Madhaodas Jankidas Mohta Ginning ... vs Hirabai Wd/O Mohan Chavan
2017 Latest Caselaw 1868 Bom

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   IN THE HIGH COURT OF JUDICATURE AT BOMBAY
             NAGPUR BENCH, NAGPUR


                   Writ Petition No.3023 of 2009
                                And
                   Writ Petition No.3026 of 2009


                   Writ Petition No.3023 of 2009


  Madhaodas Jankidas Mohta
  Ginning and Pressing Factory,
  Through its Manager, Wardha,
  District Wardha.                                 ... Petitioner

       Versus

  Hirabai wd/o Mohan Chavan,
  Major,
  R/o C/o Shri Akhilesh Shrivastav,
  Near Dr. Sharma's House,
  Ramnagar, Wardha.                                ... Respondent


                               And

                  Writ Petition No.3026 of 2009


  Madhaodas Jankidas Mohta
  Ginning and Pressing Factory,
  Through its Manager, Wardha,
  District Wardha.                                 ... Petitioner

       Versus




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  Sk. Ramzan s/o Sk. Karim,
  since deceased, through his LRs.:

  1. Smt. Inyatbi Ramzan Sheikh,
     Aged Major,
     Occupation - Household.

  2. Sk. Rehman Sk. Ramzan,
     Aged Major, 
     Occupation - Not Known.

        Both Residents of Station Falye,
        Ward No.31, Near Boudha Mandir,
        Wardha, Tahsil and District -
        Wardha.                                   ... Respondents


  In both writ petitions :

  Smt. Neeta Jog, Advocate for Petitioner.
  Shri S.A. Kalbande, Advocate for Respondents.


                Coram : R.K. Deshpande, J.

th Dated : 20 April, 2017

Oral Judgment :

1. In both these petitions, the Controlling Authority under

the Payment of Gratuity Act, 1972 (for short, "the said Act") has

passed an order holding that the respondent-employees are

entitled to gratuity in terms of sub-section (2) of Section 4 of the

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said Act for every completed year of service or part thereof in

excess of six months, at the rate of fifteen days' wages based on

the rate of wages last drawn by the employee. The case of the

petitioner-employer before the authorities below was that both

the employees were entitled to payment of gratuity at the rate of

seven days' wages for each season, being employed in seasonal

employment and covered by the second proviso below

sub-section (2) of Section 4 of the said Act. According to the

petitioner-employer, both the employees were paid accordingly

the gratuity under the said proviso as seasonal employees and in

fact the respondent-Sk. Ramzan s/o Sk. Karim in Writ Petition

No.3026 of 2009 has accepted such payment of Rs.8,925/-

without any protest.

2. It is not in dispute that the employee Mohan Chavan in

Writ Petition No.3023 of 2009 was working as Wireman in the

establishment of Ginning and Pressing Factory run by the

petitioner with effect from 1-10-1972 and he continued to work

till his death, on 18-2-1997. The claim for gratuity was made by

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his widow. Another employee Sk. Ramzan s/o Sk. Karim, the

respondent in Writ Petition No.3026 of 2009, was employed in

the said factory as Press Driver on 1-11-1972 and he continued to

work till the age of superannuation was attained on 1-6-2001.

The case of both the employees was that they worked throughout

the year irrespective of season. The employee-Mohan Chavan is

held entitled to total gratuity of Rs.82,800/- with interest at the

rate of 12% per annum, whereas another employee-Sk. Ramzan

is held entitled to total gratuity of Rs.34,845/- with 12% simple

interest per annum.

3. The entitlement of the employees in the present case for

gratuity is to be judged on the basis of the provision of Section 4

of the said Act. An employee, who has rendered continuous

service for not less than five years, is entitled to gratuity on

termination of employment, or on his attaining the age of

superannuation, or on his retirement or resignation, or on his

death or disablement due to accident or disease. It is not in

dispute that both the employees in this case rendered continuous

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service of not less than five years. The employee, Mohan

Chavan, worked for 25 years, and the another employee, Sk.

Ramzan, worked for about 29 years. Both the employees became

entitled to receive gratuity in terms of sub-section (1) of

Section 4 of the said Act. This finding of the authorities below,

is not challenged.

4. The only question is whether the employees were

entitled to gratuity at the rate of fifteen days of wages based on

the rate of wages last drawn by them, as contemplated under

sub-section (2) of Section 4, or whether they were entitled to the

gratuity at the rate of seven days of wages for each season, as

contemplated by the second proviso below sub-section (2) of

Section 4 of the said Act.

