Act. [Pata 14) (10-06-C-E]
B
Jeevanlal (1929) Ltd. v. Appellate Authority, (1984) Lab IC 1458,
referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 252 of2007.
c From the final Judgment and Order dated 21.3 .2005 of the High Court
of Punjab and Haryana at Chandigarh in C.W.P. No. 4475/2005.
Neeraj Kumar Jain, Bharat Singh, Aditya Kumar Chaudhary and Ugra
Shankar Prasad for the Appellant.
D
Suresh Kumari, Dinesh Verma and A.P. Mohanty for the
•
I
Respondents. :.-.,
The Judgment of the Court was delivered by
E G.P. MATHUR, J. : L Leave granted.
2. This appeal, by special leave, has been preferred against the
judgment and order dated 21.3.2005 of a Division Bench of High Court of
Punjab and Haryana, whereby the writ petition filed by the appellant
challenging the award.dated 9.11.2004 of the Industrial Tribunal-cum-Labour
F Court, Hisar, was summarily dismissed.
3. The respondent Dharam Pal issued a notice dated 20.1.1998 under
Section 2A of the Industrial Disputes Act, 1947 (hereinafter referred to as
'the Act') alleging that he was employed as an unskilled workman by the
G appellant Guru Jambheshwar University, Hisar, on 2.10.1995, but his services
were illegally terminated on 15. l .1998. As the conciliation proceedings could
not fructify, the Government of Haryana referred the dispute under Section
10(1) of the Act for adjudication by the Industrial Tribunal-cum-Labour
Court, Hisar (hereinafter referred to as 'the Labour Court") regarding the
validity of the termination of services of the respondent Dharam Pal and the
H
--+
GURU JAMBHESHWAR UNIVERSITY, HISAR v. DHARAM PAL [MATHUR, J.] '°E7
relief which he was entitled to get in case the termination order was found A
to be illegal.
4. The respondent in his claim statement pleaded, inter alia, that he
was appointed as u11,skilled workman on the post of Mali (gardener) in the
University by a verbal order dated 2.10.1995; that he was removed from
service on 2. 7 .1997 but subsequently he was taken back on duty on B
15.10.1997; that he was illegally removed from the service of the University
on 15.1.1998; that the University was paying wages ofRs.1638 per month
before his removal from service; that the University had regular work and
persons junior to him had been retained in service and had been regularized;
that the University was forcing the workman to work on contract basis C
despite the fact that there is work of regular nature; that the University was
adopting unfair labour practice and that his retrenchment was illegal as
1
· neither any notice was given nor any compensation was paid to him at the
time of his retrenchment.
5. The Registrar of the University filed a reply on the grounds, inter D
I alia, that the respondent was engaged as Mali on daily wages on 2.12.1995
and not on 2.10.1995; as claimed by him; that he was appointed for doing
specific job of Mali in the Farming/Horticulture Wing of the University; that
the Government of Haryana on the basis of the orders passed in CWP
No.4522 of 1994 (Kulbhushan v. State of Haryana) by the High Court had E
issued instructions to the University vide letter No.12/5-96/Ad.1(5) dated
17 .1.1996 that no appointment on daily wage basis should be made and all
appointments should be made on contract basis; that in accordance with the
instructions all existing employees in, the University who were working on
daily wage basis were put on contract basis; that the respondent and some
other employees engaged on contract basis had been appointed without
F
following any procedure; that meanwhile the University advertised the post
of Mali for making regular appointments in order to comply with the
requirements of Articles 14 and 16 of the Constitution; that the respondent
also applied for the said post of Mali and appeared in interview but he was
not selected yet he was allowed to continue; that consequent upon the G
closure of the farming operations in the University and cessation of other
seasonal work, the respondent was given one month's notice vide University
letter no.485-500 dated 15.12.1997; that on completion of one month, the
services of the respondent were retrenched vide order dated l 5.1.1998; that
a cheque bearing no.416869 dated 15 .1.1998 was also given to the respondent H
-~
\
998 SUPREME COURT REPORTS (2007) I S.C.R.
A in compliance of Section 25F(b) of the Act as retrenchment compensation;
that as there was some work in the University all the employees who were
retrenched earlier were called but the respondent did not turn up for duty
though 14 other employees reported for duty and were engaged and a letter
in this regard was sent tO the Labour and Conciliation Officer, Hisar on
2l.5,1998. It was specifically pleaded that the services of the respondent
B were retrenched after duly complying with the provisions of Section 25F of
the Act and that in the regular selection held for the post of Mali the
respondent was not selected 15y the selection committee.
