Ind.

5 INDIA

Supreme Court o f India

Bakshish Singh v Darshan Engineering Works
(Before P.B. Sawant and Yogeshwar Dayal, JJ)

Gratuity on termination o f employment - qualifying p e r i o d -

f u n d a m e n t a l right o f employer to c a r r y on business subject only to
reasonable restrictions

HEADNOTES

Facts

The Payment of Gratuity Act, 1972 deals with retirement benefits to be paid to
the workmen when they retire from service; such benefits are calculated on the
basis of 15days average salary for each completed year of service. The payment is
made as a lump sum in addition to the provident fund accumulations under the
Employees Provident Fund Act, 1952; cumulatively they form the totality of the
statutory provisions relating to social security of the workmen on their retirement
or resignation.
Under Article 19( 1 ) (g) of the Constitution of India, the freedom to carry on the
business of an employer is a fundamental right guaranteed under that Article, sub-
ject only to reasonable restrictions. Section 4(1) (b) of the Payment of Gratuity Act
lays down 5 years as the qualifying period for receipt of gratuity. The challenge
was that the provision is unconstitutional as it imposes an unreasonable restriction
on the employer's right to carry on his business under Article 19(1) (g) of the Con-
stitution of India.

Decision

The Court held, after considering the provisions of the Act, that the law relating to
payment of gratuity is a welfare measure introduced in the interest of the general
public to secure social and economic justice to the workmen and to assist them in
their old age and give them a decent standard of life on their retirement. Further
the gratuity under the Act represents one of the minimal service conditions which
must be made available to the employees irrespective of the financial capacity of
the employer to bear the burden. The said provision is a reasonable restriction on
the right of the employer to carry on his business within the meaning of Article
19(6) of the Constitution.
Law Applied

Constitution of India
Article 19(1) (g): Protection of certain rights regarding freedom of speech, etc.-
All citizens shall have the right to practise any profession, or to carry on any occupa-
tion, trade or business.
Article 19(6): Nothing in sub-clause(g) of the said clause shall affect the opera-
tion of any existing law in so far as it imposes, or prevent the State from making any
law imposing, in the interests of the general public, reasonable restrictions on the
exercise of the right conferred by the said sub-clause, and, in particular, nothing in
the said sub-clause shall affect the operation of any existing law in so far as it reaches
to, or prevent the State from making any law relating to-
(i) the professional or technical qualifications necessary for practising any profes-
sion or carrying on any occupation, trade or business, or
(ii) the carrying on by the State, or by a corporation owned or controlled by the
State, of any trade, business, industry or service, whether to the exclusion, com-
plete or partial, of citizens or otherwise.
Payment of Gratuity Act, 1972
Section 4(1) (b): Payment of Gratuity - Gratuity shall be payable to an em-
ployee on the termination of his employment after he has rendered continuous
service for not less than five years,
a) -
b) on his retirement or resignation, or
c) -
Provided that the completion of continuous service of five years shall not be
necessary where the termination of the employment of any employee is due to death
or disablement.

JUDGMENT

The Judgment of the Court was delivered by

Sawant, J.- These two appeals - one by the Union of India and the other by the
aggrieved employee - are directed against the decision dated March 24,1983 of the
Punjab and Haryana High Court whereby the High Court has struck down Section
4( 1 )(b) of the Payment of Gratuity Act, 1972 (hereinafter referred to as the 'Act') as
being violative of Article 19( 1)(g) of the Constitution of India.
2. The admitted factual matrix of the case is in a narrow compass. Bakshish Singh,
the appellant-employee joined the services of the respondent-M/s Darshan Engi-
neering Works as a Fitter on March 2, 1968 and resigned from service on December
10, 1978 after a total period of continuous service of more than 10 years. His last
drawn wages were Rs 335 per month. It is not disputed that at the time he joined the
employment on March 2, 1968, his age was 54 years 3 months, his date of birth
being December 17, 1913. This was known to the respondent-employer.
3. The Act came into force w.e.f. September 21, 1972. On the employee's resig-