Respondents 2 to 8 were weavers, employed as permanent workmen, with the petitioner since before .1972. The number of workmen, employed with the petitioner, was, at no time, more than 30.
2. On 4th January, 1972, as a result of negotiations between the petitioner employer and representatives of the Workers' Union, they reached an agreement, one of the terms of which, relevant for the purpose of present petition, was: "Gratuity will be given on resignation also and in the event of death, it will be given to his legitimate heirs."
The above agreement was reached for one year from 4-9-1972 to 3-9-1973.
3. On 5th September, 1973, that is, two days after the above agreement had expired on 3rd September, 1973, the Workers' Union submitted a charter of demands to the petitioner in which one of the demands raised was- "Gratuity should be paid according to Standing Order 12(6) and 12(8)."
4. As a result of negotiations between the petitioner-employer and the Workers' Union, an agreement was arrived at between them on 6th September, 1973, which was in force with effect from 4-9-1973 for one year till 3rd September, .1974. In this agreement, there was no term that any gratuity would be paid to the workers, as was incorporated in the previous agreement dated 4th September, 1972.
5. Again on 5th September, 1974, that is, two days after the expiry of the last agreement, the Workers' Union submitted another charter of demands to the petitioner in which, too, the workers demanded, inter alia,- "Gratuity should be given to all labourers equal to one month's pay."
6. As settlement was reached between the petitioner and Workers' Union through mediation of the Assistant Director, Labour Welfare, which was in force for one year from 4-9-1974 to 3-9-1975. In this settlement as well, demand of gratuity was not conceded, and it was not incorporated in the agreement.
7. Due to adverse market conditions and lack of finance to run the factory, the petitioners laid off' all their workers, in all 28, including respondents 2 to 8, for 14 days, and terminated their services on 9th of July, 1975, under Standing Order 12. The workers were all offered one month notice pay along with lay-off compensation, which all the workers, except respondents Nos. 2 to 8, accepted.
8. On 31st July, 1977, respondents 2 to 8 made applications to the Authority under the Payment of Wages Act, claiming gratuity, annual leave, bonus, and enhanced notice pay. The Authority, however, disallowed the claim of respondents, but because the petitioners were willing to pay the lay off compensation as they had paid it to their other workers whose service they had terminated with these respondents, the Authority, by order dated 5th April, 1978, directed lay off compensation and notice pay to be paid to respondents. This amount worked out at Rs. 4,723.39, which the petitioners deposited with the Authority on 10th April, 1978.
9. Respondents 2 to 8 filed an appeal before the Second Sind Labour Court, Karachi, against the aforesaid order of the Authority under the Payment of Wages Act. In appeal, the only point urged before the Labour Court was that by an agreement dated 13th September, 1972, the petitioners had agreed to pay gratuity to the workers, and, in case of death of any workers to his hers, and, this facility of gratuity once enjoyed could not be taken away, if the gratuity was not mentioned in the subsequent agreements. The Labour Court by decision dated 25-4-1979, held that respondents 2 to 8 are entitled to gratuity because- "benefit of gratuity once extended to the workers under agreement (Exh. P/1) cannot be withdrawn to their disadvantage and the workers cannot be deprived of it merely on the plea that in the subsequent agreements, there is no clause regarding payment of gratuity to the workers."
10. Petitioners have filed this Constitutional Petition against the above decision mainly on the ground that agreement dated 4-9-1972 having expired, no right to gratuity survived because if it had, the respondents would not have included the demand of gratuity in their two charters of demands dated 5-9-1973 and 5-9-1974.
11. The agreement between the petitioners and the Workers' Union which provided for gratuity to be given to the workers on resignation or in the event of death of any one of them to his heirs, was in force for only one year from 4-9-1972 to 3-9-1973. Under subsection (2) of section 40 of the Industrial Relations Ordinance, 1969, this settlement was only binding till 3rd September, 1973. The fact that Workers' Union included their demand of gratuity in their two subsequent Charters of Demands dated 5th September, 1973, and 5th September, 1974, clearly show that this facility of gratuity to the workers was not to continue after 3rd September, 1973. In spite of the demand of gratuity made by the Workers' Union in the two Charters, it was not conceded and included in the two subsequent agreements. This only proves that facility of gratuity to the workers was withdrawn after 3rd September, 1973. There was discharge of the agreement dated 4th September, 1972, which was substituted by new contract. Reference is made to the following passage from Anson's Law of Contract, 1959, Edition at page 395- "Contract rests on the agreement of the parties: as it is their agreement which binds them, so by their agreement they may be loosed.
And this mode of discharge may occur in one of four ways: by rescission of a contract which is still executory; by accord and satisfaction, by the substitution of a new contract; or by the operation of some provision contained in the contract itself." In the case of Seimen Pakistan Employees' Union v.
Seimen (Pakistan) Engineering Company and 2 others (1969 PLC 341), it was held that if all period of time in settlement is fixed by contract, the contract will automaticay lapse after that It follows that the agreement which was in force for one year 3-9-1973 and the period from 4-9-1972 to 3-9- 1973 automatically lapsed after facility of gratuity, provided in the agreement, was no more available to workers after 3-9-1973. Reference in this connection is also invited to 1974 PLC Note 76 at p. 42.
12. The decision of the Sind Labour Court that respondents 2 to 8 are entitled to gratuity is without lawful authority, and, is set aside.