as to the extent to which the period of absence
from duty of any workman, whom the arbitra-tor, industrial court (or labour tribunal) has deci-ded should be reinstated, shall be taken intoaccount or disregarded for the purposes of hisrights to any pension, gratuity or retiring allow-ance or to any benefit under any providentscheme. ”
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(The words in brackets did not occur in the text of the Act asoriginally enacted but came in with the establishment of LabourTribunals under the Industrial Disputes Amendment Act, No. 62of 1957). The phrase “ to any pension, gratuity or retiring allow-ance or to any benefit under any provident scheme ” is very signi-ficant. The arrangement of the words is indicative that the phrase“ pension gratuity or retiring allowance ” is one group of wordsand “ benefit under any provident scheme ” is another ; for other-wise the phrasing would have been “ to any pension, gratuity, re-tiring allowance or benefit under any provident scheme ”. In aprovident scheme there are usually found provision for benefitswhich are not confined to the time of retirement. On the otherhand the two expressions that stand on either side of the word‘ gratuity i.e., “ pension ” and “ retiring allowance ”, are, in theone case normally and in the other case obviously intended torefer to retiral benefits. I am inclined to think that the word‘ gratuity ’ having regard to the company it keeps is also hereused in the sense of a retiring gratuity.
Having first used the word in this sense, I think the word whenit occurs elsewhere must be given the same meaning. In the caseof Independent Industrial & Commercial Employees> Union v.C. W. E. (74 N.L.R. 344) Justice Alles said :
“ The word ‘ gratuity ’ is used in common parlance as aretirement benefit available for long and meritorious servicerendered by the employee. A gratuity has now become a legi-timate claim, which a workman can make … and is intendedto help a workman after his retirement, whether the retire-ment is due to the rules of superannuation or physical dis-ability or otherwise. It is a benefit which an employee whohas worked faithfully and loyally for his employer can lookforward to in the evening of his life and which a generousand conscientious employer considers it just and equitable tooffer for loyal and meritorious service. Many model employ-ers have gratuity schemes. A gratuity differs from a Provi-dent Fund inasmuch as it is a benefit provided entirely by theemployer, whereas a provident fund is one to which the em-ployee himself contributes a part of his wagesEvery
employer who employs permanent employees for aconsiderable period must know that at the termination ofthe employee’s services provision should be made for the re-tiring employees. He should therefore make provision for thepayment of a retiring benefit in time. ”
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I agree with this part of Justice Alles’s judgment where he takesthe view a gratuity is a retiring benefit. However, in the case ofAmbalaviana Tea Estates Lit. v. Ceylon Estates Staffs' Union (76
N.L.R. 457) the then Chief Justice H. N. G. Fernando took theview that as there is no reference to the circumstance whether ornot the termination is due to the retirement of the workman fromhis employment, the term gratuity is not restricted to retiringgratuities; it seems to me that the Chief Justice failed to takenote of the fact that the word ‘gratuity ’ itself is capable of bear-ing the meaning of a retiring allowance and the sense in whichit is used in other parts of the Act. With respects I find myself indisagreement with the view of the learned Chief Justice.
Our attention has not been drawn to any case where a gratuityscheme adopted by any employer or incorporated in a collectiveagreement or industrial award which contains provision for pay-ment of gratuities irrespective of whether the termination of em-ployment came about by dismissal, resignation or retirement and,in cases of dismissal and resignation, unrelated to a minimumperiod of service. The very collective agreement which wasmarked in evidence in this case provides only for retiring gratui-ties, and there is no provision for payment by way of gratuitiesif the workmen covered by collective agreement are dismissed orresign at an age earlier than the retirement age fixed by theAgreement.
I would for these reasons hold that in section 31B (1) (b) thelegislature had in contemplation only retiring gratuities.
The question then arises as to the position of those who resignor are dismissed.
In regard to those who resign before retirement age therecan be no question of their being granted orders for -payment ofgratuity under section 31B (1) (b) for that is not the kind ofesc gratia payment that is contemplated by the expression‘ gratuity ’ in that section. This statement however is subject tothe exception that the resignation may, having regard to thecircumstances in which it is made, be regarded as a voluntaryretirement carrying with it eligibility for a retiral gratuity. Ishall return to this exception later in the judgment.
In regard to whose services are terminated by the employerbefore the retirement age, they too would not qualify for anorder of payment of gratuity as such under 31B (1) (b). But indealing xoith an application under 31B (1) (a) for relief orredress in respect of the termination of a workman’s employmentby his employer, a Labour Tribunal may in making any order
156 TENNEKOON, C. J.—The National Union of Workers v. The Scottish
Ceylon Tea Company Limited
for compensation in respect of the termination of employmentby the employer take into account the possible limitation of theultimate retiring gratuity which it might have been possible forthe workman to obtain but for the untimely termination of hisservices by his employer. To put it in another way the workmancan be compensated for any injurious affection to his prospectiveretiring gratuity by the act of the employer unlawfully or un-justly terminating his services prematurely. Such compensationas evaluated by the Tribunal would be in addition to any compen-sation of the kind that is ordinarily ordered in respect of an un-lawful or injust termination. As in the case of voluntaryresignation, a terminaiton of employment by the employer, whennot based on cause may, having regard to all the circumstanceswhich brought about the termination, be treated as a compulsoryretirement. Circumstances which permit a resignation by aworkman or a termination by the employer being treated as avoluntary or a compulsory retirement, I shall hereafter in thejudgment refer to as a ' retiral situation ’.
There are a number of situations in which it is accepted practiceto grant retirement benefits notwithstanding that there is a ter-mination of services prior to a predetermined age of retirement.Sickness or physical infirmity which prevents the workmandischarging his duties is one. A material alteration in the con-ditions of service is another. In government service constitutionalchanges of a radical nature have been regarded as an appro-priate occasion for the grant of the right of retirement ; so toohas abolition of office and a change in the official language. Thesemay all be legitimately regarded as ‘ retiral situations ’. Ques-tions can for instance arise whether retrenchment, transfer ordevolution or closure of the business or the undertaking can betreated as ‘ retiral situations ’. These questions will have to bedecided as and when they arise in the context of the facts ofeach particular case.
To turn now to the facts of the particular case before us : Thesix workmen were all persons who resigned prior to reachingretirement age. There was no gratuity legally due to them underany statute or by reason of any award, collective agreementcontract or established custom. Having regard to the sense inwhich the word ‘ gratuity ’ is used in section 31B (1) (b), i.e.,in the sense of ‘ retiring allowance ’ the Labour Tribunal wouldhave no power to make order for payment of a gratuity to thesesix workmen unless the circumstances in which they resignedcan be equated to a ‘ retiral situation. Could it be said that anyreasonable employer ought to grant retirement terms to everyworkman of Indian origin desiring to opt for Indian Citizenshipand return to India irrespective of the age of the particular
'TEKNEKOON, C. S.—The National Union of Workers v. The Scottish 157
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workman ? I think that the bare fact of resignation in order toopt for Indian Citizenship and to proceed to India is insufficientto treat these cases as resignations in a retiral situation. At the■same time, the question arises whether there are present in eachcase any additional facts which might warrant resignations beingtreated as resignations in a retiral situation and since this-question has not been examined by the Labour Tribunal or bythe Supreme Court, I think the proper order which I shouldmake in this case is to set aside both the jujdgment of theSupreme Court and the order of the Labour Tribunal, and sendthe case back to the Labour Tribunal for an inquiry into the•question whether in each one of these cases the resignationcould be regarded as having been made in a retiral situation.
