021-SLLR-SLLR-1996-1-DE-COSTA-V.-ANZ-GRINDLAYS-BANK-PLC.pdf
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De Costa v. ANZ Grindlays Bank pic. (Da Silva, C.J.)
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DE COSTAV.
ANZ GRINDLAYS BANK PLC.
SUPREME COURT.
G.P.S. DE SILVA, C.J.,
DHEERARATNE, J„
RAMANATHAN, J„
S.C. APPEAL NO. 108/95.
C.A.NO. 873/94.
L.T. NO. 2394/A.
24 JUNE, 31 JULY AND 09 AUGUST, 1996.
Industrial Law – Gratuity – Gratuity Act, No. 12 of 1983 ss. 6(2) (a), 10(1) -Reference to Arbitration under Industrial Dispute Act s. 4(1) – Jurisdiction ofarbitrator – Was the reference made by the Minister ultra vires?
Industrial Dispute as defined in section 48 of the Industrial Disputes Act-Amendment to section 33(1) (e) of the Industrial Disputes Act by section17(2) of the Payment of Gratuity Act, No. 12 of 1983.
The suggestion that the* definition of industrial dispute* could never applyto a dispute between an employer and an ex-employee cannot be sup-ported. However when the awards relate to no dispute to which the em-ployer and employee had been parties, there was no industrial disputewhich could have been referred by the Minister for settlement by arbitrationand consequently the objection to jurisdiction in such a case can be wellfounded.
A dispute in regard to a claim for 'gratuity' can arise only upon the cessationof employment (as a retiral benefit or terminal benefit). The contention ad-vanced on behalf of the 1 st respondent Bank that the Minister has no powerto refer the present dispute for settlement by arbitration because the disputearose after the appellant resigned from service is not well- founded in thecontext of a dispute relating to a claim for gratuity. Hence the reference toarbitration under section 4(1) of the Industrial Disputes Act, by the Ministerwas not in excess of his powers (not ultra vires).
The matter in dispute referred for settlement by arbitration was whether thenon-payment of gratuity to Mr. D. A. de Costa at a higher rate than the legalminimum as was paid to other employees by ANZ Grindlays Bank was jus-tified. The decision of the Commissioner of Labour refusing gratuity at thehigher rate could not have resolved or determined the ‘dispute* referred toarbitration.
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Where an Industrial Dispute is referred in terms of section 4(1) of the Indus-trial Disputes Act for settlement by arbitration, section 17(1) requires thearbitrator to make such award as may appear to him just and equitable. Theappellant complained of discriminatory or unequal treatment in regard tothe payment of gratuity and the arbitrator was required to determine whetherin the circumstances the non-payment of the gratuity claimed was justified.The amendment to section 33(1) (e) of the Industrial Disputes Act by section17(2) of the Payment of Gratuity Act No. 12 of 1983 does not constitute ajurisdictional bar to the determination of the matter in dispute referred tothe arbitrator for settlement by arbitration in terms of section 4(1) of theIndustrial Disputes Act.
Cases referred to:
The Colombo Apothecaries Co. Ltd. v. Wijesooriya and Others 70 NLR481.
State Bank of India v. Sunderalingam 73 NLR 514.
Perera v. Standard Chartered Bank and Others (1995) 1 Sri LR 73,91.
APPEAL from judgment of the Court of Appeal.
S. Sivarasa P.C. with A.R. Surendran and G. Ranawaka for the Appellant.S.L. Gunasekera with Gomin Dayasiri for 1st Respondent.
K.Sripavan DSG for 2nd and 3rd Respondents.
Cur.adv.vult.
August 26, 1996.
G.P.S. DE SILVA, C.J.
