judgement:
Appeals Nos. 489 & 490 of 1961.
Appeals by special leave from the award dated March 16, 1959, of the Second Industrial Tribunal, Delhi in Reference I. D. No. 20 of 1958.
G.S. Pathak, section T. Desai, M. L. Sethi, B. Dutta and Anand Prakash, for the appellant (in C. A. No. 489/61) and the respondent (in C. A. No. 490/61).
M. C. Setalvad, Attorney General for India M.K. Ramamurthi, D. P. Singh, R. K. Garg and S.C. Agarwal, for the respondents (in C.A. No. 489/61) and the appellants (in C. A. No. 490/61).
December 14.
The judgment of the Court was delivered by DAs GUPTA,. ' J.
These two appeals by special leave, one by the employer and the other by the workmen, arise out of an industrial dispute that was referred for adjudication to the Industrial Tribunal Delhi, by an order made on January 23, 1958 by the Chief Commissioner, Delhi.
The Tribunal made its award on March 16, 1959.
Out of the numerous 237 matters that were included in the terms of reference, we are concerned in these appeals only with a few.
The employer challenges the award as regards : (1) Scales of pay, (2) Dearness allowance, (3) Adjustments, (4) Leave Rules, (5) Gratuity and (6) Retrospective effect of the award.
The workmen also attacked the award as regards the scales of pay and dearness allowance.
In addition, they have attacked the award as regards the working hours, leave rules, night shift allowance, retirement age and procedure for taking disciplinary action.
At the time of the hearing before us however the learned Attorney General, appearing for the workmen, did not press their claim for modification of the award as regards, night shift allowance, leave rules and procedure for taking disciplinary action and working hours.
It appears that when the dispute was before the Conciliation Officer, Delhi, for settlement an interim agreement was arrived at between the parties on December 20, 1957 by which the management agreed to give certain interim reliefs, ranging between Rs. 6/ to Rs. 10/ per month from the month of November 1957.
One of the terms of the agreement was that this payment "will be adjusted against the final outcome of the demands by constitutional means".
The Tribunal has in its award given a direction that this interim relief shall remain unaffected.
Taking this to be a direction that the adjustment as agreed upon of payments under the interim arrangement shall not be made, the employer has in its appeal challenged the correctness of this direction also.
The most important of the matters in dispute are the questions of the wage scale, the dearness allowance and the adjustment of existing employees into the new scales.
It appears that from 1946 onwards the Company 's workmen have had a consolidated wage scale, no distinction being made between 238 the basic wage and the dearness allowance.
This wage scale has remained practically unaltered except for some special increments given in the year 1948.
By the award the Tribunal has introduced new wage scale for certain existing categories of workmen and in some cases has introduced new scales, after amalgamating more than one category.
Thus certain railway despatchers, advertisers, Box No. sorters, filing clerks and bank clerks who were formerly in the scale of Rs. 50 4 90 EB 4 115 and Junior Clerks etc., who had a scale of Rs. 60 100EB 4 115 have all been put on a new scale of Rs. 70 5 100 EB 5 150.
There has been a similar amalgamation or clerks, assistants, cashiers, record keepers and others some of whom were on Rs. 80 175 and some on Rs. 80 203 scale, all of them being now put on a new scale of Rs. 90 200.
In both cases the starting salary has been raised; the maximum has been raised for the first category.
Supervisors and others who were formerly on three different scales, some on Rs. 125 350, some on Rs. 125 300, and some on Rs. 100 250, have all been amalgamated and have been put on a new scale of Rs. 100 350.
Obviously, this would mean a lower starting salary for some and maximum for some.
,job I)Daftries some of whom were on Rs. 70 115 scale and others on Rs. 100 155 have all been put on a new scale of Rs. 80 to Rs. 11,15, resulting thus in a lowering of starting salary for some and a rise of a higher maximum for all.
A similar lowering in the starting salary has also occurred in cases of some of the jobmachinemen.
They were formerly on two scales, one of Rs.125 175 and the other of Rs. 75 175.
The Assistant Foremen in the job Department formerly on Rs. 125 175 are put on a scale of Rs. 125 202.
Where there has been no amalgamation the new scale has resulted in a slight increase in some cases both in the starting salary and the maximum.
In some catagories, no change has been made at all, 239 It is unnecessary to give more details of the difference between the old scale and the new scale as what has been mentioned above is sufficient to indicate that there has been some change in favour of the workmen, though this change is not much.
The employer 's contention before us is that there was no case for any revision whatsoever and the Tribunal acted wrongly in making any change in the old wage scale.
The workmen 's contention on the contrary is that the changes do not go far enough.
The fixation of wage structure is among the most difficult tasks that industrial adjudication has to tackle.
On the one hand not only the demands of social justice but also the claims of national economy require that attempts should be made to secure to workmen a fair share of the national income which they help to produce, on the other hand, care has to be taken that the attempt at a fair distribution does not tend to dry up the source of the national income itself On the one hand, better living conditions for workmen that can only be possible by giving them a "living wage" will tend to increase the nation 's wealth and income on the other hand, unreasonable inroads on the profits of the capitalists might have a tendency to drive capital away from fruitful employment and even to affect prejudicially capital formation itself.
The rise in prices that often results from the rise of the workmen 's wages may in its turn affect other members of the community and may even affect prejudicially the living conditions of the workmen themselves.
The effect of such a rise in price on the Country 's international trade cannot also be always ignored.
Thus numerous complex factors, some of which are economic and some spring from social philosophy give rise to conflicting considerations that have to be borne in mind.
Nor does the process of valuation of the numorous factors remain static.
While international movements in the cause of labour have for many years influenced thinking and 240 some times even judicial thinking in such matters, in this country, the emergence of an independent demo cratic India has influenced the matter even more profoundly.
Gajendragadkar, J. speaking for the Court in Standard vacuum Refining Co., of India vs Its Workmen (1), has observed : "In constructing a wage structure in a given case industrial adjudication does take into account to some extent considerations of right and wrong, propriety and impropriety, fairness and unfairness.
As the social conscience of the general community becomes more alive and active, as the welfare policy of the State takes a more dynamic form, as the national economy progresses from stage to stage, and as under the growing strength of the trade union movement, collective bargaining enters the field, wage structure ceases to be a purely arithmetical problem.
Considerations of the financial position of the employer and the state of national economy have their say, and the requirements of a workman living in a civilised and progressive society also come to be recognised.
" In trying to keep true to the two points of social philosophy and economic necessities which vie for consideration, industrial adjudication has set for itself certain standards in the matter of wage fixation.
At the bottom of the ladder, there is the minimum basic wage which the employer of any industrial labour must pay in order to be allowed to continue an industry.
Above this is the fair wage, which may roughly be said to approximate to the need based minimum, in the sense of a wage which is "adequate to cover the normal needs of the average employee regarded as a human being in a civilised society.
" Above the fair wage is the "living wage" a wage "which will maintain the workman in the highest state of industrial efficiency, which will enable him to (1) , 543.
241 provide his family with all the material things which are needed for their health and physical well being, enough to enable him to qualify to discharge his duties as a citizen." (Cited with approval by Mr. justice Gajendragadkar in Standard Vacuum Company 's Case (1) from "The living Wage" by Philip Snowden).
While industrial adjudication will be happy to fix a wage structure which would give the workmen generally a living wage economic considerations make that only a dream for the future.
That is why the industrial tribunals in this country generally confine their horizon to the target of fixing a fair wage.
But there again, the economic factors have to be carefully considered.
For these reasons, this court has repeatedly emphasised the need of considering the problem on an industry cum region basis, and of giving careful consideration to the ability of the industry to pay.
(Vide Crown Aluminium 's Case (2); the Express Newspapers Ltd., Case (8) and the Lipton 's Case (4).
On an examination of the Tribunal 's award as regards the wage scale, we are satisfied that all the considerations mentioned above were present in the mind of the adjudicator and we are of opinion that there is nothing that would justify us in modifying the award either in favour of the employer or in favour of the workmen.
It is stated in the award that before the Tribunal the Company 's representative desired that a fair wage level within its paying capacity should be evolved though at the time he argued that existing wage structure is quite fair ""looking to the Company 's financial position as well as the comparative rates prevailing in the other concern.
" The Tribunal has not accepted the Company 's contention that the existing wage structure is fair, though at the same time it has held that the wage system needs no such radical change as alleged by the Union.
(1) , 543.
(3) (2) ; (4) [1959] Supp. 2 S.C.R. 150.
242 Mr. Pathak, who appeared before us for the Company, did not seriously suggest that the present wage structure gives the employees "a fair wage." He argued generally that no case was made out for any revision of the wage structure.
Such an extreme proposition has only to be mentioned to deserve rejection.
At the time the Tribunal was dealing with this question the wage scale of the workmen in this concern had remained practically unaltered for almost 12 years 12 years of momentous change through which social ideas have moved forward in favour of workmen getting a better share of the national income; 12 years during which the new India was born and a Constitution was framed for this new democracy "to secure to all its citizens, justice, social and economic and political" and enshrining in its 43rd Article the principle that ,the State shall endeavour to secure by suitable legislation or economic Organisation or in any other way to all workers agricultural, industrial or otherwise" among other things tea living wage and conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. . . . ".