6. The parties adduced oral and documentary evidence in support of
c their case before the Labour Court. The Labour Court held that the instructions
issued by the Goverinnent showed that the monthly wages of unskilled Mali
were Rs.1642. The respondent had been appointed on 2.12.1995 and his
services were terminated on 15. 1.1998 and thus he had completed two years
and one month of service on the date when he was retrenched from service.
He was thus required to be paid 15 days' average pay for completion of the
D first year of service and 15 days' average pay for completion of second year
of service as retrenchment compensation. it was further held that ·in order '\
to calculate the retrenchment compensatiop, the,': legal requirefnent was to
divide average monthly wage by 26 and not by 30, as a worker ordinarily
gets four weekly holidays and has to work only on 26 days in a QJ.onth. For
E holding so, the. Labour Court relied upon some decisions of the High Courts
and also a decision of this Court in Jeevan/al (1929) Ltd. v. Appellate
Authority under the Paynu~nt of Gratuity Act and 01-s., (1984) Lab IC 1458.
After holding so, it was held that one day's average pay of th~ respondent
would be Rs.63 .15 (Rs.1642/26) and thus the compliance of Section 25F(b)
p .required payment ofRs. 63.15 x 15 x 2 =Rs. 1,894.50. Itwas accordingly held
that the retrenchment compensation of Rs.1642 paid by the University to the
respondent fell short of the amount which was required to be paid under law
and, therefore, there was non-compliance of Section 25F(b) of the Act which
rendered the retrenchment of the respondent as illegal. It was further held
that the University had not produced any evidence to show that the
G respondent had been gainfully employed after termination of his service, but
looking to the fact that he was engaged in a job which did not require ahy
qualification, it could not be held that he remained totally out of job during
the intervening period and, therefore, he was entitled to SO% back wages.
The Labour Court, accordingly, gave an Award directing that the respoildcnt
H be reinstated with continuity in service and all other con~quent sefviee
J
· GURU JAMBHESHWAR UNIVERSITY, HISAR v. DHARAM PAL [MATHUR, J.) 999
benefits along with 50% back wages from the date of issuance of demand A
notice dated 21.1.1998 till publication of the Award and full wages thereafter
till his reinstatement.
7. The question which requires consideration is whether the Labour
Court was correct in holding that one day's average pay of the respondent
should be calculated by dividing his monthly salary of Rs.1642 by 26 and B
the quotient so arrived at should be multiplied by 30 (15 x 2) as he had
worked for two years and one month.
8. Sections 2(aaa) and 25F of the Industrial Disputes Act, 1947 read as
under :-
c
2(aaa) "average pay" means the average of the wages payable to
a workman-
(i) in the case of monthly paid workman, in the three
complete calendar months,
D
I
I (ii) in the case of weekly paid workman, in the four complete
weeks,
(iii) in the case of daily paid workman, in the twelve full
working days, E
preceding the date on which the average pay becomes payable
ifthe workman had worked for three complete calendar months
or four complete weeks or twelve full working days, as the
case may be, and where such calculation cannot be made, the
average pay shall be calculated as the average of the wages F
payable to a workman during the period he actually worked.
25F. Conditions precedent to retrenchment of workmen.-
No workman employed in any industry who has been in
continuous service for not less than one year under an
employer shall be retrenched by that employer until- G
(a) the workman has been given one month's notice in writing
"(· indicating the reasons for retrenchment and the period of
notice has expired, or the workman has been paid in lieu of
such notice, wages for the period of the notice:
H
1000 SUPREME COURT REPORTS [2007] 1 S.C.R.
A (b) the workman has been paid, at the time of retrenchment,
· compensation which shall be equivalent to fifteen days'
average pay for every completed year of continuous sery'ice
or any part thereof in excess of six months; and
(c) notice in the prescribed manner is served on the appropriate
B Government or such authority as may be specified by the
appropriate Government by notification in the Official Gazette.
Sub-section (b) of Section 25F requires payment of retrenchment
compensation to a workman which shall be equivalent to 15 days' average
pay for every completed year of continuous service or any part thereof in
c excess of six months. Average pay has been defined in Section 2(aaa) of the
Act and, therefore, average pay has to be determined strictly in accordance
with the aforesaid provision and not on the basis of some hypothetical
calculation. Section 2(aaa) contemplates four different kinds of wage period
for payment of wages. Clause (i) speaks of monthly paid workman and here
D the average wage has to be calculated by arriving at the average or mean
of three complete calendar months. Clause (ii) refers to weekly paid workman ,.