My brother, Samerawickrame, J. who has prepared a separatejudgment has himself come to the conclusion, though for diffe-rent reasons, that the judgment of Rajaratnam, J. as well as theorder of the Labour Tribunal should be set aside. He has alsodrawn my attention to the Emergency (Payment of Gratuitiesand other Monetary Benefits to Indian Repatriates) Regulation■No, 3 of 1975 contained in Government Gazette (Extraordinary)No. 185/59 dated 17.10.1975. In setting aside the judgment of theSupreme Court and the order of the Labour Tribunal, I wouldremit the case back to the Labour Tribunal. The workmen or theappellant Union on their behalf may obtain gratuities under theEmergency regulations in accordance with the procedure set outtherein. If gratuity under the regulations is not available tothem, or if for any other reason an order of the Tribunal isdesired by them, an application for an order may be made to theLabour Tribunal by motion ; and on such application being made,the Tribunal is authorised and directed forthwith to hold an in-quiry into the question as to whether each of the resignations ofthe workmen involved in this case is or is not a resignation in aretiral situation ; if, in any particular case, the Tribunal concludesthat the resignation was made in a retiral situation, the Tribunalwill proceed to compute the amount of gratuity which each ofsuch workmen would have been entitled to in accordance withthe rates set out in the Emergency Regulations referred to-earlier, and to'make suitable order for payment of such amounts.
Before concluding this judgment I would like to make some•observations of a general nature in regard to the powers of^Labour Tribunals.
158 TENNEK.OON, C. J.—The National Union of Workers v. The Scottish
Ceylon Tea Company Limited
When an application comes up before a Labour Tribunal underSection 31 of the Industrial Disputes Act, the Labour Tribunalis not called upon to work out a scheme applicable to all work-men belonging to the class to which the applicant belongs. Insuch cases a Labour Tribunal cannot do better than to guide him-self by reference to existing and settled schemes. I accordinglyagree with Justice Rajaratnam in condemning the rejection bythe President of the Labour Tribunal of the Collective Agree-ment as an unsafe guide. As indicated in an earlier part of thisjudgment, if an application for a gratuity was made under Sec-tion 31B (1) to a Labour Tribunal by a workman bound by thatAgreement, no Labour Tribunal would have been free to dis-regard the provisions of that Agreement. I can see no reason whythe position should be different in the workman applying underSection 31B (1) is a workman in respect of whom the employeris obliged by law only to “ observe terms and conditions whichare not less favourable ” to the workman than those contained'in the Collective Agreement. It would indeed be extremelyanomalous and productive of disruption for the existing Collec-tive Agreements if workmen who are in the position of thosewith whom we are concerned in this case, were to be placed ina more advantageous position, than those who are bound by thatAgreement.
I further agree with Justice Rajaratnam that gratuity and pro-vident fund benefits cannot be treated as cumulative. Were itotherwise, the Labour Tribunal would be entitled to order both apension and a gratuity, in addition to any provident fund benefitsthat the workmen may be entitled to, for the reason that in Sec-tion 31 B (1) (b) the words used are ‘any gratuity or otherbenefits
I am also in agreement with Justice Rajaratnam’s statementthat among the matters to be taken into account in ordering agratuity the Labour Tribunal must have regard to the followingmatters—-
length of service of the workman,
the quality of that service,
the financial capacity of the employer.
In regard to the point made by Rajaratnam, J., that a LabourTribunal should also have regard to the impact of any order madeby him on the national economy. I agree with the commentsmade by my brother, Samerawickrame, J. in regard thereto in his,separate judgment.
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Ceylon Tea Company Limited
I have already indicated that this appeal must be allowed, thatthe judgment of the Supreme Court and the order of the LabourTribunal must be set aside, and the case remitted back to theLabour Tribunal with the directions indicated earlier.
There will be no order as to costs.
Udalagama, J. I agree.
Tittawella, J. I agree.
Samerawickeame, J.
The appellant Union made an application to the LabourTribunal on behalf of six workmen for payment of gratuity. Theworkmen were employed on Invery Group, Dickoya and termina-ted their service by notice as from 16.3.70 to leave Ceylon underthe Indo-Ceylon Agreement Implementation Act. There was noprovision for payment of gratuity to them either in their terms of-employment or any contract or statute.
Section 31. B. 1. of the Industrial Disputes Act reads : —
“ A workman or a Trade Union on behalf of a workmanwho is a member of that Union may make an application inwriting to a Labour Tribunal for relief or redress in respectof any of the following matters :
the termination of his services by his employer,
the question whether any gratuity or other benefits are
due to him from his employer on termination of hisservices and the amount of such gratuity and thenature and extent of any such benefits.
such other matters relating to the terms of employment orthe conditions of labour as may be prescribed. ”
Sections 31. B. (4) and 31. C. (1) set out what the Tribunal maydo in respect of an application made to it and read :—
“31. B. (4).—Any relief or redress may be granted by aLabour Tribunal to a workman upon an application madeunder sub-section (1) notwithstanding anything to thecontrary in any contract of service between him and hisemployer,
and31. C. (1).—It shall be the duty of the tribunal to make allsuch inquirines into that application and hear all suchevidence as the tribunal may consider necessary and there-after make such order as appears to the tribunal just andequitable
160 SAMERAWICKRAME J.—The National Union of Workers v. The Scottish –
Ceylon Tea Company Limited
Among the objects for which an application may be made under-Section 31. B. (1) is relief or redress in respect of the questionwhether any gratuity is due and the amount of such gratuity-Though the provision is not happily worded, it is clear that thefirst matter raised on such an application is that a gratuity is due -to the workman."
The word “ due ” appears to mean owing or payable as a debtcr obligation and in the context obligation would include a moral,obligation, for in deciding any matter a tribunal may disregardanything to the contrary in the contract of service and may makesuch order as appears to it just and equitable. In United Engi-neering Workers Union v. Devanayagam, 69 N. L.R. 298, the Privy-Council considered the following provision in Section 31 B (1)(b) : —
“ the question whether any gratuity or other benefits aredue”
and held that the words “are due” do not mean “are legallydue ”. In delivering the majority judgment, Viscount Dilhornesaid : —
“ The question is one for the tribunal to determine and, in;the light of Section 31. C. (1) to decide on the basis of whatappears to it just and equitable. If Section 31 B. (1) (b)stood alone then the words ‘ are due ’ might be interpretedas meaning ‘ are legally due ’ but this sub-section must beread with Sections 31 (B). (4) and 31 C. (1) and readingit with these sub-sections it is clear that the tribunal’sdecision is not to be whether a gratuity or other benefit islegally due but whether it is just and equitable that it should,be paid. It is not whether it is legally due but whether itought to be paid that the tribunal is required to decide. ”
He was not dealing with a case in which an application had been,made under Section 31 B (1) (b) but was considering whetherthat provision properly construed lent any support to the view-that on an application a Labour Tribunal has to determine legalrights.
