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Regional Director, Employees State Insurance Corporation Vs. New Asarwa Mfg. Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectService
CourtGujarat High Court
Decided On
Judge
Reported in(1983)2GLR1174
AppellantRegional Director, Employees State Insurance Corporation
RespondentNew Asarwa Mfg. Co. Ltd.
Cases ReferredBird v. British Celanese Ltd.
Excerpt:
- - 1. a short but interesting question arising in this group of appeals is, whether payment of wages and clearness allowances to workers in respect of the unsubstituted festival, religious and national holidays is 'wages' within the meaning of section 2(22) of the employees' state insurance act, 1948 (hereinafter referred to as 'the esi act') as it stood prior to its amendment by act no. since what is precisely the source of this payment was not clear from the two orders which we have referred to we call upon the parties to produce the agreement and/or award in pursuance of which such payment was made to the workers, so as to enable us to adjudicate fully and effectively on the question raised in these appeals. this is precisely the contention which has been reiterated on behalf of.....b.k. mehta, j.1. a short but interesting question arising in this group of appeals is, whether payment of wages and clearness allowances to workers in respect of the unsubstituted festival, religious and national holidays is 'wages' within the meaning of section 2(22) of the employees' state insurance act, 1948 (hereinafter referred to as 'the esi act') as it stood prior to its amendment by act no. 44 of 1966. the question arises in the following circumstances:1. before the employees' state insurance court (hereinafter referred to as 'the esi court'), five applications were moved by five different mill-companies of this city under section 73-b of the esi act for declaration that the respective mill-company was not liable to pay employer's special contributions on the wages paid to its.....
Judgment:

B.K. Mehta, J.

1. A short but interesting question arising in this group of appeals is, whether payment of wages and clearness allowances to workers in respect of the unsubstituted festival, religious and national holidays is 'wages' within the meaning of Section 2(22) of the Employees' State Insurance Act, 1948 (hereinafter referred to as 'the ESI Act') as it stood prior to its amendment by Act No. 44 of 1966. The question arises in the following circumstances:

1. Before the Employees' State Insurance Court (hereinafter referred to as 'the ESI Court'), five applications were moved by five different mill-companies of this city under Section 73-B of the ESI Act for declaration that the respective mill-company was not liable to pay employer's special contributions on the wages paid to its employees in respect of the unsubstituted holidays. The Mill-companies, which had moved the ESI Court were (1) The New Asarwa Mfg. Co. Ltd., (2) The Aryodaya Spg. & Wvg. Co. Ltd., (3) The Aryodaya Ginning & Mfg. Co. Ltd., (4) Shri Ambica Mills Ltd. No. 1 & No. 2, and (5) Arbuda Mills Ltd. It is not necessary to go into the details as to what were the precise amounts claimed by the Regional Director, Employees' State Insurance Corporation', but suffice it to say that these Mill-companies were called, upon to make contributions for the period comprising of two quarters ending on March 31, 1966 and June 30, 1966. The Regional Director had called upon these different companies by letters of different dates, which need not be referred to and set out, to make contributions on the wages paid for unsubstituted paid holidays. The Mill-companies resisted the demands made in the said letters on the ground that the payment made for such unsubstituted holidays were not wages within the terms of the definition of the expression, 'wages' under the ESI Act. They, there-fore, moved the ESI Court for declaration that they were not liable and also prayed for interim injunction restraining the Corporation-from enforcing the demands made by the different letters addressed to the said companies.

2. The applications were resisted by the Corporation, inter aha, on the grounds that the wages for the unsubstituted paid holidays were paid under the agreement between the workers and the Mill-companies and since the payment made to the workers for such unsubstituted holidays comprised of basic wages and dearness allowance, the payment must be treated as remuneration paid or payable in cash to the employees as if the terms of contract of employment were fulfilled.

3. On the aforesaid pleadings, the ESI Court proceeded to consider the dispute on the legal submissions urged by the respective parties before it, though, admittedly, no oral evidence was led before it. The ESI Court, therefore, examined the question in light of the definition of the term, 'wages', and following the decision of a Division Bench of the Bombay High Court in Nutan Mills v. ESI Corporation : (1956)ILLJ215Bom , held that the impugned payments were in effect and substance merely a benefit and not payments for the services rendered. The ESI Court, therefore, granted the declaration and restrained the Corporation from recovering the demands made by the Corporation from these different Mill-companies by its judgment and order of July 30, 1974.

