1. The petitioner-company is a public joint stock company incorporated under the Indian Companies Act 1913. The petitioner-company carries on business of manufacturing and selling textile piecegoods. The petitioner-company in the course of its business employs a large number of workers. Between 30 October, 1955 and 15 February, 1957, the petitioner-company terminated the service of 41 employees. Some of the persons whose services were terminated were operatives and some were clerks. The standing orders as finally settled by the industrial court under S. 36(3) of the Bombay Industrial Relations Act, 1946, applicable to the petitioner-company provide by order No. 19(a) that the employment of any permanent operative may be terminated by fourteen day's notice or by payment of thirteen days' wages in lieu of notice. The standing orders applicable to clerks provide by order No. 10 that the employment of any permanent employee may be terminated by one month's notice or one month's pay in lieu of notice unless provided otherwise in any specific agreement. The petitioner-company had terminated the service of the operatives on payment of thirteen days' wages in lieu of notice and of the clerks on payment of one month's pay in lieu of notice. The Central Provident Fund Commissioner considered that the petitioner-company was liable to pay provident fund contribution in respect of the amount paid as aforesaid on the termination of the services of the aforesaid operatives and clerks. The Regional Provident Fund Commissioner issued notices requiring payment of the amounts representing the petitioner-company's share as well as the employees' share of the provident fund contribution from the petitioner-company in connexion with the amounts paid as aforesaid. The petitioner-company denied the liability to pay the same and declined to pay the same. The amounts claimed were sought to be recovered from the petitioner-company by the coercive machinery available under S. 8 of the Employees' Provident Funds Act, 1952. The petitioner-company has challenged the action of the authorities in requiring payment of the said amounts and in seeking to recover the same.
2. The petitioner-company had filed the petition for the issue of a writ of certiorari or other appropriate writ or direction or order under Art. 226 of the Constitution against the Regional Provident Fund Commissioner, the State of Bombay and the Collector of Bombay, calling for the records of the case and for quashing and setting aside respondent 1's order relating to the demand of these amounts and the respondents 2 and 3's demand for recovery of the said alleged dues. The petitioner-company has also prayed for the issue of a writ of mandamus or other writ or direction or order under Art. 226 or an order under S. 45 of the Specific Relief Act against respondents 1 and 3 requiring them and their successors-in-office to withdraw and/or cancel the said orders and the said notices. The petitioner-company has also prayed for the issue of a writ of prohibition or any other appropriate writ or direction under Art. 226 of the Constitution restraining respondents 2 and 3 'from enforcing or taking any proceedings in enforcement of the recovery of the amounts' mentioned in the said notices.
3. It is not disputed that the services of the operatives stood determined on payment of thirteen days' wages in lieu of notice and that the contract of employment did not subsist during the period of thirteen days after payment. It is also not disputed that the services of the clerks stood determined on payment of one month's pay in lieu of notice and that the contract of employment did not subsist during the period of one month after such payment. In my view, the words 'thirteen days' wages' and 'one month's pay' appearing in the standing orders refer merely to the quantum of payment to be made for the immediate termination of the services of the employees without notice.
4. It is urged on behalf of the respondents that the standing orders constitute the terms of the contract of employment between the employer and the employees, that what is payable by the company for terminating the services of the an employee under the standing orders constitute 'wages' in the case of an operative and 'pay' in the case of a clerk and that the amounts so paid are amounts in respect whereof provident fund contribution is payable under the provisions of the Employees' Provident Funds Act, 1952.
5. On the other hand it is contended on behalf of the petitioners that wages or pay represent the consideration which is payable during the subsistence of the contract of employment, and that any sum which is payable for securing the due termination of the contract of employment is in reality in the nature of compensation. It is urged that the nature or character of such payment is not altered merely because the parties agree in advance about the amount thereof in terms of wages or pay for a particular period. It is further contended that no amount is payable under the Employees' Provident Funds Act, 1952, and the scheme framed thereunder by way of provident fund contribution in respect of such payment.