The mere passage of time and these revolutionary changes would be sufficient to convince any right thinking man of the need for revision of wage scales which, on the face of it, were far below the "living wage" and mostly also below the " 'fair wage", provided the industry could bear the additional burden.
The case for revision becomes irresistible when one takes into consideration the further fact that the cost of living rose steeply during this period.
On the basis of 1939 cost as 100, the index for 1946 was 282.
By 1958 it had risen to 389.
It may be mentioned that since then there has been a further rise.
Nor can it be seriously suggested that this concern cannot bear the burden of an increased wage scale.
The Tribunal was, in our opinion, right in its conclusion that the material on record shows that the Company has been prospering and has financial 243 stability.
We have for ourselves examined the balance sheets and the other materials on the record and have no hesitation in agreeing with that conclusion.
Mr. Pathak 's uphill task in the face of these balance sheets already on the record to show that the Company would not be able to bear the burden of an increased wage scale has been made more difficult by the discovery that even after the imple mentation of the award the Company has made large profits during the years 1959 60, 1960 61 and 1961 62.
It appears that when the Company was given special leave to appeal to this Court the operation of the Tribunal 's award was stayed only in so far as it directed the management to pay arrears of the wages determined thereby but the operation of the award in so far as it related to the payment of wages from the date of the award was not stayed; and the management was directed to pay to the workmen from that date wages in accordance with the wage scale fixed by the Tribunal by its award under appeal.
The result of this has been that the Tribunal 's award as regards the wage scales has been implemented with effect from the date of the award and it is possible for this Court to know how such additional payment has affected the financial position of the Company.
It appears that after meeting the additional charges and also after payment of bonus and appropriation to reserves the net profits for the year 1959 60 rose to Rs. 8,04,508/ .
For the year 1960 61 these profits were Rs. 8,44,627/ .
For the year 1961 62 the profits are shown in the balance sheet as Rs. 59,955/ .
That the Company has been prospering is clear.
It has its own aeroplanes and possesses immovable properties of considerable value.
It has built up good reserves and inspite of that it has been making good profits.
It is reasonable to think that with the progress of education in the country and the increasing news mindedness of the people the future prospects of the Company are no less bright.
On a consideration 244 of all this,, we are clearly of opinion that Mr. Pathak 's contention that the wage scale fixed by the Tribunal is too heavy for the Company to bear, must be rejected.
Equally unacceptable is Mr. Pathak 's next contention that the wage scale fixed by the Tribunal operates unfavourably on this Company vis a vis two other concerns in Delhi region, viz., the Times of India, Delhi and the Statesman, Delhi.
We have compared the wage scales in these two concerns viz., the Times of India, Delhi and the Statesman, Delhi, with the wage scale under the award and have for the purpose of comparison taken into consideration the dearness allowance as fixed by the Tribunal.
The comparison shows that while in some cases the Company (the Hindustan Times) will have to pay more to its workmen than what is being paid to workmen of the same category by the Times of India, Delhi and the Statesman, Delhi, in several cases it will be less.
It has also to be borne in mind that the Times of India, Delhi and the Statesman, Delhi, are much smaller units of the newspaper industry than the Hindustan Times.
These Companies are mere adjuncts to the Times of India, Bombay and the Statesman, Calcutta, respectively.
Therefore, even if for some categories the wage scale under the award is higher than that in the Times of India, Delhi and the Statesman, Delhi, that would be no ground for modifying the award in favour of the Company.
We have therefore come to the conclusion that there is no ground whatsoever for modifying the wage scale fixed by the award in favour of the Company.
On behalf of the workmen it was strenuously contended that the increase given by the award over the previous wage scale falls far short of justice.
It is pointed out that even the Times of India, Delhi and the Statesman, Delhi, which are much smaller 245 concerns and of lesser financial stability and strength, pay to some categories of its workmen higher wages than what has been fixed by the award.
Thus our attention has been drawn to the fact that for Assistants, the Times of India, Delhi, rate is Rs. 241 402, and in the Statesman, Delhi, it is Rs. 190 297 for some and Rs. 264 463 for others while under the award the scale is Rs. 125 375.
There are several other cases also where the wage scale under the award appears to be lower than what is being paid by the Times of India, Delhi and the Statesman, Delhi.
It has been urged by the learned Attorney General that in view of the fact that the wage scale of the Company has remained practically stationary for the last 12 years and that it is indisputably well below the fair wage and the further fact that even smaller concerns in this region, like the Times of India, Delhi and the Statesman, Delhi, have been paying more to some categories of its workmen, the wage scale as fixed by the Tribunal should be raised at least for some of the categories.
There is undoubtedly some force in the contention and it maybe said that the Tribunal has been rather cautious in the matter of revision of wage scales.
Even so, it has to be remembered that where, as in the present case, the proper principles have been applied by the Tribunal, it is not the practice of this Court to interfere, ordinarily, with details of this nature when exercising its special jurisdiction under article 136 of the Constitution.
It also appears to us that the very fact that the Tribunal has been cautious in the matter of raising the wage scales has influenced it in the directions it has given on the question of adjustment of the present employees into the wage scale.
In this way some relief has been given to the present employees which might otherwise have been given by raising the wage scale.
On a consideration of all these facts we have reached the conclusion that it will not be 246 proper for us to modify the wage scales fixed by the Tribunal in favour of the workmen also.
On the question of dearness allowance it is not disputed before us that in the circumstances of the resent case the Tribunal acted rightly in awarding dearness allowance at a flat rate for all categories of workmen.
On behalf of the Company it was however urged that the Tribunal has made an obvious mistake in fixing the amount of dearness allowance at Rs. 25/ .
For fixing the rate at Rs. 25/ the Tribunal has said : "In view of the revised scales as now laid down, I think the same should further be supplemented in the circumstances stated above by a flat rate of dearness allowance in all cases, viz., Rs. 25/ with retrospective effect from the date of reference so that the lowest paid worker will start not less than Rs. 75/ .
1 direct accordingly.
" Mr. Pathak points out that the lowest paid worker for whom wage scales have been fixed will be getting under the award a minimum of Rs. 6l0/ so that with the dearness allowance of Rs. 25/ "the lowest paid worker" will start at Rs. 85/ and not Rs. 75/ .
Mr. Pathak suggests that the Tribunal has made a mistake in its calculations and that having decided that the lowest paid worker will start at not less than Rs. 75/ , it should have fixed Rs. 15/ and not Rs. 25/as the dearness allowance.
This argument however overlooks the fact that the reference as regards the dearness allowance was in respect of all categories of workmen, though the reference as regards scales of pay did not cover some categories, viz., mazdoors and canteen boys.
They therefore continue to remain on their old scale of Rs. 50 3 85.
When the Tribunal in considering the question of dearness allowance was thinking of the starting pay of the lowest paid worker 247 it had obviously these categories in mind.
Having concluded that the lowest paid worker should start at Rs. 75/ as the total amount of basic pay and dearness allowance the necessary conclusion reached by the Tribunal was that Rs. 25/ should be fixed as the dearness allowance.
It is, in our opinion, proper and desirable that the dearness allowance should not remain fixed at this figure but should be on a sliding scale.
As was pointed out in Workmen of Hindusthan Motors vs Hindusthan Motors (1), the whole purpose of dearness allowance being to neutralise a portion of the increase in the cost of living, it should ordinarily be on a sliding scale and provide for an increase on rise in the cost of living and a decrease on a fall in the cost of living.
On a consideration of all the circumstances of this case, we direct that a sliding scale be attached to the dearness allowance of Rs. 25/ per month as awarded by the Tribunal on the lines that it will be liable to be increased or decreased on the basis of Re. 1/ for every ten points in case of rise and fall in the cost of living from the base of 400, the 1939 index being taken to be 100 the sliding scale to take effect from April 1, 1959.
This brings us to the question of adjustment of the existing employees into the new scale.
The Tribunal has dealt with this matter thus : " '. the adjustment in the new scales shall be made with retrospective effect from the date of the reference, viz., 23rd January, 1958.
In making adjustment in the new scales no one shall be adversely affected and it shall be on the line laid down by the Industrial Tribunal in the case of Caltex India Ltd., at p. 659 read with para.
23 of the decision of the Labour Appellate Tribunal, reported in at page 188.
" It appears that in the case of Caltex India Ltd.
,(Supra) the Industrial Tribunal, West Bengal, gave (1) 248 the following directions for adjustment of employees into the wage scale fixed by it.
All employees for whom the scale has been stated above should be stepped up in the stage next above which the present pay is drawn.
A special increment at the rate of one increment in the new scale for every three completed years of service should be given.
The employees whose salaries are less than the minimum prescribed will be pulled up to the minimum of the prescribed scale.
If the existing salary of an employee is higher than the salary he will be entitled to under the prescribed scale, there will be no cut and he will be stepped up to the nearest increase with the increments given above.
After the salaries are adjusted, no employee should be staggered and he will continue to get future increments.
If an employee be already drawing a salary which is higher than the maximum prescribed by the award, he will be subjected to no cut in his salary.
" This was followed by a direction as regards the date by which the adjustment was to be made.
