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Birla Cotton Spinning and Weaving Mills Vs. Employees' State Insurance Corporation (26.03.1976 - DELHC) - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 65 of 1972
Judge
Reported inILR1976Delhi350; 1977LabIC119; (1977)IILLJ420Del
ActsEmployees State Insurance Act, 1948 - Sections 2(22)
AppellantBirla Cotton Spinning and Weaving Mills
RespondentEmployees' State Insurance Corporation
Advocates: S. Pappu,; B.R. Sabharwal and; C.M. Oberoi, Advs
Cases ReferredUnion of India v. Landra Engineering
Excerpt:
(i) employees' state insurance act (1948) - section 2(22)-- 'wages' -- definition of -- whether overtime payments, made to an employee, is included in the term 'wages'.; that the remuneration paid or payable to the employees must have origin and sanction in the contract between the parties, whether would not be covered by the expression 'wages' contained in the employees' state insurance act.; overtime work is done in pursuance of contract of service between the parties and not otherwise by the force of law.; further, that the terms of the contract between the employer and the employee broadly relate to the nature of the work and the remuneration. the hours of work are regulated by statute or standing instructions and constitute implied terms of the contract. the employer asks the.....c. misra, j. (1) this judgment will-dispose of two appeals (fao 65 of 1972 and fao 61 of 1972),, filed under section 82 of the employees' state insurance act (34 of 1948), (hereinafter referred to as 'the act'), both of which arise out of an order dated 29th april, 1972, by which the court below has allowed the claim of the respondent corporation for recovery of contribution on the overtime payments but has refused interest on the delayed payment for an earlier period. the first mentioned appeal (fao 65 of 1972) has been filed by the mills challenging the order for recovery of contribution, while the cross appeal (fao 61 of 1972) has been filed by the corporation against the order refusing relief of interest.(2) the material facts of the case are not much in dispute. the respondent.....
Judgment:

C. Misra, J.

(1) This judgment will-dispose of two appeals (FAO 65 of 1972 and Fao 61 of 1972),, filed under section 82 of the Employees' State Insurance Act (34 of 1948), (hereinafter referred to as 'the Act'), both of which arise out of an order dated 29th April, 1972, by which the court below has allowed the claim of the respondent Corporation for recovery of contribution on the overtime payments but has refused interest on the delayed payment for an earlier period. The first mentioned appeal (FAO 65 of 1972) has been filed by the Mills challenging the order for recovery of contribution, while the cross appeal (FAO 61 of 1972) has been filed by the Corporation against the order refusing relief of interest.

(2) The material facts of the case are not much in dispute. The respondent Corporation claimed recovery of contribution of the employer on the wages of the employees including the amount of overtime wages paid during the period 30th June, 1969 to 31st March, 1970 and it claimed interest on the delayed payments of contribution for a previous period 1st April, 1968 to 31st December, 1968. The defense of the appellant Mills was that the overtime wages were not included within the definition of wages as given in clause (22) of section 2 of the Act. This has been repelled by the court below in answer to issue No. 1. The defense to the second claim for interest covered by issue No. 2 was that the appellant had purchased the requisite stamps for payment of the contribution, though the contribution cards had not been submitted and since the amount of purchase had been credited to the account of the Corporation, it should be deemed that the payment had been made in time and as such the Corporation was not entitled to claim any interest. This submission of the appellant Mills has prevailed with the court below.

(3) Feeling aggrieved, both the parties have filed these appeals. The learned counsel for the respondent Corporation has contended that under section 82 of the Act, an appeal lies to the High Court only if it involves substantial question of law and so the appeal is not maintainable. I have no hesitation in rejecting the contention, since the appellant Mills has raised a substantial question of law, which needs decision by this court. The first question is whether overtime wages are included . . in the. 'wages' as defined by the Act.

