Over 2 lakh Indian cases. Search powered by Google!

Case Details


High Court of Judicature at Allahabad

Case Law Search

Indian Supreme Court Cases / Judgements / Legislation


Chairman-Cum-Managing Director Fertilizer Corpn. & Anr. v. Regional Labour Commissioner & Ors. - WRIT - C No. 36892 of 2004 [2005] RD-AH 1408 (26 May 2005)


This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).


Hon'ble Rakesh Tiwari, J

Common questions of law and facts are involved in all these writ petitions and they are, therefore, being decided by this common judgement. Writ Petition no. 36892 of 2004 is treated as leading case.

Writ petition no. 36892 of 20044 has been filed for quashing the order dated 30.6.2004 passed by the respondent no. 1- Regional Labour Commissioner (Central) Appellate Authority under the Payment of Gratuity Act, 1972 (hereinafter referred to as ''the Act'), Kanpur and notice dated 29.12.2003 for payment of gratuity under Rule 17 of the Payment of Gratuity (Central) Rules issued by the Controlling authority/the Assistant Labour commissioner (Central), Allahabad- respondent no. 2.


Briefly stated, facts of the case are that Fertilizer Corporation of India Limited is a multi-unit Public Sector Undertaking. Of its 5 units, one is situate at Gorakhpur.  An advertisement no. 35/89 was published in newspaper by the petitioners- the Fertilizer Corporation of India Ltd., Gorakhpur Unit, Gorakhpur ( hereinafter referred to as ''the Corporation').    The relevant extract of conditions for training, eligibility etc., relevant for the purpose of deciding the controversy in the writ petition are quoted below for ready reference:-  

"(1) Qualifications : (a) Must have passed :

        Essential          (i) High School Examination with science  

                                  and Mathematics.                                    


                                   (ii) Part I examination of Higher Secondary Examination, conducted by University or Board with Physics, Chemistry and Mathematics.


                                    (iii) 10th class Examination conducted by University or Board with above subjects.

                                      (b) Preference will be given to those who have qualifications as required at (a) above plus I.T.I from the recognized institute.

(2) Age:                        Between 1`5-18years. Relaxable up to 20 years in case of I.T.I Pass candidates or those belonging to Scheduled Caste/Tribe candidates.

(3) Period of Training :   Three years.

(4) Stipend :           (a) Candidates qualifications s per (a) above

                                        Consolidated First Year : Rs. 100 p.m

                                                            Second year: Rs.110 p.m.

                                                            Third year   : Rs. 120p.m.

                                (b) Candidates having qualifications as per

                                      (b) above :              

                                      Consolidated: First year : Rs.110 p.m

                                        Second and third year:     Rs.120 p.m.

General:      In addition to stipend, the apprentices will be eligible for free hostel accommodation, water charges, electricity and medical aid to the extent available at Gorakhpur in accordance with the rules governing this.  They will not be eligible for any other allowances during apprenticeship.

              Suitable reservation will be made in the case of Scheduled Caste/Tribe candidates.

                                 Selection of a candidate as an apprentice does not guarantee any employment under the corporation but subject to vacancies and successful completion of apprenticeship, the apprentices will be eligible for appointment as Operator/Technicians Gr. II in the scale of Rs.150-205 plus the usual Dearness Allowance and benefit of contributory Provident fund as per rules of the Corporation.

                             Selected candidates will have to execute a ''Bond' undertaking to serve the corporation for a minimum period of 5 years after appointment to regular post, besides the period of apprenticeship mentioned above.

            Candidates already in employment of the Government or any State Undertakings should apply through proper channel."


Respondent no. 3 in the present writ petition and the concerned respondent-employees in other connected cases applied for "Craftsman training"in pursuance of the aforesaid advertisement and were selected.  After completing their apprenticeship of three years w.e.f 16.11.70 to 15.11.73 they were appointed by the Corporation and they joined their service on 16.11.1973.

As all the units of the Corporation except Jodhpur Minding Organization suffered huge losses, reference was made to the Board of Industrial and Financial Reconstruction (B.I.F.R). The corporation was declared a sick company by the B.I.F.R vide order dated 6.11.1992. It was upheld in appeal with certain modification by the Delhi High Court.  The Government of India ultimately decided to close down all sick units of the Corporation except Jodhpur Mining Organization.  It offered better terms for separation with golden hand-shake under Voluntary Separation Scheme to  the employees of the Corporation.

The eligibility clause of the amended Voluntary Retirement Scheme provides that the Scheme was operative in respect of all categories of permanent regular employees of the company. The general conditions provided that the calculation of compensation under the Voluntary Separation Scheme would be based on every completed year of service or part thereof. It further provided that the part of completed year of service shall be entitled for ex gratia on pro-rate  basis.

The respondent-employees opted for the Voluntary Separation Scheme offered by the petitioners and were paid gratuity  amounting to Rs. 1,15,873/- excluding the period of training on their retirement on 31.12.2002.