The Labour Appellate Tribunal modified these directions by introducing two provisions : (1) that the maximum of the grade should not be exceeded and (2) that the basic wage that was being paid to an employee at the date of the award of the Tribunal is not to be affected to the employees 'prejudice.
The employer 's objection is to the provision that a special increment at the rate of one increment in the new scale for every 249 three completed years of service should be given.
It is argued that such a provision may well be appropriate in a case where wage scale is being fixed for the first time or where even if there was already a wage scale in force the rate of increment in the new scale is much higher than that in the old wage scale, but not where, as in the present case, the increments under the new scale and the old scale are practically the same.
We are not impressed by this argument.
As was pointed out by this Court in a recent judgment in French Motor Car Co., Ltd. vs Its Workmen (1), what adjustment should be given is to be decided when fixing wage scales whether for the first time or in place of an old existing scale has to be decided by industrial adjudication after consideration of all the circumstances of the case.
It may well be true that in the absence of any special circumstances and adjustment of the nature as allowed in this case by allowing special increment in the new scale on the basis of service already rendered may not be appropriate.
Clearly, however, in the present case the Tribunal took into consideration in deciding this question of adjustment the fact that it had been extremely cautious as regards increasing the old wage scales.
Apparently, it thought that it would be fair to give some relief to the existing employees by means of such increase by way of adjustment while at the same time not burdening the employer with higher rates of wages for new incumbents.
In these circumstances, we do not see ally Justification for interfering with the directions given by the Tribunal in the matter of adjustment.
It will be convenient to consider at this stage the objection raised in the Company 's appeal to the Tribunal 's direction in connection with the interim agreement.
As has been stated earlier, this agreement was arrived at between the parties when the dispute was before the Conciliation Officer.
The (1)(1962) 250 relevant portion of the agreement is in these words : "It is hereby agreed between the parties that: 1.
The Management agrees to make interim relief on the following terms to every employee, excluding working journalists, drawing salary up to Rs. 400 p.m. (i)Advance payment ranging between Rs. 6/ to Rs. 10/ per month beginning from the month of November, 1957 in the following manner : (a) Those with annual increment of Rs. 3/ , Rs. 4/ , and Rs. 5/ Rs. 6/ (b) Those with annual increment of Rs. 6/ Rs.
7/ (c) Thosewith annual increment of Rs. 7/ Rs.
8/ (d) Thosewith annual increment of Rs. 10/ Rs. 10/ Note.
(i) In case any employee has already reached the ceiling of his grade, even then he would he entitled for the above benefit.
(ii) This payment will be adjusted against the final out come of the present demands by constitutional means." "The final out come of the present demands by constitutional means 's is the Tribunal 's award.
Under the agreement therefore what has been received by 251 the workmen as advance payment at Rs. 6/ or Rs. 71or Rs. 8/ or Rs. 10/ per month as interim relief has to be adjusted against what is due to be paid to them under the award.
In other words, the Company is entitled under the agreement to deduct the payments made as interim relief from what is payable to these very employees under the award.
The Tribunal 's direction that the interim relief shall remain unaffected is in effect an order that term (ii) of the agreement need not be complied with.
We can find no justification for such an order.
While it is true that industrial adjudication can and often has to modifiy existing contracts between an employer and its workmen, there can be no justification for modification of an agreement of this nature pending final settlement of a dispute.
Such a direction that the solemn words of the workmen 's representatives that interim relief which may be given will be adjusted against the relief finally given need not be complied with, is not only unfair to the employer but is also not calculated to serve the best interests of the workmen themselves.
For one thing, an order of this nature in one case by a Tribunal that such an undertaking need not be carried out is likely to hamper interim settlements generally; it is also not desirable that workmen should be encouraged to treat their undertakings as of no value.
Industrial adjudication must be careful not to encourage bad faith on the part of the workmen or the employer.
A direction as given by the Tribunal in this case that the term in the agreement that payments made will be adjusted against the final outcome need not be complied with, is unfortunately to have such effect on workmen.
We therefore set aside the Tribunal 's direction that interim relief will remain unaffected and direct that adjustments should be made in terms of the said interim arrangement.
This brings us to the question of Leave Rules.
The Company objects to the award as regards this matter in so far as it directs the Company to allow 15 252 day 's sick leave with full pay and allowances with accumulation up to six months on production of medical certificate given by a registered medical practitioner.
It also objects to the direction that the present practice as to insistence on previous application for the purpose of casual leave should not be relaxed in cases where it cannot possibly be so done in emergent and unforeseen circumstances and the direction that up to 3 days no medical certificate should be asked for.
It appears that at present the Management grants 10 days ' casual leave to the business staff and 7 days ' casual leave to all the other categories and there is no sick leave facility available.
Mr. Pathak has tried to convince us that in view of the provisions of the , no provision need be made about sickness leave at all.
, That this Act has been applied to the Company and that the workmen of the Company get the benefit of this Act is not disputed.
It is difficult to see however how the benefit that the workmen will get under this Act can affect the question of sickness leave being provided for the workmen.
This Act it has to be noticed does not provide for any leave to the workmen on the ground of sickness.
It provides in section 46 (1) (a) for periodical treatment of any insured person in case of his sickness if certified by a duly appointed medical practitioner.
It is unnecessary to mention here the several provisions in the Act; viz., Sections, 47, 48 and 49 which deal with the eligibility of workmen for sickness benefit and the extent of the benefit that may be granted.
Section 56 of the Act provides for medical benefits to the insured workman or in certain cases to the members of his family.
It appears to us clear however that in providing for periodical payments to an insured worker in case of sickness (sickness benefit) or for medical treatment or, attendance to him or the members of his family, the legislature did not intend 253 to substitute any of these benefits for the workmen 's right to get leave on full pay on the ground of sickness.
It is next contended that the Tribunal 's direction as regards sickness leave offend the provisions of Delhi Shops and Establishments Act, 1954.
Admittedly, a large number of workmen covered by the reference are governed by the provisions as regards leave under the Delhi Shops and Establishments Act, 1954.
Section 22 of that Act fixes the maximum for sickness or casual leave with wages to a period of 12 days and further provides that such leave shall riot be accumulated.
It is thus clear that as regards those workmen to whom the Delhi Shops and Establishments Act, 1954 applies the Tribunal has acted illegally in fixing the period of sick leave at 15 days and permitting accumulation.
We therefore set aside this direction in the award and direct instead that the Company shall allow to the workmen to whom the Delhi Shops and Establishments Act, 1954 applies, sickness or casual leave of a total of 12 days with full pay and allowances and that such leave shall not be accumulated.
We are also of opinion that it will not be right to have two separate leave rules for the two classes of workmen, one to whom the Delhi Shops and Establishments Act, 1954 applies and the other two whom it does not apply.
For that is likely to be a source of much discord and heartburning.
Therefore, in respect also of those workmen to whom the Delhi Shops and Establishments Act, 1954 does not apply, we think that the same period of 12 days in a year with full pay and allowances should be fixed for sickness or causal leave, and there should be no accumultation of such leave; and we direct accordingly.
We cannot find any justification for the direction of the Tribunal that the practice of insistence on 254 previous application for the purpose of casual leave should be relaxed in cases where it cannot possibly be so done in emergent and unforeseen circumstances and that upto 3 days no medical certificate should be asked for.
The leave rules of the Company as they now stand provide that ordinarily previous permission of the head of the department and the Establishment Manager shall be obtained before casual leave is taken but that when this is not possible due to sudden illness, the head of the Department or the Manager as soon as may be practicable should be informed in writing of the absence from work and of the probable duration of such absence.
In our opinion, this provision is reasonable and is calculated to meet the needs of workmen for taking leave without previous permission, in case of emergency.
In these circumstances, the further directions as regards this that have been given by the Tribunal appear to us to be unnecessary and are hereby set aside.
On the question of gratuity, the only argument seriously pressed by Mr. Pathak was that the scheme as framed by the Tribunal would put undue strain on the Company 's sources.
We have already expressed our agreement with the Tribunal 's conclusion that the Company 's financial resources are strong and stable and that not only has the Company been prospering in recent years but that its future prospects are also bright.
Therefore, we do not think that the scheme of gratuity as framed by the Tribunal is unduly favourable to the workmen or that it places any undue strain on the Company 's financial resources.
One provision in the gratuity scheme which ought to be mentioned is that under it an employee who is dismissed for misconduct shall not be entitled to any gratuity.
It has been pointed out by this Court in more than one case that having regard to the nature of gratuity it will not be proper to deprive 255 an employee of the gratuity earned by him because of his dismissal for misconduct and the proper provision to make in this connection is that where an employee is dismissed for misconduct which has resulted in financial loss to the employer the amount lost should be deducted from the amount of gratuity due.
As however in the present case, the workmen have not appealed against the award as regards the gratuity scheme framed by the Tribunal, it will not be proper for us to make the modification as indicated above.
Coming now to the question of retirement age on which the workmen have appealed, we find there is some controversy as regards the existing position.
The workmen stated in their written statement before the Tribunal that " 'at present there are no set rules in the Company in this matter.
" Their claim was that the retirement age should be fixed at 60 for all the employees of the Company.