(4) Clause (22) of section 2 of the Act reads ap follows :

'(22)'Wages' means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfillled and includes any payment to an employee in respect of any period of authorised leave. lockout, strike which is not illegal or layoff and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include-

(a) any contribution pad by the employer to any pension fund or provident fund, or under this Act ;

(B)any traveling allowance or the value of any traveling concession;

(E)any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or

(D)any gratuity payable on discharge;'

THISprovision came up for consideration before the Supreme Court in M/s Braithwaite & Co. (India) Ltd. v. The Employees' State Insurance Corporation, : (1968)ILLJ550SC . The court was considering the case of a scheme of giving Inam to the employees: as a reward for good work. This was held not to be included in the definition of wages. The court observed that the payment of Inam was not amongst the original terms of contract of employment and the employees were expected to work for certain periods at agreed rates of wages and the offer under the scheme was to make incentive payments if certain specified conditions were fulfillled by the employees. Inam was not payable on account of certain conditions like, lack of materials, breakdown of machinery, lack of labour, strikes, lock out, etc. and it was made clear in the scheme that the payment of reward was in no way connected with the part of the wages. The Supreme Court, revers- ing the decision of the High Court of Calcutta (reported in 2nd (1966) 2 Cal 140, held that the payment of Inam. though remuneration could not be said to have become a term of the contract of employment within the meaning of the definition of 'wages' as given in section 2(22) and had the Inam become an implied condition of the contract of employment, the employer could not withdraw that right at its discretion without assigning any reason nor could the employer vary its conditions without agreement from the employers. It was also found that since the exemption from payment of the Inams rested on grounds for which the employees could not be blamed and possibly for which the company itself might be responsible clearly showed that the payment of the Inam was not enforceable as one of the terms of the contract of employment implied or express. Hence, the same did not constitute part of the wages. The court further observed as follows :

'ITcannot, thereforee, be held that remuneration payable under a scheme is to be covered by the word 'wages' if the terms of a contract of employment are taken to have been fulfillled...... The mere fact that a reward for good work offered by the employer was accepted by employee after he had successfully satisfied the requirement laid down by the employer for earning reward could not mean that this payment became a part of contract of employment.' This authority of the Supreme Court accordingly lays down the rule of law that 'the remuneration paid or payable to the employees must have origin and sanction in the contract between the parties, whether express or implied, but any unilateral extra payment by the employer would not be covered by the expression 'wages' contained in the Act.'

(5) Mrs. Pappu has cited Regional Director of E.S.I. Corpn. v. Management of Mysore Kirloskar Ltd., 1974 Lab.I.C. 1083, where the High Court of Karnataka construed the expression 'wages' occurring in the Act and held that the payments made as incentive payments to employees on its own voluntary scheme could not be considered as wages and no contribution was payable either by the employer or by the employee and that such payments were not covered by the expression other additional remuneration, if any, paid at intervals not exceeding two months'. In the Assistant Regional Director, In-charge, Employees' State Insurance Corpn. v. The Model Mills Nagpur Ltd., 1975 Lab. I.C. 85, the High Court of Bombay held that the amount paid to the employees towards the authorised leave period prior to June, 1967 which they enjoyed under the provisions of sections 79 and 80 of the Factories Act could not be included in the total wage bill of the employer for the purpose of computing its share of special contribution under section 73A, as they are not wages within section 2(22) before its amendment in 1966. In the Regional Director, E.S.I. Corpn. v. Bata Shoe Co., 1976 Lab. I.C. 12, the High Court of Patna field that the payment of goodwill bonus was not part of the wages. Mrs. Pappu also relied upon the Income-tax Officer v. Gwalior Rayon Silk . : AIR1976SC43 , to show how an irrevocable agreement was arrived at between the revenue and the party under section 220(3) of the Income-tax Act. I am unable to derive any assistance from this decision. Mrs. Papuu has cited Bala Subramanya Rajaram v. V. C. Patil, : (1958)ILLJ773SC , where the Supreme Court held that bonus', was not payable because of the contract, but because of the a,ward of the Industrial Court and so it was not wages' within the meaning of the Payment of Wages Act as it stood before its amendment in 1957 and also after its amendment. Hence, the Authority under the Act had no jurisdiction to entertain the petition made to it under section 15 of that Act. This authority is of no help in solving the problem raised before me.