While I am of the view, with respect, that the statement of-Viscount Dilhorne is correct and is sufficient for a considerationof the matter with which he was dealing, it appears to me neces-sary in the present context to emphasise that the question is notwhether payment of gratuity to the workman is just and equit-able, simpliciter, but whether payment of gratuity to the workman-is a just and equitable obligation resting on the employer. This
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Ceylon Tea Company Limited
aspect of the matter is succintly put in the last sentence of LordDilhome’s statement—“ it is not whether it is legally due butwhether it ought to be paid that the tribunal is required todecide. ”
The primary meaning of gratuity is a gift made in recognitionof services rendered by the recipient. As between master andservant, it was regarded as a gift made by the master, at hispleasure, which the servant had no right to claim. In the sphereof industrial relations, a gratuity is no longer regarded as a pay-ment made gratuitously or as a matter of boon, but as a rewardfor long and meritorious service. It may be in a proper case beclaimed by an employee and can give rise to an industrial dispute.This is exemplified by the fact that Section 33 of the IndustrialDisputes Act provides for an order for payment of gratuity.
There is often not such excess or gap between the monetaryreceipts of an employee and the amounts spent by him on hisday to day expenses as to permit him to put by anything sub-stantial for the time when he is unable to work. A gratuity ispaid to an employee to help him, after retirement, to maintain afairly comfortable existence. It is a kind of retiral benefit likethe provident fund or pension. The expectation of a gratuitymakes an employee contented and secure ; as he grows old heknows that some compensation for the gradual deterioration ofhis wage earning capacity is being built up. It is also an induce-ment for him to render loyal and meritorious service and toremain in, and to give to the service of his employer, the benefitof the experience and skill which he has acquired through theyears. The benefit to the employer is that he has a loyal and con-tented staff and does not have superannuated or disabled em-ployees who, but for such a retiring benefit would continue inemployment even though they function inefficiently. Where anemployee has rendered long, faithful and meritorious service andhas devoted the best years of his life to the work of his employer,it would appear to be the duty of an employer to give him asuitable gratuity on termination of his services, provided that theemployer can afford, having regard to his financial condition andthe return from his business, to pay it.
The financial capacity of the employer, the condition or pros-perity of his business, and the profits made by him may be rele-vant and may have to be considered. It would not be just andequitable to decide the matter by reference to the needs or claimof the workman alone. The tribunal has to determine, whether aconsideration of the relevant facts and circumstances leads it to
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the view, that there has been long and meritorious service by theworkman and that there is a duty or moral obligation on the em-ployer to pay a gratuity, as a reward or return for such service.
In the absence of a gratuity scheme or collective agreementwhich applies to him, a workman has only a claim to a gratuity,,the acceptance of satisfaction of which is dependent on variousconsiderations. I am, therefore, with respect, unable to agree withdicta of Alles, J. in Independent Industrial and Commerical Em-ployees Union v. Board of Directors, Co-operative Wholesale Es-tablishment, 74 N. L. R. 344, in so far as they suggest that anemployee has a fundamental or absolute right to a gratuity.
Dicta from judgments of the Supreme Court of India are oftencited but it must be borne in mind that in India before 1972 anindividual worker was entitled, apart from a provision in his con-tract of service, to a gratuity, only if a gratuity schemeapplicable to him had been formulated, in the award of an indus-trial arbitrator, for the industry or for the business concern. Suchawards were generally made, on demands put forward by Unionson behalf of workmen in large industrial concerns. Subject to thisreservation, such dicta are useful as they contain considerationsrelevant to the matter of gratuity in general. In the judgmentof the Supreme Court of India, in Delhi Cloth Manufacturing Co.Ltd. v. The Workmen. A. I. R. 1970 S. C. 919 at 930, deliveredby Shah, J. there an’ ared the following : —
“ ‘ Gratuity ’ in its etymological sense means a giftespecially for services rendered or return for favoursreceived. For sometime in the early stages in the adjudica-tion of industrial disputes, gratuity was treated as a giftmade by the employer at his pleasure and the workman hadno right to claim it. But since then there has been a longline of precedents in which it was ruled that a claim for gra-tuity is a legitimate claim which the workman may makeand whi^h in appropriate cases may give rise to an industrialdispute-
“ In Garment Cleaning Works (1961) Lab. L J. 513—(A.I.R.1962 S. C. 673) it was observed that gratuity is not paid tothe employee gratuitously or as a matter of boon. It is paidto him for the service rendered to him by the employer. Thesame view was expressed in Baralkand Textile Manufactur-ing Ltd’s case 1960 3 SCR 329—(A.I.R. 1960 S.C 833) Gratuitypaid to workmen is intended to help them after retirementon superannuation, death, retirement, physical incapacity,disability or otherwise. The object of providing a gratuity
:SAMARAWICKRAMA, J.—The National Union of Workers v. The Scottish 163
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scheme is to provide a retiring benefit to workman who haverendered long and unblemished service to the employer andthereby contributed to the prosperity of the employer. It isone of the ‘ efficiency devices ’ and is considered necessaryfor an ‘ orderly and human elimination ’ from industry of a. superannuated or disabled employees who but for suchretiring benefits, would continue in employment even thoughthey function inefficiently. It is not paid to an employeegratuitously or merely as a matter of boon ; it is paid to himfor long and meritorious service rendered by him to theemployer. ”
Some of the considerations material to the grant of a gratuityare stated to be (i) financial capacity of the employer (ii) hisprofit making capacity (iii) the profits earned by him in thepast (iv) the extent of his resources (v) the chances of his re-plenishing them (vi) the claim for capital invested by him videBaralkand Textile Manufacturing Co. Ltd.’s case, A.I.R. 1960 SC338. These are not exhaustive, and there may be other materialconsiderations which are relevant. On the other hand, it may bethat in a particular case one or more of these considerations neednot be taken into account. As a gratuity is a retirement benefit,the existence of any other retiring benefit such as providentfund should, in my opinion, be taken into account in bothdeciding whether a gratuity is due and in assessing the quantum.
If the necessary conditions are satisfied a workman who retireseither because of physical disability or on superannuation will beentitled to payment of a gratuity. It is necessary to consider theposition of a workman whose services are terminated by the em-ployer otherwise than on the grounds of misconduct or any faulton his part. It is true that a gratuity is given to help an em-ployee during the time when he is unable to work and is, inthat sense, a retiral benefit. Yet, as I have indicated earlier, itis by his meritorious and faithful service during the years whenlie works that a workman’s claim to a gratuity is acquired. Wherethe circumstances are such that all conditions on which he willbecome entitled to claim a gratuity would be satisfied, when thetime of retirement is reached, the workman has a legitimate ex-pectation of obtaining a gatuity and may in fact by faithful andmeritorious service have begun to earn the right to claim it.Should his expectation be frustrated and his years of faithfulservice be unrewarded without gratuity because through nofault or act of his he is precluded from further service by thetermination of his employment effected by his employer.