According to the Management 's written statement "the existing superannuation system is that the age of retirement is fixed at 55." The Magagement further stated that the age of retirement " 'as fixed, that is, 55 years" is appropriate and should not be raised.
In respect of this controversy as regards the existing position there appears to be little material on the record.
From the appointment letters of some of the employees that we find on the record it appears that for some appointments made in 1955 the age of retirement was mentioned as 55.
In the several letters of appointments made prior to that year no age of retirement has been mentioned.
It is not clear, therefore, how on the question of retirement age the Tribunal proceeded on the basis that the "existing retirement" age is 55.
Proceeding on this basis the Tribunal directed "that the existing retirement age at 55 years should continue but the workers may be allowed to remain in employment and work up to 60 years if found fit.
The question of the further extension 256 should rest with the discretion of the Management.
" On behalf of the workmen the learned Attorney General has contended that the assumption that the existing retirement age is 55 is wrong in respect of most of the workmen and that except for a few persons appointed after 1955 no retirement age is fixed either in the letters of appointment or in the standing orders of the Company.
For all these employees for whom no retirement age has been fixed already, the learned Attorney General argued on the basis of the decision of this Court in Guest Keen, Williams Private Ltd., vs P. J. Sterling., (1) that it would not be fair to fix any age of superannuation.
It was held in that case that it was unfair to fix the age of superannuation of previous employees by a subsequent standing order.
The Labour Appellate Tribunal had held that it would be unreasonable and unfair to introduce a condition of retirement at the age of 55 in regard to the prior employees having regard to the fact that when they entered service there was no such limitation.
This Court felt that it would not be justified in reversing this decision of the Labour Appellate Tribunal.
Dealing next with the question whether it followed that there should be no rule of superannuation in regard to these previous employees the Court said : "In our opinion it is necessary to fix the age of superannuation even with regard to the prior employees, and we feel no difficulty in holding that it would not be unfair or unreasonable to direct that these employees should retire on attaining the age of 60.
An option to continue in service even thereafter which the respondent claimed is wholly unreasonable and is entirely inconsistent with the notion of fixing the age of superannuation itself.
Once the age of superannuation is fixed it may be open to the employer for special reasons to continue in its employment a workman who has passed that (1) ; 257 age : but it is inconceivable that when the age of superannuation is fixed it should be in the option of the employee to continue in service thereafter.
We would accordingly hold that in the circumstances of this case the rule of retirement for the previous employees in the concern should be 60 instead of 55 and that the rule of 55 should apply to all employees who enter the service of the appellant after the relevant standing orders came into force." Assuming therefore that for the majority of the employees there is no existing retirement age it would on the authority of the above case, be open to the Tribunal to fix the age of superannuation even with respect to them.
As however the Tribunal 's decision that this age should be 55 is vitiated by the incorrect assumption that there is an existing retirement age of 55 it has been necessary for us to consider the question for ourselves.
It appears that before the Tribunal the Union 's representative himself desired that the retirement age should be fixed at 58 years which may be extended up to 60 years in fit cases.
Before us the Counsel for the Company did not seriously contest that in consideration of the present day circumstances in the country it would be fair to fix the retirement age at 58.
Accordingly, we set aside the Tribunals award on this question of retirement age and fix the age at 58 years, subject to the proviso that it will be open to the Company to continue in its employment a workman who has passed that age.
This rule should apply to all the employees of the Company.
There remains for consideration the question of retrospective operation of the award.
Under section 17A of the , an award shall come into operation with effect from such date as may be specified therein but where no date is so specified it shall come into 258 operation on the date when the award becomes enforceable.
Even without a specific reference being made on this question it is open to an industrial tribunal to fix in its discretion a date from which it shall come into operation.
The reference, in the present case, included as a matter in dispute the question of retrospective effect in these words : "Whether all the above demands should be made applicable retrospectively with effect from April 1, 1956 and what directions are necessary in this respect ?" The Tribunal rejected the workmen 's claim for giving effect to its award from April 1956.
Wherever however the Tribunal has given relief the Tribunal has directed that the award should come into effect from the date of reference, i. e., January 23, 1958.
On behalf of the Company Mr. Pathak contends that there is no reason why the award should be given effect to from any date prior to the date of its pronouncement.
We are not impressed by this argument .
No general formula can be laid down as to the date from which a Tribunal should make its award effective.
That question has to be decided by the Tribunal on a consideration of circumstances of each case.
There have been cases where this Court has made an award effective from the date when the demand was first made.
There are other cases where the orders of the Tribunal directing the award to be made effective from the date of the award has not been interfered with.
It is true that in some cases this Court has modified the Tribunal 's award in such a case.
But it does not appear however that any general principles have been laid down.
Indeed, it is difficult and not even desirable that this Court should try to lay down general principles on such matters that require careful consideration of the 259 peculiar circumstances of each case for the exercise of discretion.
It is sufficient to say that we find no reason to interfere with the Tribunal 's direction in this case that the reliefs given by it would become effective from the date of the reference.
We therefore allow both the appeals in part by modifying the Tribunal 's award as regards dearness allowance, leave rules and retirement age and also as regards the adjustment of the interim relief as mentioned above.
In all other matters in appeal before us the award is confirmed.
The modifications made as regards dearness allowance will, as already stated, take effect from April 1, 1959.
The modifications as regards leave rules and as regards retirement age will take effect from this date.
In both the appeals the parties will bear their own costs.
Appeals allowed in part.

summary:
The Chief Commissioner, Delhi, referred an industrial dispute for adjudication to the Industrial Tribunal, Delhi, which gave its award on March 16, 1959.
Both the appellant and the respondents were dissatisfied with the award and they came to this Court by special leave.
The award was challenged by the appellant with regard to scales of pay, dearness allowance, adjustments, leave rules, gratuity and retrospective effect of the award.
The respondents attacked the award as regards the working hours, leave rules and retirement age.
Held, that while social justice demands that workmen should get a fair share of the national income which they help to produce, it has also to be seen that that does not result in the drying up of the source of national income itself.
Inroads 235 on the profits of the capitalists should not be such as have a tendency to drive capital away from fruitful employment and thereby affect prejudicially capital formation itself The Tribunal had applied the correct principles and the award should not be disturbed, Held, also, that the Tribunal had erred in awarding a fixed dearness allowance of Rs. 25 / .
The object of dearness allowance being to neutralise part of the rise or fall in the cost of living, it should ordinarily be on a sliding scale.
Held, that the contention of the appellant that in view of the provisions of the , no provision need be made about sickness leave at all, was rejected.
It was pointed out that in providing for periodical payments to an insured worker in case of sickness or for medical treatment or attendance to him or the members of his family under the Act of 1948, the Legislature did not intend to substitute any of these benefits for the workmen 's right to get leave on full 'Pay on the ground of sickness.
Held, that as regards those workmen to whom the Delhi Shops and Establishments Act, 1954, applied,.
the Tribunal had acted illegally in fixing the period of sick leave at 15 days and permitting accumulation.
The appellant shall allow to the workmen to whom the Delhi Shops and Establishments Act applied, sickness or casual leave for a total period of 12 days with full pay and allowances, and such leave shall not accumulate.
As it was not desirable to have two separate leave rules for two classes of workmen, one to whom the Act of 1954 applied and tile other to whom the Act did not apply, it was held that the same rule should apply to other workers also.
Held, also, that tile scheme of gratuity as framed by the tribunal was not unduly favourable to workmen and it also did not place any undue strain on the financial resources of tile Company.
As regards the provision in the gratuity scheme that an employee who is dismissed for misconduct shall not be entitled to any gratuity; it was held that the proper provision should be that where an employee is dismissed for misconduct which has resulted in financial loss to the employer, the amount of loss should be deducted from the amount of gratuity due.
The award of the Tribunal on tile question of retirement age was set aside and the retirement age was fixed at 58, subject to the proviso that it would be open to the company to continue in its employment a workmen who had passed that age, The rule was to apply to all tile employees of the Company.
236 No general formula could be laid down as to the date from which a Tribunal should make its award effective.
That question has to be decided by the Tribunal on consideration of the circumstances of each case.
There was no justification for interfering with the direction of the Tribunal that in this case the reliefs given by it should become effective from the date of the reference.
Standard Vacuum Refining Co., of India vs Its workmen, , M/s. Crown Aluminium Works vs Its workmen; , , Express Newspapers Ltd. vs Union of India, , M/S. Lipton Ltd. vs Their Workmen [1959] Supp. 2 section C. R. 150, Workmen Hindustan Motors vs Hidustan Motors, 52, French Motor Car Co. vs Their Workmen, and Guest Keen, Williams (P) Ltd. vs P. J. Sterling [1961] 1 section C. R. 348, referred to.


judgement:
Appeal No. 493 of 1960.
Appeal by special leave from the judgment and order dated April 29,1959, of the Calcutta High Court in Appeal from Original Order No. 177 of 1958.
section T. Desai, D. N. Mukherjee and B. N. Ghosh, for the appellants.
C. K. Daphtary, Solicitor General of India, section K. Kapur and P. C. Chatterjee, for the respondent.
December 12.
The judgment of the Court was delivered by SHAH,J.
