Holding

The Payment of Gratuity Act, 1972 applies to the Hydel project, retrenchment is a form of retirement triggering gratuity liability, and the Act is a self‑contained code, rendering the Labour Court's jurisdiction under the Industrial Disputes Act invalid.

Summary

The Supreme Court examined whether the Hydel Upper Bari Doab Construction Project, undertaken by the Punjab Hydel Department, qualified as an "establishment" under Section 1(3)(b) of the Payment of Gratuity Act, 1972, and whether the retrenchment of its workers entitled them to gratuity. It held that the project fell within the definition of an industrial establishment under the Payment of Wages Act, making the Gratuity Act applicable. The Court further ruled that retrenchment is a termination of service that qualifies as "retirement" under Section 4(1) of the Gratuity Act, thereby triggering gratuity liability. The Act was deemed a self‑contained code, so claims for gratuity must be pursued under it, not under Section 33‑C(2) of the Industrial Disputes Act, 1947. Consequently, the Labour Court lacked jurisdiction, its order granting gratuity was quashed, and the appeal was allowed.

Issues considered

The scope of Section 1(3)(b) of the Payment of Gratuity Act, 1972: does it include projects governed by the Payment of Wages Act?
Whether retrenchment qualifies as "retirement" under Section 4(1) of the Payment of Gratuity Act, 1972.
Whether a claim for gratuity can be made under Section 33‑C(2) of the Industrial Disputes Act, 1947 or must be pursued exclusively under the Payment of Gratuity Act.
The jurisdiction of the Labour Court, Jullundur, to entertain a gratuity claim filed under the Industrial Disputes Act.

Legislation cited

Code of Civil Procedure, 1908
Industrial Disputes Act, 1947s. 33-C(2)
Payment of Gratuity Act, 1972s. 1(3)(b), s. 2(q), s. 2(r), s. 4(1), s. 7, s. 8
Payment of Wages Acts. 2(ii)(g)
Punjab Shops & Commercial Establishments Act, 1958

Subjects

Payment of Gratuity Actretrenchmentindustrial establishmentjurisdictionLabour CourtIndustrial Disputes Actgratuity entitlementself‑contained code

Judgment

953
STATE OF PUNJAB
A
v.
,,.~. LABOUR COURT, JULLUNDUR & ORS.
·. '
Ocrober 16, 1979
[V. R. KRT~HNA lv!'R AND R. S. PATfr.\K, JJ.]
B
Poymmt of Gratuity Act, 1972-S. 1(3)(b)-Scope of-A Gov~rnment
projert wlmhtr an "Industrial Estnblishmcnr".

Rttrrnched 11 orkers-1/ entitTccl to gratulty-"Rctrenc:liment"-Meaning of.
t.
~~\
Act, a sdf-co~ttained Code-Application for gratuiry-Tf "'ou/d fie under
1• J3 C(2} of Jndu.rtrial Dispmcs Acl.
c
The re<>ponden!s. who were the employees of the H~dcl Department the or
Go,·ernment of Punjab, were retrenched on the completion of the work assign-
-ed to !bern. Their claim for payment of gratuity under the Payment of
Gratuity Act, 197:! having been rejected by the appellant,., th(y moved the
bbour Coun under s. 33-C(2) of the IndtL<trial Dispute~ Act. 1947. The D
l.:lbonr (.curt allowed their claim. The High Court di<mi<<ed the appellant's
arpcal /11 //mint.

.,..;J
In appenl it conkmkd that (I) the · view of the l.abour Court that the
projrct Wll' 11n esb.bli>hmcnt within tbe me:min[l: of the definition of •Indus-
trial establishment~ contained in ~. 2(ii) (g) of the Pa.ymcnt of Wages Act
1'3.< erroneous. and the i'a)•ment of We.sc.~ Act being a Central Act ~ not au
E
tnactment cont~mpl:>.ted by s. 1(J )(b) of the Payment of Gr:lluity Act: (2)
'~ retren.:.hment is not superannuation or retir~m~nt or re~ignation or death
or di~blemcnt due to accident or disease as defined in s. 4( 1) ot th~ Act.