I think that such a result would be harsh- Totake an example, a workman has given fifteen yearsof faithful and meritorious service from his thirtieth
164 SAM ARA WICK RAMA, J.—The National Union of Waiters v. The Scottish
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to his forty fifth year, when his employer sells his business at aveiy substantial capital gain to himself, and terminates the ser-vice of all his employees. I think that it is irresistible that insuch circumstances some payment has to be made to the work-man. Whether one calls it compensation, retrenchment compen-sation or by some other name it is a form of gratuity. I am,therefore, of the view that, on termination of his service by theemployer on grounds other than misconduct or fault on his part,a workman is entitled to claim gratuity if the appropriate condi-tions are fulfilled but the tribunal should examine the circum-stances to satisfy itself that they render a gratuity due. It issuggested that the term gratuity is used in the Industrial Dis-putes Act in the sense of retiring gratuity. Attention is calledto Section 33 (1) (c) which sets out one matter in respect of whicha decision may be made in the order of a tribunal and it is saidthat in that provision gratuity must be taken to be used in thesense of retiring gratuity by reason of its juxtaposition to pen-sion and retiring allowance. Section 33 (1) (c) reads: —
“ as to the extent to which the period of absence from dutyof any workman, whom the arbitrator, industrial court orlabour tribunal has decided should be reinstated, shall betaken into account or disregarded for the purposes of hisrights to any pension, gratuity or retiring allowance or toany benefit under any provident scheme. ”
With respect, if the term gratuity is considered to be used in thisprovision in the sense of retiring gratuity, it is because of thesubject matter of the provision, i.e., the context, rather than be-cause of its juxta position with pension and retiring allowance.In any event it does not follow that it is used in that sense inother provisions of the Act. When one reads the provision in Sec-tion 31 B (1) (b) ‘ the question whether any gratuity or otherbenefits are due to him from his employer on termination of hisservices’ one is inclined at first glance to think that termina-
tion means dismissal or resignation though on a consideration ofthe entire provision in the sub section it appears to be clear thatit includes retirement as well.
In Amblamana Tea Estates Ltd. v. Ceylon Estates Staff’s Union76 N.L.R. 457, H. N. G. Fernando, C. J. considered this matterand said : —
“ As already stated, the termination of employment in theinstant case was caused solely by the act and will of the em-ployer, in pursuance of his desire to sell the estate. In our
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opinion, an employee whose services are terminated for thiscause does have a just claim to the gratuity referred to inSection 31 B. Although the judgment of Alles, J. (whichdealt with a case of retirement at the age limit) refers to agratuity as being intended for the benefit of an employeeafter his retirement, we must note that Section 31 B does notrestrict the benefit therein mentioned to retiring gratuities.What is contemplated by the section is an application by aworkman for a gratuity on termination of his services, andno reference is made to the circumstance whether or not thetermination is due to the retirement of the workman from hisemployment. ”
With respect, I agree with the view of Section 31 B, taken byhim. Later in his judgment he states that a person employedeven for a short period can make a claim for gratuity in respectof that period if his services are terminated by the employer forreasons not within the employee’s control. I am inclined to thinkthat the period of employment, though it need not be long,should at least cover a moderate length of time and not be short.However, I am not dealing with a case of termination of employ-ment by the employer and I. therefore, express no view but Ireserve my opinion on the point.
A workman who terminates his services by voluntary resigna-tion leaves, by his own act the service of his employer. His actmilitates against a claim by him for a gratuity. If he leaves hisemployer to obtain better and more profitable employment else-where, he is doing what he is entitled to do, but it is not a cir-cumstance which tends to cast on his employer an obligation topay him a gratuity. In certain circumstances his leaving may bedetrimental to the business of his employer and may import alack of loyalty to him and then the workman will be even lessworthy of a gratuity. But one must not be dogmatic. It is possibleto conceive of circumstances in which a workman who leaves hisemployer may have a claim for gratuity. A man may leave hisemployer neither to obtain more profitable^ employment nor incircumstances which import any lack of loyalty. A man mayleave employment in Colombo and take less well paid work insalubrious Bandarawela because his wife has contacted tubercu-losis and has been advised to reside there. In such a case, ifother conditions are satisfied, it appears to me that a gi'atuityought to be paid.
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In the cases under consideration, the workers resigned inorder to proceed to India under the Indo Ceylon Agreement. Thedeparture of Indian nationals from Sri Lanka to India may beworthy of promotion by the Government of Sri Lanka. It pro-bably meant to the employer, the Scottish Ceylon Tea Co. Ltd.,the loss of some experienced workers. It has not been suggested,uor has it been shown, that there was any advantage derived by-the employer from the migration of any of their workers out ofthe country. The President of the Labour Tribunal appears tohave accepted the submission that as the workers were giving uptheir employment and going to India, they were entitled to gra-tuity. He states that the collective agreement had established theprinciple that labourers going to India were entitled to compen-sation. But the collective agreement only provided that malelabourers who have reached 55 years and female labourers whohave reached 50 years and retire off the estate to go to Indiaunder the pact will be entitled to gratuity. None of the workmenon whose behalf applications were made have reached the agesreferred to in the collective agreement ; the oldest is aged 42years. I am therefore of the view that the President has failedto address himself to the correct question that his failure to doso has arisen from a misconstruction of the act and/or a mis-conception as to the meaning of the relevant provision.
Rajaratnam, J. held that the order of the tribunal could notstand because it had made findings on certain matters withoutevidence. He added, “ I cannot now hold sitting in appeal thatthe order paying some gratuity to the workman was bad in lawns being a totally unreasonable order. ” On the view that I havetaken, the order of the tribunal is bad not because it is unreaso-nable but because it is vitiated by error of law. I agree that thematters set out in Rajaratnam ; J’s judgment as fit for considera-tion by the President on the claim made, except one with whichI deal later, should have been considered by him. Though themaking of an order that appears to a tribunal to be just and equi-table should be free from ‘ the tyranny of dogmas or the subconscious pressure of pre-conceived notions ’, it should also notbe arbitrary but made after taking into account relevant materialconsiderations.
I do not, however, think that upon applications for gratuitieswhich would amount in the aggregate to no more than aboutthe Rs. 5,000 there fell to be considered th: impact of the orderon the national economy. I think there could be an impact on the
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national economy only in the way in which the want of a horse-shoe nail is said in the doggerel to have caused a battle to be lost.If there was in fact a serious possibility of such an impact onthe national economy, the Scottish Ceylon Tea Co. Ltd. washardly the proper party to have the sole responsibility of placingthe facts relating to it before the tribunal. Under Section 46 (4),the Commissioner of Labour or his authorised representative isentitled to be present and to be heard in any proceedings beforea Labour Tribunal- The Commissioner of Labour or the Attorney-General might have been noticed to appear and heard.
Whatever may be the position regarding the claim of the work–men and the obligation of the employer under the provisions ofthe Industrial Disputes Act, viewed as a human problem it is de-sirable that some provision should be made to ensure that theworkmen do not return to their homeland with empty hands. Itis gratifying therefore to find that emergency regulations, whichare more commonly used to provide pains and penalties forvaried omissions and failures, have been used to grant relief byproviding for payment of gratuities to labourers returning toIndia under the agreement. I think it only fair that the workmenon whose behalf applications were made in these proceedingsshould receive the gratuities provided for by the regulations..From the material on record the amount of gratuity payable tothem interms of the regulations can easily be assessed. We areexercising the jurisdiction exercised by the former Court ofAppeal under Act No. 44 of 1971 and Section 8 (2) of that Actenabled the Court to make such order as was necessary to docomplete justice in the case. We are, therefore, in a position toensure relief to the workmen.