The appellants are a firm carrying on business as importers in the name and style of "M. 21 Golodetz & Company" at 120, Wall Street, New York in the United States of America.
The respondents are a firm carrying on business, among others as exporters of manganese ore and their principal office of business is at Bentinck Street in the town of Calcutta.
By a contract in writing dated July 5, 1955 the respondents agreed to sell and the appellants agreed to buy 25,000 tons of manganese ore on the terms and conditions set out therein.
The contract contained the following arbitration clause : "Arbitration : Any dispute arising out of the contract is to be settled by arbitration in New York according to the rules of the American Arbitration Association.
" Between September 1956 and August 1957 the respondents supplied 5478 tons of manganese ore.
Disputes having arisen between the parties about the liability of the respondents to ship the balance of the goods not delivered, the appellants referred them on or about January 15, 1958 to the arbitration of the American Arbitration Association and claimed compensation on the plea that the respondents had unlawfully made default in shipping the balance of the goods agreed to be sold.
On February 2, 1958 the respondents commenced an action on the original side of the High Court of Calcutta claiming a decree that the written contract dated July 5, 1955 be adjudged void and delivered up and cancelled, that a perpetual injunction be issued restraining the appellants, their servants and agents from taking steps in purported enforcement of the said contract and that a declaration (if necessary) be made that the said contract stands discharged and that the parties have no rights and obligations thereunder.
It was the case of the respondents that the appellants had accepted manganese ore shipped till August 1957 in full satisfaction of their liability and that the contract was discharged and the rights and liabilities 22 of the parties thereunder came to an end.
In the alternative the respondents pleaded that the appellants had repudiated the contract or had committed breaches thereof and on that account also the contract stood discharged or had become void or voidable at their option and that they had avoided the same.
In the further alternative they pleaded that the contract had become impossible of further performance and that the same stood frustrated or discharged and they were exempted from further performance thereof.
The appellants thereupon petitioned the High Court of Calcutta for an order that the proceedings in suit No. 194 of 1958 commenced by the respondents be stayed by an order under section 34 of the X of 1940.
and that an injunction be issued restraining the respondents, their agents and servants from proceeding with the hearing of the suit.
Ray, J, who heard the petition held that to the agreement to submit the disputes to arbitration to a foreign arbitral body section 34 of the Indian , applied that the remedy of the party aggrieved by the manner in which the proceedings are conducted, or by the award was to contest the arbitration proceeding and the award in the foreign tribunal, according to the law applicable thereto, and that there was no sufficient reason for not staying the action filed in breach of the agreement to refer the disputes arising under the contract to arbitration.
In appeal under the Letters Patent against the order, the High Court held that the Court of first instance had not exercised its discretion properly for it had failed to take into consideration certain important circumstances emerging from the evidence, viz. that all the evidence regarding the contract and the disputes was in India, that there were on account of the restrictions imposed by the Government of India special difficulties in securing foreign exchange for producing evidence before a foreign arbitration tribunal, that it would be impossible for the respondents to produce their evidence and there 23 fore the foreign arbitration tribunal "would Dot be a safe and convenient forum for a just and proper decision of the disputes between the parties.
" The learned judges also observed that it was conceded by the Advocate General appearing on behalf of the appellants that the entire matter would be governed by the Indian laws, the Indian and the Indian Contract Act and on that account also the discretion of the Court to refuse to stay the suit should be exercised.
The High Court accordingly reversed the judgment of Ray, J., and vacated the order passed by him.
Against that order, with special leave, this appeal is preferred.
We will assume for the purpose of this appeal that section 34 of the invests a Court in India with authority to stay a legal proceeding commenced by a party to an arbitration agreement against any other party thereto in respect of any matter agreed to be referred, even when the agreement is to submit it to a foreign arbitration tribunal.
Where a party to an arbitration agreement commences an action for determination of a matter agreed to be referred under an arbitration agreement the Court normally favours stay of the action leaving the plaintiff to resort to the tribunal chosen by the parties for adjudication.
The Court in such a case is unwilling to countenance, unless there are sufficient reasons, breach of the solemn obligation to seek resort to the tribunal selected by him, if the other party thereto still remains ready and willing to do all things necessary for the proper conduct of the arbitration This rule applies to arbitrations by tribunals, foreign as well as domestic.
The power enunciated by section 34 of the is inherent in the Court : the Court insists, unless sufficient reason to the contrary is made out, upon compelling the parties to abide by the entire bargain, for not to do so would be to allow a party to the contract to approbate and reprobate, and this consideration may 24 be stronger in cases where there is an agreement to submit the dispute arising under the contract to a foreign arbitral tribunal.
A clause in a commercial transaction between merchants residing in different countries to go to arbitration is an integral part of the transaction, on the faith of which the contract is entered into, but that does not preclude the Court having territorial jurisdiction from entertaining a suit at the instance of one of the parties to the contract, even in breach of the covenant for arbitration.
The Court may in such a case refuse its assistance in a proper case, when the party seeking it is without sufficient reason resiling from the bargain.
When the Court refuses to stay the suit it declines to hold a party to his bargain, because of special reasons which make it inequitable to do so.
The Court ordinarily requires the parties to resort for resolving disputes arising under a contract to the tribunal contemplated by them at the time of ' the contract.
That is not because the Court regards itself bound to abdicate its jurisdiction in respect of disputes within its cognizance, it merely seeks to promote the sanctity of contracts, and for that purpose stays the Suit.
The jurisdiction of the Court to try the suit remains undisputed : but the discretion of the Court is on grounds of equity interposed.
The Court is therefore not obliged to grant stay merely because the parties have even under a commercial contract agreed to submit their dispute in a matter to an arbitration tribunal in a foreign country.
It is for the Court, having regard to all the circumstances, to arrive at a conclusion whether sufficient reasons are made out for refusing to grant stay.
Whether the circumstances in a given case make out sufficient reasons for refusing to stay a suit is essentially a question of fact.
In the present case the circumstances, in our judgment, are somewhat peculiar.
The appellants in their petition for stay averred that the petition was bona fide, and was filed at the earliest possible 25 opportunity, that the appellants were ready and willing to do all things necessary for the proper conduct of the arbitration proceeding and there was no sufficient reason why the matters in respect of which the suit had been filed could not be referred to arbitration in accordance with the arbitration agreement.
The respondents by their counter affidavit contended that the entire evidence regarding the subject matter of the suit and all the witnesses in connection therewith were in India and that no part of the evidence regarding any of the aforesaid matters was in New York.
They also submitted that the proper law applicable to the contract dated July 5, 1955 was the Indian law and that the Indian law of Contracts would govern the rights and obligations of the parties.
They also contended that the suit raised difficult questions of law applicable to the contract, and on that account also they should not be required to submit the dispute to adjudication by lay men.
It was also submitted that the arbitration clause even if it was binding on the respondents firm contemplated a foreign arbitration i.e. the arbitration was to be held in New York and any award, that might be made would be a foreign award, the arbitrators not being subject to the control of the Courts in India and therefore the provisions of the including section 34 would not be availed of by the appellants.
By their counter affidavit the appellants did not challenge the assertion made by the respondents that all the evidence in connection with the dispute was in India and that no part of the evidence was in New York.
The constituted attorney of the appellants in paragraph 11 of his counter affidavit merely affirmed that " 'there is no sufficient reason why the matters in respect of which the said suit has been filed should not be referred to arbitration in accordance with the arbitration clause in the said agreement.
I deny that there is any valid and/or sufficient reason why the said disputes which are the subject matter of the said suit should not be so referred 26 to arbitration.
I further say that it would be a cause of injustice to the petitioners to permit the respondents, subsequent to the conclusion of a contract to pick and to choose as whim or prejudice may dictate which clauses are binding and which are "inoperative." He further stated in paragraph 12 I do not admit that evidence with regard to matters mentioned in the said paragraph (10(a) of the res pondent 's affidavit) is necessary or cannot be given before the arbitrators as alleged.
In particular, deny that if arbitration is held in terms of the agreement as deliberately concluded by and between the parties there will be any denial of justice as alleged or at all.
I do not admit that it will be necessary or that it will not be possible for the respondent to send any representative or to take any witness to New York as alleged.
On the other hand, if the suit is not stayed, the petitioners will be greatly prejudiced and will suffer hardship.
" The High Court addressed itself to the question, whether the pleas raised by the respondents constituted sufficient reason within the meaning of the , and pointed out, and in our judgment it was right in so doing, that the statement made in the affidavit of the respondent had remained practically unchallenged, that all the evidence in the case relating to the disputes was in India and that was a strong ground for not exercising the discretion in favour of the appellants.
It must be observed that having regard to the severe restrictions imposed in the matter of providing foreign exchange to individual citizens it would be impossible for the respondents to take their witnesses to New York and to attend before the arbitrators at the arbitration proceeding to defend the case against them and the proceeding before the arbitrators would in effect be ex parte.
That would result in injustice to the respondents.
Undoubtedly the appellants would be put to some inconvenience if they are required to defend 27 the suit filed against them in India, but the High Court has considered the balance of inconvenience and the other circumstances and has come to the conclusion, and in our judgment that conclusion is right, that the facts established make out 'sufficient reason ' for not granting stay.
