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Burmah Shell Oil Storage and Distributing Company of India Ltd. Vs. the Regional Provident Fund Commissioner Delhi and ors. - Court Judgment

LegalCrystal Citation
SubjectService
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 1315 of 1971
Judge
Reported in[1981(42)FLR315]; ILR1980Delhi841; (1981)IILLJ86Del
ActsEmployees Provident Fund and Miscellaneous Provision Act, 1952 - Sections 2
AppellantBurmah Shell Oil Storage and Distributing Company of India Ltd.
RespondentThe Regional Provident Fund Commissioner Delhi and ors.
Advocates: G.B. Rai,; G.C. Mathur,; D.H. Misra,;
Cases ReferredBraithwaite and Co.. (India) Ltd. v. The Employees State Insurance Corporation
Excerpt:
employees' provident funds and family pension funds act (1952) - section 2(b)--'basic wages'--what are its characteristics--whether ad hoc payments made by the employer in pursuance of a settlement is 'basic wages'.; the question which arises for determination in this writ petition is whether an ad hoc payment made to employees by an employer in pursuance of a settlement arrived at between the employees and the union representing the workman is 'basic wages' within the meaning of the employees' provident funds and family pension funds act, 1952. allowing the writ petition,; 1. the ad hoc payment postulated by clause vi of the seelement in neither basic wages nor payment of compensatory station allowance for the year 1969.; 2. section 2(b) of the act defines 'basic wages' and by reading..........of a settlement arrived at between the employer and the union representing the employees is 'basic wages' within the meaning and for the purposes of the employees' provident funds and family pension funds act, 1952, hereinafter referred to as the act. (2) the facts leading to the filing of the petition under article 226 of the constitution are these. the petitioner is an employer and its employees, as represented by the petroleum workers union, respondent no. 2, are covered by the provisions of the act. respondent no. 1. is the regional provident fund commissioner, delhi, and the union of india is respondent no. 3. disputes were raised by respondent no. 2, which were referred for conciliation to the conciliation officer, delhi, as contemplated by the industrial disputes act, 1947......
Judgment:

Prakash Narain, J.

(1) The question which arises for determination in this petition filed under Article 226 of the Constitution of India is whether an ad hoc payment made to employees by an employer in pursuance of a settlement arrived at between the employer and the union representing the employees is 'basic wages' within the meaning and for the purposes of the Employees' Provident Funds and Family Pension Funds Act, 1952, hereinafter referred to as the Act.

(2) The facts leading to the filing of the petition under Article 226 of the Constitution are these. The petitioner is an employer and its employees, as represented by the Petroleum Workers Union, respondent No. 2, are covered by the provisions of the Act. Respondent No. 1. is the Regional Provident Fund Commissioner, Delhi, and the Union of India is respondent No. 3. Disputes were raised by respondent No. 2, which were referred for conciliation to the Conciliation Officer, Delhi, as contemplated by the Industrial Disputes Act, 1947. A settlement was arrived at between the employer and the employees and the Memorandum of settlement postulated by Section 12(3) of the Industrial Disputes Act read with Rule 58 of the Rules framed under that Act was reduced to writing and signed on March 21, 1970 (Annexure 'A' to the position). In consequence, the petitioner and its employees became bound by the Settlement arrived at. The settlement provides, inter alia, that the parties in consideration of the settlement arrived at on March 21, 1970 terminate an earlier settlement dated March 22, 1968. Further, the workman agree that there was no subsisting dispute thereafter and that all demands, whether pending in conciliation or before the company or before Industrial Tribunal shall be deemed to be settled so far as is provided in the settlement and that the rest shall be deemed to have been withdrawn. It was specifically agreed by Clause Viii of the settlement dated March 21, 1970 that the settlement shall come into force with immediate effect from the date of signing and shall remain in force until December 31, 1972 and continue in operation thereafter until the expiry of two months' notice of termination in writing served by either party on or after December 31, 1972. Among the various points on which settlement was arrived at. the workmen agreed to the employer's right to undertake such reorganisation measures as it considers necessary in the interest of promoting productivity and efficiency without prejudice to the legal rights of both the parties and ensuring that in pursuance of such reorganisation there will be no loss in the gross remuneration of any workmen. In consideration of this undertaking by the workmen, the employer agreed not to retrench any of the workmen during the period of settlement. With regard to the demand for bonus by the workmen the employer agreed that it will pay bonus for the years 1967, 1968, 1969, 1970, 1971 and 1972, to all workmen in labour and clerical cadres in the service of the employer and who have worked 30 days or more during the year for which the bonus is payable at the rate of 25 per cent of the annual basic wages actually earned during the said year in full and final settlement. It was stated that the employer had already offered bonusor the years 1967 and 1968 at the rate of 4 per cent of the gross wages earned, and where the bonus for the said years has been accepted, then only the difference between 25 per cent basic and 4 per cent gross shall be paid as bonus for the years 1967 and 1968. It was also agreed that the bonus for the years 1967, 1968 and 1969 will be paid before April 30, 1970 and thereafter for each of the remaining years mentioned earlier by the 15th February of the respective year following. It is worth noting that in Clause Iv (b) it has been set out that the parties agrees that the bonus agreed to be paid was part of a package deal and would not be treated as a precedent for any purposes whatsoever in respect of future bonus for the year 1972 onwards which would be payable in accordance with the provisions of the payment of Bonus Act, 1965. Clause V of the said settlement reads as under :