•
where the average pay would be the average or mean of four complete
weeks. Clause (iii) deals with daily wage workman and in this case the
average pay would be the average or mean of wages in twelve full working
days. The fourth category would be a case where it is not covered by any
E of the sub-clauses (i), (ii) or (iii) and in this case the average pay shall be
calculated as the average of the wages payable to a workman during the
period he had actually worked.
9. The language used in Section 2(aaa) is absolutely plain and clear and
F there is not the slightest ambiguity in the same. It is well settled principle
that the words of a Statute are first understood in their natural, ordinary or
popular sense and phrases and sentences are construed according to their
grammatical meaning, unless that leads to some absurdity or there is
something· in the context or in the object of the statute to suggest to the
contrary. The true way is to take the words as the legislature have given
G them, and to take the meaning which the words given naturally imply, unless
where the construction of those words is, either by the preamble or by the
context of the words in question, controlled or altered. As is often said the
golden rule is that the words of a statute must prima facie be given their
ordinary meaning and natural and ordinary meaning of the words should not
H
GURU JAMBHESHWAR UNIVERSITY, HISAR v. DHARAM PAL [MATHUR, J.] 1001
be departed from unless it can be shown that the legal context in which the A
words are used requires a different meaning. (See Principles of Statutory
Interpretation by Justice G.P. Singh Ninth Edition 2004 pg.78-79).
10. In the demand notice served by the respondent upon the University
under Section 2-A of the Act on 20.1.1998, it was stated "that the University
was paying him Rs.163 8 per month before removal." Again in para 2 of the B
claim statement which was filed by the respondent before the Labour Court,
'¥ wherein he described himself as petitioner, it was stated "that the University
was paying the petitioner Rs. l.638 per month before the removal." In the
reply, it is also the specific case of the University that the respondent was
being paid on monthly basis at the rate of Rs.1642 per month. Therefore, c
there is no dispute that the respondent was being paid wages on monthly
basis though there is slight difference in the actual amount which was being
paid to him. The Labour Court has recorded a finding that a cheque for
Rs.1642 was given by the University to the respondent as retrenchment
compensation. Since the respondent was being paid wages on monthly
basis, his average pay has to be calculated in accordance with the formula
D
given in clause (i) of Section 2(aaa) of the Act which would mean the sum
total of wages paid to him in three complete calendar months immediately
preceding his retrenchment and dividing the said amount by three. The
respondent was being paid wages amounting to Rs.1642 per month in
immediately three preceding months before his retrenchment. Therefore, the E
"average pay" in accordance with Section 2(aaa)(i) would come to Rs.1642.
The respondent had worked for two years and one month and, therefore, he
was entitled to thirty (I 5 x 2) days of average pay by way of retrenchment
compensation in order to comply with requirement of Section 25F(b) of the
Act. The "average pay" of the respondent being Rs. 1642 per month and F
.~
he being entitled to 30 days' average pay by way of retrenchment
compensation, he was required to be paid Rs.1642 as retrenchment
compensation. The University gave him a cheque for Rs.1642 at the rime of
his retrenchment and, therefore, there was full compliance of Section 25F(b)
of the Act.
G
11. The Labour Court has basically relied upon a decision of this Court
loo
rendered in Jeevanlal (1929) Ltd v. Appellate Authority under the Payment
°l"'.
of Gratuity Act and Ors.,(1984) Lab IC 1458 for coming to the conclusion
that the respondent's average pay has to be calculated on per day basis by
dividing the monthly salary drawn by him by 26 and the quotient.so arrived H
1002 SUPREME COURT REPORTS [2007] I S.C.R.
-
A at should be multiplied by 30 in order to determine the retrenchment
compensation under Section 25F(b) of the Act. It, therefore, becomes
necessary to consider the aforesaid decision in detail. The issue involved
in the said case related to payment of gratuity. Section 2(s) and sub-sections
(I), (2) and (3) of Section 4 of Payment of Gratuity Act at the relevant time
read as under :-
B
"2(s) "wages"· means all emoluments whiCh are earned by an
employee while on duty or on leave in accordance with the terms
and conditions of his employment and which are paid or are
payable to him in cash and includes dearness allowance but does
c not include any bonus, commission, house rent allowance, overtime
wages and any other allowances."