It was urged by counsel for the appellants that the High Court for reasons which were not adequate interfered with the order which was within the discretion of the trial judge and on that account the order must be set aside.
But the High Court has pointed out that Ray, J., 'did not give full, proper and adequate consideration to all the circumstances and failed to apply his mind to the relevant affidavits ' from which it emerged that all the evidence relating to the dispute was in India and that he did not express his views on the diverse contentions raised and remained content to observe that he was not in a position to decide the questions raised thereby and granted stay because he did not find any compelling reasons for exercising the discretion against the appellants.
This criticism of the High Court appears not to be unjustified.
The High Court was therefore competent on the view expressed in interfering with the discretion.
The two Courts below have differed on the question as to the law applicable to the contract.
Ray, J., held that the contract was governed by the American law.
In appeal Mr. section Choudhry appearing for the appellants propounded that view, but the Advocate General of Bengal who followed him conceded (as observed by the High Court) that the "entire matter would be governed by the Indian law, the matter of arbitration by the Indian , and the other matters under the aforesaid contract by the Indian Contract Act, x x x x x so far as the rights and obligations under the disputed contract are concerned, the parties must now be taken 28 to have accepted the Indian Contract Act as the relevant law for their determination.
" Counsel for the appellants say that no such concession was made before the High Court by the Advocate General, and the observations made in the judgment were the result of some misconception.
Counsel relies in support of this submission upon an affidavit sworn by one Surhid Mohan Sanyal constituted attorney of the appellants filed in this Court on the day on which special leave to appeal was granted.
Apart from the circumstance that the affidavit is couched in terms which are vague, and the denial is not sworn on matters within the personal knowledge of the deponent, it is a somewhat singular circumstance, that Sanyal who swore the affidavit relied upon, did not when he swore an affidavit in support of the petition for certificate under article 133 of the Constitution before the High Court, make any such assertion.
But on the view expressed by us, we deem it advisable not to express any opinion on the question as to the law applicable to the contract.
It will be for the Court trying the suit to deal with that question, and to decide the suit.
The appeal therefore fails and is dismissed with costs.
Appeal dismissed.

dataset_name: IN-Abs

summary:
The appellants are a firm carrying on business in the United States of America.
The respondents are an Indian Firm.
These two firms entered into a contract in writing by which the appellant agreed to buy certain goods from the respondents.
An arbitration clause in the contract provided that disputes arising out of the contract are to be settled by arbitration in New York according to the rules of the American Arbitration Association.
Disputes having arisen the appellants referred them to arbitration.
The respondents thereupon filed a suit on the Original side of the Calcutta High Court for the cancellation of the contract and for the issue of a perpetual injunction restraining the appellants from taking steps in purported enforcement of the contract.
The appellants then filed a petition before the same High Court for the stay of that suit under section 34 of the .
This petition was heard by a Single Judge who held that the remedy of the party aggrieved by manner in which the proceedings are conducted by foreign Tribunal was to contest the proceedings according to the law applicable to the tribunal and that the respondents have not shown sufficient reasons for not granting stay.
In appeal under the Letters Patent the order was set aside and the appellants appealed with special leave.
The main question before this Court was whether the Court of first instance has or has not exercised its discretion properly in granting stay.
Held, that a clause in a commercial contract between mer chants residing in different countries to go to arbitration is 20 an integral part of the contract on the faith of which the contract is entered into, but that does not preclude the court having territorial jurisdiction from entertaining a suit at the instance of one of the parties to the contract even in breach of the covenant.
The court ordinarily requires the parties to resort for resolving disputes arising under a contract to the tribunal contemplated by them at the time of the contract.
The court may in such cases refuse its assistance in a proper case when the party seeking it is without sufficient reason resiling from the bargain.
It is for the court having regard to all the circumstances to arrive at a conclusion whether sufficient reasons are made out for refusing to grant stay.
Whether the circumstances in a given case make out sufficient reasons for refusing to stay a suit is essentially a question of fact.
In the present case all the evidence of the parties was in India, and the current restrictions imposed by the Government of India on the availability of foreign exchange, made it impossible for the respondents to carry their witnesses to New York for examination before the arbitrator.
The proceeding before the arbitrator would in effect be ex parte.
The High Court was therefore right in its conclusion, on a review of the balance of convenience, that stay should not be granted.


judgement:
Appeals Nos. 94 to 97 of 1960.
Appeals from the judgment and order dated March 15, 1956, of the ' Allahabad High Court in First Appeals Nos.
172, 364, and 379 of 1954.
Veda Vyasa, R. K. Garg, D. P. Singh, Shiv Shastri and K. K. Jain, for the appellant (in C. As.
Nos. 94 96/60) and respondent No. 2 (in C. A. No. 97 of 1960).
Rameshwar Nath, section N. Andley and P. L. Vohra, for the appellant (in C. A. No. 97/60) respondent No. 2 (in C. A. No. 94/60) and respondent No. 1 (in C. As .
Nos. 95 and 96/60).
K. L. Gossain and Sohan Lal Pandhi for respondent No. 1 (in C. As.
94 and 97/60) respondent No. 2 (in C. A. No. 95 of 60) and respondent No. 4 (in C. A. No. 96/60).
Harbans Singh, for respondent No. 3 (in C. A. No. 94/60).
J. P. Agarwal, for respondent No. 4 (in C. A. No. 94160) respondents No. section 3 and 4 (in C. A. No. 95/60) respondents Nos.
I and 3 (in C. A. No. 96/60) and respondents Nos. 3 and 4 (in C. A. No. 97/60).
318 1962.
December 17.
The relevant facts are briefly as follows : The plaintiff Kundanlal and the defendants 1 to 5 Banarsi Das, Kanshi Ram, Kundan Lal, Munnalal, Devi Chand and Sheo Prasad are brothers and formed a joint Hindu Family, till the year 1936.
Amongst other properties the family owned a sugar mill at Bijnor in Uttar Pradesh called "Sheo Prasad Banarsi das Sugar Mills".
After the disruption of the family the brothers decided to carry on the business of the said sugar mill as partners instead of as members of a joint Hindu Family.
The partnership was to be at will and each of the brothers was to share all the profits and losses equally.
The mill was to be managed by one of the brothers who was to be designated as the managing partner and the agreement arrived at amongst the brothers provided that for the year 1936 37, which began on September 1,1936, the first defendant Banarsi Das, who is the appellant in Civil Appeals 94 to 96 of 1960, was to be the managing partner.
The agreement provided that for subsequent years the person unanimously nominated by the brothers was to be the managing partner and till such unanimous nomination was made, the person functioning as managing partner in the previous year must continue.
For the years 1941 44, Kundanlal was the managing partner.
On May 13,1944, Sheo Prasad defendant No. 5 now deceased, instituted a suit in the court of the Sub ordinate judge, First Class, Lahore, for dissolution of partnership and rendition of accounts against Kundanlal and joined the other brothers as defendants to the suit, In the course of that 319 suit the court, by its order dated August 3,1944, appointed one Mr. P.C.Mahajan, Pleader, as Receiver but as the parties were dissatisfied with the order the matter was taken up to the High Court in revision where they came to terms.
In pursuance of the agreement between the parties the High Court appointed Kanshiram as Receiver in place of Mr. Mahajan as from April 5,1945.
In the meanwhile, the District Magistrate, Bijnor took over the mill under the Defence of India Rules and appointed Kundanlal and his son to work the mill as agents of the U. P. Government for the year 1944 45.
This lease was renewed by the Government for the year 1945 46.
On August 28,1956, the parties, except Devi Chand, made an application to the Court at Lahore praying that the Receiver be ordered to execute a lease in favour of Banarsidas for a period of five years.
It may be mentioned that this application was made at the suggestion of the District Magistrate; Bijnor.
The Subordinate Judge made an order in terms of the application.
In September 1946, Banarsidas obtained possession of the mill.
It may be mentioned that Sheo Prasad had in the meanwhile applied to the court for distribution amongst the erstwhile partners of an amount of Rs. 8,10,000/(out of the total of Rs. 8,30,000/ ) which was lying with the Receiver and suggested that the amount which fell due to Kundanlal and Banarsidas should be withheld because they had to render accounts.
However, the aforesaid amount lying with the receiver was distributed amongst all the brothers and Devichand acknowledged receipt on November 14, 1946.
On October II, 1947, the Lahore suit was dismissed for default, the parties having migrated to India consequent on the partition of the country.
On November 8,1947, Sheo Prasad instituted a suit before the court of Civil judge, Bijnor against his brothers for a permanent injunction restraining Banarsidas from acting as Receiver.
The suit, how 320 ever, was dismissed on March 3,1948.
On July 16, 1948, Sheo Prasad transferred his 1/6th share to Banarsidas and since then Banarsidas has been getting the profits both in respect of his own share as well as in respect of that of Sheo Prasad.
On October 7,1948, the suit out of which these appeals arise was instituted by Kundanlal against all his brothers claiming the reliefs set out in para 29 of the plaint.
The reliefs are as follows : "(a) That it may be declared that the partner ship of the Shiv Prasad Banarsi Das Sugar Mills, Bijnor between the parties was dissolved on 13th May, 1944 and if in opinion of the court the partnership is still in existence, the court may be pleased to dissolve it.