Accordingly, I would allow the appeal and set aside the judg-ment of Rajaratnam, J. as well as the order of the Labour Tri-bunal. The workmen or the appellant-union on their behalf mayobtain gratuities under the emergency regulations and in themode and by the procedure set out therein. If gratuity under theregulations is not now available to them or it is not feasible toobtain it or for any other reason an order of the tribunal is want-ed or desired by them, an application for an order may be madeby motion, and on such application the tribunal is authorised anddirected, forthwith on the material already on record, to compute-
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the amount of gratuity which each of the workman would havebeen entitled to in accordance with the rates set out in theschedule to the Emergency. (Payment of Gratuities and OtherMonetary Benefits to Indian Repatriates) Regulations containedin Government Gazette Extraordinary No. 185/59-1975 dated 17thOctober, 1975 and to make a suitable order for payment of suchamount. In the circumstances. I make no order as to costs.
I have perused the judgment of the Chief Justice. I regret myinability to agree with his conclusions.
This appeal raises an issue of some importance relating to theconcept of gratuity and its legal incidents in proceedings beforethe Labour Tribunals established under section 31A of the In-dustrial Disputes Act (Chap. 131).
The facts relating to this appeal have been fully set out in thejudgment of the Chief Justice. It is not necessary to repeat them.I shall be confining myself mainly to the legal issues involved onthe said facts.
For an appreciation of the problems arising in this appeal, cer-tain sections of the Industrial Disputes Act are relevant.
Section 31B (1) introduced into the 1950 Act by the AmendingAct 62 of 1957 reads as follows : —
“ A workman or a Trade Union on behalf of a workmanwho is a member of that Union may make an application inwriting to a Labour Tribunal for relief or redress in respectof any of the following matters :
the termination of his services by his employer,
the question whether any gratuity or other bene-
fits are due to him from his employer on termi-nation of his services and the amount of suchgratuity and the nature and extent of any suchbenefits,
SHARVANANDA, J.—The National Union of Workers v. The Scottish
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such other matters relating to the terms of em-ployment or the conditions of labour as may beprescribed. ”
As Viscount Dilhorne said : “Section 31B (1) is the gate-way through which a workman must pass to get his applicationbefore a tribunal, but it is sections 31B (4) and 31C (1) whichstate the powers and duties of a tribunal on an application ”—United Engineering Workers’ Union v. Devanayagam (69 N.L.R.289 at 299 P.C.). These sections spell out the jurisdiction of theLabour Tribunals both with respect to the cause or subjectmatter and the relief to be granted by it. They are inter-related.
Section 31B (4) provides as follows : —
" Any relief or redress may be granted by a Labour Tri-bunal to a workman upon an application made under sub-section (1) notwithstanding anything to the contrary in anycontract of service between him and his employer. ”
Section 31C (1) defines the powers and duties of a Labour Tri-bunal on an application made to it :
“ It shall be the duty of the tribunal to make all such in-quiries into that application and hear all such evidence asthe tribunal may consider necessary and thereafter makesuch order as appears to the tribunal just and equitable. ”
Section 33 of the Act sets out the kinds of decisions that aTribunal’s order may contain. Section 33 (1) (e) states that “thedecision may provide for the payment by an employer of a gra-tuity or pension or bonus to any workman, the amount of suchgratuity or pension or bonus and the method of computing suchamount and the time within which such gratuity or pension orbonus shall be paid ”. Sincethe power tppres-
cribe other matters relating to employment and con-ditions of labour in relation to which an applicationcan be made (section 31B (1) (c)) has not been exercised, theapplications that can be entertained by a Labour Tribunal mustrelate to termination of services only and to liabilities arising
170SHARVANANDA J.—The Naiiona' Union of Workers v.The Scottish
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therefrom. Section 31 B (1) (a) specifically postulates the termi-mination of the workman’s services by his employer. The reliefof reinstatement in service is available thereon. Section 31B (1)(b) is however independent of section 31B (1) (a). The later sub-section is directed, to the reliefs available on the termination ofservices, whether the termination be by the employer or by theworkman. “ The absence of the word ‘ such ’ between the words‘ from his employer on ’ and the words ‘ termination of his servi-ces ’ in clause (b) is a pointer to the fact that the clause is notdependent on clause (a)—-per de Krester, J in Hatton
Transport Agency Co. Ltd. v. George (74 N.L.R. 473 at 477.) Aworkman can bring about the termination of his services byhimself resigning or discontinuing his services. On suchtermination, the question whether any terminal benefitshould be paid to him has to be determined by theTribunal on the facts and circumstances of the particular case-in this context, the use of the words “ are due ” to himfronj his employer ” is significant. Controversy has raged onits interpretation whether “ are due ” must be construed to meanare legally due ”. A quietus was considered to have been givento that dispute by the Privy Council in Devanayagam’s case (69N.L.R. 289). Viscount Dilhorne, after consideration of the rele-vant sections of the Act, was of the view that “ section 31B (1)'(b) must be read with sections 31B (4) and 31C (1) and readingit with these sub-sections it is clear that the Tribunal’s decisionis not, to be whether a gratuity or other benefit is legally due,but whether it is just and equitable that it should be paid. It isnot whether it is legally due, but whether it ought to be paidthat the Tribunal is required to decide. ” This view has beenaccepted by the Supreme Court in Ceylon State Mortgage Bankv. Fernando (74 N.L.R. 1); Ceylon Estate Officer’s Union v. Super-intendent, Galahandawatte Estates (74 N.L.R. 182) ; IndependentIndustrial & Commercial Employees' Union v. Co-operativeWholesale Establishment (74 N.L.R. 344) ; Silva v. Southern Frei-ghters Ltd. (74 N.L.R. 239) ; Hatton Transport Agency Ltd. v.George (74 N.L.R. 473) ; Amblamana Tea Estate Ltd., v. CeylonEstate Staffs Union 76 N.L.R. 457 (DB) ; Swedeshi IndustrialWorks Ltd v. de Silva (77 N.L.R. 211) ; and G. C. de Silva v. Siri-serux (81 C.L.W. 14).
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The provision in section 31B (4) that the Tribunal, in grantingrelief or redress, is entitled to supersede the terms of the con-tract of service militates against the contract-oriented view that“ are due ” must be construed to mean “ are legally due Thejurisdiction of the Tribunal is not invoked by the workman forthe enforcement of his contractual rights. Grant of terminalbenefits which the terms of his contract of employment mightnot by themselves justify is the means by which labour practicesregarded as unfair are frustrated, and dependence on the kindljrpaternal benevolence of employers is replaced by legitimate ex-pectations of fair and reasonable terminal benefits. In terms ofsection 31C (1), the decision of the Tribunal is not an adjudica-tion according to the strict law of master and servant. The Tri-bunal is not fettered by the limitations of the contract of employ-ment but is guided by what is just and equitable in each parti-cular case. The yardstick of justice and equity itself changes withchanges in social, political and economic outlook and withchanges in the conditions of individual and national life. A Courtof Law proceeds on the footing that no power exists in the Courtto depart from the contracts made by parties. The Court reachesits limit of power when it enforces contracts which the partieshave made. In a Court of Law, what is ‘ due ’ has to be measuredand determined within the framework of the contract of employ-ment. A Labour Tribunal is not so hamstrung. The contentionthat the jurisdiction of the Tribunal is concerned only to inquirewhether the contract between the parties provided for gratuity,bonus and other fringe benefits, in order to ascertain whethersuch benefits are legally due to the workman and that in casethere was no contract between the parties to that effect, it had nojurisdiction to direct the employer to provide those benefits in-volves reading words into section 31B (1) (b) which are not thereand which, if they were, would seriously impair or cut down therights of the applicant.
