Holding

The Court held that "fifteen days' wages" must be calculated by dividing the monthly wage by 26 working days to obtain a daily rate and then multiplying by fifteen, and that the ceiling of "twenty months' wages" is a separate provision not requiring a harmonised 26‑day interpretation.

Summary

The Supreme Court considered appeals by a public limited company challenging the calculation of gratuity for a monthly‑rated employee who had retired after 35 years of service. The employee claimed that "fifteen days' wages" under s.4(2) of the Payment of Gratuity Act, 1972 should be computed by first determining a daily wage based on 26 working days in a month and then multiplying by fifteen, whereas the employer argued it meant simply half of the monthly wage (13 days). The Court held that the statutory language, read in a beneficent manner, requires the daily wage to be derived from the monthly wage divided by 26 working days, and the fifteen‑day amount to be calculated accordingly. It also clarified that the ceiling of "twenty months' wages" in s.4(3) is a separate provision and does not alter the method of computing the fifteen‑day wage. The jurisdiction of the Controlling Authority under s.3 was affirmed as proper for the employer. All appeals and special leave petitions were dismissed with costs.

Issues considered

The proper method of computing "fifteen days' wages" for a monthly‑rated employee under s.4(2) of the Payment of Gratuity Act, 1972
Whether the phrase "twenty months' wages" in s.4(3) should be interpreted on the basis of 26 working days per month or 30 calendar days
The jurisdiction of the Controlling Authority under s.3 of the Act with respect to an establishment having branches in multiple states

Legislation cited

Payment of Gratuity Act, 1972s. 2(a)(1), s. 3, s. 4(1), s. 4(2), s. 4(3), s. 7

Subjects

gratuityPayment of Gratuity Actstatutory interpretationmonthly‑rated employeesocial security legislationappropriate governmentbeneficent construction

Judgment

~64

A

JEEWANLAL (1929) LTD.

ETC. ETC. •
B v.

THE APPELLATE AUTHORITY UNDER THE
PAYMENT OF GRATUITY ACf & ORS, ETC. ETC.
August 29, 1984
c [0. CHINNAPPA REDDY, A.P. SEN AND E.S. VENKATARAMIAH, JJ.]

Payment of Gratuity Act 1972, Sections 4(2) and 4(3)

Monthly-rated em.,loyee-Computation of gratuity-·Scope of expression
''fifteendays' wages"-Ex.1l•ined.
D
Inter,,retilti•n •f st•lutes S•,i•I We/f11re letislilti6n-Benejicient rule of •
construction-Adoption of

Social security measures-Application of provisions-Doubt or difficulty
arising-Necessity for Government to introduce legislation to cure the defect with-
out wai1ing for interpretation by highest Court-Suggestion for setting up of
E Nation/ labour Commission for Periodical review.

W•rds & Phrases : 'appropriate government'-Meaning of Section 2(a)(l)
Payme1tt oiOrttlUilj ,1ct 1972.

The respondent-a monthly-rated employee of the appellant -a public
limited company, ceased to be an employee on attaining the age of superannua-
F tion after completing 35 years of service. Since he was entitled to payment of
Graluity under the Payment of Gratuity Act, 1972, the appellant calculated the
amount of eratuity payable under sub-s.(2) of s.4 on the basis that '·fifteen days'
wages" meant half of the_ monthly wages last drawn i.e., for 13 working days.
there beine 26 working days in a month, The respondent being dissatisfied with
this payment, made a claim under sub-s.(1) of s.7, before the Controlling
G Authority, for payment of an additional sum of gratuity on the ground that the
daily wages should be ascertained on the basis of what he actually got for 26
days and the amount of "fifteen days' wages" should be calculated accordingly,
not by just taking half of his wages for a month of 30 days or fixing his
daily waaes by dividine his monthly wages by 30.

The Controlling Authority held ; that for the purpose of calculating
H "fifteen days' wages" it was necessary to ascertain one day's wage and since ~1
IEEWANLAL v. APPELLATE AUTHORiTY 665
month consists of 26 working days, the'"amount of gratuity should be calculated A
by dividing the monthly wages last drawn by 26 and multiplying by 'fifteen' ;
and not by just taking half of the monthly wages or by dividing such monthly
wages by 30.

On appeal, the Appellate Authority, held that there was an error in the
mode of cqmputation of the amount of gratuity that was payable, and held that
the gratuity payable would have to be calculated at half of the monthly rate of B
wages, i.e .. wages earned in a consecutive period of 15 days and the daily wages
had to be multiplied by "thirteen" and not by "fift·~en"~for every completed year
of service or part thereof not exceeding six months. The amount of gratuity
payable was accordingly reduced.

The High Court under Article 226, held following the decision of this c
Court in Shri Digvijay Woollen Mills Ltd. etc. v. Mahendra Pralaprai Buch etc.
198 l 1 SCR 64 that in order to determine "fifteen days' wages" of a monthly-
rated employee under sub-s.(2) of s.4 of the Act, it was necessary to determine
one day's wages last drawn by him, and them multiply the same "fifteen' times.
and the resultant sum h.'.'s to be multiplied by twenty to arrive at the maximum
amounl of gratuity payable under sub-s.(3) or s.4 of the Act. The orders of the
Controlling Authority were restored. .)