The respondent-employees claimed that they were entitled to a further sum of Rs. 11,987/- towards gratuity, hence each one of them filed an application under Section 7(4) of the Act read with rule 10(2) of the Rules, before the Controlling Authority/Assistant Labour Commissioner (Central), Allahabad for payment of further sum of Rs.11,987/- towards shortfall in payment of gratuity for the training period of three years w.e.f. 16.11.1970 to 15.11.1973. They claimed that period of their service during the training of three years as Craftsman trainee had not been counted towards their total length of 32 years of service for the purposes of computation of gratuity.

The Corporation contested the claim of the employees before the Controlling Authority by filing objection.

The case of the management before the Authority was that the respondent was selected as "Craftsman Trainee" on 16.7.70 pursuant to the advertisement no. 35/89 for a period of 3 years stipulated therein on a consolidated monthly stipend.  The training was to be imparted at the Training Center and Plants of Gorakhpur Unit or in any Unit/Division of the FCI ; that on successful completion of training, he was appointed as Operator on 16.11.1973.  He was relieved from employment on 31.12.2002 under the Voluntary Separation Scheme and was paid gratuity amounting to Rs.1,15,873/- and other dues/benefits for the period of his service. It was also stated in the objections that during the period of three years of apprenticeship, the concerned respondent were not in employment of the petitioners and did not work in their business or trade and also did not earn any wages as such their length of service was to be reckoned from their date of appointment in service of the Corporation i.e. 16.11.1973.   The Controlling Authority/Assistant Labour Commissioner (Central), Allahabad - respondent no. 2 allowed the application of the employees vide impugned order dated 29.12.2003 and directinig the petitioners to make payment of shortfall gratuity of Rs.11,987/-not paid for the training period along with 10% simple interest per annum from 1.02.2003.

Appeals under Section 7(7) of the Act were preferred by the petitioners before the respondent no.1-Appellate Authority-cum-, the Regional Labour Commissioner (Central) Kanpur against the  order dated 29.12.2003 passed by the Controlling Authority. The appeals were dismissed vide order dated 30.6.2004. The operative portion of the appellate order is as under  :-

"..... After hearing contention of both the parties and also after examining the related documents available in the file of C.A. it is observed that the C.A. has rightly given its direction.  Although Payment of Gratuity Act, 1972 specifically excludes the apprentices appointed under the Apprentices Act, it does not exclude trainees.  The trainees will be covered under the P.G. Act and the period of training of the trainees will be counted towards the service rendered for the purpose of calculation of gratuity.  Hence I do not find any reason to interfere in the direction of C.A. and the appeal filed by appllant is, hereby, dismissed."

Aggrieved the petitioners have come up in this petition challenging the validity and correctness of order 30.6.2004 passed by respondent no. 1 and order/notice for payment of gratuity dated 29.12.2003 passed by the Controlling Authority- respondent no. 2, appointed under the Payment of Gratuity Act, 1972.


It is urged by the counsel for the petitioners that from the perusal of the advertisement in pursuance of which the respondents were admitted as "craftsman trainee" as well as the agreement executed between the guardians on their behalf and the Fertilizer Corporation of India Limited, it is established that the concerned respondents were apprentices and not ''employees'. He submits that as per definition of the word ''employees' in the Act, only a person employed on wages in an industrial or other establishment to which the Act applies is entitled to gratuity.  He submits that the phrase  ''employees '' is defined in Section 2(e) of the Act to mean ''any person (other than an apprentice) employed on wages in any establishment, factory used in the definition of employee means any person employed on wages discharging in one industrial establishment  who is eligible for gratuity under the Act except those whose nomenclature is excluded from the definition including an apprentice, any skilled, semi skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, Counsel for the petitioner has then drawn attention of the court to the Scheme under the Apprentice Act, 1961 and submits that combined reading of Section 2(aa) read with Section 2(aaa) of Apprentice Act, 1961 means a person who is undergoing a course of training in an industry or establishment undergone in pursuance of a contract of apprenticeship under the prescribed terms and conditions which may be different for different categories of apprentices. It is then submitted that Section 13 of the Act provides that the employer shall pay to every apprentice during the period of apprenticeship training stipend and every apprentice undergoing apprenticeship training in a designated trade in an establishment is a trainee and not a worker and that he is excluded under Section 18(b) from the provisions of any law with respect to labour which shall not apply to or in relation to such apprentice.

The decisions in (i) The Employees' State Insurance Corporation and another V. The Tata Engineering & Co., Locomotive Co. Ltd., and abitger- A.I.R 1976 S.C-66 (ii) The Factory Manager, CIMMCO Wagon Factory etc., Vs. Virendra Kumar Sharma and another etc.,- JT 2000(8) S.C-229 (iii) Mukesh K. Tripathi Vs. Senior Divisional Manager, L.I.C and others-JT 2004(7)-232(iv) Officers and Supervisors of I.D.P.L Vs. Chairman & M.D. I.D.P.L and others- J.T. 2003(6) S.C-68 and (v) U.P. State Electricity Board V. Shri Shiv Mohan Singh and another-JT 2004(8) SC-272 have been relied upon by the counsel for the petitioners in support of his contention.


