P. Vishwanatha Shetty, J.
1. The appellant in this appeal is a beedi contractor who gets the beedies rolled through home workers. The 3rd respondent in this appeal is one such home worker who was engaged by the appellant in rolling beedies for him as a piece rated employee. The 3rd respondent after putting in fifteen years of service as a beedi roller under the employment of the appellant voluntarily resigned from his service with effect from 29th June, 1996. Since the claim of the 3rd respondent for payment of gratuity was not settled, the respondent made an application Under Section 4 of the Payment of Gratuity Act, 1972 (hereinafter referred to as 'the Act') seeking for payment of gratuity payable to him by the appellant. The appellant resisted the claim of the 3rd respondent inter alia contending that the Act is not applicable to the 3rd respondent who is a beedi roller and the calculation of the gratuity made by the 3rd respondent is also not correct. The 2nd respondent on consideration of the rival claims of the parties made an order dated 3rd May, 1998, a copy of which has been produced as Annexure-A to this appeal allowing the application filed by the 3rd respondent and directed the appellant to pay a sum of Rs. 3,732/- towards gratuity. While calculating gratuity, the 2nd respondent has taken the average of 48 days actually worked by the 3rd respondent prior to his resignation. The 2nd respondent rejected the contention of the appellant that the average of 90 days wages received by the 3rd respondent prior to the date of resignation should be taken into consideration. Aggrieved by the said order-Annexure-A, the appellant filed an appeal before the 1st respondent-Appellate Authority as provided Under Section 4 of the Act. The Appellate Authority by means of his order dated 4th December, 1998, a copy of which has been produced as Annexure-B confirmed the order-Annexure-A. The appellant filed the writ petition out of which this appeal arises before this Court challenging the correctness of the orders-Annexure-A and B. The learned Single Judge of this Court while entertaining the petition filed by the appellant on 11th February, 1998 rejected the contention of the appellant that the provisions of the Act has no application so far as the beedi rollers are concerned, following the decision of this Court in the case of Bagi Beedi Factory, Hubli v. The Appellate Authority under the Payment of Gratuity Act and Joint Labour Commissioner, Bangalore and Ors. 1998(1) Kar. L.J. 304 : ILR 1997 Kar. 2896. However, he entertained the petition only for the purpose of deciding the question whether the calculation made by the respondents 1 and 2 for payment of gratuity taking average of 48 days worked by the 3rd respondent instead of 90 days was correct or not. When the matter was finally heard on 27th September, 2002, the learned Single Judge by means of his order dated 27th September, 2002 dismissed the writ petition confirming the conclusion reached by respondents 1 and 2 so far as the basis adopted for settlement of gratuity is concerned. Aggrieved by the said order, this writ appeal is presented.
2. Sri Kasturi, learned Senior Counsel appearing for M/s. Kasturi Associates strongly urged two contentions. Firstly, he submitted that the learned Single Judge having permitted the appellant to go into the question of applicability of the Act, at the stage of final hearing of the appeal has seriously erred in law in not recording a finding as to whether the provisions of the Act is applicable to the beedi rollers. Secondly, he submitted that the interpretation placed on proviso given to Sub-section (2) of Section 4 of the Act for the purpose of determining the average of wages earned by a beedi roller for the purpose of payment of gratuity is erroneous in law. Elaborating this submission, learned Senior Counsel pointed out that the learned Single Judge as well as respondents 1 and 2 have failed to consider that what is required to be considered under the proviso given to Sub-section (2) of Section 4, is the average of the wages received by an employee for a period of three months preceding the termination of his services. In other words, according to the learned Counsel, even if an employee has not worked continuously for a period of 90 days preceding the termination of service, the average of 90 days is required to be calculated going backwards beyond 90 days, as the emphasis in the proviso is for receipt of 90 days' wages.
3. However, Sri Shivakumar, learned Additional Government Advocate strongly supported the impugned order and submitted that if an employee has not worked for a few days during the period of 90 days preceding termination of service, the average of the number of days the employee has worked is required to be taken into account and on that basis gratuity is required to be settled. He further submitted that the view taken by the learned Single Judge as well as the respondents 1 and 2 on the first proviso given to Section 4(2) of the Act is correct.