In the Appeals ~nd Special Leave Petitions it was contended oa beka.lf of
the Management : that th~ words "fifteen days' wages" occurring in su\>.s.(2)
of s.4 of the Act are clear a~d unambiguous and must mean half a month's
wages and therefore there was no scope for an artificial calculatioa being made
by dividing the wages for a month by the number of working days .

• Dismissing the Appeals and Special Leave Petitions,

HELD : 1.(i) The Payment of Gratuity Act, 1972 was enacted to
introduce a scheme for payment of gratuity for certain industrial and con1mercial
establishments as a measure of social security. The significance of this
lefislation lies in the acceptance of the principle of gratuity as a conlpulsory (I
statutory retiral benefit. [672G ; 673Jll

(ii) In construing a social welfare legislation, the Court should adopt a
beneficent rule of construction and if a section is capable of two constructions,
that conslruction should be perferred which fulfils the policy of the Act, and is
more beneficial to the persons in whose interest the Act has been passed. When G
the language is plain a.nd unambiguous. the Court must give effect to it what-
ever may be the consequence. The argument of inconvenience and hardship is
~ . only admissible in construction where the meaning of the statue is obscure and
••
there are two methods of construction. Jn an anxiety to advance the beneficent
purpose of the legislation, the Court must not yield to the temptation of seeking
ambiauity when there is none. [675B-D]

2.(1) The intention of the Legislature in enacting sub-s.(2) of s. 4 of the
Act was not only to achieve uniformity and resonable degree or certainty, but II
666 SUPREME COURT REPORTS [1985] 1 s.c.R

A also to create and bring into force a self-contained, all·ernbracing, complete and
comprehensive code relating to gratuity as a compulsory, retiral benefit. The
quantum of gratuity payable under sub-s.(2) of s.4 of the Act has to be "fifteen
days' wages" based on rate of wages last drawn by the employee concerned for
every completed year of service or more in excess of six months 'subject to
the maximum of 20 months' wages as provided by sub-s. (3). [6760-H; 677AJ
.
B Shri Dig1•ijay Woollen Mills ltd. etc. v. Mahe11dra Prataprai Buch etc.,
[1981] 1 SCR 64, referred to.
,
Associated Cement Co. ltd. Kistna Ce1nent Works, Kistna Guntut Distt. v.
The Appellate Authority under Pay1ne11t of Gratuity Act (Regional Assistant Coin-
n1iJsio11er of Labour, Guntur) & Ors. [1976] 1 LLJ 222 and Swatny & Ors. v.
Controlling Authority under Pay1nent of Gratuity Act & Ors., (1978] 52 TFJ J38,
c over-ruled.

(ii) The word 'rate' appears twice in sub·s.(2) of s.4 and it necessarily •
involves the concept of actual working days. Although a month is understood
to consist of 30 days, gratuity payable under the Act treats the monthly wages
as wages for 26 working days. [675AJ
D •
(iii) Sub-ss.(2) and (3) of the Act arc designed to achieve two separate and
distinct objects and they operate at two different stages. While sub-s. (2)
provides for the mode of calculation of th1.: amount of gratuity, sub-s:(3) seeks
to impose a ceiling on the amount of gratuity payable at 20 months wages. It
is n1cant to provide in incentive to employees to serve for the period of 30 years

E
or more. Sub-s.(2) of s.4 of the Act which uses the words "fifteen days' wages"
and not half a months wages, cannot be called in aid for construction of the
.
words "20 month' wages', appearing in sub-s.(3) of s.4 of the Act. f677F-GJ

3. The definition of 'approoriate government' in s.2(a)(l) in relation to
an establishment makes a distinction between establish1nents and factories. In •
relation to an establishment belonging to. or under the control of, the Central
F Government and of a factory belonging to, or under the control of, the Central
Government, the appropriate government is the Central G-ovc:rnment. But the
Central Government is the appropriate government only in relation to an
establishment having branches in more than one State. There is no like pro- •
vision madt: in relation to such an establishment having factories in different
States. [678F-G)

G 4. Whenever doubt or difficulty is expressed by the lligh Courts in the
application of provisions of sociill security measures, namely, retiral benefits,
gratuity, provident fund, etc., the Governn1ent 111ust always introduce legislation
to cure the defect rather than wait judicial interpretation by the highest Court.
[680H)

H Lalappa Lingappa and Ors. v. Laxml Vishnu Ttxti/e Mills., Ltd. [1981] 2
SCR vin. referred to.
•
-·
\
JEEWANLAL V. APPELLATE AUTHORITY 667

5. The Government may consider the desirability of setting up a National A
Labour Commission which may be entrusted not only with the task ot making
periodical review of social welfare legislations fro1n time to time but also to
suggest radical reform of the laws relating to industrial relations which must be
brought in tune with the changing needs of the society. (68IA·BJ
. CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2332 B
1970, 2432, 2784-2877 of 1981 and 7447 to 7497 of 1983

