Southern Clock Industries vs Regional Joint Labour Commissioner

J.B. Koshy, J.—Whether the Kerala Industrial Employees'' Payment of Gratuity Act, 1970 (hereinafter referred to as ''Kerala Act'') is applicable after the enactment of the Payment of Gratuity Act, 1972 (hereinafter referred to as the ''Central Act'') is the question referred to the Division Bench for decision in this case. Before dealing with the question, we consider the facts of the case.

The petitioner establishment is a small scale industrial unit employing six persons. The second respondent herein was a Carpenter employed there. He was retrenched from service on 22.5.1992. The facts that his last drawn wages was Rs. 974/- and that he had twelve years'' service at the time of retrenchment are not disputed. The second respondent filed an application before the Controlling Authority for payment of gratuity. The employer/petitioner contended that he is not entitled to gratuity because under the Central Act only establishments employing ten or more employees are liable to pay gratuity. Section 1(3) of the Central Act reads as follows:

"1. Short title, extent, application and commencement:- ........

(3) It shall apply to, -

(a) every factory, mine, oil-field, plantation, port and railway company;

(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;

(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf."

Under Section 2(g) it is stated that ''factory'' has the meaning assigned to it in Clause (m) of Section 2 of the Factories Act, 1948 and u/s 2(m) of the Factories Act also minimum strength of ten employees are required to come within the definition of factory even if power is used. Since the petitioner establishment has employed only six persons, the Central Act is not applicable. There is no award or agreement compelling the petitioner to pay gratuity to the employees. Therefore, according to the petitioner, the second respondent is not entitled to gratuity. The Controlling Authority was of the opinion that even though for application of Central Act ten or more persons should be employed, under the Kerala Act there is no restriction of number of employees and, therefore, he is entitled to gratuity under the Kerala Act. The Controlling Authority calculated the gratuity of the second respondent for twelve years'' of service taking Rs. 974/- as his monthly salary. But, the Appellate Authority noticed that a person who earns more than Rs. 750/- as monthly salary is not an employee under the Kerala Act. Therefore, the Appellate Authority has calculated gratuity under the Kerala Act taking Rs. 750/- as the deemed salary of the employee. Those orders are under challenge in this petition.

The question regarding application of Kerala Act after enactment of the Central Act is to be answered first. The constitutional validity of the Kerala Act was challenged before this Court and a Full Bench of this Court in V.N. Sunder and Ors. v. State of Kerala and Ors. 1975 KLT 867 (FB) held as follows:

"The provisions in the Act which were the same as those in Ordinance 7 of 1969 remained in force only between 10.12.69 and 16.9.72. The Central Act having superseded the Act on the latter date the liability arising under the Act to those employees whose services had been terminated for the reasons mentioned in Section 4(1) (a), (b) and (c) already extracted will be limited to termination that took place between 10.12.69 and 16.9.72. The Act has thus very limited application though it cannot be said to be a temporary piece of legislation."

The above observation would show that the Central Act superseded the State Act. Apart from the above, the Payment of Gratuity Act was enacted by the parliament for having uniform pattern in payment of gratuity through out the country as can be seen from the objects and reasons. Paragraphs 1 and 2 of the Statement of Objects and Reasons when the bill was presented read as follows:

"1. There is at present no Central Act to regulate the payment of gratuity to industrial workers, except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Governor promulgated an Ordinance on the 3rd June, 1971, prescribing a similar scheme of gratuity. The ordinance has since been replaced by the West Bengal Employees'' Payment of Compulsory Gratuity Act, 1971, enacted by the President on 28 of the August, 1971. Gratuity is also being paid by some employers to their workers under awards and agreements.

Since the enactment of the Kerala and the West Bengal Acts, some other State Governments have also voiced their intention of enacting similar measures in their respective States. It has become necessary, therefore, to have a Central Law on the subject so as to ensure a uniform pattern on payment of gratuity to the employees throughout the country. The enactment of a Central Law would also avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another."

So, the object of the Act itself was to provide gratuity in a uniform pattern through out the country. It is true that ''objects and reasons'' need not be taken into account while interpreting the plain words of a section. It cannot control the words used in the Section but reference can be made to it for understanding the background and the evil which the statute sought to remedy. See The State of West Bengal Vs. Subodh Gopal Bose and Others, and Sanghvi Jeevraj Ghewar Chand and Others Vs. Secretary, Madras Chillies, Grains and Kirana Merchants Workers Union and Another, . But it is useful in finding out the intention of the Legislature as held by the Apex Court in The Workmen of Firestone Tyre and Rubber Co. of India (Pvt.) Ltd. Vs. The Management and Others, . Now we will come to Section 14 of the Central Act. It provides that the Central Act will override the other enactments. Here apart from the statement of objects and reasons there are express provisions also. Section 14 is as follows:

"14. Act to override other enactments, etc.:- The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act."