Per contra Counsel for the respondents submits that applications were invited for training from persons between 15-18 years i.e. minors. The employees concerned in these writ petitions being eligible applied in pursuance of the aforesaid advertisement no. 35/89 for Craftsman Trainee on being found eligible and  suitable for training, they were selected and admitted in the ''Corporation' on 16.11.1970. After completing the training on 15.11.1973 all of them were absorbed in the corporation on the post of Operator Grade II. They applied for voluntary retirement and on acceptance of their option by the management under the Voluntary Separation Scheme, retired from the post of Junior foremen on 31.12.2002. It is urged that since they had been absorbed in service on 16.11.1973  in continuation after successful completion of their training on 15.11.1973, there was no break in their service and hence the training period should be added for the purpose of gratuity in continuity of their service as per clause 4.2 of the Voluntary Separation Scheme.

The counsel for the respondents also has placed reliance upon the definition of ''employee' in Section 2(e) of the Act and has emphasized that ''any person other than an apprentice employed on wages means that only an apprentice has been excluded from the definition and not a trainee.  In support of his contention he has relied upon the reported judgment of Madras High Court in S. Arunachalan Vs. Managing Director, Southern Structurals Pattahbiram, Madras -2001 (91) F.L.R-689 wherein the petitioner was appointed as Assistant (trainee) on 2.6.84 for a period of two years on a consolidated stipend of Rs. 650/- but  was treated as full member of the department and was allotted duties equivalent to other staff of personnel department.  The court after examining and considering the nature of duties of the petitioner after referring to the judgments of the apex court in Jagalkishore Saraf V. M/s. Raw Cotton Co. Ltd-A.I.R. 1955 S.C-376; Bombay High Court in Khanderan P. Rajopudhye V. United Western Bank Ltd. and others-1984 Lab.I.C.-1910 and Orissa High Court in Orissa Miniing Corporation Limited Vs. Controlling Authority under Payment of Gratuity Act, 1972- cum-AssistantLabour -1995 (71)F.L.R.-144  held that

nomenclature of the post is not of much importance and what is to be seen is the nature of duties performed by the employee concerned and that while interpreting the provisions of any Act, the court has to read the provisions literally in its ordinary and grammatical meaning as used by the legislature keeping in mind the object of the Act and that a trainee employee under a contract of employment is not an apprentice under the Apprentices Act unless he is undergoing apprentice training in a designated trade in pursuance to a contract of apprentice. It further held that on perusal of nature of duties performed by the petitioner it was evident that he was not an apprentice.

The whole thrust of the arguments of the counsel for the respondents is that they were trainees and not in employment but their period of training should be counted for the purpose of gratuity as only apprentice is excluded from the definition of employee under The Payment of Gratuity Act and not a trainee who has been employed in the establishment continuously w.e.f. 15.11.1970to 31.12.2002.

It is then urge by the counsel for the respondents  that National Fertilizer Ltd., New Delhi sought a clarification from the Government of India, Ministry of Labour, office of the Chief Labour Commissioner (Central),  New Delhi by means of letter dated 8.4.97 as to whether the trainees are entitled to payment of gratuity for the period of training under the Payment of Gratuity Act, 1972. The Labour Commissioner (Central) New Delhi by his letter dated 17.9.1997, appended as Annexure C.A. 3 to the Counter Affidavit replied that while the Act specifically excludes the apprentices appointed under the Apprentices Act, it does not exclude trainees and the trainees will be covered by the definition of ''employees' given in the Act.

Subsequent thereto a circular letter was issued by the National Fertilizers Ltd. on 17.10.2001 clarifying para 4.2 of the Voluntary Retirement Scheme for National Fertilizers Limited to the effect that the

service would include training period in the company, prior to absorption other than Act apprentices.

The Joint Secretary, Government of India, Labour Ministry, New Delhi then issued another letter dated 11.12.2002 in respect of employees of Fertilizer Corporation of India (F.C.I) for counting the period of training as service for the purpose of calculation of gratuity  under Section 4(1) of the Payment of Gratuity Act, so that the workers are not denied their legitimate dues.  The letter dated 11.12.2002 is as under :-  

                      "J.P.Patil                                                      URGENT

                    Joint Secretary                                  Dated 11.12.2002

                    Tel. No. 511028


                    Dear Sri V. Sudhirji,                                                        

           Kindly refer to my D.O letter of even no. dated 3.12.2002 regarding inclusion of the period of training of the employees of Fertilizer Corporation of India Ltd. for the purpose of calculation of the voluntary separation/retirement package.  We have now received another representation from the Fertilizer Officer's Association (copy enclosed) informing us that the period of training of the employees of FCI is also being not taken into account while calculation of their gratuity due.