\
(
the ret rene hell employees were not entitled to gmtuity; ond (3) the P11yment
of Gratuity Act being a self-contained cod~. it exclud~ recourse to any o~r
ltltute for claimins; relief under thi' Act and. therefore, the respoodenl3'
application under a. 33-<:(2) of th~ Industrial Disputes Act. w::ts misconceived. F

'?'; Allovrin;: the appenl In part;
i' ol
i HELD : 1(a). It Is not correct to say thnt whnt is contemplated by •s.
I H3)(b) of the Payment or Grutuity Act is a I:Jrw enacted by the State Legts-
l:iture and not a Central Act like the Payment of Wnge5 A.ct_ There can bo
?0 doubt that when 1 , 1(3 )(b) speao of "any law :or. t~e hme t-e!ng in force G
" relation to $bop• und e~~tnbli!hmenu in 11 Stale tt lnclu<l~ the Payment
<>f Wa~e; Act, which is 11 law in force in the Stnte. [956 B-C)
fb) 'The Paayment or Wnse• Act i' a ~tatute which. whi~e it m:t~ not re-
late to \ho... , . f . bli•htnents. i.e. in,tnstnal e>1llbhsbments.
T< . ,.• , rc1alA!~ to a c 1u.s (1 ~'1a · "law~ ·n ~
'"''e ;. no Y.:trrnnt for limilillg tho meaning of the e.:rress•on 1 ..
lf3)(b) to a 1. ·h' h I· t. 1 both shops and esL'Ibhsh~n~ such ~ th.e H
l>unj;.b Sho~ :~ v.('~~.n:·r~~;l~ f:~t~blishmcnts Act, 1958: The e~presston l~
eomf)rehen~; . . d mean 0 Jnw in relatton to !hops as wdl
a,, c-ar•t•r"e ml tt, l~~eope ~~~ teun t bli•hment~ or a law in relation to &hOJ"S
·~ • ' y. a aw n reiMton o e• a ·' .
A
954 SUPREME COURT REPORTS [1980] 1 S.C.R..

ami tommcrcial establ~hme~ts and a J~w in relation to non-commercial ~ta
blishments. Had the mtcnt1on of Parhamcnt been to refer to a law rclatin
lj.,
to con.mercial establishments it would not have left the expression "cstabli~h~
ments" unqualified. There is no reaso_n for giving a limit-ed meaning 10 s.
1 (3 )(b). · This section applies to CYery establishment within the mean in<> of
any law f(lr th'c time being in force in relation to establishments in a S~;tte.
Such an establishment would include an industrial establis-hment wilhiA the
B meaning of s. 2(ii) (g) of the Payment of W2.gcs Act. Therefore, the Pay-
ment of' Gratuity Act applies to an establishment in which any work relating,
among oth'e rs, to the generation, transmission and distribution of electricity
or any other form of power is being cahied on as defined ins. 1(3)(b) of
tl:e Act. [956 D-H, 957 A)
2. The upr~ion "reufochment" which has been defined in s. 2(q) to
mean ''termination of the service of an ernplO)•ec otherwise than on supcr-
c <mnuation" is framed in the widest terms. Ex-cept for superannuation, any ,
termination of ~n;ce would amount 10 "retire!l1ent" for the purposes of the
.Act. Retrenchment .is termination of ser.·ice. It is imm~terial that the ter-
m inatio!l is occasioned by the need to discharge surplus labour. [957 E-Fl
Bu:rl light Rdf..,·ay Company Lo.bour v. K. M. lo:;f.:lcar, .\]R 1957 SC
11 J, ref erred to.
3(a). Parliamem intended that proc~diogs for rarmeut of gratuity due
under the Act must be taken under that .Act and not under any other. There-
fore the r~pondents• application did not lie under s. 33-C(2} of the Indu5trial '
Di•r:utes Act. and the Labour Court had no jurio;diction to entertain it. [959-
f'.) .

(b). The Payment of Gratuity Act is a compl~te code oontaining detailed
£ pro\'isions co\·eriog :til the e~sen~bl features of ~he 9Cheme for p:~yment of
1;1 :Jtuity. For the enforcement of ih provi~ion~. the Act provides for the
appointment of a Controlling Autlx,rit'l for administcrin~ the Act He has
been in\'ested v.ith :10 amplitude of power for th~ full dhcharg·e of his r~
pon~ibilitie~ under the /\ct. Any error cummitle<..l by him can b.: corr¢ct~t1 in
:.ppral by the lll"f'mpriate Go\'<'T'nmcrlt or an :tprclla!e authoritr particularly \
con~tituted under the Act. {9.59 B-DJ

CI\'!L At•PLLL.nr. JvRt<DJcTroN: Civil Appcat No. 8 of 1977. -r
Appe:JI by Sp.::<:i:.l Leavl! from the Judgment and Order dJtcJ
5-6-1975 of the Punj:rb and Haryana High Coun in Civil Writ
No. 31 66/75.
G
Soli I. Sorabii, Solicitor General and
l:Jnt.
o: P. S!taml<t fnr the r\ppcl-

1/artlt'l' Sin~ll for the Respondent.