Gratuity and other benefits referred to in section 31B (1) (b)are not ex gratia payments that can be given or withheld by theemployer at his pleasure. In the sphere of employer-employee re-lationship, in order to ensure social security gratuity and similarbenefits have come to be commonly expected as due, though theyhave not yet acquired the quality of enforceability in a Court ofLaw.
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A Tribunal administering social justice, in the exercise of justand equitable jurisdiction, is not inhibited by limitations of legalrights and legal obligations and is free to give effect to conceptsof social justice, to secure social harmony and industrial peace.The Tribunal grants that relief whenever circumstances justifyit though there has been no legal stipulation for same. In grant-ing relief, the Tribunal has to address itself the question notwhether gratuity or other benefit is “ legally due ”, but whetherin accordance with current social norms it is “ justly due ”■—notby way of legal obligation, but as social or moral obligation inorder to redress the unequal bargaining position of employer andemployee. That way, the Tribunal’s jurisdiction to order what itconsiders just and equitable by way of relief or redress remainswholesome without being clogged by the terms of the contractthat are weighted against the employee. With all respect, I agreewith the opinion of Their Lordships of the Privy Council that thedecisions in Richard Pieris & Co. v. Wijesifiwardena (62 N.L.R.233) and The Electric Equipment Co. v. Cooray (64 N.L.R. 71)which interpret “ are due ” as meaning “ legally due ” do notrepresent the correct view and should not be followed. In myview, the words “ are due ” mean “ justly due ” according to pre-vailing concepts of equity, justice and fair practice. Schemes ofgratuity and other benefits operating in similar sectors of em-ployment may serve as helpful guides and offer satisfactory cri-teria for the determination of what is just and equitable. Butthey would not be conclusive. There may be features in theschemes which may not harmonise with notions of justice andequity and justify departure therefrom.
What benefit is due has to be determined in the context of thejurisdiction of the Tribunal to make a “ just and equitable ”order. It is all one indivisible process. The question of what isdue cannot be divorced from what is a just and equitable orderto make. The Tribunal is not called upon first to decide whetheranything is due and then to proceed to determine whether it isjust and equitable to hold that it is due. Two independent stagesof inquiry are not contemplated. At the end of the inquiry, theTribunal has to determine whether it is just and equitable thatthe benefit should be held to be due. Any attempt to decide first“ what is due ” without reference to the justice and equity of thecase would amount to putting the cart before the horse.
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Ceylon Tea Company Limited
The Legislature, when it conferred on the Tribunal the powerto make such order as may appear to the Tribunal to be just andequitable (section 31C (1) ), made justice between the parties tothe application, in accordance with the norms prevailing in theindustry, the objective. In the achievement of such end, the Tri-bunal may disregard schemes of gratuity and other benefits ope-rative in other sections of the industry if they do not survive thetest of being just and fair, or if they contain unfair provisionsproduced by economic compulsions. A Tribunal acting reasonablyis the judge of such provisions. The decision arrived at by it inthe exercise of its powers to do, what it considers just andequitable may, for good reason, go beyond the terms of anyexisting contract or scheme. If it considers such contract orscheme inequitable or inadequate, not only has it the power, butit is its duty to override it, unless of course it is a statutoryscheme. In the discharge of its functions, ths Tribunal musthowever have in mind the all pervasive purpose of preventinginvestigating and settlement of industrial disputes.
The question that arises in this consolidated appeal is whetherthe Labour Tribunal was justified in granting relief or redress byway of gratuity to the workmen who, after long periods of ser-vice, have voluntarily resigned in order to return to India interms of the Indo-Ceylon Agreement of 1964. From the point ofview of the interests of the State, no impediment should beplaced in the way of such repatriates. They should be encoura-ged to wind up and quit Sri Lanka
Now, what is the connotation of the word ‘ gratuity ’ as usedin sections 31B (1) (b) and 33 (1) (e) of the Industrial DisputesAct ? The primary meaning of the word ‘ gratuity ’ is that it isa gift of money in addition to salary or wages voluntarily madeto a retiring employee for services rendered by him. This im-ports the conception of a gift or boon otherwise described as ‘ exgratia ’ payment. In industrial law, this meaning has undergonea fundamental change in its attribute of voluntariness. Gratuitycan no longer be regarded as an ex gratia payment or merely as
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a matter of boon. As stated by the Supreme Court of India inDelhi Cloth and General Mills Co. Ltd. v. the Workman (197dA. I. R. S. C. 919 at 930) :
“ Gratuity in its etymological sense means a gift speciallyfor services rendered or return for favours received. Forsome time, in the early stages in the adjudicationof industrial disputes, gratuity was treated as agift made by the employer at his pleasure and the workmanhad no right to claim it. But, since then, there has been along line of precedents in which it has been ruled that aclaim for gratuity is a legitimate claim which the workmanmay make and which may give rise to an industrial dispute. ”
In the case of Indian Hume Pipe Co. Ltd. v. the Workman.
(1960 A.I.R. S.C. 251), the Supreme Court observed :
“ Gratuity is a kind of retirement benefit like the ProvidentFund or pension. At one time it was treated as payment gra-tuitously made by the employer to his employee at his plea-sure, but gratuity has now come to be regarded as a legiti-mate claim which workmen can make. ”
The granting of bonuses, gratuity, pension and the like to em-ployees today is not out of charity. They are given in order tomake the employees more contented and to enable them to havea sense of satisfaction and security without being always on thebrink of insecurity about their future. Though entitlement tosame has not yet acquired the quality of enforceability in aCourt of Law and the employer cannot, in a Court of Law, becompelled to give what he is not legally bound to give, yet thosebenefits are recognised by Labour Tribunals as part of the remu-neration of the workers for their services and as their dues orrights on termination of employment. Where an employer hasthe financial capacity, the workman would be entitled to thebenefit of gratuity. However, long and faithful or meritoriousservice is a condition precedent to the award of gratuity ; for,gratuity still remains a reward for faithful service rendered fora fairly substantial period.
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Ceylon Tea Company Limited
The question next arises, on what basis is gratuity awarded ?Is it awarded as superannuation, or does it represent payment forlong and faithful service ? It has been contended by Counsel forthe respondent that the term ‘gratuity’, as used in section 31B(1) (b), refers only to retiral gratuities. According to him, gratui-ty paid to workmen is intended to help them after retirementon superannuation, physical incapacity, disability or otherwise.He stressed that the object of providing gratuity is to providea retiring benefit. He relied on the observatoin in Indian HumePipe Co. Ltd. v. the Workmen (A.I.R. 1960 S.C. 251) that :
“ Gratuity is a kind of retirement benefit like the Provi-dent Fund or pension. Gratuity paid to workmen is intendedto help them after retirement, whether the retirement is theresult of the rules of superannuation or physical disability.The general principle underlying such gratuity schemes isthat by their length of service, workmen are entitled toclaim a certain amount as retiral benefit. ”
He argued that since gratuity is in the nature of a retiralbenefit, it can only be granted when a workman retires fromservice on account of superannuation, physical incapacity orother allied cause and not when he resigns, when still physicallyable to work even though he had put in a long period of faithfulservice.