In this context, I would like to mention that under Section 4(1) of the Payment of Gratuity Act, 1972 the period of training of the officers is also counted for the purpose of calculation of gratuity.  I shall, therefore, be grateful if necessary directions are issued to the concerned company to comply with the legislation so that the workers are not denied their legitimate dues.  Action taken may kindly be intimated to us to enable us to apprise the Hon'ble Labour Minister of the same.

            With regards,

Yours sincerely

                                                     Sd/ Illigible

                                                     (J.P. Patil)"

It further appears from Annexure C.A-4 appended to the counter affidavit that the clarification was also received from the Government of India pursuant to which The National Fertilizer Ltd. (N.F.L.) issued circular no. PA 134035 dated 17.10.2001 clarifying clause 4.2 of Voluntary Retirement Scheme as under:-

" The service will include training period in the company prior to absorption  other than Act Apprentices.  Further, the services rendered in other P.S.E's before joining National Fertilizer Limited would be taken into account only on transfer or cash equivalent to earned leave and Provident Fund."


The law cited by the parties may now be dealt with in reference to context of facts and record above.

The case of The Employees' State Insurance Corporation and another (supra) was a case where the definition of the word ''employee' in Section 2(9) of the Employees' State Insurance Act, 1948 was being considered.  The question before Hon'ble the Supreme Court was whether a person who is not given wages can be said to be employed in the work of the company merely because he was being imparted training and paid stipend. The court dealt with the question and replied in negative.  The pith and substance and the ratio decided  by the apex court is as under :-

"        The heart of the matter in apprenticeship is the dominant object and intent to impart on the part of the employer and to accept on the part of the other person learning under certain agreed terms.  That certain payment is made during the apprenticeship, by whatever name called, and that the apprentice has to be under certain rules of the discipline do not convert the apprentice to a regular employee under the employer. Such a person remains a learner and is not an employee.  It is inherent in the word ''apprentice' that there is no element of employment as such in a trade or industry.

  When under the terms and conditions of agreement under which apprentices are engaged by a company, they are mere trainees for a particular period for a distinct purpose and the company is not bound to employ them in their work after the training period is over, such apprentices cannot be said to be employed in the work of the company more so when they are not given wages within the meaning of that term as defined in Section 2(22).  Thus, an apprentice is not an employee within Section 2(9) of the Act."

In the case of Officers and Supervisors of I.D.P.L (supra), the controversy was :-

(i) whether the employees of public enterprises can be considered to be Central Government employees and

(ii)  Whether they are entitled to interim relief paid to Central        Government employees in terms of the recommendations of the Fifth Pay Commission.  

The petitioners in the aforesaid case were employees of public sector undertaking and claimed three instalments of interim relief at par with the Central Government employees in terms of the recommendations of Vth Pay Commission. Dismissing the appeal, Hon'ble the Suprme Court held that the employees of the Government company are not employees of the Government and cannot claim any legal right to ask for a direction to the Central Government for additional expenditure on the ground of parity. It was a case of wage revision and in that context, apex court  in paragraph 18  held that :-

" 18. Since this court has already decided the very issue in question and the petitioners have opted for the VRS nothing survives in this petition and the same is liable to be dismissed.  The petitioners having applied for VRS it is not open to them to contend that they are entitled for pay revision."

        It is evident from above that once the terms and offer of Voluntary Retirement (V.R.S.)/Separation Scheme is accepted by an employee, then all their previous rights under the contract of service OR for service are replaced by their terms of the V.R.S i.e. they are then governed by the new contract of V.R.S.

The case The Factory Manager, CIMMCO Wagon Factory etc.,(supra) was a case under Industrial Disputes Act, 1947 where reference was made regarding termination of services of labour- Sri Virendra Kumar Sharma.  It was claim by the respondent in that case that he was appointed as an apprentice and after expiry of apprenticeship period was taken on regular service after lockout was declared in the factory was lifted, he was entitled to be taken as a permanent workman as he had continuously worked from 9.2.81 to 15.4.83.

In appeal, Hon'ble the Supreme Court, in paragraph 12 of the case held that :-

"12. Assuming that the respondent was asked to work in the factory in anticipation of securing employment, that too by an officer who was not competent to give appointment, did not make the respondent workman or a regular employee of the appellant company.  We have no hesitation to say that the Division Bench was not right in raising presumption under Section 103 of the Act iin order to say that the respondent was a workman in relation to an industrial dispute for the purposes of any proceedings under the Industrial Disputes Act, 1947."

From the above judgment, it is evident that if a person is  permitted to work as an apprentice,  he has no legal right to claim himself to be a worker under the Industrial Disputes Act, 1947 as he does not acquire the status of an industrial worker.

