1. The Regional Director, Employees' State Insurance Corporation, Ahmedabad, is the appellant in all these appeals. A common question which arose is decided by the First Labour Court in E.S.I. Applications Nos. 11, 32, 33, 51, 52 and 54 of 1971. The question that arose was whether the respondent-companies were liable to pay employers' special contribution under S. 73A of the Employee's State Insurance Act, 1948, on the payments made to its employees in respect of paid holidays. The First Labour Court in all the petitions came to the conclusion that the opponent-companies were not liable to contribute and, therefore, orders were passed restraining the appellant from recovering certain amount specified in the orders.
2. Those orders are now challenged by filing these appeals.
3. The only question which requires to be decided for the purpose of these appeals is whether the amount paid on account of extra paid holidays would be wages within the meaning of the said term under the Employees' State Insurance Act, 1948, (hereinafter referred to as the Act). Section 73A of the Act relevant for the purpose of deciding these appeals may be reproduced as under :
'73-A. Employer's special contribution : (1) For so long as the provisions of this Chapter are in force, every principal employer shall, notwithstanding anything contained in this Act, pay to the Corporation a special contribution herein after referred to as the employer's (special contribution) at the rate specified under sub-s. (3)
(2) * * * (3) The employer's special contribution shall consist of such percentage, not exceeding five per cent, of the total wage bill of the employer, as the Central Government may, by notification in the Official Gazette, specify from time to time :
Explanation. - 'Total wage bill' in this section means the total wages which have accrued due to employees in a factory or establishment in respect of such wage periods as may be specified by the Central Government by notification in the Official Gazette.'
4. For the purpose of these appeals another section which is of importance is S. 2(22) of the Act which defines wages. It runs as under :
'2(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 fulfilled and includes any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay-off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include -
(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) any travelling allowance or the value of any travelling concession;
(c) 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'.
5. This definition was amended by Act 44 of 1966, by which in the above definition after the word 'includes' and before the words 'other additional remuneration' the following words were added and that amendment came into force on 28th January, 1968 :
'any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay-off and ...'.
6. The amendment is not required to be considered in these in appeals as much as the contributions referred to are for the period before the amendment came into force.
7. The learned advocate, Miss Shah, appearing on behalf of the appellants submitted that the word 'wages' should be construed in wide sense and it is not necessary to give any restricted meaning to that word. It was submitted that whatever was paid to the employee for a paid holiday was paid to him because he had worked in that particular week for all the remaining days on which the factory or the establishment was working. It was because of the services rendered on all the days that he was paid for a paid holiday. It may be sated here that under the Factories Act and particularly because of S. 52 of that Act certain weekly holidays are required to be given and those holidays cannot be adjusted and, therefore, the factory is required to be paid because of a contract entered into with the representatives of the employees. Those days are popularly known as 'paid holidays'. The question which is now posed is whether payments made in regard to those paid holidays could be construed as wages within the meaning of S. 2(22) of the Act. If the answer could be 'yes', the employer would be liable to make a special contribution as provided by S. 73-A of the Act. To decide this question it would be fruitful to refer to certain cases.
8. The first case which is required to be referred to is Nutan Mills v. Employees' State Insurance Corporation, reported in [1956-I L.L.J. 215]. In that case the question which was required to be decided was as to whether the lay-off compensation paid to an employee under S. 25C of the Industrial Disputes Act was or was not wages as defined in the Employee's State Insurance Act. 1948, and it was held that the lay-off compensation paid to an employee was not wages and, therefore, the employer was not liable to pay special contribution on such compensation under the provisions of S. 73A of the Act. His Lordship the Chief Justice Shri Chagla (as he then was) of the Bombay High Court, who delivered the said judgment, in para 7, in regard to the word 'wages' observed as under :
'In the first place, the definition of 'wages' emphasises the fact that it is remuneration paid or payable to an employee if the terms of the contract of employment, express of implied, were fulfilled. Therefore, it is clear that it is not every payment by the employer which would come within this definition. It must be a payment which should be remuneration, and remuneration must mean that it is payment for services rendered or to be rendered by the employee'.
9. Another case to which reference is required to be made is the case of the Employees' State Insurance Corporation, Nagpur v. Model Mills, Nagpur Ltd., 76 Bom, L.R. 779. There the question which was required to be decided was whether the payments made by an employer to his employees towards authorised leave as per the provisions of S. 79 to 81 of the Factories Act, 1948, are or are not wages as defined by the provisions of S. 2(22) of the Act before its amendment by Act 44 of 1966. It was held that they were not wages, Consequently it was held that the amounts so paid to the employees for the leave period cannot be considered as wages for the purposes of computation of the employer's special contribution under S. 73A of the Employees' State Insurance Act. In regard to the definition of 'wages' in S. 2(22) of the Act it was held that it was necessary that three conditions must be satisfied before the payments can be said to be included therein. Firstly, it must be a remuneration; secondly, such remuneration must be paid or payable in cash to the employee, thirdly, it must be paid or payable if the terms of the contract of employment express or implied were fulfilled. Now, therefore, in the ruling under reference the first condition which is mentioned is that the wages must be a remuneration. The Chief Justice Shri Chagla in the first ruling observed that remuneration must mean that it is payment for services rendered or to be rendered by the employee.