Valued at Rs. 5000.
(b) That an account be taken from defendants I and 2 or any of them and decree be passed in favour of the plaintiff for the amount that may be found to be due to the plaintiff on account of his share in the assets and profits and sums of money in their possession.
Valued at Rs. 500.
(c) That a pendete lite interim Receiver may be appointed for the Seth Shiva Prasad Banarsi Das Sugar Mills, Bijnor.
(d) Any other relief which the plaintiff may be entitled against any or either of the defendants as the court may deem fit to grant.
(e) Costs may be awarded to the plaintiff.
" On July 30, 1949 , Banarsidas filed his written statement but none of the other dependents put in an 321 appearance.
On Decemberl8,1950, an application which had been made for the appointment of a Receiver was dismissed on the ground that kanshi Ram who had been appointed as Receiver by the Lahore High Court continued to be the Receiver.
It may be mentioned that during the pendency of this suit the appellant Banarsidas entered into an agreement with Devchand and Kanshi Ram whereunder he took over all their rights and interests in the said mill for a period of five years commencing from July 1, 1951.
On February 19,1951, he made an application to the court for directing Kanshi Ram to give a lease of the mill to him for a period of five years commencing from July 1, 1951.
It may be mentioned that under an earlier arrangement Banarsidas had obtained a lease for a similar term which was due to expire on June 30, 1951.
On April 26 1951, one Mr. Mathur was appointed Receiver by the court and in july 1 951, he granted a lease for five years to Kundanlal on certain terms which would be settled by the court.
It may be appropriate to mention here that, issues in the suit instituted by Kundanlal were framed on December 7, 1951, and one of the important issues was whether the lease dated September 12, 1946, granted to Banarsidas was void ab initio or wits voidable and in either case what was its effect.
On April 2, 1954, the advocate appearing for Kundanlal stated that he did not wish to press this issue and that the only question left was of taking accounts.
In view of this concession by the plaintiff, the Court decreed the suit in the following terms: "1.
The suit is decreed for declaration that the section B. Sugar Mills, Bijnor, stood dissolved with effect from 13th May, 1944.
The plaintiff 's share is declared to be 1/6th; of defendant No. 1 Seth Banarsi Das as 1/3rd and of defendants 2 to 4 1/6th each.
322 2.
Seth Kanshi Ram is held liable to render accounts to the plaintiff and other defendants in respect of joint stores and lubricants in Exhibits I and 7. 3.
Shri P. N. Mathur shall continue to be the receiver till further orders.
And it is ordered that Shri Kashi Nath who is appointed Commissioner for the purpose of winding up the affairs of the Mills, in this case, shall prepare accounts of the credits, properties and effects and stocks now belonging to the said mills and then submit the report to the court.
After the report has been submitted and objections heard and decided, the court would fix a date for the sale of the assets of the Mills.
The Commissioner shall receive instructions from the court from time to time.
Three appeals were preferred before the High Court against this decision.
One was by Kanshi Ram, another by Banarsidas and the third was by Munnalal.
It may be mentioned here that the suit has been decreed ex parte against both Kanshi Ram and Munna Lal.
It may also be mentioned that even in the appeals the winding up of the partnership business and the appointment of Mr. Kashi Nath as Commissioner for this purpose was not challenged by any party to the appeals.
These appeals were heard together and were disposed of by a common judgment by the High Court on March 15, 1958.
The High Court, in effect, dismissed the appeals of Banarsidas and Munnalal but granted partially the appeal of Kanshi Ram.
As a result of the High Court 's decision, Kundanlal 's suit stood decreed for declaration that the partnership 323 should be dissolved with effect from May 13, 1944, and that the six brothers had shares in the partnership as found by the trial court.
But the suit stood dismissed with regard to other reliefs.
As there were three appeals before the High Court, the appellant Banarsidas has preferred three separate appeals for complying with the requirements of the law.
Before the High Court the stand taken by the parties was this : Devichand and Munnalal wanted that the winding up order should be set aside while Kundanlal wanted that it should be upheld but that he should not be asked to render any accounts.
Kanshi Ram contended that the suit was barred by time and that at any rate he should not be called upon to account.
The appellant Banarsidas wanted that the winding up order should be maintained and also wanted that accounts should be rendered both by Kundanlal and Kanshi Ram.
The ground on which the High Court dismissed the suit was that the suit for accounts was barred by article 106 of the Limitation Act.
It was, however, contended before the High Court on behalf of the plaintiff that although a suit for accounts and share of profits may be barred by time, the suit in so far as it related to the distribution of the assets of the dissolved firm was not barred by limitation as such a suit falls outside article 106 of the Limitation Act.
This contention was also rejected by the High Court and it held that not only the claim for accounts and share for profits was time barred but also the claim for distribution of the assets of the dissolved firm was time barred.
The High Court was alive to the fact that the plea of limitation was not taken by any of the defendants in the trial court but was of the opinion that the plaint itself disclosed that the Suit was barred by time and, therefore, it was the duty of the court under section 3 of the Limitation Act to dismiss it.
It was then contented before the High Court on behalf of the plaintiff that as in none of the appeals preferred 324 before it the appellants had questioned that portion of the decree which granted the plaintiff the relief of a share in the assets of the partnership and therefore it ought not to be interfered with.
The High Court, however, resorted to O. 41, r. 33 of the Code of Civil Procedure and held that under this provision, it was competent to it to disallow the claim decreed by the trial court.
Upon this view, the High Court allowed Kanshi Ram 's appeal, but lost sight of the fact that same order had to be made with regard to the moneys lying in the court.
In his appeal, it was contended by Banarsidas that that portion of the decree which declared the partnership to have been dissolved on May 13, 1944, should be set aside.
But the High Court refused to permit him to urge this point in as much as he had admitted in his written statement that the partnership was dissolved on May 13,1944.
The High Court also said that the decree which had been passed against Banarsidas in so far as this relief is concerned was a consent decree and that an appeal therefrom is barred by s.96, sub section
(3), of the Code of Civil Procedure.
Upon this view, the High Court dismissed his appeal.
Dealing with Munnalal 's case, the High Court observed that the only relief sought by him was that Banarsidas should be asked to render accounts for the year 1944 1945, and that as it had already held, while dealing with Kanshi Ram 's appeal that this claim was barred by time, his appeal should also be dismissed.
Banarsidas has come up in appeal against the judgments and decrees of the High Court in all the three appeals and his appeals are Civil Appeals Nos.
94 to 96 of 1960.
Kundanlal has preferred an appeal from the judgment and decree of the High Court in Kanshi Ram 's appeal, which is numbered 325 Civil Appeal No. 97 of 1960.
This judgment governs all these appeal.
The points raised by Mr. Veda Vyasa on behalf of Banarsidas are these : (1) Under the Partnership Act, the partners are entitled to have the business of the partnership wound up even though a suit for accounts is barred under article 106 of the Limitation Act.
(2) Kanshi Ram having been appointed a Receiver by the Court stood in a fiduciary relationship to the other partners and the assets which were in his possession must be deemed to have been held by him for the benefit of all the partners.
Therefore, independently of any other consideration, he was bound to render accounts.
(3) The question of ' limitation was not raised in the plaint or the grounds of appeal before the High Court and as it is a mixed question of fact and law, it should not have been made this foundation of the decision of the High Court.
If it was thought necessary to allow the point to be raised in view of the provisions of section 3 of the Limitation Act, the courts should at least have followed the provisions of O. 41, r. 25, Code of Civil Procedure, and framed an issue on the point and remitted it for a finding to the trial court.
(4) The Court was wrong in holding that limitation for the suit commenced on May 13, 1944.
(5) The High Court was wrong in resorting to the provisions of O.41, r.33, of the code of Civil Procedure.
Before we consider the points raised by Mr. Veda Vyasa, we would like to point Out that at 326 the commencement of the argument, Mr. Veda Vyasa made an offer that if all the parties agreed, Banarsidas was prepared to waive his claim for accounts against Kundanlal and Kanshi Ram provided that the decree of the trial court was restored in other respects.
While the learned counsel appearing for those two Parties were willing to accept the offer, two others were not, and, therefore, we must proceed to decide the appeals on their merits.
The most important point to be considered is whether the suit was barred by limitation.
If the appellants in these appeals succeed on this point, the first, second and fifth points will really not arise for consideration.
In the plaint in the present suit, the plaintiff Kundanlal alleged in para 10 that the partnership being at will it stood dissolved on May 13, 1944, when Sheo Prasad filed suit No 105 of 1944 in the court of the Sub Judge, Lahore.
No doubt, as pointed out by the High Court, Banarsidas has admitted this fact in his written statement at no less than three places.
The admission, however, would bind him only in so far as facts are concerned but not in so far as it relates to a question of law.
It is an admitted fact that the partnership was at will.
Even so, Mr. Veda Vyasa points out, the mere filing of a suit for dissolution of such a partnership does not amount to a notice for dissolution of the partnership.
In this connection, he relies upon 68, Corpus Juris Secundum, P. 929.
There the law is stated thus : The mere fact that a party goes to court asking for dissolution does not operate as notice of dissolution.