Question whether an apprentice is worker or not was also considered in Mukesh K. Tripathi (supra) wherein it has been held that unless a person has been appointed and confirmed, the question of his becoming the workman would not arise.  It has further been held that the period of apprenticeship of an apprentice Development Officer recruited for training and subsequent appointment to the cadre of Development Officer is not counted for service for any purpose, including gratuity as during the period of his apprenticeship/training, he is paid monthly stipend according to the scheme framed by the Corporation, which governs the terms and conditions of appointment though not under a statutory obligation. In that case, the apex court considered the term ''apprentice' under the scheme, vis-à-vis Apprentices Act 1961.  The court also considered the definition of workman as contained in Section 2(s) of the Industrial Disputes Act, 1947 which is an inclusive definition and an apprentice. It was held that a person claiming himself to be a workman must conforms to the requirements laid down therein i.e. he must be working in one or other capacities mentioned in the definition. The court held in paragraph 37 of the judgment  as under :-

"37. In case any person raised a contention that his status has been changed from apprentice to a workman, he must plead and prove the requisite facts.  In absence of any pleading or proof that either by novation of the contract or by reason of the conduct of the parties, such a change has been brought about, an apprentice cannot be held to be a workman."

The meaning of the word ''apprentice'  again came up for consideration by the apex court in U.P. State Electricity Board (supra), as to (i) whether non registration renders apprenticeship contract void and illegal and (ii) whether a person appointed as apprentice ceases to be an apprentice and becomes a workman when the employer does not register the contract with  the Apprenticeship Advisor.

 It is admittedly not the case of any of the parties that the concerned persons were apprentice under the Apprentices Act 1961 or that any contract under the said Act  was executed with the Apprenticeship Advisor.  Hence, the ratio laid down therein is not applicable to the facts of the instant cases.


The Payment of Gratuity Act, 1972 was enacted as there was no Central Act to regulate payment of gratuity to industrial workers, except the Working Journalists (Conditions of Service) Miscellaneous Provisions Act, 1965.  The Act provides for payment of gratuity to employees employed in the establishment in the event of superannuation, retirement resignation and in certain other events, who were in employment continuously for at least for a period of five years and were drawing wages on fulfilling their terms and conditions of service, express or implied.

The provisions of the Act are to be given a plaint, fair and literal meaning of its words. The intention of the legislature in any particular Act is construction of the Act as a statute is the will of the Legislature, and the fundamental rule of interpretation, to which all other are subordinate, if that a statute is to be expounded according to the intent of those that made it.  It is the duty of the court to interpret ambiguous provision in a beneficial statute in such a manner so as to reject the construction which would defeat the plain intention in enacting the statute even though there may be some inexactitude in the language used.  Therefore, various enactments have to be read in harmony with one another as far as possible.  The words ''employee' and ''wages' have not only been used in Payment of Wages Act but different also in connotations in other Acts The definition has been drafted differently from the various definitions of workman and employee occurring under the Industrial Disputes Act, 1947, The contract Labour(Regulation and Abolition) Act, 1970, employees' State Insurance Act, 1948, The Employees Provident Fund Act, 1952 and laws relating to shops and establishments in the State.  

Since the counsel for both the parties have relied upon the definitions of ''employee' and ''wages'  and have interpreted the words in their own manner in support of their respective cases, it is necessary to interpret them according to rules of interpretation to have an insight to the legislative intent in consonance with the objects and reasons of the legislation.


The word ''employee' has been defined in Section 2(e) of the Payment of Gratuity Act as under :-

"2(e) ''employee' means any person (other than an apprentice employed on wages, not exceeding one thousand rupees per mensem, in any establishment, factory, mine, oilfield, plantation, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, but does not include any such person who is employed in a managerial or administrative capacity, or who holds a civil post under the Central Government or a State Government or who is subject to the Air force Act, 1950 ( 45 of 1950), the Army Act, 1950 (46 of 1950) or the Navy Act, 1957 (62 of 1957).

The legislature has used the word ''means' while defining the words ''employees' and ''wages' used in The Payment of Gratuity Act, 1972.. It is well known that legislature uses the word ''means' when it wants to exhaust the significance of the term defined and uses the word ''includes' where it intends that while the term defined should retain its ordinary meaning its scope would be widened by specific enumeration of certain matter which in its ordinary meaning may or may not comprise, so as to make the definition enumerative but not exhaustive. Where the legislature defines a word or phrase, to mean certain things or acts ''the definition is a hard and fast definition  and no other meaning can be assigned to the expression than is put down in the definition.'  When the legislature intends to speak exhaustively it uses the word ''mean' or ''means.

Therefore, except otherwise required by statute, it would mean and include what it plainly means or includes.

The word ''employed' used in the definition can have two meanings : (1) in the sense of being engaged or occupied, and also (2) in the sense of a contract of service being established between the workers and the owner or occupier of the factory as has been used in the Factories Act.. It involves the connotation of the relationship between a person employed and the employer as being one of master and servant. In Ramnath shankar Lal chandrika V. State of Bombay (1952) 1 L.L.J-129, view taken by His Lordship is :

              "....that the expression 'employed' as used in Section 2(1) does not necessarily involve the relationship of master and servant.  It may be that if one is employed upon the basis of wages, then in that case there may be a relationship of master and servant, but there are other conceivable cases in which there may not be a relationship of master and servant and yet such persons would be workers."