5. Sub-section (2) of Section 4 of the said Act along with

the second proviso and Explanation being relevant, is reproduced

below :

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"4. Payment of Gratuity.- ...

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned: ...

Provided further that in case of an employee who is employed in a seasonal establishment, and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days' wages for each season.

Explanation.-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen."

Once it is accepted that the employee becomes entitled to

payment of gratuity in terms of sub-section (1) of Section 4, then

what follows is sub-section (2), which states that for every

completed year of service or part thereof in excess of six months,

the employer shall pay gratuity to an employee at the rate of

fifteen days' wages based on the rate of wages last drawn by an

employee concerned. Sub-section (2) confers a right upon every

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employee to get gratuity at the rate prescribed therein. The

second proviso below sub-section (2) is for the benefit of an

employer of the seasonal establishment to pay gratuity to an

employee at the reduced rate of seven days' wages for each

season. It is a deviation for denial of legal right to receive

gratuity at a prescribed rate. The second proviso thus operates as

an exception to sub-section (2) of Section 4 of the said Act.

6. Merely because an establishment is categorized as

seasonal establishment, does not advance the case to claim

benefit under the second proviso so as to qualify for the benefit

of payment of gratuity at a reduced rate. To avail the benefit of

second proviso below sub-section (2), two things are required to

be established - (a) that an employee works only in season, and

(b) that he is not employed throughout the year. Thus, a real

test is the period of employment of an employee in particular

establishment for the purposes of second proviso. It is, therefore,

the burden upon an employer to establish that an employee was

working only during the season in the seasonal establishment

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and was not so employed throughout the year. It is for an

employer to come forward with such a specific case and lead

evidence to establish it. It is a social welfare legislation, to be

construed in beneficial way to the employees and unless the

burden is satisfactorily discharged, a legal right cannot be taken

away.

7. In the decision of the Apex Court in the case of

Maharashtra State Co-operative Cotton Growers' Marketing

Federation Ltd. and another v. Maharashtra State Co-operative

Cotton Growers' Marketing Federation Employees' Union and

another, reported in AIR 1994 SC 1046, relied upon by Smt. Jog,

the learned counsel for the petitioner-employer in both these

petitions, makes a distinction in para 4 between seasonal

employment and seasonal employees. The said para is

reproduced below :

"4. What is further necessary to note is that there is a difference between season employment and seasonal employees. The employments which are only seasonal may

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require only seasonal employees and there are no perennial employees on their staff. On the other hand, an employment may have both perennial and seasonal work as in the present case, and hence require both kinds of workmen. Further, seasonal employees may be permanent or temporary. The permanent employees are employed from season to season successively and are entitled on that account for retention allowance and all other benefits referred to above during the off-season because of their permanency as seasonal employees which is different from permanency as perennial employees. The temporary seasonal employees are not obviously entitled to the said benefits as the permanent seasonal employees since the temporary employees are not engaged from season to season but only when there is an increase in work. So is the case with the casual employees. There are also part-time seasonal employees and they carry different scales of wages by the very nature of their employment as pointed out above. The seasonal employees like the perennial employees also belong to different categories and grades. As stated above, at the relevant time the perennial employees of all categories were 2200 whereas the seasonal employees were 4500. We have to stress this aspect because we find that there is a good deal of confusion by the Tribunal and the Courts below on these

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aspects of the matter which has contributed to their erroneous conclusions."

The distinction made is that the employments which are only

seasonal may require only seasonal employees and there are no

perennial employees on their staff. An employment may have

both perennial and seasonal work and hence require both kinds

of workmen. Seasonal employees may be permanent or

temporary. The permanent employees are employed from season

to season successively and are entitled on that account for

retention allowance and all other benefits referred thereto during

the off-season because of their permanency as seasonal

employees which is different from permanency as perennial

employees. The temporary seasonal employees are not obviously

entitled to the said benefits as the permanent seasonal employees

since the temporary employees are not engaged from season to

season but only when there is an increase in work. It holds that

the seasonal employees like the perennial employees also belong

to different categories and grades. This distinction has to be kept

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in mind by the Court to judge the rights of employees.