Appeals by Special leave from the Judgment and Order
dated the 19th June, 1981 of the Madras High Court in Writ
• Petition Nos. 338, 4263 of 1977, 4028/80, 2662/78, 4056, 2171,
c
2170/80, 4136/78, 4339/80, 2028/78, 2085/80, 2171/78, 1590/76 3164,
2426/80, 2122/80, 2452/78, 4414/80, 2073/78, 1598/76, 1596/76,
4257/80, 614/79, 4057, 4254, 4411, 1732/80, 1597/76, 4259/80,
2664/78, 4252, 2175/80, 2058/78, 3972/80, 26/79, 4410/80, 1592/76,
3571, 4259, 4058, 3570, 2007/80, 2169/78, 2135, 4331/80, 2665/78,
2006, 4255, 4022/80, 1595/76, 4054/80, 1594/76, 4026, 2174/80, D
2168/78, 3567/80 2172/78, 2133/80, 2469/78, 2470/78, 1593/76,
3569/80, 1551/76, 1591/76, 2008, 3156, 4029, 3165, 4055, 4409,
• 4408, 2427, 3412, 4024, 4023, 4412, 3166/80, 2663/78, 4225, 2134,
3157, 4253/80, 2454/78, 4027/80, 2471/78, 1959/80, 1635/76, 2453/78
2172, 3163/80, 2461/78, 3158, 4053, 4413/80, 2073/78, 3568, 2005/80
1542, 1540, 1378, 1377/78, 492, 339, 340/77, 1541, 1379/78, 3041/77 E
226/79, 3050, 3056, 3034 3038, 3037/77. 3767, 4261, 3058/77, 168/79,
3766, 3039/77, 3048, 3035, 3047, 4262, 4259, 3988, 30)3, 4260,
4383/77 265/79, 4258, 2967, 3055, 3052, 3280, 3033, 3032, 3036,
3051, 3049, 3040, 4381, 4382, 3042/1977 & 264of1979 .

• WITH
F

Civil Appeal Nos. 2985-87, 3398-3410 of 1981, 369-410,
• l 450-59, 3091-3092 of 1982, 60/83, 2560/83, 10778 of 1983,

Appeals by Special leave from the Order of the Appellate
Authority, Under the payment of Gratuity Act, Madras dated 29th G
May, 31st January, 27th February, of 1981, 17th, & 30th April
16th December & 20th December, 1982 in P.G.A. Nos. 24/81,
31/80, 90/80, 138, 132, 131, 134, 139, 129, 137, 92, 133, 91 136, 135,
of 1980, 19-23, 25-28, 30, 29, 31-39 of 1981, 61, 69, 101, 98, 66, 73,
50, 63, 60, 32, 33, 34, 35,36, 57, 58, 59, 62, 64, 65; 67, 68, 74-79, 97,
•68 SUPREME COURT REPORTS [1985] 1 S.C.R.

99, 100 & 49 of 1980 2 & 6 of 1981, 458/81, 48/82 and 12 of
1981
AND

Civil Appeal No. 2559 of 19'84.
B
Appeal by Special leave from the Judgme!lt and Order dated
22nd March, 1984, of the Appellate Authority and the Regional
Labo~r Commissioner (Central) Madras Under the Payment of
Gratuity Act, i972 in Appeal No 17 of 1983.

D AND
•
Special Leave Petition (Civil) Nos. 181'9, 3324, 11382-84,
14754 of 1982 and 4940 of 1984.

From the Orders dated the 19th July, 1981,, 28th July & 12th •
August, 1982 and 16th February, 1984, of the Appellate Authority
c and the Regional Labour Commissioner (Central) Madras Under
the Payment of Gratuity Act, 1972 in P.G.A. Nos. 20/81, 1/77, 9/82,
10 & 11/82 and 16 of 1983

Soli J. Sorabjee, A.N. Haksar, S. Ramasubramaniam, Sanjay
.
Mohan & D.N. Gupta for the Appellants in CAS. 1970/81 &
E
2560/83.

Dr. Y.S. Chitale, S. Ramasubramaniam, Sanjay Mohan, D.N. •
Gupta for the AppeJlants in CAS. 2432/81, 10778/83 & 2559/84.
S. Padmanabhan, S. Rama;ubramaniam, Sanjay Mohan &
D;N. Gupta for the Appellants in CA. Nos. 2332/81 & 2985 of
,
1981
S. Ramasubramaniam, Sanjay Mohan & D.N. Gupta for
Appellants in rest of the Appeals and for Petitioners in Special
f •
Leave Petitions.
G S.H. Mehta & M.C. Tiwari for Respondent No. 1 in CA. No.
3091/82.
H.S. Parihar for Respondent in CA. 60 of 1983.
Ambrish Kumar for the Respondent.