Th~ Ju·l~,,1ent <if th~ Court wa..; delivered by
n· PAtHM~ J.-rn tr,i~ appeal by special leave the State or Punjall'
i appctils ;.rg<~in•,t th.: j ~dzment and order of the High Court of Punjall'
& lhry-Jna rdu<oi1,~ I·• q::a' h an order under section 33-C(2) of the
I

r ..-
PUN.T AB V. LABOUR COURT (Pathak, J.) 9 55

._ ·~ Industrial Disputes Act, 1947 for payment of gratuity to the respondents A
under the Payment of Gratuity Act, 1972.
The Hydel Department of the Government of Punjab had under-
taken a Project described as the "Hydel Upper Bari Doab Construe ...
..... tion Project." The respondents Nos. 2 to 8 were employed as work-
charged employees. On completion of the work assigned to them they
were retrenched, and retrenchment COJ!lpensation was paid to: them.
The employee respondents claimed that lhey were also entitled to
gratuity, bonus and certain other allowm1ces and benefits. The gra-
tuity was claimed under the Payment of Gratuity Act, 1972- The
• claim being disputed, the respondents applied under section 33-C(2)
C .
of the Industrial Disputes Act , 1947 to the Labour Court, Jullundur.
The L'\bour Court made an order dated April 30, 1975 that the emp-·
loyec respondents were entitled to the gratuity claimed by them bu~
not to bonus and the other allowances and benefits. A writ petition
filed by the appellant has been dismissed in limine by the High Court
of Punjab and Haryanu. D
In this appeal, the learned Additional Solicitor-General contends, on
behalf of the appellant that the Payment of Gratuity Act, 1972 cannot
be invoked by the respondents! because the Project does not fall within
the scope of Section 1 ( 3) of that Act. Section 1 (3) provides that
the Act will apply to :
E
"(a) every factory, mine, oilfield, plantation, port and
railway company;
(b) every shop or establishment within the meaning of
any law for the time being in fqrce in .relation to
shops and establishments in a State, in which ten or F
more persons are employed, or were employed, on
any day of the preceding twelve months;
(c) such other establishments or dass of establishments,
in which ten or more employees are employed, or
wero employed, on any day of the preceding twelve
months, as the Central Government may, by notifica- G

.. tion, specify in this behalf."
According to the parties, it is clause (b) alone which needs to be
considered for deciding whether the Ac't applies to the Project. The
'l . Labour Court l1os held that the Project is an establishment within the
~leaning of the Payment of Wages Act, section 2(ii) (g) of which de- R
fines an "industrial estsablishment" to mean an "establishment in which
any work relating to the construction, development or maintenance of
956 SUPREME COURT REPORTS [1980] 1 S.C.R.

buildings, roads, bridges or canals, or relating to oper:~tions connected l
with navigation, irrigation or the supply of water, or relating to the
_generation, transmission and distribution of electricity or any other
form of power is being carried on." It is qrged for the appellant that
_the Payment of Wages Act is not an enactment contemplated by sec-
tion 1 (3) (b) of the Payment of Qratuity Act. The Payment of
Wages Act, it is pointed out, is a central enactment and seetion,
1 (3 )(b) , it is said, refers to a law enacted by the State Legislature.
We are unable to accept the contention. Section 1 (3)(b) speaks o[
_"any law for the time -being in force in relation to shops and establish·
ments in a State." There can be no dispute that the Paymcrlt of
Wages Act is in force in the State of Punjab. Then. it is submitted,
the Payment of \Vages Act is not a law in relation to "shops and est;}..
blishments". As to that, the Payment of Wages Act is a st:Jtuk
which, while it may not relate to shops, relates to a class of establish--
ments, that is to say. industrial establishments. But, it is contended,
the law referred to under section 1 ( 3) (b) must be a law whh:h relates
! '·9 to both shops and establishments, such as the Punjab Shops & Commer-
cial Establishments Act, 1958. It is difficult to accept th~tt conten-
tion because t~1ere is no warrant for so limiting the meaning of _the
expression ''law" in section 1 ( 3 )(b). The expression is comprehen-
sive in its scope, and can mean a law in relation to shops as well as,
separately, a law in relation to establishments~ or a law in relation to
shops and commercial establishments and a law in relation to non-
commercial establishments. Had sectiOn. 1 ( 3) (b) intended to refer
to a single enactment, surely the appellant would have been able to
point to such a statute, that is to say, a statute relating to shops and
establishments, both commercial and non-commercial. The Punjab
Shops & Commercial Establishments Act does not relate to aU kinds
of establishments. Besides shops, it relates to commercial establiSh~
ments alone. Had the intention of Parliament been, when enacting
section 1(3)(b), to refe.r to a law relating to commercial establish-
ments, it would not have left the expression "establishments" unquali-
fied. We have carefully examined the various provisions of the Pay-
ment of Gratuity Act, and we are unable to discern any reason for
giving the limited meaning to section 1(3)(b) urged before us on be--
half of the appellant. Section 1 (3) (b) applies to every establishment
within the meaning of any law for the time being in force in relation
•
to establishments in a State. 'Such an establishment would include an
industrial establishment within the meaning of section 2(ii)(g) of the
Payment of Wages Act. Accordingly, we are of opinion that the
Payment of Gratuity Act applies to an establishment in which any· work
relating to lhc construction , development or maintenance of buildings,
PUNJAB v. TAilOUR COURT (Pathak, J.) 957 :