(6) On the other hand, Mr. Oberoi, counsel for the respondent Corporation, has relied upon Shivraj Fine Art Litho Works v. The Regional Director, Maharashtra 1974 Lab. I. C. 328. In this decision, the Division Bench of the High Court of Bombay at Nagpur, construing the provisions of section 2(22) of the Act held that the definition of 'wages' took in all remuneration which was paid to an employee in cash, if the terms of the contract of employment, express or implied, were fulfillled and when the definition referred to 'all remuneration' there was no difference on principle to exclude from it the remuneration paid for additional period or overtime period. This authority supports the respondent. Mrs. Pappu has commented upon it as being contrary to the decision of the Supreme Court in Braithwaite & Company's case (supra). The criticism is, in my opinion, not well founded. The Supreme Court in Braithwaite & Company's case held that the scheme of giving Inam was unilateral and not enforceable by the employee and so it did not become a part of implied or express terms of contract between the parties, as otherwise the employer would not be able to withdraw it without assigning any reason; consequently, it did not constitute wages. The High Court of Bombay in Shivraj's case (supra) observed in paragraph 5 as follows:

'NORMALLY,when an employee or a worker works overtime, he does so at the bidding or the behest of the employer who offers an opportunity for doing overtime work and the employee agrees to work for a period in excess of his normal working days. Such an offer by the employer is made to an employee with whom he has a subsisting contract of employment, because unless the employee has a subsisting contract of employment, the concept of an overtime work will not follow. The concept of overtime work must necessarily flow, in our view out of the original contract of employment and it is difficult to see how it can be held that the moment the period of normal working day is over the contract of employment with the employee comes to an end at least for that day and there is some new arrangement by which the employee continues to work on the employer's establishment beyond the normal working day. If such working beyond the normal working day is de hors the period of work during the normal working day then the additional period during which the employee is being asked to work, will not really be in the nature of overtime work. What has to be taken into consideration is that an employee who has himself gone through his normal working day is being asked by the employer to work for an additional period and that is why he gets a right to the benefit of the provisions of section 59 of the Factories Act or section 14 of the Minimum Wages Act. There is no question of any fresh contract of employment being entered into and in our view, when an employee is asked to work beyond the normal working day, it is really done in pursuance of the original contract of employment which is being extended by the parties so far as the period of work is concerned. 'The definition of 'wages' in section 2(22) of the Insurance Act takes in all remuneration which is paid to an employee in cash, if the terms of the contract of employment, express or implied, were fulfillled.'

MOSTrespectfully, I agree with the observations of the Division Bench of the High Court of Bombay, expressed in Shivraj's case and I find that it is not contrary to the observations of the Supreme Court in any of its decisions. Overtime work is done in pursuance of contract of service between the parties and not otherwise by the force of law. Only wages for overtime are regulated by section 59 of the Factories Act, the relevant portion of which reads as follows :

'(1) Where a worker works in a factory for more than nine hours in any day or for more than forty-eight hours in any week, he shall, in respect of overtime work, be entitled to wages at the rate of twice his ordinary rate of wages.'

WHILEsection 59 of the Factories Act is specific, the general provisions of overtime are contained in section 14 of the Minimum Wages Act, 1948, which is to the effect that where an employee, whose minimum rate of wages is fixed under this Act by the hour, by the day or by such a longer wage period as may be prescribed, works on any day in excess of the number of hours constituting a normal working day, the employer shall pay him for every hour or for part of an hour so worked in excess at the overtime rate fixed under the Act or under any law of the appropriate Government for the time being in force, whichever is higher. Sub-section (2) of the said section provides that nothing in this Act shall prejudice the operation of the provisions of section 59 of the Factories Act, 1948 in any case where those provisions are applicable.

(7) The ra,te but not the work, is, thereforee, prescribed by section 59 of the Factories Act and wages shall be paid at the rate double the normal rate for overtime work. The overtime work is, however, as observed by the High Court of Bombay, done in pursuance of the contract of service and it constitutes and flows from the original contract and not statute. The terms of the contract between the employer and the employee broadly relate to the nature of the work and the remuneration. The hours of work are regulated by statute or standing instructions and constitute implied terms of the contract. The employer asks the workman to work and the workman agrees to work. But this is not in pursuance of a new contract, but as an implied term of the original contract. So far as the wages for overtime work are concerned, they are fixed by the statute. This will, thereforee, constitute an implied term of the contract and as such it would answer the definition of wages given in the Act, which means all remunerations paid or payable if the terms of contract of employment express or implied, were fulfillled. The payment for overtime wages is certainly a remuneration which is paid cr payable in cash to an employee on the fulfillment of the conditions of contract of employment and working overtime is an implied term of the contract.