On the other hand, Counsel for the appellant submitted thatthe only consideration for the grant of gratuity is whether theworkman has, to his credit, a long period of faithful or meri-torious service prior to the termination of his services, whetherby retirement or resignation.
In Express Newspaper Ltd. v. Union of India (A.I.R. 1958 S.C.578 at 628), the Supreme Court of India stated :
“ A gratuity is a scheme of retirement benefit, and the con-ditions for its being awarded have been thus laid down inthe Labour Court decisions in this country.
It was observed in the case of Workmen employed underthe Ahamedbad Municipal Cotporation v. AhamedbadMunicipal Corporation (1955—Lab. A.C. 155 at 158) :
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“ The fundamental principle in allowing gratuity isthat it is a retirement benefit for long services, a provisionfor old age. . . ”
These were cases, however, of gratuity to be allowed to em-ployees on their retirement. The Labour Court decisionshave however awarded gratuity benefits on the resignationof an employee also. In the case of Cipta Ltd. v. the Work-men (1955—2 Lab. LJ 355), the Court took into considerationthe capacity of the concern and other factors therein re-ferred to and directed gratuity on full scale on voluntary re-tirement or resignation after 15 years continuous service.
Similar considerations were imported in the case of IndianOxygen Ltd. (1955—1 Lab. LJ 435) where also the Court,awarded gratuity on retirement or resignation of an em-ployee after 15 years of continuous serviceIt will be
noticed from the above that even in those cases where gra-tuity was awarded on the employee’s resignation from ser-vice, it was granted only after the completion of 15 yearscontinuous service and not merely on a maximum of threeyears’ service as in the present case. Gratuity being areward for good, efficient and faithful service rendered for aconsiderable period, there would be no justification forawarding the same when an employee voluntarily resignsand brings about a termination of his services, except in ex-ceptional circumstances… . The other exception is wherethe employee has been in continuous service of the employerfor a period of more than 15 years. ”
In Hydro (Engineers) Ltd. v. their Workmen (A.I.R. 1969S.C. 182), the Supreme Court expressed the view that:
“ It is now well settled that gratuity is a reward for good,efficient and faithful service rendered for a fairly substantialperiod and that it is not paid to the employee gratuitiouslyor merely as a matter of boon, but for long and meritoriousservice. Since the justification for gratuity is a long andmeritorious service, schemes of gratuity have always provi-ded some qualifying period and fixed the minimum periodfor qualifying for gratuity on voluntary retirement at 15years. ”
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Ceylon Tea Company Limited
In Silva v. Southern Freighters Ltd. (74 N. L. R. 239), Samera-wickrame J. was of the view that :
“ A Workman who terminates his employment after aperiod of service which cannot be regarded as long does notappear to be entitled to the payment of gratuity
In Ceylon Estate Officers Union v. The Superintendent,Galahandawatte Talawakele (74 N-L.R. 182), Sirimane J.held that the fact that the employee brought about the ter-mination of his services by his own ‘conduct was no bar tohis claim for gratuity from his employer.
In Hatton Transport Agency v. George (74 N.L.R. 473), deXxetser J. observed at page 477 :
“ In my opinion, it is open to a workman on terminationof his services with his employer for any reason whatsoeverto raise the question whether or not in the particular cir-cumstances of that termination it is not just and equitablethat gratuity should be paid to him. ”
Again, in the Divisional Bench case of Amblamana TeaEstates Ltd. v. Ceylon Estates Staff Union (76 N. L. R. 457),
N. G. Fernando C. J., delivering the judgment of that Court,stated that section 31B does not restrict the benefit therein men-tioned to retiring gratuities—“ what is contemplated in thatsection is an application by a workman for gratuity on termi-nation of his services, and no reference is made to the circum-stances whether or not the termination is due to the retirementof the workman from his employment ”. He might have re-ferred relevantly to section 33 (1) (e) also which states that theorder of a Tribunal may contain decisions as to the payment byan employer of a gratuity or pension or bonus. That section doesnot warrant any in-built limitation restricting gratuity to re-tiring gratuity.
In that well-known book, ‘The Law of Industrial Disputes ’, atpage 815, O. P. Malhotra, the author, summarises the Indian Lawas to when gratuity is payable:
“ It is well known that a scheme for gratuity is an integra-ted scheme and it covers all cases of termination of servicesin which gratuity can be legitimately claimed. From the
178 SHARVANANDA, J.—The National Union of Workers v. The Scottish
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decided cases, it appears that workmen become entitled togratuity under the following circumstances after they haveput in a requisite number of years of service—
retirement on superannuation ;
retirement on physical incapacity ;
voluntary retirement or resignation;
termination of services otherwise than dismissal or mis-
conduct ;
dismissal for misconduct after putting in a prescribednumber of years and subject to deduction of financialloss.
However, the length of service of a workman varies for thepurpose of voluntary retirement, resignation, termination ofservices for other reasons and dismissal. ”
The above statement of the law corresponds, according toexisting authorities, to our law.
In India, the Payment of Gratuity Act No. 39 of 1972 waspassed to provide a scheme for the payment of gratuity to em-ployees. Section 4 of the Act provides that “gratuity shall bepayable to an employee on the termination of his employmentafter he has rendered continuous service for not less than fiveyears : (a) on his superannuation, "or (b) on his retirement orresignation, or (c) on his death or disablement due to accidentor disease ”.
It is manifest that the word * gratuity ' has thus come to meannot only retiring allowance or retiral benefit payable on retire-ment, but also terminal benefit payable on termination of a longand faithful service consequent to resignation prior to retiringage.
Preponderance of view is in favour of regarding gratuity as apayment for long and faithful service. The other view that gra-tuity means only retiring gratuity—superannuation benefit—which cannot be granted if the workman should resign before
SHARVANANDA, J—The National Union of Workers v. The Scotilsh Ceylon 179
Tea Company Limited
the fulness of time, even though he had served faithfully for along period, is not supported by any local authority. I havechecked up the number of awards and orders of LabourTribunals cited by Counsel for the employer, alleged to be insupport of the ‘ retiring gratuity ’ interpretation, but I did notcome across any decision that bore out that proposition or thedistinction. If Counsel for the employer-respondent with histhoroughness, was not able to invoke in support of his proposi-tion any order of a Labour Tribunal or Industrial Court, I feeljustified in stating that that view or meaning of gratuity reliedon by Counsel for the employer has not found acceptance in theLabour Tribunal from 1957 to date. In the case of Industrialand Commercial Employees’ Union (74 N. L. R. 344) where AllesJ. took the view that gratuity is a retiring benefit, the applicantwas a person who actually retired in 1966 on his reaching themaximum age of retirement of 60 years, and he thereafterclaimed retiring gratuity. There was no question of prematureresignation and claim for gratuity. One should be slow to jetti-son all local authorities on the strength of a view casually ex-pressed in an isolated case where the present issue or conflictof views did not arise for consideration. At most, the view ex-pressed by Alles J. was an obiter dictum only. On a considerationof all the above reasons, I do not agree with the view that in sec-tion 31B (1) (b) the Legislature had in contemplation only4 retiring gratuity ’. In my considered view, a workmanbecomes entitled to payment of gratuity on his resignation orpremature retirement also, provided he had rendered faithfulservice for a considerable period.
