CEYLON COLD STORES LTD. v. SRL NANDALOCHANA AND ANOTHER

027-SLLR-SLLR-1989-V-2-CEYLON-COLD-STORES-LTD.-v.-SRL-NANDALOCHANA-AND-ANOTHER.pdf


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CEYLON COLD STORES LTD.
v.SRI NANDALOCHANA AND ANOTHER
SUPREME COURT
RANASINGHE, C.J., G.P.S. DE SILVA, J„ AND JAMEEL, J.
S.C. APPEAL 43/87CA (LA-SC) 8/87CA 621/81LT 2/15052/81SC APPEAL 44/87CA (LA-SC) 9/87CA 622/81LT 2/15053/81NOVEMBER 09, 1988
Industrial Dispute – Gratuity – /s gratuity payable to an employee who resigns? -Payment of Gratuities Act, No. 12 of 1983, ss. 3, 5 and 6 – Computation duringperiod before the Act.
The Gratuities Act. No. 12 of 1983 certified on 18.03.83 regulates and prescribes
the mode and computation of gratuity after its passage. During the period beforethe Act came into operation the principles governing the computation of gratuityare as follows:
A month's salary for each year of service when there has been no benefitof a Provident Fund.
Half a month's salary for each .year of service as gratuity when there hasbeen a contribution to a Provident Fund at the minimum statutory rate.
When the employer has made contributions considerably higher than thestatutory rates, gratuity awards which are relatively less have been made.
Gratuity is payable even on resignation and notwithstanding the fact that the
workman had been contributing to a Provident Fund Scheme. The gratuityordered must be just and equitable.1
Cases referred to:
Karunaratne v. Appuhamy 74 NLR 46
Employees Union v. CWE 74 NLR 344
N.U.M. v. Scottish Tea Co. Ltd. 78 NLR 133
Boyd Moss v. George Stuart & Co. Ltd. S.C. 119/74; Supreme Court Minutes24.03.76
’ Silva y. Southern Freighters 74 NLR 239
Y.G. Silva v. A.N.C.L. Bar Association L.J. Reports Vol. I Part III p. 87
Wickremasekera v. Ganegoda 76 NLR 452
sc
Ceylon Cold Stores Ltd. v. Sri Nandalochana and Another
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Ran Banda v. R.V.D.B. 71 NLR 25
RVDB v. Sheriff – S.C. Minutes of 24.11.1971
OWE v. Superintendent Beragala Estate -S.C. Minutes of 03.02.72
U.P.W.U. v. Kaliappa – Sri Lanka Labour Gazette No. 52 of 23.03.72
Mayen (Ceylon) Tea & Rubber Co. Ltd. v. C.E.S.U. – S.C. 1:3/71: S.C. Minutesof 16.10.72
.(13) U.E.W.U. v. Kandiah Chetty – S.C. 81/72: S.C. Minutes 12.02.72
C.E.S.U. v. Ambalamana Tea Estates Ltd. ■ Sri Lanka Labour Gazette No. 13 of23.06.72, 76 NLR 457
Peiris v. A.C.C. & I.W.U. S.C. 34/72 – S.C. Minutes of 29:01.74
Swadeshi Industrial Works Ltd. v. De Silva 77 NLR 211
H.W. Amarasuriya v. C.F.S.: C.A. (S.C.) 254/75 Court of Appeal Minutes of17.11.80
R.V.D.B. v. All Ceylon R.V.D.B. & State Corporation General Employees Unionet al: S.C. Application 29/83 – S.C. Minutes of 20.03.84
APPEAL from judgment of the Court of Appeal
Crossette Tambiah tor appellant
D.R.P. Goonetilleke with Sidath Sri Nandalochana for respondent
Cur. adv. vult.
December 14, 1988
JAMEEL, J.
Mr. Nandalochana, the Applicant in S/C43/87 had been anemployee of the Appellant for twenty years and had resigned his postof Marketing Manager on 31.3.81 in order to better his prospects. Atthe time of resignation he was drawing a salary of Rs. 4725/- amonth and was a contributer to the Provident Fund. He had to hiscredit, at the time of resignation, a sum of Rs. 311,013/80, out ofwhich sum of Rs. 97,409/25 had been, admittedly, the contributionmade by the Employer-Appellant. The Applicant had filed action inthe Labour Tribunal in December 1981 claiming gratuity, as none hadbeen awarded to him by the Appellant.