-~roads, bridges or canals, or relating to operations connected with navi·
gation, irrigation or the supply ofwater, or relating to the generalion,
transmission and distribution of electricity or any other form of power .
~ is being carried on. The Hydel Upper Bari Doab Construction Pro~
ject is such an establishment, and th~ ·Payment of Gratuity Act applies
.. to it.
D
The second contention on behalf of the appellant is that retrench-
ment does not fall within section 4( 1) of the Paym)!nt of Gratuity Act,
under which g;:atuity is payable to an employee on the termination ofl
. his employment. ThefeiiJ!_ination ..el~v~saged occurs cithe.r
• "(a) on his superannuation, :or. ·· ·
(b) on his retir~ment or ~esignation, or
(c) on his death or disablement due to accident or disease."
......
' Having regard to the definition of "superannuation" in section 2(r)
of the Act, it is dear that the case is not one nntkr clause (a). Nor,
admittedly, is it a case which falls under clause (c). As regards D··
clause (b), it is not a case of resignation. The only question is :
whether it can be regarded under clause (b) as a case of retirement.
The expression "retirement'' has been defined by section 2 ( q) to ·
mean "termination of the service of an employee otherwise .than ·on ,
superannuation." The definition is .framed. in tbe :wide~t)eru1s. ·,Ex-
cept for superannuation, any termination of service would amount to : E
"retirement" for the purposes of the Act. Retrenchment is a termi-
-./.. nation of service. It is immaterial that the termination is occasioned·; :
. by the need to discharge surplus labour. Th::tt retrenchment · impli~-: .
the dischnrge of smplus labour was explained in 3ersi Light Railway
Compmiy Labour v. K. M: Joglekar.(') Nonetheless, it amounts to p:
termination of service; We are of opinion that the retrenchment of
the employee respondents falls within the scope of section 4(1) of the
Paymc.nt of Gratuity Act, and the employee respondents .are tlicrefo.re:
'"'- ... / entitled to gratuity under that provision. ·
\' The third contention raised by. the appellant is that the employee G
respondents were not entitled to apply under section 33-C(2)' of the
• Industrial Disputes Act, 1947 for payment of the grntuity, and should
have, if at all, applied under the provisions or
the Payment O[ Gratuity
Act. It is urged that the' Payment of Gratuity Ac~ is a self--contained
, code incorporating all the essential prqvisions relating to payment of
·• "-gratuity which can be claimed tm<;le.r that Act, and its provisions impli- u.
.'
edly exclude recourse to any ()ther statute for that purpose. The
(1) A.l.R.f957 S.C. 121.
958 SUPREME COURT REPORTS [1980] 1 S.C.R.