In A.I.R 1955 Bombay-209, the view taken by the court was:

                 " It is clear to my mind that the expression ''a person employed' in clause (1)  of Section 2 means a person who is actually engaged or occupied in a manufacturing process, a person whose work is actually utilized in that process.  The definition of a worker in clause (1) is clearly enacted in terms of a person who is ''employed' in and not in terms of a person who is employed by.  Under the definition, it is immaterial how or by whom he is employed so long as he is actually employed in a manufacturing process....."

In order to bring a person within the definition of person employed in the Company concerned,  it is to be seen as to whether he is wholly or principally employed in connection with the business of the Company.  


The questions involved in this petition are confined to following:-

(i) whether a trainee or an apprentice is an ''employee' within the definition under the Payment of Gratuity Act

(ii) whether the period of training has to be counted towards ''service' for the purpose of calculation of gratuity under the Payment of gratuity Act, 1972 AND

(iii) whether the training period is to be counted as service for payment of gratuity in terms of clause 4.2 of the V.S.S/V.R.S?

The entire case rests upon the fulcrum of the questions whether there was relationship of master and servant or employer and employee subsisting between the petitioners and the respondents.

The question of relationship of master and servant and employer and employee has been considered by their Lordships of Hon'ble the Supreme Court in a catena of cases.  The crux of the decision of the apex court as well as various High Courts is that concept of employment has three essential ingredients, namely, he must be (a) employed on wages; (b) employed in (i) establishment (ii) factory (iii) shop etc. (c) employed to do work which may be of skilled, semi-skilled, unskilled, manual, supervisory, technical or clerical nature and their term of employment may be express or implied.

Whether a person is an employee or not is a question of fact. A contract of employment may be for training i.e., a person may be employed for imparting education and training but it does not follow from the fact that it is a contract of employment.  There is well established distinction between contract for service and contract of service and also a contract of training or apprenticeship as used in context to The Apprentices Act, 1961.  Mere existence of contract to employ does not constitute a relationship of master and servant until the contract is performed and the person is actually employed (emphasis supplied).  The expression ''employed' used in  therefore, postulates relationship of master and servant and that such employment must be for wages earned by him.

Therefore, in every case, nature of engagement is essential to come to the conclusion whether a workman is an employee at all.

In the instant case, admittedly, the training period was separate from the period of employment after absorption. Therefore, the question of continuous service does not arise.

Wages are primarily a question of contract, express or implied.  Emoluments according to the Webster's dictionary means the profit arising from office or employment usually in the form of compensation or perquisite. Wages has been defined in Section 2(s) of the Payment of Gratuity Act as under :-

(s) ''Wages' means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, over time wages and any other allowance."

From plain reading of the definition, the term ''wages' means earned wages and not potential wages.  The expression ''in accordance with the terms and conditions of his employment' mean no more than the remuneration payable or paid in employment. They have further to be earned in accordance with the terms and conditions of employment express or implied. The phrase used in the definition of ''wages' should not, therefore, be construed in a narrow sense.    The question whether there is an implied term of employment is a mixed question of fact and law and not a pure question of fact.  

The definitions of apprenticeship and apprentice trainee in the Apprentices Act are of no relevance as admittedly there was no contract of apprenticeship executed between the parties in the prescribed proforma laying down the terms and conditions for receiving training under the Apprentices Act, 1961.

Apprentice in an industrial establishment are of two distinct classes, i.e.,

(i) apprentices who are learners in a designated trade under a contract of apprenticeship executed under the Apprentices Act 1961.  They are not workmen under Section 18 of the Act and Labour Laws are not applicable to them

(ii) apprentices who are not under apprenticeship training under the Apprentices Act but are learning or are under apprenticeship scheme of the Company or the employer AND

(iii) who are already in employment but are being sent on training while on jobs.

In the second case, whether the trainee is an employee or not would depend upon the terms of contract executed between him and the industrial establishment as well as on the nature of duties performed by him.  It is evident that wages are the emoluments earned by an employee while on duty or on leave which implies that a person has to be employed in the establishment against a sanctioned post and is paid emoluments earned by him on fulfilling the terms and conditions of employment.

It is also not in dispute between the parties that the employees concerned were paid stipend during their training period and not wages. They were taken in employment after completion of training, hence the terms of contract of training executed between the petitioners and the guardians of the apprentices at the relevant time have an important bearing in the case.   It is apparent from the contract of training appended as Annexure 6 to the writ petition that the petitioners did not guarantee any employment in the Corporation which is also evident from the advertisement. It was further agreed between the parties that if there was any violation of any terms of agreement by the trainees, the concerned apprentice craftsman trainee was liable to refund the amount paid to and spent on him by the employers on his training.