The Appellant was employed by the 1 st respondent (ANZ GrindlaysBank) from 1 st June 1979 (X1). He resigned from the post of Manager,Grindlays Bank with effect from 1st July 1991 (X5). His gratuity wascomputed on the basis of 1/2 a month's salary for each year of com-pleted service in terms of section 6(2) (a) of the Payment of GratuityAct No. 12 of 1983. The amount so computed as gratuity was creditedto the Bank account of the Appellant on 23.7.91 and the appellant wasinformed of that fact. The Appellant was dissatisfied with the basisupon which the Bank had computed his gratuity and by letter dated6.9.91 (XI0) addressed to the General Manager of the Bank he set out
his position -"two of the employees (sic) resigned after
my leaving were paid gratuity at 2 month's gross salary for every year
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of service and after adding further 5 years to the period of service. Alady who resigned recently with 17 years of service was paid gratuityfor 22 years at 2 months gross salary. I therefore kindly request you topay me also on the same basis, that is, for 17 years and one month at2 months gross salary for each year."It is the case for the 1st respond-ent Bank that the dispute in regard to the payment of gratuity aroseafter the appellant had resigned from service.There was further corre-spondence between the parties in regard to the question of enhancingthe amount paid as gratuity, but no finality was reached.
On 7.5.92 the Appellant made an application to the Commissionerof Labour for an enhanced gratuity (P4). In paragraph 7 of P4 the Ap-pellant stated that "employees who had tendered their resignationssubsequent to that of the complainant (Appellant) had been paid onthe scheme of 2 months salary (gross) and that the failure on the partof the employer to pay the complainant on the existing scheme vio-lates section 10(1) of the Gratuity Act".The Commissioner of Labour,however, refused the application made by the appellant. (P4a).
On 21.2.94 the Minister of Labour referred the dispute between theAppellant and the Bank "for settlement by arbitration to an arbitrator"in terms of section 4(1) of the Industrial Disputes Act. The disputewhich was referred in terms of section 4(1) was "whether the non-pay-ment of a gratuity to Mr. D.A. de Costa (Appellant) at a higher rate thanthe legal minimum as was paid to other employees by Grindlays Bankis justified, and if not to what reliefs he is entitled."At the commence-ment of the inquiry before the arbitrator objections to the jurisdiction ofthe arbitrator to hear and determine the matter in dispute were raisedon behalf of the 1st Respondent Bank. The arbitrator having heardsubmissions of both parties, overruled the preliminary objections andin the course of his order stated, "it seems to me that it is necessaryto be acquainted with the antecedents and other circumstances, howthe resignation of the applicant came about, to decide whether thecases cited are on all fours with the instant case. The cases citedseems to be concerned more with the terms of employment, whereasthe instant case seems to be one which is not concerned at all with theterms of employment but is confined to the one principle, that therehad been discrimination in the payment of gratuity"
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Upon the arbitrator overruling the preliminary objections, the 1stRespondent Bank moved the Court of Appeal by way of a writ of Cer-tiorari to quash the order made by the Minister referring the dispute forsettlement by arbitration and the order of the arbitrator overruling thepreliminary objections. The Court of Appeal quashed the order of theMinister on the ground that the order was ultra vires section 4(1) of theIndustrial Disputes Act and also quashed the order of the arbitrator.This appeal is against the judgment of the Court of Appeal.
Special Leave to appeal to this court was granted on the followingquestions :-
Whether the Court of Appeal erred in law in holding that the.
reference made by the Minister in respect of the Appellant's claimfor gratuity was ultra vires because the dispute arose only afterthe cessation of the Appellant's employment by reason of resig-nation.• ,
Whether having regard to the fact that the Commissioner.ofLabour refused the Appellant's application for an enhanced gratu-ity in terms r*. oection 10(1) of the Payment of Gratuity Act, theMinister had no power to make a reference in respect of the Ap-pellant's claim for gratuity and/or the arbitrator had no jurisdictionto make any order in respect of such claim;
Whether in any event the Minister had power to make thereference, and the arbitrator had jurisdiction to make any orderupon that reference, in view of the provisions of section 33(1) (e)of the Industrial Disputes Act as amended by the Payment ofGratuity Act.