, He then points out that under O.20, r. 15, of the Code of Civil Procedure, a partnership would stand dissolved as from the date stated in the decree, and that as the Lahore suit was dismissed in default arid no decree was ever passed therein it would be incorrect even to say that the partnership at all stood dissolved because of the institution of the suit.
On the other hand, it was contended on behalf of some 327 of the respondents that the partnership being one at will, it must be deemed to have been dissolved from the date on which the suit for dissolution was instituted and in this connection reference was made to the provisions of sub section
(1) of section 43 of the Partnership Act which reads thus : "(1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.
" The argument seems to be based on the analogy of suits for partition of joint Hindu family property, with regard to which it is settled law that if all the parties are majors, the institution of a suit for partition will result in the severance of the joint status of the members of the family.
The analogy however cannot apply, because, the rights of the partners of a firm to the property of the firm are of a different character from those of the members of a joint Hindu family.
While the members of a joint Hindu family hold an undivided interest in the family property, the partners of a firm hold interest only as tenants in common.
Now as a result of the institution of a suit for partition, normally the joint status is deemed to be severed, but then, from that time onwards they hold the property as tenants in common i.e., their rights would thenceforth be somewhat similar to those of partners of ' a firm.
In a partnership at will, if one of the partners seeks its desolution, what he wants is that the firm should be wound tip, that be should be given his individual share in the assets of the firm (or may be that he should be discharged from any liability with respect to the business of the firm apart from what may be found to be due from him after taking accounts) and that the firm should no longer exist.
He can call for the dissolution of the firm by giving a notice as provided in sub section
(1) of section 43 i.e., without the intervention of 328 the court, but if he does not choose to do that and wants to go to the court for effecting the dissolution of the firm, lie will, no doubt, be bound by the procedure laid down in 0.20, r. of the Code of Civil Procedure, which reads thus: "Where a suit is for the dissolution of a partnership or the taking of partnership accounts, the Court, before passing a final decree, may pass a preliminary decree declaring the proportionate share of the parties, fixing the day on which the partnership shall stand dissolved or be deemed to have been dissolved, and directing such accounts to be taken, and other acts to be done, as it thinks fit.
" This rule makes the position clear.
No doubt, this rule is of general application, that is, to partnerships at will as well as those other than at will; but there are no limitations in this provision confining its operation only to partnerships other than those at will.
Sub section
(1) of section 43 of the Partnership Act does not say what will be the date from which the firm will be deemed to be dissolved.
For ascertaining that, we have to go to sub section
(2) which reads thus : "The firm is dissolved as from the date men tioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.
" Now, it will be clear that this provision contemplates the mentioning of a date from which the firm would stand dissolved.
Mentioning of such a date would be entirely foreign Lo a plaint in a suit for dissolution of partnership and therefore such a plaint cannot fall within the expression "notice" used in the Sub Section.
It would follow therefore that the date of service of a summons accompanied by a copy of a plaint in the suit for dissolution of 329 partnership cannot be regarded as the date of dissolution of partnership and section 43 is of no assistance.
Even assuming, however, that the term "notice" in the provision is wide enough to include within it a plaint filed in a suit for dissolution of partnership, the sub section itself provides that the firm will be deemed to be dissolved as from the date of communication of the notice.
It would follow, therefore, that a partnership would be deemed to be dissolved when the summons accompanied by a copy of the plaint is served on the defendant, where there is only one defendant, and on all defendants, when there are several defendants.
Since a partnership will be deemed to be dissolved only from one date, the date of dissolution would have to be regarded to be the one on which the last summons was served.
Now, if the High Court wanted to give the benefit of the provisions of section 43 to any of the parties defendants before it , it should have borne in mind the full implications of those provisions.
We have no material on record for ascertaing the date on which the last summons was served in this case.
Since that date is not known or could have been known by the High Court, it was in error in holding that the suit was barred by time.
The High Court has overlooked the fact that even upon the argument addressed before it on behalf of Kanshi Rain, the question of limitation was not one purely of law but was a mixed question of fact and law and, therefore, it was not proper for it to allow it to be raised for the first time in argument.
We are satisfied that what the High Court has done has caused prejudice to some of the parties to the suit and on that ground alone, we would be justified in setting aside its decision.
If the High Court felt overwhelmed by the provisions of section 3 of the limitation Act, it should at least have given an opportunity to the parties which supported the 330 decree of the trial court to meet the plea of limitation by amending their pleadings.
After allowing the pleadings to be amended, the High Court should have framed an issue and remitted it for a finding to the trial Court.
Instead of doing so, it has chosen to treat the pleading of one of the defendants as conclusive not only on the question of fact but also on the question of law and dismissed the suit.
It is quite possible that had an opportunity been given to the defendants, they could have established, in addition to proving the dates on which the summonses were served, that the suit was not barred by time because of acknowledgment in the course of the discussion, the High Court had said that it was not suggested before it by anyone that the claim was not barred by reason of acknowledgments.
Apparently, no such argument was advanceb before it on behalf of the plaintiff and the defendant Banarsidas because the counsel were apparently taken by surprise and had no opportunity to obtain instructions on this aspect of the case.
We are clearly of opinion that the High Court was in error in allowing the plea of limitation to be raised before it particularly by defendants who had not even filed a written statement in the case.
We do not think that this was a fit case for permitting an entirely new point to be raised by a non contesting party to the suit.
In view of our decision on this point, it would follow that the High Court 's decision must be set aside and that of the trial court restored.
We may, however, mention that some of the parties including the appellant Banarsidas and the plaintiff respondent, Kundenlal as well as the defendant respondent Kanshi Ram were agreeable to certain variations in the decree.
But as there were other parties besides them to whom these variations are not acceptable, we are bound to decide the appeals on merits.
For the aforesaid reasons, we allow the appeals of Banarsidas and Kundanlal and restore the decree of the trial 331 court, but make no order as to costs.
Along with the appeals, we heard two Civil Miscellaneous Petitions, Nos.
1482 of 1962 and 1534 of 1962.
The first is to the effect that the lease granted by this Court during the pendency of these appeals should be terminated early.
It is said that the reason why the term of five years was fixed was that this Court was seized with the litigation and it was expected to last for five years.
But as it happens, it has terminated within about a year and a half and therefore there is no reason for the lease to continue.
Apart from the fact that it would not be in the interest of the parties to determine the lease before its expiry we doubt whether we can legally do SO.
We, therefore, reject this application.
As regards the other application, it is agreed between parties that it should be considered by the Receiver when the assets are distributed.
We may also mention that during arguments it was stated before us on behalf of Banarsidas that he had installed some new machinery for the efficient running of the mill and that before the mill is sold he should be allowed to remove the machinery.
It was suggested that perhaps it would be in the interest of all the parties if the mill is sold along with the new machinery at the date of sale.
The other parties, however said that it would be best if Banarsidas removes the machinery before the expiry of the lease.
In the circumstances, we can give no direction in the matter.
It will be open to the parties, however, to agree upon the course to be adopted when the Receiver sets about selling the machinery, or if they do not agree, to obtain directions from the High Court.
While we dismiss the Civil Miscellaneous Petitions, we make no order as to costs.
Appeals allowed.

summary:
The plaintiff filed a suit against his brothers who had for merly constituted a joint family for a declaration that the partnership which had been formed by them after they ceased to be joint in respect of a sugar mill stood dissolved on May 13, 1944, on which date one of the brothers had filed an earlier suit for dissolution of the partnership.
The earlier suit had been dismissed for default.
The plaintiff in the present suit also prayed for a decree for accounts from defendants I and 2 as well as for the appointment of a Receiver.
The trial court decreed the suit, ordered winding up and appointed a Commissioner.
It also directed the accounts prayed for.
Before the High Court Kanshi Ram who had not filed a written statement and against whom the proceedings in the trial court had been ex parte contended that the suit was barred by limitation and in any event he should not be called upon to account.
The plaintiff contended that the suit was one for distribution of the assets of a dissolved firm and was not barred by limitation.
The High Court while noticing that the plea of limitation taken by one of the parties was raised before it for the first time, held that by reason of section 3 of the Limitation Act it was bound to take notice of the bar of limitation and dismissed the suit.
Having decided Kanshi Ram 's plea the High Court passed consequential orders with regard to the several appeals by the other defendants.
On appeal it was contended in this Court that the question of limitation which was not raised even in the grounds of appeal before the High Court was a mixed question of fact and law and it should not have been entertained by the High Court.
Hold, that the suit for dissolution filed on May 13, 1944, had ended in a dismissal for default, and as such no date 317 of dissolution of the partnership as contemplated by 0.20, r. 15, of the Code of Civil Procedure had been fixed by the Court; the plaint could not be construed as the notice contemplated by section 43 of the Partnership Act, to terminate the partnership.
Even on the assumption that the summons accompanied by the plaint could be said to be the service of notice for dissolution of the partnership, the date of dissolution could only be the date on which the last of the partners was served.
With all these questions of fact to be investigated, the High Court had committed an error in treating the question of limitation as purely one of law and allowing it to be raised at the hearing for the first time before it, at the instance of a party who had not filed a written statement and raised an issue on the question before the trial court.