A contention has force nnd must be accepted. A careful perusal of the )....
relevant provisions of the Payment of Gratuity Act shows that Parlia
....
ment has enacted a closely knit scheme providing for payment of gra-
tuity.. A controlling authority is appointed by the approp.riate Go
vernment under section 3, and Parlinment has made him responsible
for the administration of the entire Act. In what event gratuity will
8
become payable and how it will be quantified are detailed in section 4.
Section 7 ( 1) entitled a person eligible for payment of gratuity to apply
in that behalf to the employer. Under sectiop. 7 (2), the. employer
is obliged, as soon as gratuity becomes payable and whether an appli-
cation has or has not been made for payment of gratuity, to deternrine
c the amount of gratuity and inform the person to whom the gratuity is ·•
payable specifying the amount of gratuity so determined. He is obli-
ged, by virtue of the same provision, to inform the controlling authority
also, thus ensuring tha"t the controlling authority is seized at ail times
of information in regard to gratuity as it becomes payable. If a dis-
pute is raised in regard to the amount of gratuity payable or as to the
D admissibility of any claim to gratuity, or as to the person entitled to
receive the gratuity, section 7 ( 4) (a) requires the employer to deposit
with the controlling authority such amount as he admits to be payable
by him as gratuity. _The controlling authority is empo;wered. under
section 7 ( 4) (b), to enter upon an adjudication of the dispute, and
after due inquiry. and after giving the parties to the dispute a reason-
E able opportunity of being heard, he is required to determine the amount
of gratuity payable. In this regard, the controlling authority has alii
the powers as are vested in a court while trying a suit under the Code
of Civil Procedure, 1908 in respect of obtaining evidentiary Inaterial
and the recording of evidence. The amount deposited by the em-
ployer with the controlling authority as the admitted amount of g.ra-
F
tuity will be paid over by the controlling authority to the employee or
his nominee or heir. Section 7 (7) provides an appeal agaimt the
order of the controlling authority under section 7 ( 4). to th~ appropriate
Government or such other authority as may be specified by the ·appro- ...
,..
priate Govenunent in that behalf. The appropriate Government or 1
G the appellate authority is empowered under section 7(8), after giving
the parties to the appeal a reasonable opporttmity of being l1eard, to
confirm, modify or reverse the decision of the controlling authority. •
Where the amount of gratuity payable! is not paid by the employer with-
in the prescribed time, the controlling authority is required by section
8, on application made to it by the aggrieved person, to issue a certi~ ..(
H ficate for that amount to the Collector. The Coneetor, thereupon, is
empowered to recover the amount of gratui1y, together with compound
intereit thereon at the rate of nine per cent per annum from fhe date
PUNJ,\B v. LABOUR COURT (Patlzak, J.) 959

of expiry of the prescribed time, as arrears of land revenue, and pay A
the same to the person entitled thereto.

I It is apparent that the Payment of Gratuity Act enacts a complete
code containing detailed provisions covering all the essential features
of :1 scheme for payment of gratuity. It creates the right to payment of
B
gratuity, indicates when the right will accrue, and lays· down the princi-
ples for qunntification of the gratuity. It provides further for re-
covery of the amount, and contains an especial provision that compound
interest at nine per cent per annum will be payable on delayed pay-
ment. For the enforcement of its provisions, the Act provides for
the appointment of a controlling authority, who is entrusted with the c
task of administering the Act. The fulfilment of the rights and obli-
gations of the parties are made his responsibility, and he has been
invested with an amplitude of power for the full discharge of that res-
ponsibility. Any error committed by him can be corrected in appeal
by the appropriate Government or an appellate authority particubrly
constituted under the Act. D

Upon all these considerations, the conclusion is inescapable tha~
P:uliament inrended that proceedings for payment of gratuity due
under the Payment of Gratuity Act must be taken under that Act and
not under any other. That being so, it must be held that the applica-
E
tions filed by the employee respondents under section 33-C(2) of the
Industrial Disputes Act did not lie, and the Labour Court had no juris-
diction to entertain and dispose of them. On that ground, this appeal
must succeed.

In the circumstances, it is not necessary to notice the further sub- F
mission on behalf of the appellant that where a se.rious dispute exists
in regard to the basis of a claim for payment of gratuity, no proceed-
ings will lie under section 33-C(2) of the Industrial Disputes Act.

The appeal is allowed, and the order dated April 30, 1975 of the
G
Labour Court, Jullundur is quashed. Having rega.rd to the terms on
which special leave was granted by this Court to the appellant, the
appellant shall pay to the employee respondents their costs of this
""l appeal.

At this stage we put to the learned Solicitor-General, who appeared H
for the State whether in the special circumstances it was not fair that
the entire amount be paid by the appellant ti the employees without
960 SUPREME COURT REPORTS [1980] 1 S.C.lt.

A driving them to a separate proceeding. He has fairly stated that the )....
appellant is willing to do so and the sore objoci-{)f· this litigation was
to have the law clarified. We, therefore, direct the appellant to pay
to the employee respondents within one month from today the amounts J
that may .be due to them, if they have not already· b~ p!lid. . '
.... ~#.,II •.

a
P.B.R: Appeal allowed

,. ;' : .

t: '. ,