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1981 (6) TMI 129

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..... o 4414 of 1988, have been filed by Messrs. Jeevanlal Limited. In all these cases, the concerned employee has been impleaded as the first respondent, the Controlling authority and the Appellate Authority under the Act have been impleaded respectively as respondents 2 and 3, the Workers' Union in which the concerned employee is a member as the fourth respondent, the Union of India represented by the Secretary, Ministry of Labour as the fifth respondent and the workers' union belonging to another concern run by the petitioner management as the sixth respondent. 3. These petitions have been filed for quashing the orders passed by the third respondent in the respective appeals filed by the petitioner against the concerned employee shown as the first respondent in each of the petitioner, by the issue of a writ of certiorari or any other appropriate writ or direction or order as may be deemed fit and necessary. 4. The impugned orders came to be passed in the following circumstances. In all these cases, the employees retired from the service of the petitioner between the years 1979 and 1980. They claimed payment of gratuity in accordance with the provisions of the Act which c .....

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..... cheme was introduced in 1967. The salient features of the gratuity scheme are as follows : (1) The qualifying period for payment of gratuity is five years of continuous service. (2) The gratuity is payable on the basic salary or wage exclusive of dearness allowance and other allowances. (3) Gratuity is payable at the rate of half a month's basic salary or wage for every completed year of service, subject to a maximum of ten months' basic salary or wage. (4) Gratuity shall be payable only for the period upto superannuation and at the rate of the basic wage prevailing then. (5) No gratuity is payable to an employee for certain proved acts of misconduct. 6. The petitioner-company has two factories in Madras, viz., (1) Sree Ganeshar Aluminum Works and (2) Mysore Premier Metal Factory. It has also a branch office in Madras. All the three establishments employ more than ten persons. In respect of the workmen employed in Ganeshar Aluminum Works, the petitioner entered into a settlement with the Worker's Union of Sree Ganeshar Aluminum Factory for payment of gratuity to the workmen of that factory. Similarly, in respect of the workmen employed in the Mysore Pr .....

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..... ability has been inflicted on the petitioner. Under S. 4(2) gratuity is payable to an employee at the rate of 15 days' wages for every completed year of service. Every completed year of service has been defined to mean continuous service of one year and continuous service has been defined to mean uninterrupted service and includes service which is interrupted by sickness, accident, leave, lay-off, strike or lock-out or cessation of work not due to any fault of the employee. In view of this wide definition, the Act has not only imposed an additional liability on the petitioner, but has also given retrospective effect to the Act since the period of service prior to the commencement of the Act can also be taken advantage of by the employee. It is also pertinent to state that the liability is exposed to contingencies over which the employer has no control. 7. For example, if all the employees eligible to receive gratuity bring about a simultaneous cessation of service, the petitioner company would not have the requisite resources to pay the gratuity amount and that would lead to the driving out of the petitioner from existence or to appropriate the capital which will seriously a .....

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..... iolative of the Constitution. For the enforcement of the Act, the financial position of the petitioner-company is not a relevant factor, but even if that factor was to be taken note of, the company was making huge profits year after year and as such, the petitioner cannot be in want of funds for petitioner gratuity to its workmen as per the terms of the Act. The settlement entered in to between the petitioner and the workers union for payment of gratuity contains a provision that the settlement would give place as and when any enactment is made for payment of gratuity to the employees and in view of this position, it was futile for the petitioner to harp upon the scheme originally framed. The failure of the petitioner to have created a gratuity fund a reserve there for was of no consequence and, at best, it would only amount to laches on the part of the petitioner and cannot be converted to the advantage of the petitioner. The other grounds put forward such as linking up of the dearness allowance with wages, the appreciation of dearness allowance due to causes beyond the control of the petitioner, the huge financial burden the payment of gratuity will cast upon the petitioner compa .....