'
"4(1): Gratuity shall be payable to an employee on the termination
of his employment after he has rendered continuous service for not
less than five years :
D
(a) on his superannuation; or
\
..
(b) on his retirement or resignation; or
(c) on his death or disablement due to accident of disease.
E
Provided that the completion of five years shall not be
necessary where the termination of the employment ofany.employee
is due to death or disablement :
Provided further that in the case of death of the employee,
F gratuity payable to him shall be paid to his nominee or, if no
nomination has been made, to his heirs.
Explanatio11-For the purpose of this section, disablement means
such disablement as incapacitates an employee for the work which
he was capable of performing before the accident or disease
G resulting in such disablement.
(2) For every completed year of service or part thereof in excess of
six months, the employer shall pay gratuity to an employee at the
rate ~f fifteen days' wages based on the rate of wages last drawn
H by the employee concerned :
1 I
GURU JAMBHESHWAR UNIVERSITY, HISAR v. DHARAM PAL [MATHUR, J.) 1003
-t
Provided that in the case of a piece rated employee, daily A
-::- wages shall be computed on the average of the total wages
received by him for a period of three months immediately preceding
the termination of his employment, and, for this purpose, the wages
paid for any overtime work shall not be taken into account :
Provided further that in the case of an employee employed in B
...: a seasonal establishment, the employer shall pay, the gratuity at the
y rate of seven days' wages for each season.
(3) The amount of gratuity payable to an employee shall n<?,t exceed
twenty months' wages."
c
While interpreting the aforesaid provisions, the Court held as under in
para l 0 or' the reports :
10. In dealing with interpretation of sub-sections (2) and (3) of
Section 4 of the Act, we must keep in view the scheme of the Act.
D
Sub-section ( 1) of Section 4 of the Act incorporates the concept of
) gratuity being a reward for long, continuous and meritorious
service. Sub-section (2) of Section 4 of the Act provides for
payment of gratuity at the rate of "fifteen days' wages" based on
the rate of wages last drawn by the employee concerned for every
completed year of service. The legislative intent is obvious. Had E
the legislature stopped with the words "fifteen days' wages",
occurring in sub-section (2) of Section 4 of the Act, there was
something to be said for the submission advanced by the learned
counsel for the appellants based upon the decision of the learned
- '
,..,
single Judge of the Andhra Pradesh High Court in Associated
Cement's case (1976) Lab IC 926) which was later approved by a
Division Bench of the Court in Swamy's case (1978 Lab IC 1285).
F
But the legislature did not stop with the words "fifteen days'
wages" in sub-section (2) of Section 4 of this Act. The words
< "fifteen days' wages" are preceded by the words "at the rate of'
and qualified by the words "based on the rate of wages last drawn" G
by the employee concerned. The emphasis is not on what an
- Ct·
employee would have earned in the course of fifteen days during
the month when his employment was last terminated, but on the
rate of fifteen days ' wages for every completed year of service
based on the rate of wages last drawn by the employee concerned. H
I
==.
t
1004 SUPREME COURT REPORTS [2007] 1 S.C.R
--;-
A The word 'rate' appears twice in sub-section (2) of Section 4 and
it necessarily involves the concept of actual working days. In ....
Digvijay Woollen Mills' case (AIR 1980 SC 1944) the Court rightly
observed that although a month is understood to consist of 30
days, gratuity payable under the Act treating the monthly wages
as wages for 26 working days is not new or unknown."
B
(emphasis supplied) -,.
y'
Paragraph 12 of the reports is also relevant and the same is being
reproduced below :
c 12. It is not correct to say that the decision in Shri Digvijay
Woollen Mills' case (AIR 1980 SC 1944) does not lay down any
principle. Gupta, J. speaking for the Court set out the following
passage from the judgment of the Gujarat High Court in Shri
Digvijay Woollen Mills' case (para 4) :
D
"The employee is to be paid gratuity for every completed year of
service and the only yardstick provided is that the rate of wages last drawn
\-
by an employee concerned shall be utilized and on that basis at the rate of
fifteen days' wages for each year of service, the gratuity would be computed.
E In any factory it is well known that an employee never works and could
never be permitted to work for all the 30 days of the month. He gets 52
Sundays in a year as paid holidays and, therefore, the basic wages and
dearness allowance are always fixed by taking into consideration this
economic reality.... A worker gets full month's wages not by remaining on
duty for all the 30 days within a month but remaining on work and doing
F duty for only 26 days. The other extra holidays may make some marginal •
~
variation into 26 working days, but all wage boards and wage fixing
authorities or Tribunals in the country have always followed this pattern of
fixation of wages by this method of 26 working days."