Similarly, Mr.Wijesinghe, the Applicant in S.C. 44/87 had been ahemployee under the Appellant for 17 years and he too had resignedhis post of Assistant Factory Manager on 1.2.81 in order to better hisown prospects. He had then been in receipt of a salary of Rs. 3T00/-per month. His Provident Fund account stood at Rs. 141,446/31, out
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of which the Employer-Appellant’s contribution had been Rs.32,590/-. He too had been refused a gratuity payment and hadthereupon gone to the Labour Tribunal in June 1981.
Of consent of parties, both cases had been taken up together on24/8/81 at the Labour Tribunal. The questions that had arisen in eachcase were whether gratuity was due, and, if so, in what amount.Each party had been directed to file written submissions on thesematters in each case. The employer had done so in each case. Thelearned President of the Labour Tribunal had made a consolidatedorder, rejecting their claims. Both Applicants appealed and the Courtof Appeal, after due hearing, made a consolidated order grantingApplicant Nandalochana Rs. 47,250/- and Applicant Wijesinghe Rs.27,350/- as gratuity, based on a computation of HALF a monthssalary at termination for each year of service.
• These appeals are by the employer from that decision. Leave toappeal to this Court had been granted to each of these Appellants bythe Court of Appeal itself. In this Court, too, of consent, both caseswere argued together and one consolidated order is being made inrespect of them.
It is not without significance that each of these applicants wentbefore the Tribunal claiming that they had retired from service whenin fact they had resigned, presumably that was because there didexist at that time a measure of. ambiguity and uncertainty as towhether gratuity will be available to the worker who resigns his job.Indeed the Employer in these cases, in the answer filed by him, hastaken up that position, namely, that in practice no gratuity is paid tothose, who resign their posts vide Karunaratne v. Appuhamy(1),Employees Union v. C.W.E.(2).
After a careful analysis of the law and the reported precedents thelearned President held that in the circumstances gratuity is payableeven on resignation – vide N.U.M. v. Scottish Tea Co. Ltd.(3); BoydMoss v. George Stuart .& Co. Ltd.(4).
The learned President also held that gratuity was availablenotwithstanding the fact that the workman had been contributing to aProvident Fund Scheme. The Court of Appeal affirmed these findingsand we see no reason to differ. (Scottish Tea Co. Case – supra) Thisdoes reflect the current thinking on this matter. (Vide Silva v.Southern Freighters(5)] Y.G. de Silva v. A.N.C.L.(6)
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Ceylon Cold Stores Ltd. v. Sri Nandalochana and Another (Jameel, J.)
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However, the Learned President granted no relief to eitherApplicant as the quantum of the Appellant’s contribution to theProvident Fund was held by him to be:-
Almost PHENOMENAL in comparison to what an averagemiddle grade employee could ever hope to get after a much longerperiod of service.’’
On and after 18/3/83 (the date of the certification of the Act) bySection 5 of the Payment of Gratuities Act, No. 12 of 1983 everyemployer irr Industry who employs more thap 15 workmen, shall payto a workman on termination of his services (if he had worked formore than 5 years) a gratuity. The pardhthetical clause in this sectionmakes the question as to whether the termination had been due toan act of the employer or worker or whether it had been onretirement or on death or by operation of law or otherwise, irrelevantto the grant of gratuity.
The terms of the section itself precludes it from being treated asretroactive. Indeed, Mr. Crossette-Thambiah,' who appeared for theEmployer not only conceded that after* th.e Act the resignation of aworkman would be irrelevant to the consideration as to whether he isentitled to claim gratuity but he also did not seriously challenge thefindings of the learned President or of the Court of Appeal that thesetwo Applicants were entitled to claim gratuity notwithstanding the factthat they had resigned their posts. The mode of computation ofgratuity is spelled out in Section 6 of the Act. For monthly ratedworkmen it is half a month’s salary per year of service, provided thatbesides other matters he is not entitled to a pension under anon-contributable pension scheme. The Act does not disqualify aworkman who is involved in a contributable Provident Fund. Bycontrast, in the case of workmen and labour on estates andagricultural lands that are specified in the Act, Section 3, grantsgratuity at the rates specified therein LESS the employer’scontribution to the Provident Fund if any.