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..... ssrs. Jeevanlal Limited have raised a contention that the Act is unconstitutional in that it violates Art. 14, 19(1)(f) and 19(1)(g) and 31, Mr. Govind Swaminathan, learned counsel appearing for the petitioner-company, did not seriously press this contention. Learned counsel conceded that having regard to the several pronouncements of the Supreme Court and several High Courts about the Act and analogous legislations it would not serve any purpose to press the contention. It is, therefore, enough if we refer in passing to the several decisions cited by Mr. N. G. R. Prasad, learned counsel for respondents 1 and 4 and the Senior Standing Counsel for the Central Government in support of their contention that the Act does not offend the Constitution in any manner. In Delhi Cloth Mills v. Workmen, [1969-II L.L.J. 755] the Supreme Court observed that in respect of bonus, provident fund, retrenchment compensation, State Insurance Scheme as well as medical benefits, legislations have been introduced bringing a reasonable degree of certainty in the laws governing the various benefits available to the workmen and hence they are of the view that even in respect of gratuity a reasonably uniform .....

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..... profit, is clearly enacted to ensure the object of that Act and hence the validity of S. 10 of the said Act cannot be disputed. All these decisions have been succinctly considered by a learned single Judge of the Karnataka High Court in Sujirkar's Tile Works v. Union of India, 54 (1979) F.J.R. 281, while disposing of a petition filed to challenge the validity of the Payment of Gratuity Act, 1972. After an elaborate consideration of the provisions of the Act and the case-law, the learned Judge held that the Act did not violate Arts. 14 and 19(1)(g) of the Constitution and whatever restrictions have been placed by the Act on the employers are permissible under clause (6) of Art. 19 of the Constitution. Having regard to all these decisions, even if Mr. Govind Swaminathan had pressed the contention of the petitioner that the Act violates Arts 14. 19(1)(f), 19(1)(g) and 31 of the Constitution, we would have had no hesitation in discountenancing the argument and upholding the validity of the Act. 10. Passing on to the next contention of Mr. Govind Swaminathan, it was argued that the petitioner company is an all-Indian concern and while it has its registered head office at Calcutt .....

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..... II L.L.J. 163.] An employee of the Neiveli Lignite Corporation who had voluntarily retired in accordance with the scheme governing the employees of the Corporation, claimed payment of gratuity as pet the terms of the Act. But the Corporation took the stand since he was not employed in the factory or mine, he would not be entitled to payment of gratuity in accordance with the provisions of the Act. Such a contention was raised on the basis that the employee was employed as a Junior statistical officer and hence he could not be considered an employee of an establishment of a factory belonging to the Central Government and likewise, he could not considered as an employee in a factory or mine run by the Corporation, because the Material Controller's Office was an independent unit and had nothing to do with the factory or the mine. The controlling authority sustained the objections of the corporation and held that the employee was entitled to payment of gratuity only as per the scheme framed by the Corporation and not in accordance with the terms of the Act. The employee filed an appeal to the appellate authority. The appellate authority took a different view and held inter alia th .....

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..... y' has been assigned the meaning given to it in clause (m) of S. 2 of the Factories Act, 1948. Having given such a definition, the Legislature would not have intended to enlarge the meaning of the word factory by describing it as 'establishment of a factory'. Section 2, the wording of which has presumably led the second respondent to hold that there can be an establishment of a mine, is intended to cover (i) establishments belonging to or under the control of the Central Government and (ii) establishments having branches in more than one State, as well as (iii) factories belonging to or under the control of the Central Government and (iv) major ports, mines, oilfields or railway companies. It is on account of the composite nature of the subsection, the word 'establishment' has been used even with reference to factory, major port, mine, etc. Therefore, the view of the second respondent that the Gratuity Act is applicable not only to' factories and mines, but also to establishments related to such factories and mines, is not correct. This decision was relied on by the respondents' counsel to counter the argument of Mr. Govind Swaminathan. 11. Having .....

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..... d by Messrs. Lakshmi Mills Co. Limited, Coimbatore and Writ Petition No. 4995 of 1980 had been filed by a worker employed in Messrs. Gordon Woodroffee and Co., Madras. As already stated, Writ Petition Nos. 4136 of 1978 and 26 of 1979 filed by Messrs. Jeevanlal Limited also fall for consideration in this batch of cases. In all these cases, the controversy is with reference to the interpretation of the words rate of fifteen days' wages occurring in sub S. (2) of S. 4 and the words twenty month wages occurring in sub-s. (3) of S. 4 of the Act. Before referring to the arguments of Mr. M. R. Narayanaswami, learned counsel for the petitioners in this batch of cases and Mr. Govind Swaminathan, learned counsel for the petitioners in writ petition No. S. 4136 of 1978 and 260 of 1979, we may usefully extract the relevant portions of S. 4 of the Act and in particular, sub-S. (2) and (3). The relevant provisions read as follows : Section 4(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years ............. (a) on his superannuation, or. (b) on his retirement or resignation, or. .....