The Judgment of the Court was <\elivered by
JEEWANLAL v. APPELLATE AUTHORITY (Sen, J.) 669

SEN, J. These appeals by special leave and tlo.c connected A
special leave petitions from the judgment and order of the Madras
High Court dated June 19, 1981 raise a question of substantial impor-
tance. The question is whether the words "fifteen days' wagcs"occur-
ring in sub-s. (2) of s.4 of the payment of Gratuity Act, 1~72 (herein-
after referred to as the 'Act') in the case of monthly-rated emp-
B
loyees, can only mean half a month's wages, i.e., wa:cs which they
would have earned in a consecutive period of 15 days or ia 13 work-
ing days and therefore, in calculating the amount of gratuity payable
to such employees, the rate of wages earned by them has to be
multiplied by 'thirteen" there being 26 worki""g d~ys in a month
• and nt>t by "fifteen". A subsidiary question arises as to whether
the words "twenty months' wages" occurring in sub-s. (3) thereof
0
would only mean wages for 520 working days taking the actual
working days in 20 months or must mean 600 days taking that a
month consists of 30 days.

It is not necessary to state the facts in any great detail. In D
all these appeals, the rcspenae•t i• each case was a monthly-rated
• employee and the appellant, a public limited company, was his
employer. The facts in each of these cases arc more or less simi-
lar and it will suffice to state the facts in one of them. In Civil
Appeal No. 2332 of 1981-Messrs Jeeva la! (1929) Ltd. v. The
Appellate Authority under the Payment of Gratuity Act, Madras & E
• Ors" the respondent ceased to be an employee on attaining the
age of superannuation after completing 35 year; of service. Since
he was entitled to payment of grntuity uader the Act. the appellant
calculated the amount of gartuity payable to him under sub-s. (2)
• of s. 4 on the basis that "fifteen days' wages" meant half of the
monthly wages last drawn by him, i.e., for 13 .working days, there F
being 26 working days in a month. Being dissatisfied with such
payment, the respondent made a claim under sub-s. (I) of s. 7 of
-, I
the Act before the Controlling Authority, Madras for determi-
nation of the amount of gratuity payable to him. He made a
demand for payment of an. additional sum as gratuity on the ground
that his daily wages should be ascertained on the basis of what G
he actually got for 26 working days and the amount of "fifteen
days' wages" should be calculated accordingly, not by just taking
half of his wages for a month of 30 days or fixing his daily wages
by dividing his monthly wages by 30. The appellant contested
the claim contend in(! that the worqs "fifteen days' wages" occuring
670 SUPREME COURT REPORTS [1985] 1 s.c.R.

A in sub-s. (2) of s. 4 of the Act only meant half a month's wages and
since a month consisted of 26 working days, the amount' of gratuity ••
was rightly arrived at by multiplying the daily wages by 'thrirteen'.

The Controlling Authority by its order dated September 23,
1978 held that for the purposes of calculating "fifteen days' wages"
B it was necessary to ascertain one day's wage and since a month
consists of 26 working days, the amount of gratuity should be calcu-
lated accordingly, i.e., by dividing the monthly wages last drawn by
26 multiplied by 'fifteen' and not by just taking half of his wages
for a month of 30 days or by dividing such monthly wages ·by 30.
It ;iccordingly directed the appellant to pay Rs. 6069.00 as gratuity •
c under sub-s. (I) of s. 4 of the Act. On appeal the Appellate Autho-
rity, Madras by its order dated July 12, 1976 held that there was an
error in the mode of computation of the amount of gratuity pay-
able to the respondent. According to it, the gratuity payable to the
respondent would have to be calculated at half of his monthly rate Ir
of wages, i.e., wages he would have earned in a consecutive period of Iii
D
15 days and his daily wages had to be multiplied by "thirteen" and
not by ''fifteen" for ever completed year of service or part thereof
not exceeding six months. It accordingly reduced the amount of
gratuity payable to Rs. 5259.80 p.

E
It, however, appears that the Appellate Authority in several
other cases took a view to the contrary such as the one in Civil
Appeal No. 2432 of 1981 relating to the same employer, Messrs
. .
Jeevanlal (1929) ltd. as also in Civil Appeal No. 1970 of 1981
relating to another employer, Messrs Madura Coat.< Ltd. as also in
Civil Appeal No. 2559 of 1984 relating to M/s Binny Ltd. and
F upheld the orders of the Controlling Authority. As a result of these •
conflicting orders pasSl'd by the Appellate Authority, the employers
iu some of these cases and the employees in other:> had to file peti-
tions in the High Court under Artile 226 of the Constitution and they
have been disposed of in the j udgment under appeal. The High Court
following the decision of this Court in Shri Digvijay Woollen Mills
G L td. etc. v. Mahendra Prataprai Buch etc('>. and that of the Bombay
High Court in Lakshmi Vishnu Textile Mills v. P.S. Mav/ankar('> held
that in order to determine "fifteen days' wages" of a monthly-
rated employee under sub-s. (2) of s. 4 of the Act,. it was necessary

(I) [1981] I SCR 64.
ff (2) [1979) ~ LLJ 443.
iEEWANLAt v. Ai>i>EtLAt~ AUTHORITY (Sen, J) 611

to determine one day's wage last drawl) by him and then multiply
A
the same "fifteen" times, and the resultant sum had to be multi-
plied by twenty to arrive at the maximum amount of gratuity pay-
able under sub-s. (3) or·s. 4 of the Act. It accordingly restored the
orders of the Controlling Authority.