An important question for decision in these appeals is the mode ofevaluation of the quantum of gratuity to which each of theseapplicants becomes entitled. The basis will have to be in accordancewith the law and practice which obtained in 1981 – viz. prior to theGratuities Act. Mr. Crossette-Thambiah went even further and arguedthat, should it be found that the order of the learned President is inaccordance with the law as it stood, then, neither should the Court of
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Appeal have substituted, nor should this Court, substitute itsdiscretion for that of the President, in fixing the quantum of thegratuity payable. A measure of support for this proposition could befound in the decision of Rajaratnam J. in Wickremasekera v.Ganegoda(7)
The facts of that case are as follows:-
In the case of Ran Banda v. R.V.D.B.(8) Weeramantry, J. had heldthat Regulation 16 framed by the Minister under the IndustrialDisputes Act was ultra vires the Act and that a workman could filehis application in the Labour Tribunal even after the lapse of threemonths of the date of the termination of his services. However, aDivisional Bench of the Supreme Court in the case of R.V.D.B. v.Sheriff(9) overruled that decision on 24/11/71. That DivisionalBench decision itself was later overruled by the Court of Appeal inC.W.E. v. Superintendent, Beragala Estate (10). In respect of allapplications filed before the Labour Tribunals between 24/11/71and 3/2/73 the law was that the time bar of three months appliedto all applications to the Labour Tribunals, although the regulationwas held to be ultra vires on the latter date. During that 15 monthsperiod several cases had been disposed of on the basis of theDivisional Bench ruling. The case that came up before Rajaratnam
J.was (76’NLR 452(8)) for a writ to quash on order of dismissalmade on 14/9/72 based on the Divisional Bench ruling. Thelearned Judge refused the writ on the ground that, that case hadbeen correctly decided by the Tribunal according to the law thatprevailed at the*time of its decision.
What then was the law or judicial consensus in 1981? How wasthe quantum of gratuity, granted at the .termination of services onresignation, being computed?
In some instances this gratuity was calculated at one month pay forevery year of service (Vide: 1 C.A.L.R – 1 – 92).S.R. de Silva in hisbook "Some Concepts of Labour Law’’ at page 43 made reference tothe case of U.P.W.U. v. Kaliappa( 11)" (the report is not available tous) published in Sri Lanka Labour Gazette No. 52 of 23/3/73 whereinthe same rate was granted for the period of service not covered byProvident Fund contributions. However, in the case of Mayen(Ceylon) Tea & Rubber Co. Ltd. v. C.E.S.U. (12) the gratuitycalculated at the rate of one month per year of service was made
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Ceylon Cold Stores Ltd. v. Sri Nandalochana and Another (Jameel, J.)
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subject to the deduction from it of the amount contributed by theEmployer to the Provident Fund.
At page 44 of this same book there is reference to the decision ofthe .Supreme Court in the case of U.E.W.U. v. Kandiah Chetty( 13)wherein one month per year of service was granted for the period notcovered by Provident Fund benefits, while only HALF a month oryear was the basis used for the period during which the employerhad made contributions to the Provident Fund. On this same pagethere is reference to the decision of the learned President in the caseof C.E.S.U. v. Ambalamana Tea Estate Lfaf(14) as follows:-
….in deciding on the quantum of gratuity that has to be paid, onefactor that the Tribunal has to bear in mind is the Provident Fundcontribution made by the employer…. The generally acceptedstandard has been to pay a month's salary for each year of servicewhere there has been no such benefits and a half month’s salarywhere such contributions have been made at the minimumstatutory rates. Where contributions have been considerably higherit has not been unusual for awards to be relatively less, theprinciple followedi no doubt, being what .was considered just andequitable.”>
A Divisional Bench of the Supreme Court endorsed the award ofthe Arbitrator. (76 NLR 457). In Peiris v. ACC & IWU( 15) (Vide: page44 of De Silva’s book – supra) the Supreme Court held that thelearned President of the Labour Tribunal should have deducted theE.P.F. contributions made by the Employer.
A collation of these decisions leads to the conclusions that
Receipt of Provident Fund benefits does not necessarilypreclude the grant, of gratuity as well – See:SwadeshiIndustrial Works Ltd. v. De Silva{ 16)
Employer is entitled to credit of his contributions toProvident Funds.
After stating "….the true test being the adequacy of existingsuperannuation benefits rather than its mere existence.” Mr. S.R. deSilva sums up at page 45 as follows:
“INDUSTRIAL SECTOR
minimum qualifying period for gratuity….
The scale of gratuity to be 1 month’s gross terminal salary
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for every year of service less the employer’s contribution tothe Provident Fund.”
It must be remembered that the award would have to be just andequitable, in all the circumstances of the case.