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..... been filed. 13. Learned counsel appearing for the petitioners advanced various arguments in support of their contention that fifteen days' wages would only mean half a month's salary and 20 months' wages would only mean the actual payment made to the employees for every month's service multiplied by 20. It was firstly pointed out that if an employee absented himself for a day without leave, the employer used to deduct 1/30th of the salary towards loss of pay for the day on which the employees was absent. The counsel then referred to the language of sub-ss. (2) and (3) and submitted that there was no basis whatever for the employees to ask for an artificial construction being made of the words fifteen days,' wages as meaning the wages payable for fifteen working days and the monthly wages being divided by the number of working days and the daily wages fixed on that basis. It was further argued that even if under S. 4(2) fifteen days wages should be taken to mean the wages paid for a month divided by the number of working days, viz., 26 and then multiplied by 15, still, when it came to a question of payment of 20 Months wages under S. 4(3), the words used, v .....

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..... the rate of 15 days' wages in S. 4(2) cannot be construed to mean 13 days' wages and if the rate of 15 days' wages under S. 4(2) cannot be reduced to thirteen working days' wages, and then the wages of twenty months covering 600 days also cannot be reduced to 520 days 'wages. It may thus be seen that contentions similar to the ones raised before us had been raised before the Bombay High Court but were not accepted by the learned Judges. The only difference is that in the cases before us the employees are monthly rated personnel whereas in the case dealt with by the Bombay High Court the employees were daily rated workmen. However, it has been pointed out by the Division Bench that the rule of construction has to be the same for daily rated employees as well as monthly rated employees. 15. Subsequent to the judgment rendered by the Bombay High Court, the Supreme Court has also rendered decision on this matter in Digvijay Wollen Mills Ltd. v. Mahendra Prataprai Buch, [1980-II L.L.J. 252]. There were two cases before the Supreme Court and in both, the employee were monthly rated workers. The employers calculated the amount of gratuity payable to the workers on t .....

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..... , and hence he has filed this writ petition. Since the worker had put in more than six months' service, it was rightly held that he was entitled to gratuity for 15 years. However, the authorities below should have ordered payment of 15 working days' wages, and not 13 working days' wages along, for each year of service as gratuity. This is in accordance with the view we have taken in similar cases. Hence the writ petition deserves to succeed. The authorities below will calculate the proper amount due to the petitioner and pass revised order : 17. The next batch of writ petitions have been filed by Messrs. Madura Coats Limited, and they are W.P. Nos. 2967, 2983, 3032 to 3042, 3047, to 3056, 3766, 3767, 4258 to 4263 and 4380 to 4383 of 1977 and W.P. No. 168 of 1979. In these cases, the interpretation of S. 4(2) of the Act is alone raised for consideration. All the employees concerned in these writ petitions are monthly rated workmen. Hence the management contended that 15 days' wages would only mean half a month's salary and there was no scope for an artificial calculation being made by dividing the wages for a month by the number of working days, viz., 26 and d .....

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..... he worker was paid. He also submitted that the period of 15 days has been taken from other enactments and cited in this connection S. 25F(b) of the Industrial Disputes Act. The words, fifteen days average pay, occurring in S. 25F(b) of that Act has been interpreted by the Supreme Court to mean half a month's wage, in Workmen U. P. State Electricity Board v. U.G.V. El. Supply Co., [1966-I L.L.J. 730]. Hence the same ratio must be adopted in the instant case also. Mr. Ramasubramaniam, however, conceded that a different view, viz., 15 days wages means wages for fifteen working days, has been taken in the following cases, but nevertheless, argued that the view taken by the Supreme Court in Workmen, U. P. State Electricity Board v. U.G.V. El. Supply Co. [1966-I L.L.J. 730], should be followed. The cases where a different view has been taken are : Lakshmi Vishnu Textile Mills v. P. S. Mavlankar (supra) and Indian Hume Pipe Company v. Palaniswami, [1968-I L.L.J. 89]. 19. Mr. Ramasubramaniam further argued that the decision of the Supreme Court in Digvijay Woollen Mills Limited v. Mahendra Prataprai Buch (supra) has been rendered without noticing the decisions in Swami v. Author .....