6. In order to decide when contribution is payable under the Employees' Provident Funds Act, 1952, it is necessary to consider the provisions of the Employees' Provident Funds Act, 1952. Section 6 of the Act provides as under :
'The contribution which shall be paid by the employer to the fund shall be six and a quarter per cent of the basic wages and the dearness allowance for the time being payable to each of the employees, and the employees' contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires and if the scheme makes a provision therefore, be an amount not exceeding eight and one-third per cent of his basic wages and dearness allowance.'
7. The expression 'basic wages' has been defined for the purposes of the Act by S. 2(b) as under :
''Basic wages' means all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include -
(i) the cash value of any concession;
(ii) any dearness allowance (that is to say, all cash payment by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any presents made by the employer.'
8. It has been strongly urged on behalf of the respondents that the expression 'basic wages' as used in the Act is wide enough to cover the payments which have been made to the employees for securing due termination of their employment. It is urged that the expression 'basic wages' means all emoluments which are earned by an employee white on duty, and that the amounts that have been paid to the employees for securing the due termination of their services represent the amounts which had been earned by them while they were on duty. It is urged that because the employees were on duty, they became entitled to receive such payment under the contractual obligation incurred by the company as embodied in the standing orders. In my view, this reading of the section is untenable. The expression 'emoluments which are earned by an employer while on duty' represents the amounts actually earned by an employee during the period of his employment while he is actually on duty. The payment in question is not a payment earned for duty done. It is not a payment earned while on duty. It is a payment by way of consideration for terminating the contract of employment of a permanent employee without notice. The payments made cannot in any sense be regarded as representing 'emoluments earned while on duty' and are not and do not constitute 'basic wages' within the meaning of the definition given in the Employees' Provident Funds Act, 1952, and no percentage thereof is payable by way of provident fund contribution.
9. Under the provisions of the said Act a scheme has been framed known as the Employee's Provident Funds Scheme. Under rule 29 of that scheme contributions are payable by the employer at the rate therein mentioned. Sub-rules (1), (2) and (3) of rule 29 provide as under :
'29. (1) The contribution payable by the employer under the scheme shall be at the rate of one anna in the rupee of the basic wages and the dearness allowance payable to each employee to whom the scheme applies.
(2) The contribution payable by the employee under the scheme shall be equal to the contribution payable by the employer in respect of such employee.
(3) The contribution shall be calculated on the basis of wages and dearness allowance actually drawn during the whole month whether paid daily, weekly, fortnightly, or monthly basis.'
10. The expression 'wages' in sub-rule (3) in the context in which it is used can only refer to 'basic wages.'
11. Rule 30 provides as follows :
'The employer shall, in the first instance, pay both the contribution payable by himself (in the scheme referred to as the employer's contribution) and also, on behalf of the member employed by him, the contribution payable by the member (in the scheme referred to as the member's contribution).'
12. Rule 32 runs as under :
'The amount of a member's contribution paid by the employer shall, notwithstanding the provision in this scheme or any law for the time being in force or any contract to the contrary, be recoverable by means of deduction from the wages of the member and not otherwise.'
13. The provident fund contribution under the Act and the scheme has to be made on the basis of a percentage of the basic wages and dearness allowance actually drawn. The amounts paid under the standing orders for securing the due termination of the employment of the employees without notice cannot be treated as amounts drawn by the employees as 'basic wages' or dearness allowance and the provisions of the Act and the scheme are not applicable thereto. No amount is payable in connexion therewith by way of provident fund contribution and the demands made upon the petitioner company are not warranted by law and are not justified.
14. In the result, the petitioners are entitled to a writ of mandamus against the Regional Provident Fund Commissioner and the Collector of Bombay, requiring them and their successors-in-office to forbear from claiming the amounts referred to in the notices, copies whereof are annexed as Ex. B to the petition, and from seeking to recover the same under S. 8 of the Employees' Provident Funds Act, 1952, and I order accordingly. Respondents to pay to the petitioner the costs of the petition. Costs fixed at Rs. 325.
15. Petitioners' attorney to be at liberty to withdraw the amount deposited in Court on behalf of the petitioners.