4. The Corporation, therefore, carried the matter in appeal under Section 82 of the ESI Act before this Court being First Appeals Nos. 325 to 330 of 1976. This group of appeals reached hearing before this Court (Coram : S.L. Talati. J.) who also agreed with the view of the ESI Court that the payment to the workers on unsubstituted holidays was not in nature of remuneration for the services rendered and, therefore, the Corporation was not entitled to enforce the demands against the Mill-companies. The learned Single Judge, therefore, by his common judgment and order of 8/1lth February, 1980 dismissed the appeals filed on behalf of the Corporation with the result that the Corporation has come by way of present Letters Patent Appeals.

5. The neat question of law, which arises in this group of appeals is, whether the payment of basic salary and dearness allowance to the workers for unsubstituted holidays would be within the purview of the definition of the said term under the ESI Act. Before we address ourselves to the main question, it would be profitable to set out briefly the genusis of this payment. It appears that before the ESI Court, on behalf of the Corporation, it was urged that the impugned payment was governed by an award and since it was under the terms of the award, the question whether it was for the work done or not was immaterial. The learned Single Judge, however, in his judgment, inter aha, has stated that the payment was made to the workers for these unsubstituted holidays in pursuance of an agreement entered into with the representatives of the employees. Since what is precisely the source of this payment was not clear from the two orders which we have referred to we call upon the parties to produce the agreement and/or award in pursuance of which such payment was made to the workers, so as to enable us to adjudicate fully and effectively on the question raised in these appeals. With the consent of the parties' we have, therefore, taken on record the following documents (1) Agreement between the Ahmedabad Mill Owners Association representing its local member Mills and the Textile Labour Association, Ahmedabad, a representative Union under the Bombay Industrial Relations Act, 1946 for the local area of Ahmedabad in the matter of payment of wages and dearness allowance to the workers in respect of the unsubstituted festival, religious and national holidays which was executed by and between the parties on September 4, 1957, (2) order of the Industrial Court, Bombay dated March 29, 1949 and (3) Award dated May 7, 1955 of the Arbitrators. On the perusal of the order of the Industrial Court, Bombay, it appears that the Textile Labour Association, Ahmedabad had a grievance that the earlier awards of the Industrial Court of April 24 and April 27, 1948 had been wrongly interpreted by the Mill-companies and the workers were deprived of their wages and dearness allowance for certain days which were observed in the local industries as holidays when such days happened to fall on the days which could not be substituted for normal weekly holidays. The Textile Labour Association had, therefore, moved the Labour-Court, Ahmedabad for appropriate reliefs. The Labour Court granted the reliefs as prayed for by the Textile Labour Association since the Labour Court was of the opinion that no wages or dearness allowance could be deducted by the Mill-companies for the holidays granted or observed in accordance with the custom or asags of the Mills with the result that the Ahmedabad Mill Owners Association was required to carry the matter in appeal before the Industrial Court, Bombay. The Industrial Court, while dismissing the appeal of the Mill -Owners Association inter alia, observed as under:

3. Coming to the merits, it has not been denied that there has been a longstanding practice at Ahmedabad for the Millowners to pay the workers in respect of the notified holidays. The question of holidays is not touched by the awards and therefore it cannot be said that it was the intention of this Court when making them to direct any change in connection with such holidays.

4. I think it desirable to state in this order, for reference in future, the names of the holidays in the list published by the Ahmedabad Millowners Association for 1949. They are....

6. In the award of the Arbitrators dated May 7, 1955, in the matter of payment of wages and dearness allowance to pieceworkers for extra holidays, it has been directed as under:

After hearing the parties and after giving due weight to all the considerations placed before us by both the parties, we have come to the following conclusions:(1) The Ahmedabad Millowners Association and the Textile Labour Association, Ahmedabad, have agreed to a list of holidays to be observed in the Textile Industry. The Ahmedabad Millowners Association is issued a list of such holidays every year. The place-workers will be paid the wages and dearness allowance for those holidays which are not substituted.