'EFFECTIVE1st January, 1970 all permanent workmen in the clerical and labour categories on the pay roll of the Company as on the date of signing of the Settlement shall be given the following increase in their Compensatory Station Allowance : Labour Rs. 25.00 Clerical Rs. 50.00 Clause Vi, the payment under which is the matter under consideration, reads as under : 'AD Hoc Payment All permanent workmen in the Clerical and Labour category on the pay roll of the Company as on the date of signing 845 of the Settlement shall receive an ad hoc non-recurring lumpsum payment as under : Clerks Rs. 6001- Labour Rs. 3001-

By Clause Vii of the Settlement basic salary/basic wage effective from January 1, 19.70 was revised for clerical and labour grades respectively. The revised grades were set out in Annexures 'B' and 'C' so the Settlement.

(3) It is common case that the settlement was duly implemented.

(4) By a summons dated December 3,-1970 issued by the Regional Provident Fund Commissioner the petitioner was informed that respondent No. I had reasons to believe that the petitioner had failed to furnish the prescribed returns required ti be submitted in respect of its establishment which was covered by the Act and had failed to remit provident fund money due in accordance with law with reference to ad hoc payments postulated by Clause Vi of the Settlement dated March 21, 190C. The petitioner was, accordingly, summoned under Section 7A of the Act to appear before respondent No. 2 with all the relevant record and explain why it had so failed. The petitioner submitted its case in writing by a reply dated January 22, 1971 and also put in appearance. The employees of the petitioner submitted their contentions also in writing. To the contentions raised by the employees the petitioner filed a reply dated April 19, 1971. To this reply the employees filed a rejoinder dated May 29, 1971. After hearing the petitioner, the representatives of the employees and the Provident Fund Inspector, respondent No. 1 passed the impugned order dated November 8, 1971.

(5) The petitioner's case before the Regional Provident Fund Commissioner, as contained in its reply dated January 22, 1971 (Annexure 'C') was that the ad hoc payments postulated by Clause Vl of the Settlement dated March 21, 1970 was not part of nor fell within the ambit of basic wages, as contemplated by the Act. Indeed, the basic wages for clerical and labour categories were revised by the said Settlement and are clearly set out in Annexures 'B' and 'C' to the Settlement. Further, the ad hoc payment was part and parcel of a package deal and had no relation whatsoever to basic wages or dearness allowance. The report of the Inspector of Provident Fund to the contrary and contending that the ad hoc payment was in the nature of Compensatory Station Allowance for the year 1969 was untenable. An increase in wage effective from January 1, 1970 is to be found in Clause Vi of the Settlement.

(6) The employees' contention was that the ad hoc payment was part of wages of the employees, as defined in section 2(b) of the Act. It was prayed that inasmuch as the employer had failed to discharge a statutory duty in making its contribution for the amount covered by ad hoc payment or to deduct from the employees, both its contribution and the employees' contribution should be made payable by the employer. The case of the employees clearly was that the ad hoc payment was really the additional or increased payment of compensatory Station Allowance for the year 1969. The reply of the employer to the case of the employees and the subsequent rejoinder of the employees reiterated their respective positions.