4. In the light of the rival submission made by the learned Counsel appearing for the parties, the two questions that would fall for our consideration in this appeal are:
(i) Whether the provisions of the Act have no application to the beedi rollers as contended by the learned Counsel for the appellant?
(ii) Whether the interpretation placed by the learned Single Judge as well as respondents 1 and 2 on proviso given to Sub-section (2) of Section 4 call for interference in this appeal?
Regarding first question:
Section 1(3)(b) of the Act provides that the Act would apply to every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State in which ten or more persons are employed, or were employed, on any day of the preceding twelve months. Therefore, the Act applies to every shop or establishment within the meaning of any law for the time being in force in relation to such shops and establishments in the State. The Payment of Gratuity Act has not defined what is meant by an establishment. Beedi and Cigar Workers (Conditions of Employment) Act, 1966 (hereinafter referred to as 'the Beedi Act') was passed with the object of providing for welfare of the workers in Beedi and Cigar Establishments to regulate the conditions of their work and for matters connected therewith. The said Act had come into force in the State of Karnataka on 10th November, 1969. Section 2(f) of the Beedi Act defines an employee. Section 2(h) of the Beedi Act defines an establishment. Section 2(k) defines manufacturing process. It is useful to extract the said provisions:
2(f) 'Employee' means a person employed directly or through any agency whether for wages or not, in any establishment or godown to do any work, skilled, unskilled, manual or clerical, and includes-.
(i) any labour who is given raw materials by an employer or a contractor for being made into beedi or cigar or both at home (hereinafter referred to in this Act as 'home workers'); and
(ii) any person not employed by an employer or a contractor or both but working with permission of, or under agreement with, the employer or contractor;
xxx xxx2(h) 'Establishment' means any place or premises including the precincts thereof in which or in any part of which any manufacturing process connected with the making of beedi or cigar or both is being, or is ordinarily, carried on and includes an industrial premises;
xxx xxx2(k) 'Manufacturing process' means any process for, or incidental to making, finishing or packing or otherwise treating any article or substance with a view to its use, sale, transport, delivery or disposal as beedi or cigar or both.
From the reading of Section 2(f)(i) referred to above, an employee for the purpose of the Act means a person directly employed or through an agency whether for wages or not in any establishment or godown to do any work, skilled or unskilled, manual or clerical and includes any labour who is given raw materials by an employer or a contractor for being made into beedi or cigar or both at home. Therefore, there cannot be any doubt that the respondent would be an employee within the meaning of Section 2(f)(i) of the Beedi Act for the purpose of the Beedi Act. From the reading of the definition of manufacturing process as provided Under Section 2(k) of the Beedi Act means any process for, or incidental to making, furnishing or packing or otherwise treating any article or substance with a view to its sale, transport, delivery or disposal as beedi or cigar or both. Therefore, there cannot be any doubt that the nature of the work carried on by the respondent in rolling beedi is a manufacturing process within the meaning of Section 2(k) of the Beedi Act. The definition of establishment Under Section 2(h) also makes it clear that the establishment means any place or premises including the precincts thereof in which or in any part of which any manufacturing process connected with the making of beedi or cigar or both is being, or is ordinarily, carried on. Therefore, there cannot be any doubt, that the' 3rd respondent is an employee within the meaning of Section 2(f) of the Beedi Act and the place in which the 3rd respondent is carrying on his beedi rolling work is an establishment which falls Under Section 2(h) of the Beedi Act. Therefore, we are of the view that the provisions of the Act governs the rights of the appellant as well as the 3rd respondent. It is also necessary to point out that the learned Single Judge of this Court in the case of Mis. Bagi Beedi, has taken the view that so far as the beedi rollers are concerned, the provisions of the Act applies. Similar view is also taken by the Gujarat High Court in the case of Mis. Patel Hiralal Ramlal and Co. v. Smt. Chandbibi Pirubhai and Ors. 1981 Lab. I.C. 790 (Guj.) (DB). Further, while considering the question whether the Gratuity Act would apply to a project undertaken by the Hydel Department of the Government of Punjab which has been described as the 'Hydel Upper Bari Doab Construction Project', the Supreme Court in the case of State of Punjab v. Labour Court, Jullundur and Ors. : (1981)ILLJ354SC , took the view that the Payment of Gratuity Act applies to an establishment in which any work relating to construction, development or maintenance of buildings, roads, bridges or canals, or relating to operations connected with navigation, irrigation or the supply of water, or relating to the generation, transmission and distribution of electricity or any other form of power is being carried on and it is not possible to give a limited meaning to Section 1(3)(b) of the Act and Section 1(3)(b) of the Act would apply to every establishment within the meaning of any law for the time being in force in relation to establishments in a State and such establishment would include industrial establishment within the meaning of Section 2(g) of the Payment of Wages Act, 1936. Therefore, we are unable to accede to the submission of the learned Counsel for the appellant that the provisions of the Act has no application to the beedi rollers. Accordingly, question No. 1 is answered.