(8) Mrs. Pappu contends that overtime work cannot be taken to be an implied term of contract and she has cited The Moorcock, (1889) 14 P. D. 64, Movil Kotta Kunchunni Nair v. Subramaniam Patter 33 Madras 162, and : (1951)ILLJ217Cal , to show as to what constitutes implied term. From these authorities no assistance can be derived in construing the provision of law under consideration, because they deal with warranty in the respective cases. She has also relied upon Halsbury's Laws of England, 3rd Edition, Volume 25, par,a- graph 894 on page 462 (12) to show the nature of the implied duties of the servant to obey the master's lawful orders and to serve him faithfully and if thereforee, a servant inviolation of his duty to serve faithfully, takes advantage of the opportunities of his position to enrich himself, he is accountable to his master for the proceeds, even if earned by a criminal act. It is also the servant's duty to take proper care of such property of the master as is entrusted to his charge. The paragraph also states that a servant may in breach of his duty to his master if in his spare time he works for a trade competitor of his master, even though no disclosure of confidential information takes place. Further duties specified in other paragraphs of the said volume of Halsbury are like a servant being under an. obligation not to absent himself from work without good cause during the time at which he is required to be at work by the terms of his contract of service. It also provides that it is the obligation of the master to provide employment to the servant and where no such obligation exists, it may be implied. Paragraph 912 of the same volume of Halsbury lays down that in certain cases powers are conferred upon the Minister of Labour and National Service to make wages regulation orders fixing the remuneration to be paid to the employees and if a contract between a workman to whom such an order applies and his employer provides for the payment of less remuneration than the statutory remuneration, it has effect as if for the remuneration in question there were substituted the statutory minimum remuneration and a corresponding power to fix minimum rates of wages is conferred on the Agricultural Wages Board.

(9) In Halsbury's Laws of England, 3rd Edition, Volume 8, page 121(13), it is observed as follows :

'212.Implication of terms.-In construing a contract, a term or condition not expressly stated may, under certain circumstances, be implied by the court, if it is clear from the nature of the transaction or from something actually found in the document that the contracting parties must have intended such a term or condition to be a part of the agreement between them. Such an implication must in all cases be found on the presumed intention of the parties and upon reason, and will only be made when it is necessary in order to give the transaction that efficacy that both parties must have intended it to have, and to prevent such a failure of consideration as could not have been within the contemplation of the parties. In every case, the question whether an implication ought or ought not to be made will depend on the particular facts ; consequently, it is neither possible nor desirable to lay down any hard and fast rules on the subject, and it must be remembered that the construction of one contract will afford but little guidance for the construction of another unless the facts and surrounding circumstances are practically identical.'

INSterling Engineering Co. Ltd. v. Patchet, (1955) 1 All E.P. 369, it was observed as follows :

'STRICTLYspeaking, I think that an implied term is something which, in the circumstances of a particular case, the law may read into the contract if the parties are silent and it would be reasonable to do so: it is something over and above the ordinary incidents of the particular type of contract. If it were necessary in this case to find an implied term in that sense, I should be in some difficulty. But the phrase 'implied term' can be used to denote a term inherent in the nature of the contract which the law will imply in every case unless the parties agree to vary or exclude it.'

INPawankumar v. Jagdeo, , Bose J. observed in paragraph 6 as follows :

'WHENthe law fastens terms of its own on to a contract those terms must be read into the deed as if they formed part and parcel of the agreement. It is not necessary for parties to a deed to produce in it terms and conditions which the law imposes upon them. Also, if . . . a statute imposes conditions which arc to apply unless expressly abrogated those conditions will clearly apply whether they are inserted in the deed or not unless and except in so far as they are expressly abrogated.'