(7) Respondent No. 1 came to the conclusion that the ad hoc payment was really the increase of Compensatory Station Allowance payable for 1969. Looking at the increase of Rs. 600 for the clerical cadre and Rs. 300 for the labour cadre, arithmetically, respondent No. 1 worked it out as Compensatory Station Allowance payable to the labour cadre at the rate of Rs. 25 and to clerical cadre at the rate of Rs. 50 P.M. having come to this conclusion respondent No. 1 then went on to examine whether the Compensation Station Allowance will form part and parcel of basic wages. He came to the exclusion that though it is not clear why ad hoc payment, which is really Compensatory Station Allowance for the year 1969, was not clearly mentioned as such for the year 1969, yet giving a beneficial construction to the provisions of the Act, it has to be held it is Compensatory Station Allowance for the year 1969 and so part of basic wagon. Respondent No. 1, however, rejected the employees' contention that the employer should be made to pay its contribution as well as the contribution of the employees on the equities of the case. He. thereforee, ordered that the employer should deposit both the contributions. The employer may issue notices to the employees for their respective contributions and such of the employees as agreed to deduction being made from their wages should contribute and the employer should remit the same otherwise if they do not agree, the employer should remit the contribution of both the employees and the employer. It is this order which is under challenge before us.

(8) In our view the order of respondent No. 1 cannot be upheld and has to be struck down. The findings that the ad hoc payment postulated by clause Vi of the Settlement is either basic wages or payment of Compensatory Station Allowance for the year 1969, are both untenable in law as well as on a reading of the Settlement dated March 21. 1970. Section 2(b) of the Act defines basic wages. It reads 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 docs not include (i) the cash value of any food concession; (ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), houserent 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 ;'

Section 6 of the Act, which provides for contributions and matters which may be provided for in the schemes for contributions and payments of Provident Fund, reads as under :

'CONTRIBUTIONSand matters which may be provided for in Schemes. The contribution which shall be paid by the employer to the Fund shall be six and a quarter per cent of the basic wages (dearness allowance and retaining allowance if any, for the time being payable to each of the employees whether as employed by him directly or by or through a contractor and the employee's 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 provision thereforee, be an amount not exceeding eight and one-third per cent of his basic wages, dearness allowance and retaining allowance, if any : Provided that in its application to any establishment or class of establishment which the Central Government, after making such enquiry as it deems fit, may by notification in the Official Gazette specify, this section shall payment of Compensatory Station Allowance for the year 1969, are both untenable in law as well as on a reading of the Settlement dated March 21, 1970. Section 2(b) of the Act defines basic wages. It reads 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 docs not include (i) the cash value of stay food concession; (ii) any dearness allowance (that is to say. all cash payments by whatever name called pafid to an employee on account of a rise in the cost of living), houserent 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 ;'

Section 6 of the Act, which provides for contributions and matters which may be provided for in the schemes for contributions and payments of Provident Fund, reads as under :

'Contributions dad matters which may be provided for in Schemes. The contribution which shall be paid by the employer to the Fund shall be six and a quarter per cent of the basic wages (dearness allowance and retaining allowance if any, for the time being payable to each of the employees whether as employed by him directly or by or through a contractor and the employee's 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 provision thereforee, be an amount not exceeding eight and one-third per cent of his basic wages, dearness allowance and retaining allowance, if any : Provided that in its application to any establishment or class of establishment which the Central Government, after making such enquiry as it deems fit, may by notification in the Official Gazette specify, this section shall be subject to the modification that for the words 'six and a quarter per cent', the words 'eight per cent' shall be substituted : Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee or quarter of a rupee. Explanationn 1. For the purposes, of this section dearness allowance shall be deemed to include also the case value of any food concession allowed to the employee. Explanationn 2. For the purposes of this section 'retaining allowance' means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.'

(9) As a reading of Clause (b) of Section 2 itself shown all empemoluments are not basic wages and before emoluments can be basic wages certain conditions must be satisfied. Apart from those, emoluments which have been specifically excluded in the sub-clauses of Clause (b) of Section 2 before any emolument can be regarded as basic wages it has to bear the following characteristics:

(a) the payment should be by way of emolument: (b) the emolument must be carried; (c) the emolument must be earned on duty, i.e., for service rendered or by way of leave wages; and (d) it must be provided for by the terms of employment or contract of service.

Unless all these characteristics are there in the payment made, it would not fall within the ambit of Ihe term 'basic wages'. In the present case the very reading of Clause Vi of the Settlement shows that the ad hoc payment in terms is not a payment which could be said to have been earned while on duty. An illustration would make this obvious. The ad hoc payment was agreed to be made at the rate of Rs. 600 for the clerical category and at the rate of Rs. 300 for the labour category to only those permanent employees who were on the pay roll of the petitioner on March 21, 1970 and to none other- Thus, if an employee had joined the petitioner's service as a permanent employee on March 21, 1970 he would be entitled to receive the ad hoc payment but an employee who had ceased to be an employee of the petitioner on March 20, 1970 was not entitled to receive it. It is obvious, thereforee, that for the employee who joins as a permanent workman on March 21, 1970 there was no earning of the emolument, particularly for the year 1969. Further, though a person may have been in the employment of the petitioner from 1968 up to March 20, 1970 he does not get the ad hoc payment. It cannot be said that such a person had not earned it in 1969 if the view-of respondent No. 1 is the correct approach. It is significant that all the payments agreed to in the said settlement were a package deal. Whenever there is a package deal the question of earning or not earning the payment agreed to be made does not arise. thereforee, though the ad hoc payment is part and parcel of emoluments, it would not be basic wage as it does not have the characteristic of being earned while on duty.

