Supreme Court Modifies Judgment, Orders Payment of Principal with Interest

SUDHIR CHANDRA SARKAR Versus TATA IRON & STEEL

SUDHIR CHANDRA SARKAR Versus TATA IRON & STEEL - 1984 AIR 1064, 1984 (3) SCR 325, 1984 (3) SCC 369 Issues Involved:
1. Entitlement to Gratuity
2. Jurisdiction of Civil Court
3. Discretionary Nature of Gratuity Payment
4. Statutory Nature of Standing Orders
5. Effect of Rule 10 on Gratuity Payment
6. Interest on Gratuity Payment

Summary:

1. Entitlement to Gratuity:
The appellant, an employee of Tata Iron and Steel Company Limited, rendered continuous service from December 31, 1929, to August 31, 1959, and claimed gratuity of Rs. 14,040 under the Retiring Gratuity Rules, 1937. Upon resignation, the appellant was paid provident fund dues but not the gratuity. The trial court decreed in favor of the appellant, directing the company to pay the gratuity with interest. The High Court, however, held that gratuity under Rule 6 was not a matter of right but subject to the company's discretion as per Rule 10.

2. Jurisdiction of Civil Court:
The High Court opined that the claim for gratuity could not be enforced by a civil suit but could be pursued before the Industrial Tribunal under the Industrial Disputes Act, 1947. The Supreme Court disagreed, stating that if gratuity is a statutory condition of service, its breach can be remedied by a civil suit.

3. Discretionary Nature of Gratuity Payment:
Rule 10 of the Gratuity Rules provided that the payment of gratuity was at the absolute discretion of the company. The High Court upheld this rule, denying the appellant's claim. The Supreme Court, however, found this rule to be "utterly arbitrary and unreasonable" and thus unenforceable.

4. Statutory Nature of Standing Orders:
The Works Standing Orders, certified under the Industrial Employment (Standing Orders) Act, 1946, were considered statutory conditions of service. The High Court acknowledged that gratuity was an implied condition of service, but the Supreme Court clarified that it was an express statutory condition of service.

5. Effect of Rule 10 on Gratuity Payment:
The Supreme Court held that Rule 10, which allowed the company absolute discretion to deny gratuity, was incompatible with modern notions of social justice and violative of Article 14 of the Constitution. Therefore, Rule 10 was deemed ineffective and unenforceable.

6. Interest on Gratuity Payment:
The trial court awarded interest at 6% per annum, but the Supreme Court increased it to 15% per annum, considering the unreasonable denial of gratuity by the company. The Supreme Court restored the trial court's decree with this modification and awarded full costs to the appellant.

Conclusion:
The Supreme Court allowed the appeal, set aside the High Court's judgment, restored the trial court's decree with modifications, and directed the company to pay the principal amount of Rs. 14,040 with 15% interest per annum from July 1, 1959, until payment, along with full costs quantified at Rs. 5,000 within two months.