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..... months which was rounded up to 27 years. On 1-9-1976 the employee claimed, by means of an application in Form I, a sum of ₹ 6,698.70 P. towards gratuity. On 14-9-1976, the company gave the sum claimed by him. However on 1-12-1976 the employee applied to the controlling authority and claimed an additional sum from the employer on the ground that he was entitled to higher gratuity as per the terms of the Act. The employer opposed the application and contended that this employee had been paid the amount claimed by him, that as such, the employee cannot seek further amounts, that in any event, the rules framed under the Act did not confer any right on the employee to make an application for the disputed amount and, likewise, the controlling authority had no jurisdiction to entertain the employee's application or pass an order on the merits of the case. These objections were not countenanced by the controlling authority and hence the employee's application was allowed and the management was called upon to pay the additional sum claimed by the employee. The employer filed an appeal to the appellate authority, but it proved of no avail. Hence the employer has come forward wi .....

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..... They were, however, re-employed on an yearly basis and eventually, their employment came to an end on 31-12-1972 or 31-12-1973 as the case may be. Having regarded to this factor, the employees claimed that they were entitled to payment of gratuity in accordance with the terms of the Act. The Management, however, contended that their employment had come to a termination on their reaching the age of superannuation long before the Act came into force, and as such, they will be entitled to get gratuity only in accordance with the terms of the scheme or award which was in force earlier. As illustrative of the facts, we may set out the case of the worker by name Adisesha Pillai. He reached the age of superannuation of 58 years in 1968. The management informed him that this services in the company ceased on 31-12-1968, but, however, having regarded to his physical fitness and capacity, he was being given re-employment for a period of twelve months operative from 1st January, 1969 to 31st December 1969. In the same way for the subsequent years also, viz., 1970, 1971 and 1972 he was given re-employment and he stopped working in the company on and from 1-9-1972. Since the Act came into forc .....

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..... terms of the Award Settlement Scheme . But, on account of the Act coming into force, the provisions of the Act would override the contract between the parties unless the terms of the contract were more favourable to the employees than what the Act has conferred on them. The order of re-employment indicates that for the period of re-employment also the worker would be entitled to gratuity benefits. As the actual stoppage of work has taken place after the Act came into force, the employees were justified in asking for payment of gratuity in accordance with the terms of the Act. State of W.B. v. Purnendu Sen, (1977) Lab. I.C., 1978, cited by the petitioner's counsel decided ones not advance the petitioner's case in any manner. The decision in that case was rendered on the basis of the construction placed on a Government Order issued by the Government of West Bengal. The decision does not lay down any general principle of law. The concerned authorities were, therefore, right in taking the view that employees should get gratuity as per the terms of the Act. 24. In the course of the arguments it was urged for the petitioner that the employees had filed their applications unde .....

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..... preceding the year for not less than : (i) 190 days, if employed below the ground in a mine, or (ii) 240 days, in any other case, except when he is employed in a seasonal establishment. Section 4(2) lays down 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 the employee concerned. According to the petitioners in these cases, the employees have not put in completed service as defined under the Act. For example, in Writ Petition No. 2078 of 1979 the date of joining of the worker is 21-7-1944 and his date of retirement is 9-5-1977. However, according to the petitioner, during the years 1974-75, 1975-76 and 1976-77, the employee had not put in completed years of service, or in other words, the employee had not put in 240 days of work. In the same day, the employees concerned in Writ Petition Nos. 2079, 2080, 2081, 2082, 2083 and 2084 of 1979 had breaks of service between the dates of joining and retirement or resignation as the case may be, in that they had not worked for a total period of 240 days in some of the years. On that .....