In support of these appeals, learned counsel for the appellants B
submitted till! the decision of this Court in Shrt Digvijay Woollen
Mills Ltd. case does not lay down any principle but, on the contrary
the Court express1y observed that'it was not necessary to go into
the question as to the correctness of the conflicting views taken by
different High Courts.' Reliance was placed on the decision of the
learned Single Judge of the Andhra Pradesh High Court in Associat- c
ed Cen1ent Co. Ltd. Kistna Cement Works, Kistna, Guntur Dist!. v.
The Appellate Authority under Payment of Gratuity Act ( Reg'onal
Assistant Commissioner of Labour, Guntur) & Or.d 1 ) which was
approved by a Division Bench of the same High Court in Swamy &
Ors v. Control/ing Authority under Payment of Gratuity Act & Ors.< 2 )
In all fairness to the learned counsel, it must be said that they also D
brought to our notice the decisions of the Calcutta High Court in
Hukamchand Jute Mills Ltd. v. State of West Bengal & Ors(') ., that.
of the Bombay High Court in Lakshmi Vishnu Textile Mills' case
• and that of the Gujarat High Court in Shri Digvijay Woollen Mills'
case taking a view to the contrary.
E
It is urged that the words ,'fifteen days' wages" occurring in
sub-s.(2) of s.4 of the Act are clear and unambiguous and must
' mean half a month's wages and therefore there was no scope
for an artificial calculation being made by dividing the wages
for a month by the number of working days viz., 26 for determining
F
the daily wages and multiplying the same by "fifteen" to determine
• the amount representing 15 days wages inasmuch as the wages of a
monthly-rated employee were for all the 30 days of a month and
not 26 working days alone and therefore "fifteen days' wages" in his
case, would amount only to half a monht's wage. It is further urged
, I
that Parliament amended sub-s.(3) of s.4 of the Act on recommen- G
dation of the Select Committee and raised the ceiling of gratuity
from JS months' wages to 20 months' wages and the reason given
by the Select Committee was that there should be an incentive for
(I) [1976] 1 LLJ 222.
(2) [1978] 52 IFJ 138,
(3) [19711 49 IFJ 145 H
sUPRl!ME coURt REPORTS [1985] 1 s.c.R..

employees to serve beyond a period of 30 years. It is submitted
that by providing for a maximum gratuity of 20 months' wages the
Select Committee meant that it should be payable for a service of
40 years ; and that, if the contention cf the employees were to ,
prevail, the maximum gratuity would become payable even after
completion of 34 years and 8 months instead of 40 years. We are
B afraid, this contention cannot prevail.

"1
These snbmissions, broadly stated, give rise to two question.
The first is whether for the purpose of computation of "fifteen days'
wages" of a monthly-rated employee under sub-s.(2) of s.4 of the
c Act, the monthly wages last drawn by him should be treated as
wages for 26 working days and his daily rate of wages should be
ascertained on that basis and not not by taking the wages for a
month af 30 days or fixing his daily wages by dividing his monthly 'i
wages by 30. The second question is whether the words "twenty
months' wages" occurring in sub-s.(3) of s.4 of the Act must be
D construed to mean wages for 520 days taking the actual working in • I

days in twenty months or must mean wages for 600 days taking that
a month consists of 30 days. As regards the first, the answer must
be in the affirmative in view of the decision of this Court in Shri
Digvijay Woollen Mil/s's case, but learned counsel for the appellant
+
want us to take a second look at is as, according to them, nothing
E was settled in that case. As regards the. second question, the learn-
ed counsel contend that sub-ss.(2) and (3) of s.4 of the Act must
receive a harmonious construction as they provide for the mode of
calculating the total amount of gratuity payable to an employee upon • I

termination of his services under sub-s.(l) of s.4 of the Act and it
F
is said that a month cannot mean 26 working days for the purpose
of sub-s.(2) and 30 days for the purpose of sub-s.(3).
•
The Payment of Gratuity Act, 1972 is enacted to·introduce a
scheme for payment of gratuity for certain industrial and commercial
establishments, as a measure of social security. It has now been uni-
G versally recognized that all persons in society need protection ¥
against loss of income due to unemployment arising out of incapa- I
city to work due to invalidity, old age etc. For wage-earning
population, security of income, when the worker becomes old or
infirm, is of consequential importance. The provisions of social
security measures, retiral benefits like gratuity, provident fund and
pension (known as the triplebenefits) are of special importance. In
H
IEEWANLAL v. APPELLATE AUTHORITY (Sen, J.} 613
bringing the Act on the statute-book, the intention of the legislature
A
was not only to achieve uniformity and reasonable degree of certainty,
but also to create and bring into force a self-contained, all embracing,
• complete and comprehensive code relating to gratuity. The signifi-
cance of this legislation lies in the acceptance of the principle of
gratuity as a comuplsory statutory retiral benefit.
B
As is true in every case involving construction of a statute, our
starting point must be the language employed by the legislature.
It is necessary to set out the relevant statutory provisions of the
Act. Sub-s.(l) of s.4 of the Act reads :