Regarding second question:
Before we proceed to consider the second question referred to above, it is useful to extract Sub-section (2) of Section 4 of the Act. The relevant portion of Sub-section (1) and Sub-section (2) of the Act reads as follows.-
4. Payment of gratuity.-(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen clays' wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in- the case of an employee who is employed in a seasonable establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days' wages for each season.
Explanation-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.
(emphasis supplied)
The services of the 3rd respondent was taken on piece rate basis. There is no dispute on this. As noticed by us earlier, the undisputed facts in this case show that the 3rd respondent before his resignation had worked only for 48 days and not 90 days. It is admitted by Sri Kasturi that for 42 days the 3rd respondent had not worked. The respondents 1 and 2 as well as the learned Single Judge in the course of the order impugned have taken the view that in cases where the workman works only for 48 days out of three months preceding the date of termination, the 48 days which the 3rd respondent has worked alone should be taken into account. In our view, the said interpretation placed by the learned Single Judge does not appear to be correct. It is necessary to point out that the proviso given to Sub-section (2) of Section 4 of the Act provides that in the case of piece rated employee, daily wages shall be paid on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment. The emphasis in the proviso is for the receipt of wages for a period of three months immediately preceding the termination of his employment. By this, can it be understood that if an employee has only worked for about ten days out of three months preceding the date of termination of his service, only the period of ten days he has worked should be taken into account for the purpose of calculating the average of the wages for determining the gratuity payable to him? In our view, such an interpretation will not be correct and it will not be even in the interest of the employee. It may be in some case that an employee would be earning higher wages during the first half of the period than the later half of the. period where the average of three months is required to be taken into consideration and in some other case it may be vice versa. The object behind the proviso is that while calculating the average of three months wages the receipt of three months wages by an employee should be taken into account for the purpose of settling the gratuity payable to an employee. Therefore, in our view, though the language employed is 'for a period of three months immediately preceding the termination of service of the employee', the same must be understood as the, period of three months preceding the termination of service of an employee during which period he has received his wages. In cases where an employee has not worked a few days in a block period of three months prior to the date of termination, to that extent to make up that period, the earlier period where the employee has earned wages should be taken into account. For example, as in this case, if an employee has not worked 42 days in a block period of three months immediately prior to the termination of service, the earlier 42 days period during which an employee has worked must be taken into account and on that basis the average of three months period must be worked out and the daily wages must be calculated for the purpose of calculating gratuity payable to an employee.
5. Therefore, while we are unable to accede to the submission of Sri Shivakumar that the view taken by the learned Single Judge that the average of 48 days should be taken into account for determining the daily wage earned by the 3rd respondent in a block period of three months, we are of the view that the three months' period is required to be calculated by taking into account the said period of 90 days during which an employee has actually worked immediately preceding the termination of his service and the total wages received by him during the said three months period.
6. In the light of the discussion made above, order dated 27th September, 2002 made by the learned Single Judge in Writ Petition No. 3550 of 1999; and also orders dated 3rd May, 1998 and 4th December 1998, copies of which have been produced as Annexures-A and B passed by respondents 1 and 2 are liable to be set aside. Accordingly, they are set aside.
7. However, before parting with this order, it is necessary to notice the fair stand taken by Sri Kasturi that since the 3rd respondent has already been paid the amount and the amount involved is only in a sun of Rs. 3,732/- the appellant will not proceed to take any steps for recovery of the amount paid to the 3rd respondent. The statement made by Sri Kasturi is placed on record and accordingly, it is ordered.
8. In terms stated above, this appeal is partly allowed and disposed of. However, no order is made as to costs.