In determining the length of the period of faithful servicewhich would qualify the workman to gratuity on the terminationof his services the original principle governing the grant of gra-tuity must be borne in mind by the Tribunal that it was regarded,as a retirement benefit—a provision for old age, being a rewardfor good, efficient and faithful service rendered for a long period.The reason for requiring a large minimum period for earninggratuity in the case of voluntary resignation is to see that work-men do not go from one employer to another, collecting gratuityafter putting in short periods of service but stick to one employer.But this does not mean that gratuity can be earned only whenone retires from service altogether by reason of superannuationor physical disability. Provided there had been faithful ser-vice for a substantial period, a person, on termination of such
180 SHARVANANDA, J.—The National Union of Workers v. The Scottish Ceylon
Tea Company Limited
service, has a claim for gratuity. The answer to the question‘ What is a substantial period ? ’ depends on the circumstances ofeach case. Ordinarily, ten years of continuous service shouldrepresent the lower limit and fifteen years the upper limit of theminimum period required to qualify a worker for entitlementto gratuity. Once a worker has earned his gratuity by his ser-vice, he does not lose it except for grave misconduct. It is stillavailable to him whatever be the motivations for his resignationor premature retirement from that service. The workmanshould not be placed in life-time bondage by being denied thebenefit of gratuity, once he has earned it, on the ground that hehad not reached superannuation or physical disability. Wagelabour is qualitatively different from slave or serf labour, in-asmuch as the workman is free to sell his capacity for work.This legal freedom should be meaningful to him and should notbe illusory. He is entitled to look forward to engage himselfin gainful occupation with the proceeds of the gratuity earnedby him. But, what is to be discouraged is short periods of ser-vice for entitlement to grauity. Once a worker has put in along innings of service, the prospect that, age and health per-mitting and employment-opportunity being available, he mayyet be able to serve another innings should not disentitle him toan order for payment of gratuity on his resignation beforereaching retirement age.
The respective years of service of the workmen involved inthese appeals were admitted by the respondents. They were 13,15, 16, 27, 28 and 31 years of service. There was nothing urgedby the respondents against the quality of service rendered bythese workmen. It has to be presumed that they renderedfaithful service for a long period. The workers had thus qualifiedthemselves for payment of gratuity. The respondents have notestablished any financial incapacity on their part to make thepayment of gratuity earned by those workmen. The burdenrested on the respondents to establish the fact of their financialincapacity to meet the demand of gratuity if they were to resistthe prima facie claim of those workmen. Their financial positionwas a matter within their peculiar knowledge.
The main ground of resistence by the respondents before theLabour Tribunal was that in view of the provisions of theCollective Agreement No. 3 of 1967, no gratuity was payable to
SHARVANANDA, J—The National Union of Workers v. The Scottish 18J
Ceylon Tea Company Limited
any of these workmen. The appellant Trade Union, of which thesaid workmen were members, was not a party to the said Collec-tive Agreement. That Agreement was entered into betwen theCeylon Workers’ Congress and the Ceylon Estate Employers’Federation, and the appellant Trade Union was accordingly notbound by the provisions of the said Agreement under section 8of the Industrial Disputes Act. In August, 1967, the Ministermade order under section 10 (2) of the Act for every employerin any tea or rubber estates in Ceylon on whom the Agreementwas not binding to observe either the terms and conditions setout in Part B of the said Agreement or terms and conditionswhich were not less favourable than the terms and conditionsset out in the said Part B.
Neither section 8 nor section 10 of the Act make the appellantUnion bound by the terms of the Collective Agreement. It wasopen to the appellant Union, which was not a party bound bythe Agreement, to agitate against the said Agreement,demonstrate its inadequacies and desiderata and criticise itsprovisions with a view to showing that the Agreement was nota model agreement which could be a safe guide for LabourTribunals to base their orders on. The said Collective Agreementwas glaringly defective in making no provision in respect ofgratuity to persons whose services got terminated before theyreached 50 years of age. In the order made by the LabourTribunal in these applications which are the subject matter ofthese appeals, the President has given good reasons fordisregarding the provisions of the said Collective Agreement.The Labour Tribunal was not bound to apply the provisions ofthe Collective Agreement. For good reasons it can depart fromsuch Agreement. When the Labour Tribunal is setting out itsreasons for so departing, it is not criticising the CollectiveAgreement. No additional sanctity attaches to such Agreementbecause the Minister has made order under section 10 (2)extending its application. The Supreme Court has held in thiscase that before an order is made for the payment of gratuity ina case which is not covered by the recognized terms andconditions, due regard must be paid, after necessary inquiry,into the following matters : —
length of service of the workman ;
the quality of that service;
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the financial capacity of the employer ; and
the impact of that order on the national economy and
trade, if that same order can be treated as a precedent.
The Legislature has not prescribed any prerequisite for makingorders for gratuity. The Tribunal’s obligation is to make suchorder as may appear to it to be just and equitable on the materialavailable to it. If the employer-respondent, for whatever reason,does not dispute his capacity to pay gratuity, the Tribunal has toassume the ability of the employer to pay. The order must be justand equitable between the parties. Before such an order is made,the Tribunal is not concerned to hold a preliminary inquiry as tothe impact of that order on the national economy and trade. TheTribunal should not widen the ambit of its inquiry by going intoirrelevant questions. The cost of such preliminary inquiries willbe prohibitive and beyond the capacity of the applicant to bear.The question of “ impact on the national economy ” is a matterres inter alios acta. Further, a number of * ifs ’ and imponderableswill be involved in that question. The workman should not feelaggrieved that the interest of the employer and of the Stateshould coalesce to resist his claim to gratuity.
In my view, on the agreed statements of facts, the LabourTribunal acted properly in refusing to apply the provisions ofthe Collective Agreement No. 3 of 1967 to the facts of the casebefore it, as the relevant provisions relating to the gratuityscheme appeared to be manifestly unjust. It was brought to thenotice of the Tribunal that other employers who were themselvesparties to the same Collective Agreement had settled questionsof gratuity somewhat outside the Collective Agreement.Settlement on Meddacombra Group was cited as a case in point.In that case TD—173, it was agreed, under the Head of Paymentof Gratuity to these Retiring to India, that “ those retiring toIndia will be paid Rs. 30 for males and Rs. 25 for females foreach year jof service in the pre E.P.F. period irrespective of age,or Rs. 150, whichever is higher ”. Another case is Ottery Estate,Dickoya, where it was agreed :
Gratuities to workers retiring to India:
The new employers will pay Rs. 30 to a male worker andand Rs. 25 to a female worker for a year for the pre E.P.F.period. No worker will get less than Rs. 150. No age basiswill be applied to make payments of gratuities in these cases
Don Somapala r. Republic of Sri Lanka
The Collective Agreement No. 3 of 1967 further did notcontemplate the situation that arose in this case. In thecircumstances, the Tribunal was justified in taking the viewthat the terms of the Collective Agreement could not be appliedwithout modifications to the applicants. The .Tribunal thoughtit fair to evolve a formula for the computation of gratuity basedon the period of service. In my view, the Supreme Court erredin setting aside the order of the Labour Tribunal and in awardinggratuity in a much lower scale than what the applicants wereentitled to on a just and equitable basis
I allow the appeal and set aside the judgment of the SupremeCourt and restore the order of the President, Labour Tribunal.The appellant Union will be entitled to costs in this Court and inthe Supreme Court.
Appeal allowed and case remitted to the Labour Tribunal.