The learned counsel for the employee invites our attention to Sub-section 5 of Section 4 which reads as follows:

"4. Payment of gratuity:- (1).......................

(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer."

But that section only protects better terms of gratuity under any award or agreement or contract with the employer and not under enactments. Further, from the statement of objects and reasons it can be seen that the Legislature was aware of the Kerala and West Bengal Acts at the time of enactment of the Central Act. The Central Act was enacted to ensure uniform pattern on gratuity and since provisions of Kerala and West Bengal Acts were not protected, the Central Act which is a subsequent Act will prevail. It is contended by the learned counsel appearing for the second respondent that in the decision in Unni Mammu Haji v. State of Kerala 1989 (1) KLT 729 there is an observation to the effect that the Kerala Act will continue to apply to such establishments which are excluded by the Central Act. In fact, on the basis of that observation, this matter was referred to the Division Bench. The Court in Unni Mammu Haji''s case was not considering the provisions of the Kerala Act regarding gratuity. There the Act, challenged was the Motor Transport Workers Welfare Fund Act, 1985. There is also provision for payment of provident fund and gratuity to the employees. That was enacted subsequent to the Central Act on gratuity. There the court held that the provisions in the Motor Transport Workers Welfare Fund Act is applicable with regard to provident fund and gratuity, only to the establishments where Central Act is not applicable. In paragraph 5 of the judgment the court observed as follows:

"5. Parliamentary legislations relating to provident fund and gratuity referred to above as well as the State Act under challenge fall under Entry 24 of List III of Schedule 7 of the Constitution. Adv. Sri. P.C. Chacko appearing for some of the petitioners has raised a contention that the Kerala Act entrenches upon the occupied field of Parliamentary legislation and is therefore invalid under Article 254(1) of the Constitution. For the one thing there is no repugnancy between the State Act and the Central Act. The Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 applies only to establishments where 20 or more persons are employed. The Welfare Fund Act passed by the Kerala Legislature applies only to such establishments to which the Central Act does not apply. So also the Payment of Gratuity Act applies to shops and establishments in which 10 or more persons are employed. The State Act with respect to gratuity applies only to such establishments excluded by the Central Act. Both the Central Act as well as the State Act can, therefore, no repugnancy as envisaged by Article 254(1) of the Constitution. That apart, the State Act had received the assent of the President and the same would prevail over the Central Act even if the same is deemed to have occupied the field."

The Welfare Fund Act was enacted especially to give gratuity and provident fund to employees of the establishments excluded by the Central Act. That subsequent State Act got assent of the President under Article 254(1) of the Constitution of India. But the Kerala Act on gratuity was passed much prior to the enactment of the Central Act.

The Central Act was enacted to have uniform pattern as legislation for payment of gratuity was existing only in Kerala and West Bengal and Central Legislature felt that uniform pattern should be maintained through out the country. Kerala and West Bengal Acts were not specifically protected under the Central Act. Therefore, after enactment of Payment of Gratuity Act (Central Act), Kerala Act passed earlier was not enforceable and superceded.

We are of the opinion that the second respondent is not entitled to gratuity as per law even otherwise. The term "employee" is defined in Section 2(d) of the Kerala Act as follows:

"2. Definitions:- ...

(a) ...... .......

(d) "employee" means any person employed in any factory, plantation, establishment or undertaking to do any skilled or unskilled, manual or clerical or supervisory work for hire or reward but does not include any such person -

(i) whose monthly wages exceed rupees seven hundred and fifty; or

....... ....... .......

Therefore, under the Kerala Act a person is not an employee if his monthly wages exceeds Rs. 750/-. Admittedly, second respondent was getting more than Rs. 750/- at the time of his retrenchment. Therefore, he is not an employee as defined under the Kerala Act also. Therefore, even under the Kerala Act he is not entitled to gratuity.

The second respondent worked with the petitioner for twelve years, the total amount granted was Rs. 5,192.30 and the order was passed in 1993. Eventhough the second respondent is not entitled to gratuity as per law, it is submitted by the counsel for the petitioner that he will compel the petitioner to pay the amount within three months. In the above circumstances, we are of the opinion that the amount of Rs. 5,192.30 should be paid to the employee within three months from today without interest, if the amount is not already deposited while filing the appeal. If the amount is already deposited, it should be disbursed to the first respondent.

The Original Petition is allowed.