On the first question set out above, Mr. S.L. Gunasekera for the1 st Respondent Bank stressed that the definition of the term "indus- .trial dispute" speaks of a dispute between "an employer" and "a work-man" and that the definition of the term "employer" and "workman"uses the verbs "employs" and "works". He emphasized that the verbsused are in the present tense. Accordingly counsel argued that theexpression 'industrial dispute" as defined in the Industrial DisputesAct must necessarily be one that arose between the workman and his
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employer while the workman was in the employment of the employer.The argument was that it was only a dispute that arose during thesubsistence of the contract of employment that falls within the defini-tion of the term "industrial dispute." In other words, a dispute betweenan employer and ex-workman does not fall within the definition.
Counsel relied in support of his submission on the judgment ofTennekoon, J. (as he then was) in the case of The Colombo Apothecar-ies Co. Ltd., v Wijesooriya and Others.<1) It is relevant to note that theview expressed by Tennekoon J., is the view of the minority of theCourt. The majority of the judges (T.S. Fernando, J., G.P.A. Silva, J.Siva Supramaniam, J., and Samarawickrema J.,) did not share thisview. Referring to section 47 (c) Siva Supramaniam, J., observed "withgreat respect, I find it difficult to agree that the provisions of this sec-tion lead to a necessary inference that a dispute connected with thetermination of service can be referred to an Industrial Court or a La-bourTribunal for settlement only if the dispute arose while the relation-ship of employer and workman subsisted."
Samarawickrema J., in his judgment referred to the last part of thedefinition of "workman" in section 48 of the Industrial Disputes Actand the provisions of section 2(1), 3(1), 4(1), and 4(2) and stated, "itfollows that for the purposes of proceedings that may be commencedor initiated by the Minister under section 4(1) of the Act, a workmanincludes a person whose services had been terminated."
Mr. Gunasekera also relied strongly on the judgment of Alles J., inthe case of State Bank of India v Sunderalinganf2' where Alles, J.stated, "I cannot see how this definition (i.e. the term "industrial dis-pute") can ever apply to any dispute or difference between an em-ployer and an ex-employee who has retired from the services of hisemployer. Referring to this case Amerasinghe J., in Perera vs Stand-ard Chartered Bank and Others,(3) made the following observation, withwhich I am in agreement. "In the matter before Alles, J., a trade unionhad applied on behalf of sub-Accountants who had retired from theservices of the Bank 16 months earlier for the benefits of a salaryrevision awarded in ID 306 and ID 306A.The dispute in ID 306 and ID306A did not concern sub-Accountants and the awards made has noreference to them. There was as Alles J., held, no dispute to which
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they had been parties before they retired. In the circumstances, ad-mittedly, there was no "industrial dispute" which could have been re-ferred by the Minister for settlement by arbitration. Consequently, theobjection to jurisdiction of the arbitrator was well founded in the cir-cumstances of the case although, with great respect, the suggestionthat the definition of "industrial dispute" could never apply to adispute between an employer and an ex-employee cannot be sup-ported." (Emphasis is mine).
The material part of the definition of the expression "industrial dis-pute" in section 48 reads thus:- "Industrial dispute means any disputeor difference between and employer and a workmancon-nected withthe termination of servicesof any per-
In considering the question whether the reference made by theMinister in terms of section 4(1) was ultra vires for the reason that thedispute arose only after the cessation of the Appellant's employment,it is of the utmost importance and relevance to note the nature of thematter in dispute. The claim of the Appellant was in respect of thepayment of gratuity and this was the subject matter of the dispute,which was referred for settlement by arbitration by the Minister in termsof section 4(1). Sharvananda, J., (as he then was) in his dissentingjudgment in The National Union of Workers vThe Scottish Ceylon TeaCompany Ltd.,w considered “the connotation of the word gratuity asused in sections 31B (1) (b) and 33(1) (e) of the Industrial DisputesAct.°Having carefully reviewed the decisions in India and of this Court,the learned Judge concluded, "It is manifest that the word 'gratuity'has thus come to mean not only retiring allowance or retiral benefitpayable on retirement but also termination benefit payable on termi-nation of a long and faithful service consequent to resignation prior toretiring age. "(at page 178). (Emphasis added) (I wish to add that themajority view that section 31B(1) (b) postulated only “retiring gratuity"makes no difference for present purposes). Thus it is seen that a dis-pute in regard to a claim for “gratuity" can arise only upon the cessa-tion of employment (as a retiral benefit or terminal benefit).Therefore itseems to me that the contention advanced on behalf of the 1 st Re-spondent Bank that the Minister had no power to refer the presentdispute for settlement by arbitration because the dispute arose after
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the Appellant resigned from service is not well-founded in the contextof a dispute relating to a claim for gratuity.