10. The Supreme Court, in a case Bala subramanya Rajaram v. V. B. C. Patil [1958-I L.L.J. 773], in regard to the word 'remuneration' in para 2 of that judgment stated 'remuneration' is only a more formal version of 'payment' and payment is a recompense for service rendered.' Now, if one looks to the meaning of the word 'remuneration' which is given in Webster's Dictionary, Second Edition, the meaning is given as under :
'Remuneration - 1. A remuneration; the act of paying an equivalent for services, loss, or sacrifices.
2. The equivalent given for services, loss, or sufferings; that which remunerates; regard; pay; recompense, compensation.'
Now, therefore, if these tests are applied it can be stated that the first test is not satisfied. The payment made in regard to the paid holiday is payable in cash to the employee. It is paid in terms of the contract of employment express or implied because the employers have agreed with the representatives of the unions to make this payment. But, the first condition that it must be 'a remuneration' is not satisfied because it is not for the services rendered because on a paid holiday no services are rendered. The learned advocate, Miss Shah, submitted that S. 73A of the Act is in Chapter V-A and it is a self contained Chapter and, therefore, the definition given in S. 2(22) of the Act should not be considered for the purpose of S. 73A. This cannot be done for the simple reason that Chapter V-A cannot be read in isolation. This Chapter makes the provisions in regard to the contributions for which formerly the provisions were in Chapter IV. Therefore, at the time of reading Chapter V-A one has to bear in mind that Chapter V-A will supersede every thing if it is in conflict with Chapter IV, but would not mean that the definition part which is not occurring in Chapter IV is given a go-by. Thereafter, it was submitted that in that Explanation to S. 73A the phrase used in 'total wage bill' which is given the meaning 'total wages'. Therefore, the word 'wages' is qualified by the word 'total' and, therefore, every other type of wages is required to be included as the word 'total' is used. It may be stated that the word 'total' could not be read in such a way as to include anything in the word 'wages' which is not a wage. In this view of the matter we are not satisfied that the definition in S. 2(22) is required to be overlooked for the purpose of construing the provisions contained in 73A of the Act.
11. Our attention was drawn to para 2 of the judgment in Balasubramanya Rajaram v. B. C. Patil, [1958-I L.L.J. 773], where it was held that 'bonus' was 'remuneration'. It was urged that just as bonus is held as remuneration payment made in respect of a paid holiday must be considered as remuneration. It may be stated that in this ruling the definition of 'wages' given under the Payment of Wages Act was being considered. That apart, bonus is calculated on the wages paid for the period for which the employee has worked. It is a sum total of the wages on which certain percentage is considered as bonus. Payment made towards a paid holiday is not percentage on the wages given to an employee for the period in a week for which he has worked. It has no relation whatsoever with the wages which the employee had earned during a particular week. Different employees may have worked for different number of days in a week and the payment for a paid holiday is not percentage on that total wages but the payment is required to be made in regard to a paid holiday because of a contract and, therefore, any payment made towards a paid holiday cannot be considered as analogous to bonus and, therefore, 'it cannot' be considered as 'wages' within the meaning of S. 2(22) of the Act.
12. A reference also may be made to a case, Braithwaite and Co. (India) Ltd. v. Employees' State Insurance Corporation, [1968 - I L.L.J. 550]. It was a case where Inam Scheme was introduced. The company decided to make the payment of Inam which was outside the original terms of contract of employment of the employees of the company. In those terms, there was no offer of any reward or prize to be paid for any work done by the employees. The employees were expected to work for certain periods at agreed rates of wages. The only offer under the Scheme was to make incentive payments if certain specified conditions were fulfilled by the employees. The company, however, reversed the right to withdraw the right to withdraw the scheme altogether without assigning any reason or to revise its conditions at its sole discretion. The payment of the Inam was dependent upon the employees exceeding the target of output appropriately applicable to them. It was 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 S. 2(22). 'Inam', therefore, in that case though could have been considered as remuneration it was found that it was outside the terms of the contract.
13. Having anxiously considered the matter it is required to be stated that the conditions specified in the case of Nutan Mills v. Employees' State Insurance Corporation, [1956 I L.L.J. 215, referred to above are required to be fulfilled for the purpose of the definition of the word 'wages'. The ruling of the Bombay High Court of the year 1956 referred to above is precedent which this Court is bound to follow. In para. 7 of that judgment it is judgment it is clearly held that remuneration must mean that it is payment for services rendered or to be rendered by the employee. On a paid holiday the employee cannot render any services, employer as well cannot take any services from the employee on a paid holiday. Paid holiday is a holiday which could not be substituted for another holiday and under the terms of the contract the parties agree that on the day no services would be rendered and no services would be taken and yet payment would be made. That payment in view of the ruling reported in Nutan Mill v. Employees' State Insurance Corporation cannot be considered 'remuneration' because it is a payment not for services rendered or to be rendered by the employee. In his view of the matter the payment towards paid holiday cannot be considered 'wages' within the meaning of S. 2(22) of the Act and, therefore, one cannot force the employers to make contribution towards those payments under S. 73A of the Act. In this view of the matter the appeals are required to be dismissed.
14. In the result the appeals fail and are dismissed with no order as to costs.