The aforesaid conditions very strongly indicate that the respondents did not enjoy the status of employee in the Corporation as wages paid to an employee in terms of his employment are not returnable by him for the reason that he has earned it. Further,  the  respondents during the training period were neither appointed on any post nor even had any right to be appointed on a post after successful completion of their training.  

As regards the argument of engagement of minors, suffice it to say that Section 67 of the Factories Act, 1948 prohibits employment of young children below 14 years of age.  Section 67 of the Factories Act reads as under :-

"67. Prohibition of employment of young children: No child who has not completed his fourteenth year shall be required or allowed to work in any factory."  

Admittedly, according to the advertisement, applications from persons were invited for undergoing training who were between the age group of 15-18 years.  Hence, there was no bar in imparting training to the employees in any factory or units of the petitioners under any law as all of them were above 14 years of age.  

In so far as the first question "whether a trainee or an apprentice is an ''employee' within the definition under the Payment of Gratuity Act" is concerned, suffice it to say that apprentices have been excluded from the definition of ''employee' in the Payment of Gratuity Act. The definition does not make any distinction between different types of apprentices whether he be an apprentice under the Apprentices Act, 1961 or an apprentice being given training in an industrial establishment, not  under the aforesaid Act.  By applying the aids and tools of interpretation of statute it is held that respondents being apprentices are not employees for the purpose of payment of gratuity under The Payment of Gratuity Act.  The first question for determination is answered accordingly.

As regard second question  "whether the period of training has to be counted towards ''service' for the purpose of calculation of gratuity under the Payment of gratuity Act, 1972" it is evident that the respondents remained learners during their period of training w.e.f. 16.11.1070 to 15.11.1973.  As stated in preceding paragraphs of the judgment, there was no element of employment during the period of apprenticeship of the respondents in the trade or industry.  They were mere trainees for a particular period and the Company was not bound to employ them in their work after the training period was over.  As such, the concerned respondents cannot be said to be employed in the business or work of the Company more so when they were not paid wages.  Since they were not employees of the Corporation their period of training cannot be counted towards service under The Payment of Gratuity Act. Second question is answered accordingly.

Now adverting to the third question "whether the training period is to be counted as service for payment of gratuity in terms of clause 4.2 of the V.S.S/V.R.S?", it is seen that the Voluntary Separation Scheme was in force in the petitioners establishment inviting applications for voluntary retirement from the employees.  The respondents accepted the offer of voluntary retirement under the aforesaid Scheme and gave their options. The management accepted the application submitted by the employee, and the respondents were relieved w.e.f. 31.12.2002. The employees in their objections before the Controlling Authority had also accepted this position  that the employees  had been relieved under the Voluntary Separation Scheme.  On offer and acceptance of the application for voluntary retirement a new contract came into existence and nothing of past contracts  of service survived.  Analogy may be drawn from the decision of Hon'ble the Supreme Court in Officers and Supercvisors of I.D.P.L. (Supra) cited by the petitioners in this regard.  Reference may also be made to the decision of the apex court in A.K. Bindal and other's case reported in (2003)5 S.C.C-163 wherein it has been held that once an employee has accepted Voluntary Retirement Scheme, his right as employee comes to an end and he cannot make any claim for pre retirement period. Voluntary Retirement Scheme is in the nature of an "invitation' to treat the acceptance to which the employee and employer could be fructified in a concluded contract.  In Anson's Law of contract, 26th Edn., at page 25, it is stated that :-

               " Offers and invitations to treat- It is sometimes difficult to distinguish statements of intention which cannot, and are not intended to, result in any binding obligation from offers which admit  of acceptance, and so become binding promises.  A person advertises good for sale in a newspaper, or announces that he will sell them by tender or by auction: a shopkeeper displays goods in a shop window at a certain price; or a bus company advertises that it will carry passengers from A to Z and will reach Z and other intermediate stops at certain times.  In such cases it may be asked whether the statement made is an offer capable of acceptance or merely an invitation to make offers, and do business.  An invitation of the nature, if it is not intended to be binding, is known as an ''invitation to treat'.

It has been stated in Treitel's ''The Law of Contract' that :-

                      "The question whether a statement is an offer or an invitation to treat depends primarily on the intention with which it was made.  A statement is only an offer if the person making it intends to be bound as soon as the person reasonably believes that it was made with this intention.  It follows that a statement is not an offer, if it expressly provides that the person making it is not to be bound merely be the other party's notification of assent, but only when he himself has signed the document in which the statement is contained."

In Halsbury's Laws of England, 4thEdn. Vol.9, meaning of ''offer has been stated in para 227 at page 98in the following terms:0

                         "227. Meaning of offer - An offer is an expression by one person or group of persons, or by agents on his behalf, made to another, of his willingness to be bound to a contract with that other on terms either certain or capable of being rendered contain.