I accordingly hold that the Court of Appeal was in error in its viewthat the reference made by the Minister in terms of section 4(1) was inexcess of his powers.
Turning now to the second matter upon which this court grantedleave to appeal, Mr. Gunasekera contended-
the Appellant has by P4 made an application to the Commis-sioner of Labour in terms of section 10(1) of the Payment of Gra-tuity Act No. 12 of 1983 to determine the quantum of gratuitypayable to him;
in P4 he has set out the basis upon which he claimed theenhanced gratuity;
the Commissioner of Labour has held an inquiry and deter-mined that the Appellant is not entitled to the enhanced gratuity(P4a);
the Appellant did not seek to canvass the decision of theCommissioner of Labour.
In these circumstances, Mr. Gunasekera urged, that the "dispute"was determined by the authority empowered by law to do so and thatthere did not exist after the date of P4A (i.e.2.12.92) any "industrialdispute" that could have been referred by the Minister in terms of sec-tion 4(1) of the Industrial Disputes Act for settlement by arbitration toan arbitrator.
With these submissions I do not agree. The Commissioner of La-bour was concerned merely with the question whether there was acollective agreement, award, or other agreement which governed thegratuity payable to the appellant. On the other hand, the matter indispute referred for settlement by arbitration was "whether the non-payment of gratuity to Mr. D. A. de Costa at a higher rate than the legalminimum as was paid to other employees by ANZ Grindlays Bank is
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justified. "(Emphasis added). Thus it is clear that the issue before theCommissioner of Labour was fundamentally different from the disputereferred to settlement by arbitration in terms of section 4(1) of theIndustrial Disputes Act. Therefore the decision of the Commissioner ofLabour could not have resolved or determined the "dispute" referred toarbitration.
Finally, there is the third question upon which this court grantedleave to appeal. Mr. Gunasekera submitted that the amendment tosection 33(1) (e) of the Industrial Disputes Act by section 17 (2) of thePayment of Gratuity Act No. 12 of 1983 has deprived the arbitrator ofjurisdiction to award a gratuity to the Appellant who is entitled to agratuity in terms of section 5 of the Payment of Gratuity Act. It wasCounsel's contention that the Appellant's right to a gratuity arose notfrom the Terms of Service but from the Payment of Gratuity Act. Withthese submissions I do not agree. Where an Industrial Dispute is re-ferred in terms of section 4(1) of the Industrial Disputes Act for settle-ment by arbitration, section 17(1) requires the arbitrator to "make suchaward as may appear to him just and equitable". The Appellant com-plained of discriminatory or unequal treatment in regard to the pay-ment of gratuity and the arbitrator was required to determine whether inthe circumstances the non-payment of the gratuity claimed was justi-fied. I hold that the amendment to section 33(1) (e) of the IndustrialDisputes Act does not constitute a jurisdictional bar to the determi-nation of the matter in dispute referred to the arbitrator for settlementby arbitration in terms of section 4(1) of the Industrial Disputes Act.
In the result, the appeal is allowed with costs fixed at Rs. 2500/-and the judgment of the Court of Appeal is set aside.
DHEERARATNE, J. -1 agree.
RAMANATHAN, J. -1 agree.
Appeal allowed.