"4(1): Gratuity shall be payable to an employee on the c
termination of his employment after he has rendered conti-
' nuous service for not less than five years :
(a) on his superannuation, or
• (b) on his retirement or resignation, or
(b) on his death or disablement due to accident or disease. D'

Provided that the completion of five years shall not be
necessary where the termination of the employment of any
employee is due to death or disablement :
Provided further that in the case of death of the E
employee, gratuity payable to him shall be paid to his
nominee or, if no nomination has been made, to his heirs.
, Explanation-For the purposes of this section, disablement,
means such disablement as incapacitates an employee for
the work which he was capable of performing before the F
accident or disease resulting in such disablement."
• Sub-ss.(2) and (3) of s.4 of the Act provide as follows :
"4(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 of fifteen day&' wages
G
based on the rate of wages last drawn by the employee
concerned:

Provided that in the case of a piece-rated employee,
daily wages shall be computed on the average of the total ,,
wages received by him for a period of three months
immediately proceeding the termination of his employment, H "
674 SUPREME COURT REPORTS [1985 l 1

A and, for this purpose, the wages paid for any overtime
worl< shall not be taken into account :

Provided further that in the case of an employee
employed in a seasonal establishment, the employer shall
pay tbe gratuity at the rate of seven days' wages for each
B season.'

"4(3) : The amount of gratuity payable to an employee
shall not exceed twenty months' wages."

The term 'wages' is defined in s.2(s) as follows :
c
"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 not .include any bonus, com·
D •
mission, house rent ·allowance, overtime wages and any
other allowance."

In dealing with interpretation of sub-ss.(2) and (3) of s.4 of
the Act, we must keep in view the scheme of the Act. Sub-s. (!)
of s.4 of the Act incorporates the concept of gratuity being a reward •
F
for long, continuous and meritorious service. Sub-s. (2) of s.4 of the
Act provides for payment of gratuity at the rate of "fitfeen days'
wages" based on the rate of wages last drawn by the employee con-
cerned for every completed year of service. The legislative intent
is obvious. Had the legislature stopped with the words "fifteen days'
F wag<s" occouring in sub-s. (2) of s.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 learned Single Judge of
the Andhra Pradesh High Court in Associated Cement's case which
was later approved by a Division Bench of that Court in Swamy's
case. But the legislature did not stop with the words "fifteen days'
wages" in sub-s. (2) of s.4 of the Act. The words "fifeen days'
'·
wages" are preceded by lhc words "at the rate of" and qualified
by the words "based on the rate of wages llast drawn" by the
employee concerned. The emphasis is not on what an employee
would have earned in the course of fifteen days during the
month when' his employment was last terminated, but on the
H rate of fifteen days' wages for every completed year of service, based

.·, ·~
JEEWANLAL v. APPELLATE AUTHORllY (Sen, J.) 675

on the rate of wages last drawn by the employe~·concerned. The .A
word 'rate appears twice in sub-s. (2) of s.4 and it necessarily
involves the concept of actual working days. In Shri Digvijay
Wollen Mills' case 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

In construing a social welfare !Cgislation, the , court should
adopt a beneficent rule of construction and if a section is capable of
two constructions, that construction should be preferred which
fulfils the policy of the Act, and is more beneficial to the persons
in whose interest the Act has been passed. When, however, the
language is plain and unambiguous, the Court must give effect to
it whatever may be the consequence, for, in that case, the words of
the statute speak the intention of the legislature. When the language
is explicit, its consequences are for the legislature and not for the
• courts to consider. The argument of inconvenience and hardship is
I)
a dangerous one and is only admissible in construction where the
meaning of the statute is obscure and there are two methods of
, construction. In their anxiety to advance beneficent purpose of
legislation, the courts must not yield to the temptation of seeking
. ' ambiguity when there is none.
E
It is not correct to say that the decision in Shri Digvijay
Wollen Mills' case does not lay down any princi pie. Gupta, J.
, speaking for the Court set out the following passage from the J udg-
ment of the Gujarat High Court in Shri Digvijay Woollen Mills'
case:
F
"The employer is to be paid gratuity for every com-
• pleted 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 com-
puted. In any factory it is well known that an employee G
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 dear-
ness 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 ,H
676 SUPREME COIJRT REPORTS [1985] I s.c.R.
I
A month but1emaining on work and doing duty for only 26
days. The other extra holida_ys 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."
B
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 :
c
"Ordinarily of course a month is understood to mean
30 days, but the manner of calculating gratuity payable
'
under the Act to the employees who work for 26 days a
month followed by the Gujarat High Cour.t cannot be called
perverse.'' •
D He further observed that it was not necessary to consider whether
another view was possible and declined to interfere under Art. 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 tli en added : " '

E "Incidentally, to indicate that treating monthly wages
as wages for 26 working days is not anything unique or
unknown."
•
We find that the same view has been taken by as many as three
High Cou<ts viz. by the Calcutta, Bombay and Gujarat High Courts
F in the cases referred to at the Bar. We find no compelling reason
to take a view different from the one expressed by this Court in •
Shri Digvijay Woollen Mills' case.