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..... ce , no doubt, presupposes a contract of employment; but a contract of employment between a master and servant is not the same thing as rendering continuous service. The two are not synonymous. The emphasis in S. 4(1) is not on a contract of employment being subsisting. The emphasis is on rendering continuous service. Notwithstanding that in the definition of continuous service interrupted service has been fictionally treated as part of continuous service, the fact remains that the concept of 'continuous service' contemplates that the employee is in fact rendering service as distinguished from a mere subsistence of a contract of employment. It may be mentioned here that this case arose directly under the Payment of Gratuity Act. The ratio laid down by the Division Bench of the Bombay High Court has been subsequently approved by the Supreme Court in Lalappa Lingappa v. Laxmi Vishnu Textile Mills, [1981 I, L.L.J. 308] The other case, Parthasarathy v. Standard Motors, I.L.R. 1979 Madras 264, related to the payment of closure compensation for workmen under Section 25-FFF of Industrial Disputes Act. Inter alia the Division Bench of this Court, in that case had to cons .....

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..... ch benefit should fall within the limits circumscribed by the Legislature such as minimum number of years of qualifying service and continuity of service. As such, if an employee had not put in the requisite number of days of work in a year, he will not be entitled to claim gratuity for that year. The decision in Messrs. Jeevanlal (1920) Calcutta v. Its Workmen, [1961-I L.L.J. 510], which has been relied on by the appellate authority to uphold the contention of the employees, does not really support the case of the workmen. As already stated, the Supreme court was dealing with a case where the rights of parties were governed by a scheme framed in pursuance of an award and not with reference to the provisions of the Payment of Gratuity Act. In fact, the Supreme Court has given the reason for the liberal construction of the words continuous service in that case, viz., the scheme did not define what continuous service should be. The position has been made still clear by the following observation : In other words, the expression, 'continuous service' may be statutorily defined, in which case, the definition will prevail. An Award using the said expression may itself gi .....

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..... vice in each of the sixteen years if the periods of privilege leaves, sick leave, lay-off or strike period were added to the number of working days. Having regard to this position, there is no basis for the petitioner to contend that the worker ought to have been paid gratuity only 14 years and not 16 years. The writ petition 'therefore' deserves to fail. 27. Writ Petition Nos. 82 of 1979 and 2284 of 1979 are connected. While the former has been filed by the management, the latter has been filed by the workman. In the former petition the management has contended that the worker has put in completed years of service only for 9 years, but the functionaries under the Act have wrongly conceded the claim of the worker and awarded him gratuity for 20 years of service. However, the management has not sustantiated its case before the controlling authority or the appellate authority and proved that the worker had not put in 240 days of service in each year between the period 1-3-1954 to 4-7-1974 and that he satisfied the requirements of the Act only for nine years during the period of his service. The appellate authority has pointed out in his order as follows : Thiru A. S. G .....

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..... ruled that she was wife of Subbiah. But further more she was entitled to gratuity in a sum of ₹ 7,260 as against ₹ 6,300 admitted as payable by the management. The order copy was not communicated to the petitioner. Long after, the petitioner came to know of the comprehensive order and obtained a certified copy thereof and preferred an appeal. The appellate authority, without taking note of the fact that the delay in filing the appeal had occurred due to the laches committed by the controlling authority (in not communicating his order to the management), rejected the appeal as barred by limitation. Hence the management has come forward with this writ petition. No doubt, the dismissal of the appeal by the appellate authority on the ground of limitation appears to be erroneous. The appellate authority ought to have noticed that the failure of the controlling authority to have communicated his order to the management had occasioned the delay in the filing of the appeal. Even so, we are not persuaded to allow the writ petition, because the main contention of the petitioner, viz., that it is liable to pay gratuity only at the rate of 13 days' wages per year and the wages .....

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..... er had filed belatedly the copy of the ex parte order passed against if by the controlling authority. Hence this is a fit case where the petition should be allowed and the appellate authority should be directed to restore the appeal to file and dispose it of on merits. The petition, therefore, succeeds : 31. In Writ Petition No. 2059 of 1976, the management (Mettur Chemical and Industrial Corporation Limited, Mettur Dam R. S.) assails the order of the authorities below on two grounds, viz., that the worker is not entitled to tack on his services under an independent contractor with his services under the petitioner for payment of gratuity and secondly, the authorities below had over-stepped their limits when they granted 15 working days' wages per year instead of 13 days' wages, when the worker had not raised such a claim. The worker, Chinna Goundan, was formerly working under a contractor who was working in the mines belonging to the petitioner. In 1967 the petitioner took over the operation of the mines and worker continued to work in the mines as a breaker. The worker resigned his job on 19-12-1975. But, as per his request, the resignation was with effect from 27-9-19 .....