Taking into account all the material before him the learnedPresident decided in these two cases that neither of these Applicantsshould receive any further payments as the employers ‘Phenomenal’contribution exceeded the gratuity that may be payable whencalculated at the rate of one month's gross terminal salary as at thetime of the resignation from service.
The learned President however, failed to consider the possibility ofgranting a gratuity payment in addition to any superannuationbenefits derived from the Provident Funds. The provision of suchdouble benefits was considered with favour in Meyen (Ceylon) Tea &Rubber Co. Ltd. v. C.E.S.U. (supra) wherein it was held: (Vide: S.R.De Silva’s book – supra – at page 43) that, an employee who hadrendered long and faithful service earns a moral right to a gratuity in ■addition to the Provident Fund, and that it should be paid in theabsence of financial incapacity on the part of the employer to bearthe double burden. The burden of establishing his inability to bearthis double burden is on the employer. That would be a matter withinhis personal knowledge. There is no evidence in these cases that theAppellant suffers any such incapacity. As contemplated in thedecision in the Ambalamana Case, (supra) it is not the total ProvidentFund contribution that would be relevant, in quantifying the gratuitythat would be payable, whenever a payment is found to be due, butwhether and in that event in what sum the employer had contributedin excess of his statutory obligation. As rightly pointed out by theCourt of Appeal there was no evidence or proof before the Tribunalas to the minimum contribution that had been due from the employerto the Provident Fund, and as a result it was not possible to computethe excess so paid. There was no denial by these workmen of theaccuracy of the figures submitted by the employer as to the totalcontribution made to each of their Provident Fund accounts. Theburden of proving such excess payments is on the employer. In theabsence of such proof, the learned Judges of the Court of Appealhave ordered as gratuity payments sums calculated on the basis ofhalf a month’s salary for each year of service. A perusal of theirjudgment reveals that the reasoning of the President in the
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Ceylon Cold Stores Ltd. v. Sri Nandalochana and Another (Jameel, J. j
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Ambalamana Case (supra) had not been available to the judges in'the Court of Appeal. While the decision of Ranasinghe, J. (as he thenwas) in the case of H.W. Amarasuriya v. C.F.S.( 17) had been citedbefore the Court of Appeal in the course of the argument in these twocases, the judgment of Colin-Thome, J. in S.C. (Application) 29/83 -C.A. 405-406, 457-507, 695-739/1979, S.C.M. 30/3/84 in R.V.D.B: v.All Ceylon R.V.D.B. & State Corporation General Employees Union etal(18) does not appear to have been made available to that Court.After an exhaustive analysis of the law and the case law His LordshipJustice Colin-Thome summarised the position, with regard to paymentof gratuity as follows:-
A month’s salary for each year of service when there has beenno benefit of a Provident Fund.
Half a month’s salary for each year of service as gratuity whenthere has been a contribution to a Provident Fund at theminimum statutory rate.
When employer has made contributions considerably higher thanthe statutory rates, gratuity awards which are relatively lesshave been made.
We are in entire agreement with this statement of the law andpractice regarding gratuity payments as it then stood. Those werealso cases filed prior to 1981.
In the circumstances the grant of half a month’s salary, per year ofservice, simplicitor, may not be just and equitable’ in a situtationwhere it is. admitted that the employer has contributed to theProvident Fund in excess of the statutory minimum. The ProvidentFund Act 15 of 1958 and its amendments by Acts Nos. 8 of 1971 and26 of 1981 indicate the percentages of the salary which the employeris statutorily bound to contribute to the Fund. Yet, without evidence ofthe salary particulars of these applicants over the years we areunable to compute exactly what has been the statutory minimumcontributable from time to time. Consequently we cannot ascertainwhat part of the admitted contribution in each of these cases is inexcess of its statutory minimum.
These two cases were> filed in 1981 and it would be invidious tosend them back to the Labour Tribunal for further inquiry and forcomputation, 8 years after they had been filed. In the circumstanceswe set aside the order for payment of .gratuity at'the rate of halfmonth’s'salary, made by the Court of Appeal in each of these cases,
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and substitute therefor orders for payment at the rate of a quartermonth's salary for each year of service, namely, in a sum of Rs.23,625/- to Mr. Nandalochana and a sum of Rs. 13,675/- to Mr.Wijesinghe. These monies should be deposited with theCommissioner of Labour within four weeks of today. In all thecircumstances of this case each party will bear its own costs.
RANASINGHE. C.J. – I agree.
G.P.S. DE SILVA – I agree.
Order for gratuity set aside.
Amended gratuity ordered.