                             An offer may be made to an individual or to a group of persons or to the world at large.  It may be made expressly by words, or it may be implied from the conduct of the offer."

Paragraphs 370115 of Chitty on Contracts show that for bringing in a change in the nature of contract, the existing contract of service must be substituted or amended by another contract.  The later contract also must be an enforceable contract.  Once it is held that the later contract is not a contract within the meaning of the provisions of the Indian Contract Act, the question of invoking this aforementioned principle would not arise.

In Brijendra Nath Bhargava V. Harsh Wardhan- (1988)1 SCC-454, the law is stated in the following terms:-    

                      "It clearly goes to show that if a party gives up the advantage he could take of a position of law.  It is not open to him to change and say that he can avail of that ground.  In Dawsons Bank Ltd V. Nippon Menkwa Kabushihi Kaish- A.I.R. 1935P.C-79  Their Lordships were considering the question of waiver as a little different from estoppel and they observed as under:-

  " On the other hand, waiver is contractual, and may constitute a cause of action: it is an agreement to release or not to assert a right .  If an agent, with authority to make such an agreement on behalf of his principal agrees to waive his principal's rights then (subject to any other question such as consideration) the principal will be bound, but he will be bound by contract....."


In Halsbury's Laws of England, 4thEdn. Vol.16 (Reissue), para 957 at page 844, it is stated :-

     " On the principle that a person may not approbate and reprobate a special species of estoppel has arisen.  The principle that a person may not approbate and reprobate expresses two propositions:

(1) That the person in question, having a choice between two courses of conduct is to be treated as having made an election from which he cannot resile,

(2) That he will be regarded, in general at any rate, as having so elected unless he has taken a benefit under or arising out of the course of conduct, which he has first pursued and with which his subsequent conduct is inconsistent."

In Americal Jurisprudence, 2d, vol. 28, 1966 pages 677-80, it is stated :-

    " Estoppel by the acceptance of benefits: estoppel is frequently based upon the acceptance and retention, by one having knowledge or notice of the facts, of benefits from a transaction, contract, instrument, regulation which he might have rejected or contested.  This doctrine is obviously a branch of the rule against assuming inconsistent position.

As a general principle, one who knowingly accepts the benefits of a contract or conveyance is estopped to deny the validity or binding effect on him of such contract or conveyance.

This rule has to be applied to do equity and must not be applied in such a manner as to violate the principles of rights and good conscience."

In the light of the aforesaid decisions, I am of the opinion that once a contract was fructified between the petitioners and the employees for voluntary retirement and the employees were placed in a disadvantageous position of relinquishing their service on payment of certain consideration, the petitioners were estopped from not taking a stand that the period of training of three years would not counted as service under clause 4.2 of the Voluntary Separation Scheme.  The stand of the employers is barred by principle of promissory estoppel.

In view of the above three decisions of the apex court, the claim of the respondents has to be determined according to Voluntary Separation Scheme for which they had opted.

The workers in the aforesaid cases were not found entitled to claim pay revision after acceptance of VRS/VSS so also in this case; gratuity being an after retirement due, payable to the employee for his long faithful services was payable after his retirement i.e. after acceptance of VSS according to terms contained therein. Clause 4.2 of the Voluntary Separation Scheme quoted in the body of the judgment provided that the services rendered by an employee during the period of training prior to absorption in service will be included for the purpose of payment of gratuity except those other than Act Apprentices.

The respondents were not employed as apprentice under the Apprentices Act 1961 and, therefore, their entitlement to gratuity would not be ineffective in view of  clause 4.2 of the Voluntary Separation even though apprentices are barred under the definition of employee under the Payment of Gratuity Act.  

There is nothing in the Act which prohibits payment of gratuity to an employee on better terms than under the Payment of Gratuity Act, 1972.  The payment of gratuity to the employee accepting their training period as ''service' prior to their absorption in the Company in pursuance of clause 4.2 of the V.S.S. does not suffer from any illegality or infirmity.  Voluntary Retirement Scheme is independent of the provisions of the Payment of Gratuity Act. The argument that respondents are not entitled to the relief of ''service' for training period, therefore, cannot be sustained. The employees cannot be denied the relief on the ground that apprentices are barred under the said Act.

For the reasons stated above, the writ petition as well as connection writ petitions are dismissed. The employees shall be paid their gratuity by the petitioners in terms of the impugned orders within a period of one month from today.  No order as to costs.

Dated 26.5.2005



Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites


dwi Attorney | dui attorney | dwi | dui | austin attorney | san diego attorney | houston attorney | california attorney | washington attorney | minnesota attorney | dallas attorney | alaska attorney | los angeles attorney | dwi | dui | colorado attorney | new york attorney | new jersey attorney | san francisco attorney | seattle attorney | florida attorney | attorney | london lawyer | lawyer michigan | law firm |

Double Click on any word for its dictionary meaning or to get reference material on it.