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..... orities functioning under the Act are statutorily bound to direct payment of gratuity to the worker as per the provisions of the Act. We have held in other petitions that a worker is entitled to get the actual wages for 15 working days per completed year of service under S, 4(2) of the Act and not 13 days' wages alone. Hence the second contention is also devoid of merit. The resultant position is that the writ petition has to fail. 32. In Writ Petition No. 3323 of 1977 filed by the management, two contentions were put forward. The first is that the claim of the workman for payment of additional gratuity was made to the controlling authority beyond a period of 90 days after he received the gratuity payment and hence the application was barred by limitation. The second contention is that the workman is entitled to gratuity only at the rate of 13 days wages and not 15 days wages. The Second contention has been overruled in several other cases and hence for the reasons given therein; it has to fail. As regards the first contention, the controlling authority as well as the appellate authority have pointed out that the workman had given sufficient reasons for the delay, viz., that .....

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..... wages paid for the 11 working days have alone got to be paid to the workmen as gratuity payable for a completed year. The workmen, however, contended that they were entitled to 15 working days' wages for each completed year and the balance of amounts should be paid to them by the management. Their contention was upheld by the controlling authority and the appellate authority has confirmed the order passed by the controlling authority. It is that order which is challenged in these petitions. In accordance with the view we have already taken on this question, we must reject the contention of the management in these petitions. Whether a week consists of six working days, or five working days as is the case here, or whether a month consists of 26 working days or 22 or 23 working days, the obligation of a management under S. 4(2) of the Act is to pay the workmen the wages for fifteen working days. Hence the authorities below were justified in granting the workmen the further amounts claimed by them towards gratuity. It, therefore, follows that these three petitions have to fail. 35. Writ Petition No. 3137 of 1979 has been filed by management of Messrs. Saradha's, Mount Road, .....

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..... out forcing him to resort to proceedings before the controlling authority. In such circumstances, it cannot be said that the controlling authority has acted beyond his powers or that he has exercised his discretion in an illegal manner. As already stated, the controlling authority has expressed his willingness to consider the objections of the petitioner regarding its liability to pay gratuity to the employee. We do not, therefore, find any merit in the writ petition and accordingly, it has to be dismissed. 36. Writ Petition Nos. 264 to 266 of 1979 have been filed by the management of Madura Coats Limited, Madurai, to assail the order of the appellate authority dismissing its appeals on the technical ground that the appeals have been filed beyond the prescribed period of limitation, viz., sixty days. The contention of the petitioner in all the cases is that the appeals had been actually filed in time if the period of limitation was reckoned from the time when the copy of the detailed order of the controlling authority was furnished to it and secondly, even the employees had not raised any objection about the appeal having been filed out of time. In the view we propose to take in .....

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..... ement has filed the writ petition to question the period for which payment of gratuity has been ordered. 38. The grievance of the management regarding the direction to pay gratuity for all the twenty years of service has to be sustained. We have already referred to the ratio which should be applied to decide the question whether a worker would be entitled to get gratuity even for those years in which he had not put in the prescribed period of service, viz., 190 days in the case of mining workers and 240 days in other cases. We have adopted the ratio laid down in the Bombay case which as already stated, has been upheld by the Supreme Court in Lalappa Lingappa v. Lakshmi Vishnu Textiles Company, [1981-I L.L.J. 308]. Hence adopting the same view, we must allow the management's writ petition, i.e., W.P. No. 84 of 1979, and quash the order of the appellate authority the appellate authority will determine the number of years in which the worker has put in completed years of service and compute the gratuity amount. 39. In the result, we allow writ petition Nos. 2078 to 2084 of 1979, 2284 of 1979, 1122 of 1979, 4995 of 1980 and 84 of 1979 and direct the appellate authority to res .....

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