It should be noted that the Arbitrators were late Shri Seth Kasturbhai Lalbhai and Shri S.R. Vasavada. The agreement which has been referred to in the said award records the understanding arrived at between the Ahmedabad Mill Owners Association and the Textile Labour Association. The opening petition in the said agreement reads as under:

It is hereby agreed between the Ahmedabad Millowners Association, Ahmedabad, representing its local member mills and the Textile Labour Association, Ahmedabad, a representative Union under the Bombay Industrial Relations Act, 1946, for the Local area of Ahmedabad in the matter of the demand of the Textile Labour Association, Ahmedabad for fixing procedure for payment of wages and dearness allowance to workers in respect of unsubstituted festival, religious and national holidays under directions contained in order dated the 29th March 1949 of the Industrial Court, Bombay and Award of the Arbitrators dated the 7th May 1955 under certain circumstances as under:

It is not necessary to set out all the clauses in extenso, but the material clauses which have a bearing so far as the question in the present group of appeals is concerned are Clauses 1, 2, 4 and 6. They are as under:

1. That a permanent, temporary or Badli worker who is present on work in the mill on both the day immediately preceding and the day immediately succeeding the unsubstituted paid holiday will be eligible to the payment of wages and Dearness Allowance for the unsubstituted holiday.

2. That a permanent worker who is on sanctioned leave on the day immediately preceding the unsubstituted holiday and is present on the day immediately succeeding the unsubstituted holiday will be eligible to payment of wages and Dearness Allowance for the unsubstituted holiday, provided such sanctioned leave does not exceed six days.

3. x x x x x

4. That a worker who is on sanctioned leave on the day immediately preceding and on the day immediately succeeding the unsubstituted holiday or is absent on the day immediately preceding and on the day immediately succeeding the unsubstituted holiday will not be eligible to payment of wages and Dearness Allowance for the unsubstituted holiday.

5. x x x x x

6. That a worker who is laid off by the Mill on the day immediately preceding and on the day immediately succeeding the unsubstituted holiday will be paid wages and Dearness Allowance for the unsubstituted holiday at the lay off rate. A worker who is laid off on the day immediately preceding the unsubstituted holiday but who is present on work on the day immediately succeeding the unsubstituted holiday will be paid at the lay off rate for the unsubstituted holiday. A worker who is present on work upto and including the day immediately preceding the substituted holiday but who is laid off on the day immediately succeeding the unsubstituted holiday will be paid wages and Dearness Allowance at the normal rate for the unsubstituted holiday.

7. The learned Advocates appearing for the respondent-Mill-Companies have supported the judgment and order of the learned Single Judge confirming the order of the ESI Court on a very short ground that under no circumstances it can be successfully urged that the payment made to the workers on these unsubstituted agreed holidays, could be claimed as wages, as is sought to be urged by the learned Advocate for the Corporation, for the simple reason that the payment of wages and clearness allowance was not for any services rendered, though, no doubt, it would be a benefit granted to the workers. Section 2(22) of the ESI Act, as it stood at all the relevant times of the quarters i.e. 1-1-66 to 31-3-66 & 1-4-66 to 30-6-66 with which we are concerned, defined 'wages' as under:

(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 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;

It should be noted at this stage that by Act No. 44 of 1966, Section 2(22) was amended with effect from June 17, 1967 and not from 28th January, 1968 as observed by the learned single Judge. On mere reading of the definition, it is manifestly clear that it is exhaustive definition in the sense that it defines the term by including certain payments and by excluding some of them. The ingredients of the definition are (1) it must be the remuneration; (2) such remuneration must be paid or payable in cash, and (3) the terms of the contract of employment, whether express or implied, were fulfilled. The definition is enlarged by including any other additional remuneration, if any, paid or payable at intervals not exceeding two months. The definition also excludes certain specified payments in nature of (a) contribution by the employer to the pension or provident fund or under the ESI Act; (b) any travelling allowance or the value of any travelling concession; (c) any sum paid to the employee to defray special expenses entailed on him by the nature of his employment, and (d) any gratuity payable on discharge. It is axiomatic to say that the right to wages arises out of a contract, express or implied. The term 'remuneration' has a definite connotation though it is not defined in the ESI Act. Remuneration is only a more formal version of payment to recompense an employee for services rendered vide: Bala Subrahmanya Rajaram v. B.C. Patil and Ors. : (1958)ILLJ773SC . The dictionary meaning of the word 'remuneration' is reward, recompense, pay, wages or salary for services rendered.