...,
G And then observed :
"The view expressed in the extract quoted above appears to
be legitimate and reasonable." ~ '""'
The learned Judge then went on to say :
H
,__(
I
GURU JAMBHESHWAR UNIVERSITY, HISAR v. DHARAM PAL [MATHUR, J.] 1005
-f "Ordinarily of course a month is understood to mean 30 days, A
~ but the manner of calculating gratuity payable under the Act
to the employees who work for 26 days a month followed by
Gujarat High Court cannot be called perverse."
He further observed that it was not necessary to consider whether
another view was possible and declined to interfere under Article B
136 in a matter where the High Court had taken a view favourable
'( to the employees and the view taken could not be said to be in any
way unreasonable and perverse, and then added :
"Incidentally, to indicate that treating monthly wages as
wages for 26 working days is not anything unique or
c
unknown."
................................................................
12. It may be noted that Section 4(2) of the Payment of Gratuity Act
D
uses the expression "the employer shall pay gratuity to an employee at the
~
1 rate of fifteen days' wages based on the rates of wages last drawn by the
employee." On account of the language used in Section 4(2) it becomes
necessary to find out the rate of wages which necessarily involves the
concept of actual working days. It wes on the basis of the aforesaid
language of the provisions under the Payment of Gratuity Act that this E
Court in the case of Jeevanlal (supra) observed that "although a month is
understood to consist of 30 days, gratuity payable under the Payment of
Gratuity Act treating the monthly wages as wages for 26 days is not new
-
or unknown."
F
,,..., 13. The principle laid down in the case of Jeevanlal (supra) and Shri
Digvijay Woollen Mills Ltd. v. MP. Butch, AIR (1980) SC 1944 can have no
application for determining the retrenchment compensation under Section
25F(b) of the Act as the word "average pay" occurring herein has been
defined in Section 2(aaa) of the Act. The concept of 26 working days was
evolved having regard to the' definition of the word "wages" as given in G
Section 2(s) of Payment of Gratuity Act, which uses the expression "all
emoluments which are earned by an employee while on duty or on leave."
,._. Therefore, there is no warrant or justification for importing th~ principle of
~·
26 working days for determining the compensation which is payable in terms
of Section 25F(b) of the Act.
H
1006 SUPREME COURT REPORTS [2007) 1 S.C.R.
_A 14. There is another important feature which deserves notice.
Subsequent to the decision of this Court in Jeevanlal (supra) an explanation
has been added after second proviso to Section 4(2) of the Payment of
Gratuity Act, by Act No.22 of 1987, which reads as under:-
"Explanation - In the case of a monthly rated employee, the fifteen
B days' wages shall be calculated by dividing the monthly rate of
wages last drawn by him by twenty-six ang multiplying the quotient
by fifteen." "'f
By adding the explanation, the legislature has brought the statute in
line with the principle laid down in the case of Jeevanlal (supra) and has
c given statutory recognition to the principle evolved, viz. that in case of
monthly rated employee the fifteen days' wages shall be calculated by
dividing the monthly rate of wages by twenty six and multiplying the
quotient by fifteen. But, no such amendment has been made in the Industrial
Disputes Act. If the· legislature wanted that for the purposes of Section
D 25F(b) also the average pay had to be determined by dividing the monthly
wages by twenty-six, a similar amendment could have been made. But the
legislature has chosen not to do so. This is an additional reason for holding
\
that the principle of "twenty-six working days" is not to be applied for
determining the retrenchment compensation under-Section 25F(b) of the Act.
E 15. We are, therefore, of the opinion that the view taken by the Labour
Court is clearly erroneous in law and has to be set aside. The High Court
did not go into the question at all and summarily dismissed the writ petition
by a one line order observing that the compensation offered to the workman
was short of the amount actually due.
F ,.___
16. For the reasons discussed above, the appeal is allowed. The order --~
dated 21 .3 .2005 passed by the High Court and the award of the Labour Court
dated 9.11.2004 are set aside. It is held that the University had paid the
retrenchment compensation to the respondent Dharam Pal in accordance
with law and there is _no infirmity in the order passed whereby his services
G were terminated. No costs.
V.S.S. Appeal allowed.
......
""
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "retrenchment compensation"Sign in to search