(10) In M/s. Bridge and Roofs Co. Ltd. v. Union of India and others, : (1962)IILLJ490SC the Supreme Court was concerned with construing whether production bonus is included within the term 'basic wages' as. defined by Section 2(b) of the Act. It was observed by Wanchoo, J. (as he then was) that :

'The main question thereforee that falls for decision is as to which of these two rival contentions is in consonance with S. 2(b). There is no doubt that 'basic wages' as defined therein 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. If there were no exceptions to this definition, there would have been no difficulty in holding that production bonus whatever be its nature would be included within these terms. The difficulty, however, arises because the definition also provides that certain things will not be included in the terms 'basic wages', and these are contained in three clauses. The first clause mentions the cash value of any food concession while the third clause mentions any presents made by the employer. The fact that the exceptions contain even presents made by the employer shows that though the definition mentions all emoluments which are earned in accordance with the terms of the contract of employment, care was taken to exclude presents which would ordinarily not be earned in accordance with the terms of the contract of emolument. Similarly, though the definition includes 'all emoluments' which are paid or payable in cash, the exception excludes the cash value of any food concession, which in any case was not payable in cash. The exceptions thereforee do not seem to follow any logical pattern which would be in consonance with the main definition. Then we come to clause (ii). It excludes dearness allowance, 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. This exception suggests that even though the main part of the definitton includes all emoluments which are earned in accordance with the terms of the contract of employment, certain payments which are in fact the price of labour and earned in accordance with the terms of the contract of employment are excluded from the main part of the definition of 'basic wages'. It is undeniable' that the exceptions contained in clause (ii) refer to payments which are earned by an employee in accordance with the terms of his contract of employment. It was admitted by counsel on both sides before us that it was difficult to find any one basis for the exceptions contained in the three clauses. It is clear however from clause (ii) that from the definition of the word 'basic wages' certain earnings were excluded, though they must be earned by employees in 'accordance with the terms of the contract of employment. Having excluded 'dearness allowance' from the definition of 'basic wages'. Section 6 then provides for inclusion of dearness allowance for purposes of contribution. But that is clearly the result of the specific provision in Section 6 which lays down that contribution shall be 6-3/4 per centum of the basic wages, dearness allowance and retaining allowance (if any). We must thereforee try to discover some basis for the exclusion in clause (ii) as also the inclusion of dearness allowance and retaining allowance (if any) in Section 6. It seems that the basis of inclusion in S. 6 and exclusion in clause (ii) is that whatever is payable in all concerns and is earned by all per manent employees is included for the purpose of contribution under S. 6 but whatever is not payable by all concerns or may not be earned by all employees of a concern is excluded for the purposes of contribution. Dearness allowance (for example) is payable in all concerns either as an addition to basic wages or as a part of consolidated wages where a concern does not have separate dearness allowance and basic wages. Similarly, retaining allowance is payable to all permanent employees in all seasonal factories like sugar factories and is thereforee included in S. 6; but house-rent allowance is not paid in many concerns and sometimes in the same concern it is paid to some employees but not to others, for the theory is that house-rent is included in the payment of basic wages plus dearness allowance or consolidated wages. thereforee, house-rent allowance which may not be payable to all employees of a concern and which is certainly not paid by all concerns is taken out of the definition of 'basic wages' even though the basis of payment of houserent allowance where it is paid is the contract of employment. Similarly, overtime allowance though it is generally in force in all concerns is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment, but because it may not be earned by all employees of a concern it is excluded from 'basic wages'. Simila'rly, commission or any other similar allowances is excluded from the definition of 'basic wages' for commission and other allowances are not necessarily to be found in all concerns, nor are they necessarily earned by all employees of the same concern, though where they exist they are earned in accordance with the terms of the contract of employment. It seems thereforee that the basis for the exclusion in clause (ii) of the exceptions in S. 2(b) is that all that is not earned in all concerns or by all employees of a concern is excluded from basic wages................'