In Mehra & Co. v. Khanayia Lal Pala Ram, , the court held that the expression 'any sum payable to such person by reason of the termination of the employment' was wide enough to embrace not only a sum payable to an employee under the terms of a, contract, but also a sum payable to him under the provisions of a statute. The court observed in paragraph 4 as follows :

'STATUtorYprovision in regard to a sum payable to an employee by reason of the termination of his employment must be deemed to be an implied terms of the contract. The expression 'implied contract' applies not only to contracts, which are implied in fact, that is which may be inferred from the conduct or presumed intention of parties, but also to contracts where the liability arises from an implication of law and from facts and circumstances independent of agreement or presumed intention or' parties.'

THElearned Judge further found that when the legislature declared that an employer shall make certain payments to an employee whose services were terminated, the law imputes to the employer a promise to fulfill that obligation. This was a decision under the Payment of Wages Act, but I derive support from it for my view that a duty to pay for the overtime work in accordance with the statutory provisions, is an implied term of the contract. I hold a,ccordingly.

(10) Mrs. Pappu has invited my attention to the word 'wages' occurring in the other statutes. In section 2 of the Industrial Disputes Act, 1947, the word 'wages' is similarly defined and includes dearness allowances. In Minimum Wages Act, 1948 and Payment of Bonus Act, 1965, the definition is given which excludes some items like traveling concession, incentive bonus, retrenchment compensation, etc. She has also invited my attention to section 2 of Payment of Gratuity Act, 1972, which expressly excludes bonus and overtime wages or any other allowance. She has referred to section 2 of the Payment of Wages Act, 1936, where the definition of wages has been given to include remuneration to which the person employed is entitled in respect of overtime work or holidays or .any leave period.

(11) In my opinion, the reference to the provisions of other statutes is uncalled for and is not of any assistance. In Laurence Arthur Adamson v. Melbourne and Metropolitan Board of Works. Air 1929 P. C. 181, the Judicial Committee observed at page 183, that it was always unsatisfactory and generally unsafe to seek the meaning of words used in, an Act of Parliament in the definition clauses of other statutes dealing with matters more or less cognate, even when enacted by the same legislature. Similarly, in Guruprasad Mazumdar v. Railway Board, 77 C. W. N. 249, in paragraph 9 it was observed that it was not the correct approach to fake the definition of a term in one statute for the purpose of that statute, as a correct definition for the purpose of a different statute. In Khazan Singh v. The President of India, , the court observed that the particular definition of the word in an Act could not be imported for consideration in a case from the provisions of another Act. In Lennon v. Gibson & Howes Ltd. 1919 A.C. 709, it was observed that when a legislature used the same words in a similar connection in two statutes, it may be presumed in the absence of any context indicating a contrary intention that the same meaning attaches to the words in the latter as in the former statute.

(12) We have, thereforee, to confine our attention to the definition as given in the statute under consideration. In I.L.M. Cadija Umma v. S. Don Manis Appa, Air 1939 P.C. 63, the Judicial Committee observed that when a phrase has been first introduced and then defined, the definition prima facie. must entirely determine the application of the phrase; but the definition must itself be interpreted before it was applied and interpreted in case of doubt in a sense appropriate to the phrase defined and to the general purpose of the enactment. Similarly, in Union of India v. Landra Engineering & Foundry Works, 0065/1962 , the Full Bench of the High Court observed that the intention of the legislature is to be gathered from the words used in the particular enactment. The meaning is, thereforee, to be gathered from the language used, the object and the context in which the expression occurs. The expression 'wages' occurring in the Act under consideration gives a special definition and the legal fiction created by the definition is to be used throughout the Act in construing its provision subject to the context to the contrary. The construction and legal import of the definition are to be found by reference to the language used the object and the context of the Act where it occurs and it would be dangerous to rely upon the provisions of other statutes where a similar expression has been defined for other purposes.

(13) Reference may, however, be made to clause (b) of subsection (9) of section 2 of the Act, which prescribes that any person so employed whose wages (excluding remuneration for overtime work) exceed five hundred rupees per month will not be included in an employee. It is, thereforee, clear that 'the legislature in enacting the law under consideration was conscious of the conception of overtime work and where it wanted to exclude it, it has clearly said so.' I do not find anything in the language of sub-section (22) to exclude the application of wages to remuneration for overtime work. In fact, the. language emphasises that wages mean all remuneration paid or payable if the terms of the contract express or implied were fulfillled. Clearly, the definition is wide enough to cover all remunerations paid or payable in cash and this would include overtime work, provided it arises out of the terms of the contract of employment whether express or implied. As observed above, performing the overtime work is an implied term of the contract of employment and it is not performed in pursuance of any distinct or independent contract, but it flows from the original contract of employment. The rate of remuneration is governed by the statute, which must be deemed to be an implied term of the contra,ct and as such it falls within the expression 'wages'.

