Sathya Studios vs Labour Court and Another

K. Veeraswami, C.J.—This appeal arises from a judgment of Palaniswamy, J. who quashed an order of the Labour Court, Madras, in so

far as it related to the second respondent''s claim for gratuity. The learned Judge directed the Labour Court to restore his claim to file and make a

suitable award in the light of the directions contained in his judgment. The second respondent was appointed on May 9, 1963 as an auditing

assistant in the first respondent''s company on a monthly salary of Rs. 125. With effect from September 30, 1967 he was retrenched which led to

his claiming u/s 33C(2) of the Industrial Disputes Act a certain sum which included gratuity at the rate of one month''s pay for four years. The claim

as to gratuity was disallowed by the Labour Court notwithstanding the fact that an award in I.D. No. 3 of 1968 had provided for gratuity for the

employees who would be bound by it. It appears that the award ceased to be operative with effect from February 22, 1962 following the

termination notice u/s 19(6) of the Act.

The question in this case is whether, the second respondent having been employed subsequent to the termination of the award u/s 19(6) he

would nevertheless be entitled to the benefit of the award in I.D. No. 3 of 1968 Palaniswamy, J., as we have indicated earlier, found for the

second respondent. We are of the same view. The appellant-management contends before us that, once an award has been terminated u/s 19(6),

any employee whose appointment was subsequent to such termination would not be entitled to the benefit of the award. Prima facie the contention

would stand to reason based on such termination. But, on a deeper consideration, we are of the view that it is not so. Section 18(3)(d) makes it

clear that an award of a Labour Court will be binding inter alia, on all persons ""who sub-sequently become employed in that establishment or part

At first night, it may appear that this provision might not be applicable to a case in which an award has been terminated u/s 19(1), for after such a

termination, it would be futile to make an award not in existence binding on employees who came subsequent to the terminating of the award. But a

combined reading of Section 18(3), Sub-sections (1) to (3) and (6) of Section 19, Section 23 and Section 29 leaves no doubt that, having regard

to the whole purpose of the Act, to wit, to bring about, conserve and promote industrial peace, the termination of an award u/s 19(6) does not

mean that the terms and conditions evolved by it and applied to the industrial relations concerned would be set at large. All that the termination u/s

19(6) would mean is that, thereafter, the parties will be at liberty to raise a fresh industrial dispute, if there is a basis there for. But, so long as the

award terminated u/s 19(6) has not been substituted by an award, the industry concerned has to proceed on the basis that the terms and conditions

of the award would continue to govern the terms of employment.

That was the view the Supreme Court was inclined to take in South Indian Bank Ltd. Vs. A.R. Chacko, . We are aware that, in that case, the

clerk in question who was promoted as an accountant was an employee at the time when the award there was in operation. But that does not

detract from the ratio of the decision that, with the termination of an award u/s 19(6),the terms and conditions as entitled by the award would

continue to govern not under the award but by a new contract which may well be assumed in the situation, in the interests of industrial peace. We

do not think that, though it would be the intention of Section 19(6) since the award has been terminated there under, the relations between the

employer and the employee would be set at large in such manner that there are no terms at all governing the industrial relationship. This idea seems

to underlie Burn and Co., Calcutta Vs. Their Employees, , Mangaldas Narandas Vs. Payment of Wages Authority and Others, and Amritsar

Rayon and Silk Mills (Private) Ltd. Vs. Amritsar Textile Clerks'' Association and Another, . We are of the view, therefore, that the second

respondent would be entitled to the benefit of the award in respect of gratuity.

The appeal is dismissed with costs of the second respondent. Counsel''s fee Rs. 150-00.