8. In Accountant General v. N. Bakshi : AIR1962SC505 , the Supreme Court examined whether the right to passage of a member of Indian Civil Service in the context of All India Services (Overseas Pay, Passage and Leave Salary) Rules, 1957 is in the nature of remuneration. In that context, the Supreme Court, speaking through Shah, J; observed as under at page 509 in paragraph 13:

(13) There is no definition of 'remuneration' in the Constitution, but that is not a ground for holding that the expression is used in any limited sense as merely salary. The expression 'remuneration' in its ordinary connotation means 'reward, recompense, pay, wages or salary for service rendered'. In R. v. Postmaster General (1876) 1 QBD 658, Mr. Justice Blackburn observed,

I think the word 'remuneration'...means a quid pro quo. If a man gives his services, whatever consideration he gets for giving his services seems to me a remuneration for them. Consequently, I think if a person was in receipt of a -payment, or in receipt of a percentage, or any kind of payment which would not be actual money payment, the amount he would receive annually in respect of this would be remuneration.

We are referring to this dictionary meaning of the term, 'remuneration', and the above observation of the Supreme Court in N. Bakshi's case (supra) for purposes of understanding as to what is the real connotation of the term 'remuneration'. We are conscious that the legislative dictionary meaning of the term 'wages' in the ESI Act does not mean all remuneration which is payable otherwise than in cash. So far as the legislative dictionary meaning of the term, 'wages' is concerned, in the present Act, it means that remuneration which is paid or pay-able in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled. The wide import of the term 'remuneration' commended to the Supreme Court in N. Bakshi's case (supra) was because it was examining the right of a member of the Indian Civil Services under the All India Services (Overseas Pay, Passage and Leave Salary) Rules, 1957. The emphasis of the learned Single Judge, while confirming the view of the ESI Court was that the remuneration in the context of the definition of the term 'wages' under the ESI Act is that payment which is in the nature of recompense for services rendered. This is precisely the contention which has been reiterated on behalf of the respondent-Mill-companies before us. The view which the Mill-companies canvassed before us appealed to the learned Single Judge having regard to the decision of the Division Bench of the Bombay High Court in Nutan Mill's case (supra). On the other hand, on behalf of the appellant-corporation, it was urged that the learned Single Judge was clearly in error in not appreciating that the payment of wages and dearness allowance to the workers on unsubstituted holidays could not have been a benefit granted de hors the consideration for services. The crux of the problem, therefore, is whether the payment of wages and dearness allowance to the workers on unsubstituted holidays is in the nature of payment to recompense the services rendered to the Mill-companies in the course of employment. Is it merely a benefit conferred on the workers irrespective of the consideration of their services as was the case before the Division Bench of the Bombay High Court in the Asstt. Regional Director ESI v. The Model Mills Nagpur Ltd. (1974) 76 Born. L.R. 779 where the Bombay High Court was concerned with the question whether the payments made to the employees towards the authorised leave were wages as defined by the provision of Section 2(22) of the ESI Act before its amendment by Act No. 44 of 1966 We are of the opinion that having regard to the genusis of this payment, the payment of wages and dearness allowance to the workers for unsubstituted holidays would, on the matter of principle as well as authority, squarely fall within the purview of the definition of the term 'wages' in ESI Act. The reasons for our view are obvious. In the first place, the term 'wages' has been defined to mean all remuneration paid or payable in cash to an employee, if the terms of contract of employment were fulfilled. The use of the words 'all remuneration' is very significant in as much as the Legislature has advisedly avoided the use of the words 'gross remuneration' or 'any remuneration'. If the payment, which is paid or payable by the employer to his employee, is in respect of his employment, or in consideration of the services rendered in fulfilment of the terms of contract of employment, such payment would certainly be entitled to be termed as 'remuneration'. In other words, the definition of the term 'wages' takes in its sweep all remuneration paid or payable under the terms of the contract of employment, even though it may not be the part of the terms of contract of employment at the inception. Remuneration, in effect and substance, is a return for the services rendered. It is not necessary that payment in order to partake the characteristic of remuneration should be paid instantaneously. The definition of the term 'wages' under the ESI Act clearly states that all remuneration which is paid or payable. It is implicit, of course, in the term 'remuneration' that it is a payment for rendition of the services. It may be a payment for services in particular, or services in general. We are afraid that the interpretation which has been canvassed on behalf of the respondent-companies takes a very limited view of the term 'remuneration' inasmuch as they want to restrict the meaning of the word 'remuneration' to such payments which are for the services actually rendered. In their submission, if the payment is not relatable to the services under the terms of the contract of employment but if it is de hors the services, such payment cannot partake the characteristic of remuneration, though it would be certainly a benefit conferred on the workers. It cannot be gainsaid that the obligation to give weekly holidays as required under the Factories Act is for the services rendered under the terms of contract of employment. If, therefore, the Mill-Companies are not able to substitute this weekly holiday by converting it to be enjoyed on notified public holidays, and if as a part of the condition of employment the Mill-companies are required to pay for such unsubstituted holidays, we do not think that it can be successfully urged, as has been sought to be done on behalf of the respondent-companies, that the payment for such unsubstituted holidays would be merely benefit and not wages.