8. The decision of Kerala High Court in the case of

Consolidated Coffee Ltd. v. Uthaman, reported in

1979 (38) F.L.R. 365, in my view, covers the entire controversy

involved in the present case. Paras 5 to 9 of the said decision

delivered by Shri Kochu Thommen, J. (as he then was) being

relevant, are reproduced below :

"5. A 'seasonal establishment' is not defined under the Payment of Gratuity Act. Nor is 'seasonal establishment' defined as such under the Employees' State Insurance Act or the Employees' Provident Funds Act, although under those two enactments a coffee curing factory, among others, is specifically mentioned as a seasonal establishment. The meaning of a seasonal establishment has therefore to be understood in the popular sense. Any factory which only works during certain seasons of the year, and not throughout the year, is a seasonal establishment."

"6. The second proviso to sub-section (2) of Section 4

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mentions a rate for each season during which a person is employed. If an employee is employed only in one season he would get the gratuity at the rate of seven days' wages for that season. Likewise, if he has been employed for more than one season, he would get gratuity at that rate for each of those seasons."

"7. It would therefore appear that the rate has to be determined for the purpose of gratuity with reference to the period of employment of an employee in a particular establishment. An establishment may be seasonal in so far as its seasonal employees are concerned, but vis-a-vis persons working throughout the year it is not a seasonal establishment. It has been found by the authorities that 36 employees work throughout the year in the factory whereas 160 employees work only during seasons. The factory is a seasonal establishment in respect of those persons who are employed seasonally, and it is a non-seasonal establishment in respect of others who are engaged throughout the year."

"8. Petitioner's counsel says that a coffee curing factory, having been treated as a seasonal establishment for the purpose of the Employees; Provident Funds Act as well as the Employees' State Insurance act, has to be so treated for

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the payment of Gratuity Act as well. It is true--and as seen from Ext. P-5 memorandum of settlement--that the petitioner's factory is a seasonal establishment. One purpose for classifying a factory as a seasonal establishment is to allow the employer to apply the lesser rate in respect of an employee employed only seasonally. But the employer cannot take advantage of the reduced rate for persons employed throughout the year."

"9. I am of the view that having found that the 1 st respondent works throughout the year in the factory, the authorities were well justified in treating himself as a non-seasonal employee, and the factory vis-a-vis him as a non-seasonal establishment, for the purpose of allowing him gratuity at the higher rate of fifteen days' wages."

In para 5, the Court defines 'seasonal establishment' as any

factory which only works during certain seasons of the year and

not throughout the year. The Court has held in para 7 that the

rate of gratuity has to be determined with reference to the period

of employment of an employee in a particular establishment. An

employment may be seasonal insofar as its seasonal employees

are concerned, but vis-a-vis the persons working throughout the

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year it is not a seasonal establishment. The question required to

be answered is whether the petitioner-Factory can be considered

as seasonal establishment vis-a-vis the employees in question. A

factory may be a seasonal establishment in respect of certain

persons, who are employed seasonally, and it may be a non-

seasonal establishment for the persons, who are engaged

throughout the year.

9. Smt. Jog, the learned counsel for the

petitioner-employer, has invited my attention to the

circular/letter dated 31-3-1994 at Exhibit 41, issued by the office

of the Joint Director, Industrial Safety and Health, stating that

the Cotton Ginning and Pressing Factory is a seasonal factory for

the purposes of Rule 5(2)(i) of the Maharashtra Factories Rules,

1963, as it does not work for more than 180 days in the

aggregate calender year. She has also invited my attention to the

agreement dated 15-9-1976 at Exhibit 42, of the petitioner with

the Maharashtra State Electricity Board for supply of power, and

the electricity bill at Exhibit 43. She has relied upon the oral

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evidence of the Service Manager Haridas Thaori, examined by

the petitioner, in which he has stated that the factory run by the

petitioner works for six months in a year, and the employees are

paid wages for the said period. She submits that the Ginning and

Pressing Factory of the petitioner being a seasonal establishment,

as mentioned under the second proviso below sub-section (2) of

Section 4, the authorities below have committed an error in

holding that the employees in question are covered by

sub-section (2) of Section 4 of the said Act.

10. There is neither any pleading nor any evidence on

record to show that the employment in the establishment of the

Ginning and Pressing Factory run by the petitioner was only

seasonal and requiring only seasonal employees and there were

no employees on the establishment working throughout the year.