The intention of the legislature enacting sub-s. (2) of s. 4 of
the Act was not only to achieve uniformity and reasonable degree •.
G of certainty, but also to create and bring into force a self-contained,
all-embracing, complete and comprehensive code relating to
gratuity as a compulsory, retiral benefit. The quantum of gratuity
payable under sub-s. (2) of s.4 of the Act has to be fifteen days'
wages based on the rate of wages last drawn by the employee con-
cerned for every completed year of service or more in excess of sill
JEEWANLAL v. APPELLATE AUTHORITY (Sen, J.) 677

months' subject to the maximum of 20 mouths' wages as provided A
by sub-s. (3) thereof. The whole object is to ensure that the
employee concerned must be paid gratuity at the rate of fifteen days'
• wages for 365 days in a year of service. The total amount of
gratuity payable to such employee at that rate has to be multiplied
by the number of years of his service subject to the ceiling imposed B
by sub-s. (3) of s.4 of the Act viz., that such amount shall not
exceed 20 months' wages. The construction of sub-s. (2) of s.4 of

- the Act adopted by the learned Single Judge of the Andhra Pradesh
High Court in Associated Cement Company's case, and later approv-
ed by a_ Division Bench of that Court in Swamy's case would make
it utterly unworkable. If the determination of the amount of c
gratuity payable under sub-s. (2) of s.4 depends on the number of
• calendar days in a month in which the services of the employee
concerned terminates, the quantum of gratuity payable would
necessarily vary between an employee and an employee, belonging
• to the same class, drawing the same scale of wages, with like service
for the same number of years. Obviously, this could not have been D ,
the legislative intentfon.

The next question is : whether a month cannot mean 26 work·
ing days for purposes of sub-s. (2) of s.4 of the Act and 30 days for
' purposes of sub-s. (3) thereof. It is said that if a month under
sub-s. (2) connotes 26 working days in a month for purposes of E
calculating the amount of gratuity, then the rule of harmonious
construction requires that the words "20· months' wages" in sub-s.
' (3) thereof must mean wages for· 520 working days taking the
actual working days in 20 months and not 600 days taking that a
month consists of 30 days. The contention is wholly misconceived.
F
Sub-ss. (2) and (3) of s.4 of the Act are designed to achieve two
• separate and distinct objects and they operate at two different stages .
While sub-s. (2) provides for the mode of calculation of the amount
of gratuity, sub-s. (3) seeks to impose a ceiling on the amount of
gratuity payable at 20 months wages. It is meant to provide an
incentive to employee to serve for the period of 30 years or more.
By no rule of construction, sub-s. (2) of s.4 of the Act which uses
the words "fifteen days' wages" and not half a months wages, be G
called in aid for construction of the words "20 months' wages"
appearing in sub-s. (3) of s.4 of the Act.

We \lo no( thin]< it necessary to deal at len1,1th with the last and
ff
I
I

678 SUPREME COURT REPORTS [1985] I S.C.R. ..
A third question raised in some of these appeals viz, the objection to
tbe jurisdiction of the Controlling Authority under s. 3 of the Act
to entertain the claim against sople of the appellants. It is said
that Messers Jeevanlal (1929) Ltd. is an all-India concern having
its branches in more than one State and therefore the 'appropriate
government' within the meaning of s.2 la) (I) (b) of the Act in
B relation to them is the Central Go ernment for purposes of s. 3.
The appropriate government is the Central Government in relation
to an estabiishment belonging to or under the control of the Central
Government or having branches in more than one State or of a
factory belonging to, or under the control of th'~ Central Govern-
ment or in the case of a major port, mine, oilfield, or railway
c company. Section 2 (a) (!)of the Act reads as follows:
"2 : In this Act, unless the context otherwise requires
(a) "appropriate governm~nt" means-
(i) in relation to an establishment- •
D
(a) belonging to, or under the control of, the
Central Government,

(b) haying branches in more than one State,

(c) of a factory belonging to, or under the control •
E
of, the Contra! Government,

(d) of a major port, mine, oilfield or rai !way
company, the Central Government,

(ii) in any other case, the State Government :
F
It would appear that the definition of appropriate government in
s.2 (a) (I) in relation to an establishment makes a distinction bet- •
ween establishments and factories. In relation to an establishment
belonging to, or under the control of, the Central Government and
G of a factory belonging to, or under the control of, the Central
Government, the appropriate government is the Central Government.
But tbe Central Government is the appropriate government only in
relation to an establishment having branches in more than one State.
There is no like provision made in relation to such an establishment
having factories in different States. We feel that the point relating
to the jurisdiction of the Controlling Auth >rity under s.3 of the Act.
H does not really arise. It appears that M?ssrs Jeewanlal (1929) U:l
JEEWANLAL V. APPELLATE AUTHORITY (Sen, J.)