(14) Mrs. Pappu has lastly submitted that overtime work may not be a regular feature, and if so, the amount of contribution by the employer or employee, if made to include the overtime wages, would keep fluctuating. This submission has no force. Provisions have been made by the Act and the regulations under the Act for determining the amount of contribution to be made by the employee as well as the employer and those provisions have to be given effect to irrespective of whether or not they have the effect of varying the amount of contribution from time to time. Hence my conclusion is that 'the definition of the word 'wages' occurring in clause (22) of section 2 of the Act covers overtime wages. The language is wide enough to include the overtime wages and there is nothing contained in the language used or the object and the context of the Act or its other provisions to exclude the remuneration for overtime work from the wages. As such the employer is liable to make his contribution on the overtime wages of the employees as well.' The contention of the learned counsel for the appellant, thereforee, fails and is rejected and the finding of the court below on the first issue is affirmed.

(15) So far as the second issue, which has been agitated in the cross appeal by the Corporation is concerned, the court below has found that the purchase of the stamps amounted to payment. I am of the view that the court below has fallen into an error. 'The mere purchase of the stamp does not amount to payment of the requisite contribution. The stamps may be purchased by the employer for his own reasons and if they are not used they may, in accordance with the rules framed for the purpose, be refunded (see Regulations 25 and 43). The payment of the contribution is, in fact, made by affixation of the stamps on the contribution cards and then cancelling them. Unless and until the same has been used and cancelled in the prescribed manner, so that they cannot be used again, the stamps cannot be said to amount to payment.' Regulations 29 and 34 prescribe the mode of cancellation. Their material portions are as follows :

'29.Payment of Contribution by Stamps.-Every contribution payable under the Act, shall, except as otherwise provided herein, be paid by affixing contribution stamps on the Contribution Card of the employee in the space indicated for that purpose upon the Card. The contribution stamps shall be of such shape and design as the Corporation may, from time to time determine, and shall be sold in such manner and at such agencies as the Corporation may notify from time to time.

34.Cancellation of Contribution Stamps.-(1) an employer shall, immediately after affixing a contribution stamps to any Contribution Card, cancel the stamp by writing in ink, or stamping with a metallic die with black indelible ink across the face of the stamp, the date upon which it is affixed, the employer's code number and such other particulars, if any, as the Corporation may specify, and save as expressly provided in these regulations, no other writing or mark and no perforation shall be made on a Contribution Card or a contribution stamp. (2) An employer may, if he thinks fit, inscribe upon the Contribution Card of an employee, the number of that employee upon the pay-list or in the books of the employer.'

(16) The submission of the contribution card is also a requisite of regulation 26, but I agree with the court below that the submission of the card is not the essence of the payment. Nevertheless, the affixation of the stamp on the contribution card and its cancellation is a necessary ingredient to constitute payment. A reference may with advantage be made to section 15 of the Stamp Act, which provides that unless and until adhesive stamp affixed to an instrument is cancelled, so that it cannot be used again, it cannot be deemed to be stamped. Regulations 29 and 34 under the Act contain a similar provision for affixation of the stamp and its cancellation. As a result, I hold that mere purchase of the stamp does not amount to payment, but purchase of stamps, their affixation on the contribution cards and cancellation of the same in the prescribed manner will amount to payment. Had that been done, the employer could not be liable to pay interest. Since in the instant case, the finding of the court below is that only stamps had been purchased, but the same had not been affixed on the contribution cards, the finding will have to be reversed. 'The court below will now determine whether the appellant Mills has paid the amount of contribution in the light of my observations above and if not how much interest it is liable to pay.

(17) As a result, Fao 65 of 1972 is dismissed. Fao 61 of 1972 is allowed and the case is remanded to the Insurance Court below for the purpose indicated above. In the circumstances of the case, the parties will bear their respective costs in both the appeals.


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