There is no evidence on record to show that the employees in

question were working only during particular season and not

throughout the year or that it was a seasonal establishment

vis-a-vis the employees. In case of seasonal employees, there has

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to be an evidence to show that they are paid retention allowance

and other benefits during the off-season because of their

permanency as seasonal employees. Merely because the factory

is categorized as seasonal for the purposes of Rule 5(2)(i) of the

Maharashtra Factories Rules, 1963 for payment of fees for

registration and grant of licence at Exhibit 41, it does not follow

that the employees working throughout the year in a seasonal

factory are not entitled to gratuity under sub-section (2) of

Section 4 of the Payment of Gratuity Act, or that it is a case

falling in Exception under the second proviso therein.

11. Neither the agreement at Exhibit 42 nor the electricity

bill at Exhibit 43 constitute an evidence of the fact that the

employees in question were working only during season or were

not working throughout the year. The production of muster roll

for specified period also does not advance the case of the

petitioner to claim the benefit under the second proviso. The

Service Manager examined by the petitioner has stated in his

cross-examination that the deceased Mohan Chavan, working as

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Wireman, was residing in the quarter which was provided to him

by the petitioner for his availability at any time, and such quarter

is allotted to the permanent employee. It is also admitted that

after the death of Mohan Chavan, the respondent-widow -

Hirabai Chavan - in Writ Petition No.3023 of 2009 vacated the

quarter. The acceptance of gratuity at a reduced rate by the

respondent-Sk. Ramzan in Writ Petition No.3026 of 2009 cannot

be enforced in violation of the legal right under sub-section (2) of

Section 4 of the said Act.

12. In the decision of the Apex Court in the case of

Aspinwall & Co., Kulshekar, Mangalore v. Lalitha Padugady and

others etc. etc., reported in AIR 1996 SC 580, relied upon by

Smt. Jog, the learned counsel for the petitioner-employer, the

claim was for payment of gratuity computed at the rate of seven

days' wages for two seasons in each calender year on the basis

that the calender year is a unit and the period of work stood split

into two seasons. The Controlling Authority accepted the claim

for two seasons at the rate of seven days' wages per season in

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each calender year and this decision was confirmed by the

learned Single Judge as also by the Division Bench of this Court.

The Apex Court reversed the said decision and it is held that the

view taken was in ignorance of the concept of 'continuous service

for one year', which has a reference to an individual workman

and not universally relatable to the calendar year. The Apex

Court held that the employees were, therefore, entitled to

gratuity at the rate of seven days' wages for each season,

continuous as it is from September of a particular year till June

of the following calendar year.

13. The Apex Court considered the provision of Section 4 of

the Payment of Gratuity Act and it holds that the first proviso to

sub-section (2) of Section 4 of the said Act relates to the right

conferred upon the employees other than those employed in a

seasonal establishment. The second proviso being so related

prominently says that in case of an employee employed in a

seasonal establishment, the employer shall pay gratuity at the

rate of seven days' wages for each season. It holds that the word

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'season' presupposes that the employee has not been employed in

annual or regularly durated work during the days in which the

establishment was in operation during the year. The Court holds

that tying all these ends together, the conclusion is thus

inescapable that when gratuity at the rate of seven days' wages

for each season requires to be worked out, then one has to see

the number of seasons in each completed year of service of the

workman, i.e. his continuous year of service, not regulated by the

calendar year. It further significantly holds that the second

proviso would have to be read in a purposive way, i.e. in the

nature of an explanation tied and woven in Section 4 of the said

Act. In working for each season thus the employee becomes

entitled to gratuity at the rate of seven days' wages per season.

14. In the decision of the Apex Court in the case of Lalitha

Padugady, cited supra, it was not a dispute involved as to

whether an employee was entitled to payment of gratuity in

terms of sub-section (2) of Section 4 or in terms of second

proviso thereunder. The claim of the employee was for the

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gratuity in terms of the second proviso for two seasons in a

calendar year which was negatived by the Apex Court, holding

that the rate of seven days' wages has to be calculated for one

season in a calendar year. Though, the question involved in this

case was not for the consideration of the Apex Court, in fact the

observations in the said decision supports the view which I have

taken that the second proviso operates as an exception to

sub-section (2) of Section 4 of the said Act. The decision was

rendered on unamended provision. The amendment by Act

No.25 of 1984, introduced with effect from 1-7-1984, in the

second proviso below sub-section (2) of Section 4 introduces

additional requirement that an employee was "not so employed

throughout the year", which created additional burden upon the

employer to establish such a fact.

15. In view of above, I do not find any fault in the view

taken by the authorities below. Both the petitions are dismissed.

Rule stands discharged. No order as to costs.

JUDGE.

wp3023.3026.09.odt Lanjewar