9. Mr. Trivedi, learned Advocate, appearing for some of the respondent-companies, urged that if at all the Court is inclined to include such payment on unsubstituted holidays within the definition of the term 'wages', it can do so only if it is capable of being included in in the latter part of the definition. The contention appears to be ingenious, but on the close scrutiny, it will not stand the test. We do not propose to include this payment in the latter part of the definition which includes additional remuneration paid on certain stated intervals. In our opinion, the payment of wages and dearness allowance on unsubstituted holidays would squarely fall within the first part of the definition since it is a remuneration which the Mill-companies have agreed to make not only having regard to the practice in the textile industry in Ahmedabad but on the consideration of the services which are rendered by the workers. The relevant passage from the citation of the aforesaid agreement between the Millowners Association and the Textile Labour Association, which we have set out above, and having regard to the dispute between the parties at different stages, as it appears from the order of the Industrial Court as well as the award of the Arbitrators, that admittedly it was a practice to pay for these unsubstituted holidays, and the attempt on the part of the Mill-companies to deduct wages and dearness allowance for such holidays was resisted by the workers as an unauthorised and illegal change in the condition of service. If, therefore, the right to receive the payment of wages and dearness allowance for unsubstituted holidays has become a part and parcel of the condition of service, it would be too late in the day to contend that it is not for the services rendered and it is a benefit de hors the services.

10. Our attention has been invited to the decision of the Division Bench of the Bombay High Court in Lal and Co. v. Kulkarni and Ors. (1968) 2 LLJ 518 where the Division Bench of the Bombay High Court was concerned with the question as to whether wages for weekly holidays payable under Section 18(3) of the Bombay Shops and Establishments Act are wages within the meaning of the provisions of the Payment of Wages Act. The definition of the term 'wages' in Section 2(vi) of the Payment of Wages Act is almost pari-materia since it defines 'wages' to mean all remuneration whether by way of salary, allowances or otherwise expressed in terms of money capable of being so expressed which would, if the terms of employment, express or implied were fulfilled be payable to a person employed in respect of his employment or of work done in such employment. Tarkunde, J., (as he then was) speaking for the Bench, held as under:

It has been held in several cases that the definition includes all the remuneration which is payable by the employer to his employee in respect of his employment or of work done in such employment, if the amount becomes payable in consequence of the worker having fulfilled the terms of the contract of employment, irrespective whether the amount becomes payable under the terms of the contract or an award or a statute, (vide Balaram Abaji Patil v. M.C. Rangofiwalla 1960 II L.L.J. 491. The fact that wages for weekly holidays have been granted by Section 18(3) of the Bombay Shops and Establishments Act, does not prevent them from being 'wages' under the Payment of Wages Act.