have their registered and head office at Calcutta and branch offices
A
and factories at Calcutta, Bombay and Madras and sales oftices at
Delhi, Hyderabad and Cochin. It has also two factories in Madras
• viz., Shree Ganes(tar Aluminoum Works and Meisrs Mysore Premier
Metal Factory. It employs about 30 0 members of Clerical staff at
the head office and its branch offices throughout the country as
well as in its two factories and employs about 1300 workmen in its B
factories at Calcutta, Bombay and Madras. We are inclined to the
view that the Controlling Authority had jurisdiction to e~tertain the
claim of an employee working in an office attached to a
factory as
such an office would be an adjunct of the factory but that is not the
question before us. The Controlling Autority has in fact, confined
the adjudication of claims in relation to workmen who were employ- c
' ed at the two factories at Madras but declined to entertain the claims
of employees who were working either at the branch office at Madras
or at the office attached to the factories in question. That being
so, the contention relating to jurisdiction of the Controlling
• Authority under s.3 of the Act must fail.
D
It has been our unfortunate experience that a beneficient
measure like Payment of Gratuity Act 1972 providing for a scheme
of retiral benefit, has been be set with many difficulties in its applica-
• tion. It need not be over emphasised that a legislation of this
kind must not suffer from any ambiguity. In the recent past, the
Court in Lalappa Lingappa and Ors. v. Laxmi Vishnu Textile Mills E
Ltd.Pl faced with the problem as tojwhether the expression "actually
' employed" in Explanation I to s.2 (c) of the Act must, in the con-
text in which it appeared, meant "actually worked". The inclusive
part of the definition of 'continuous service' in s.2 (c) is to amplify
the meaning of the expression by including interrupted service
under certain contingencies which, but for such inclusion, would
• not fall within the ambit of the expression 'continuous service'. But
the use of the words 'actually employed' in Explanation I to s.2 (c)
of the Act created a difficulty. The Court observed that it was not
•' _; permissible to attribute redundancy to the words 'actually employed'
and, accordingly, held that the expression ·actually employed' in G
Explanation I to s.2 (c) of the Act meant 'actually worked'. The
law declared by this Court in Laiappa Lingappa's case, supra,
resulted in denial of gratuity to a large number of permanent

1 r19s1]l2 s.c.R. 797, e
680 SUPREME COURT REP@RTS [1985] 1 S,C,R.

A employees, whose short term absence had remained unregularised,
due to lack of appreciation of the significance for the purpose of
working out their entitlement to gratuity. It is to be regretted that
the Government waited for a period of three years before introduc- '
ing the Payment of Gratuity (Amendment) Bill, 1984 to remove the
lacuna in the definition of continuous service in s.2 (c) of the Act
8 by specifically providing that a period of absence in respect of
which no punishment or penalty has been imposed would not
operate to interrupt the continuity of service for the purpose of
payment of gratuity. It also amplified the definition of continuous
service under s.2 (c) of the Act. Such a belated legislation must
have worked great injustice to a large number of permanent
employees.

In these cases now before us, the Court is faced with the
problem of determining the mode of calculating the amount of
gratuity payable to the employees concerned under sub-s. (!) of s.4 •
D of the Act upon the termination of their .servic:es. It turns on the
much vexed question as to the true meaning of the words "fifteen
days' wages" occurring in sub-s. (2) of s.4 of the Act. 'The section
does not specify how the rate of wages last drawn by such employees
are to be determined for the purpose of determining the rate of •
"fifteen days' wages" under sub-s. (2) of s.4 of the Act. This gave
E rise to some doubt and difficulty amongst different High Courts in
computation of the retiral benefit. It is alway,; an unequal struggle
between the capital and labour, and these cases furnish an instance
where workmen after putting in long and meritorious service for
over 30 years or more have been driven from one court to another
for the last 12 years due to the reason that the words "fifteen days'
F
wages" occurring in sub-s. (2) of s.4 of the Act were susceptible of
two possible conflicting constructions. In a situation like this, the •
Government should have intervened at once to introduce a Bill for
inserting an appropriate provision in the Act specifying the mode of
calculating the rate of wag es last drawn by such employees for the
puroose of determining the rate of "fifteen days' wages" under sub-s.
•. '
G
(2) of s.4 of the Act.

In retrospect, we wish to impress upon the Government that
whenever such doubt or difficulty is expressed by the High Courts
..
in the application of provisions of social security measures viz.,
retiral benefits, gratuity,
. provident
. fund and pension .and ti)e like,
H
JEEWANLAL v. APPELLATE AUTHORITY (Sen, J.) 681

they must always introduce legislation to cure the defect rather than A
wait for judicial interpretation by the highest Court. We may also
add that the Government may consider the desirability of setting up
a National Labour Commission which may be entrusted not only
with the task of making periodical review of such social welfare
legislations from time to time but also to suggest radical reform of B
the laws relating to industrial relations which must be brought in
tune with the changing needs of the society.

In the result the appeals as well as the special leave petitions
must fail and are dismissed with costs throughout. The costs are C
quantified at the sum of Rs. 10,000 two-thirds of which shall be
deposited with the Supreme Court Legal Aid Committee of which
Shri Subba Rao is the Hony. Secretary and the remaining one-third
shall be paid to the respondent. D

'

N.V.K. Appeals and petitions dismissed.

•