(11) It is thus clear that emoluments to constitute 'basic wages' must be earned by -an employee while on duty. If it is payment made to anyone who was not on duty and not paid to some who were on duty it cannot be regarded as basic wages. Further, the concept of basic wages on a reading of Section 2(b) and Section 6 has to satisfy the principle enunciated in the above case that basic wages are those which arc paid to all employees of a concern and are generally paid to employees of all concerns. What may be paid to some of the employees of a concern and to all employees of some concerns may be emoluments but may not have the characteristic essential for being described as basic wages.

(12) We are also convinced that the ad hoc payment postulated by clause Vi of the Settlement cannot be regarded as Compensatory Station Allowance for the year 1969. First, it is not so stated in. the Settlement. Secondly, with regard to Compensatory Station Allowance there is a specific clause, being Clause V of the Settlement which in terms says that the increase is postulated with effect from January I, 1970. If the intention of the parties at the time of Settlement was that Compensatory Station Allowance should be effective from January 1. 1969 there was no bar to it being so specifically stated, it is not as if there are no clauses dealing with retrospective payments. Clause Iv deals with bonus payable for 1967, 1968, and 1969. The Settlement was arrived at on March 21, 1970 and yet many clauses are made effective retrospectively from January 1, 1970. It is pertinent to note that no period whatsoever is mentioned in Clause VI. Further, this payment is postulated only for those persons who were in the pay roll of the petitioner on March 21, 1970 though by and large the Settlement is effective -from January 1, 1970. 1: lends credence to the contention on behalf of the petitioner that the payment postulated by Clause Vi is an ad hoc payment, as it is described, with no reference to any period- or nature, otherwise stipulated by the Settlement.

(13) It has been urged on behalf of the respondents that all emoluments would be basic wages unless specifically excluded by the sub-clauses under Clause (b) of Section 2. It is contended that the ad hoc payment is not in the nature of an allowance and so, does not fall within the ambit of the term 'similar allowance' in Section 2(b)(ii). Reference has been made in this behalf to the decision of the Supreme Court in M/s. Bridge and Roofs Co Ltd. and it is contended thatt if the payment in question is either payable to all employees of a concern or is generally paid in all concerns, it will assume the charcteristic of basic wage. In our view this is not what Wanchoo, J. has said in his judgment in the above case. The observations of the learned Judge have already been read by us at some length. The ad hoc payment would be more in the nature of a present made by the employer. In the present case it is a present to all permanent workmen on the rolls on March 21, 1970. The ad hoc payment is not an allowance of any kind. If that be correct, and we are of the view that this is the correct interpretation, the ad hoc payment cannot be regarded as basic wages.

(14) It is urged on behalf of the respondents that a person cannot claim a present as of right and, thereforee, the ad hoc payment is not a payment which could be regarded as a present. It is a payment by virtue of a settlement which can be enforced under Section 33C(2) of the Industrial Disputes Act. thereforee, it must be held to be emolument. Normally, a present is gratuitous but where a present is sought to be made as a package deal to settle various disputes raised by workmen it is really a commitment. 'The ad hoc payment may not be a present in the conventional sense of the term. Nevertheless inasmuch as it is not earned nor has any relation to time or period and is payable only to those who are in service on a particular date, it is something the nature of a present, though ceasing to be gratuitous on account of the contract of service, as envisaged by the Settlement in question. In this view of the matter reference by the respondents to M/s. Braithwaite and Co.. (India) Ltd. v. The Employees State Insurance Corporation, : (1968)ILLJ550SC , which deals with what is basic wages under the Employees State Insurance Act is irrelevant.

(15) Under Section 6 of the Act,, for purposes of the contribution, to -basic wages, dearness allowance and retaining allowance, if any, has to be added. It is nobody's case that the ad hoc payment in question is either dearness allowance or retaining allowance. We have already held that ad hoc payment does not bear the characteristic of basic wages. thereforee, no contribution under Section 6 of the Act could be made or could be asked for on the ad hoc payment postulated by Clause Vi of the Settlement.

(16) The result is that we find that respondent No. 1 has exceeded his jurisdiction in demanding contribution under section 6 of the Act for the ad hoc payments made. to the employees of the petitioner. We, thereforee, make the rule absolute and issue a writ of cartiorari quashing the impungned order of respondent No. 1 dated November 15, 1971 and direct that no contribution on the ad hoc payment is admissible or can be claimed. The petitioner by an interim order of this court dated January 10, 1972 was asked to deposit the amount of contribution of both the shares of the employer and employees. If this deposit has been made the petitioner would be entitled to refund thereof in terms of the said order dated January 10, 1972.

(17) In the circumstances of the case, as the point was not free from difficulty, we leave the parties to bear their own costs.


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