In support of its view to the contrary, the labour court placed reliance on the decision of this Court in Anusuyabai Vithal v. J. H. Mehta 1959-11 L.L.J. 742. In that case compensation payable to aworkman for lay off under the provisions of the Industrial Disputes Act was held not to be wages within the meaning of the Payment of Wages Act. The compensation payable for lay-off was held in that case not to be wages because such compensation was not remuneration and was not payable to a worker in respect of his employment or work done in such employment and not, as assumed by the learned labour court because the compensation was payable under the provisions of a statute.

We accordingly agree with the contention advanced on behalf of the petitioner that the claim for wages for weekly holidays made by respondents 2 to 17 in the present case could have been submitted by them to the authority under the Payment of Wages Act....

11. Another decision of the learned Single Judge of the Kerala High Court was pointed out to us on behalf of the appellant-Corporation. The decision is in Sreedharan Nair v. Sanku Sreedharan and Ors. (1969) 1 L.L.J. 627, where the Court was to concerned whether bonus and preparation charges of trees paid to toddy-tappers were 'wages' within the meaning of the term 'wages' under the Payment of Wages Act. Krishna Ayyar, J., as he then was, summed up the position, after referring to the relevant case law on the point as to what would constitute wages, in the following terms:

One may sum up the present position of law regarding the concept of wages as defined in Section 2(vi) of the Act as follows. It takes in all remuneration, express or implied, payable under the terms of employment even though it may riot be part of the terms of the contract of employment at the inception. Remuneration is a return for services rendered and if at any time during the year of employment bonus is made payable in return for the services rendered, at that moment such bonus becomes wages due to the employee and recoverable under the payment of Wages Act. The emphasis is not on the terms of the original contract but on the recompense payable during the period of employment on account of any understanding, settlement or otherwise, whether it be in the shape of bonus or other species of payment....

12. We are in respectful agreement with the above observation. Mr. Vyas, learned Advocate, appearing for some of the respondent-companies, strenuously made an attempt to persuade us that payment of wages and dearness allowance on unsubstituted weekly holidays is in the nature of benefit de hors the consideration of the services, and cannot, by any stretch of imagination, without violence to the language, be treated as a recompense for the services rendered. In support of his contention, he placed reliance on two decisions of the Bombay High Court and one decision of the Supreme Court, The decisions of the Bombay High Court, which are relied upon by him are in Nutan Mill's case and Model Mills' case (supra). It is no doubt true that the decision of the Division Bench in Nutan Mills' case is of 1956, that is, prebifurcation decision of the High Court of Bombay and, therefore, binding on this Court. The learned Single Judge as well as the ESI Court have followed this decision and held that payment made for unsubstituted holidays cannot be treated as wages within the meaning of the term under the ESI Act. We must bear in mind however the context in which the Division Bench of the Bombay High Court was speaking in Nutan Mill's case (supra), thought the question, of course, was under the ESI Act. But the nature of payment was lay off compensation under Section 25-C and Section 25-J of the Industrial Disputes Act. The Division Bench, speaking through Chagia, C. J; therefore posed this problem facing the Court in the following terms in para 5:

(5) What we have to consider in view of this statutory provision is whether on an employee being laid-off there is still a subsisting contract of employment' between the employer and the employee or whether during the period of lay-off the contract of employment, although not necessarily at an end, is not a subsisting and effective contract.

In that context, the Division Bench referred to its earlier decision in Padmakant Motilal v. Ahmedabad Municipal Borough AIR 1943 Bom. 9, where the Chief Officer of the Municipality claimed wages from the Municipality during the period of his suspension and emphasised that there should be a subsisting contract of employment before a payment can be said to be a wages. At page 338, the Division Bench emphasised this important aspect in the following terms after referring to the decision of Kings Bench in Bird v. British Celanese Ltd. (1945) I KB 336:

We accepted the test laid down in that judgment and what we emphasised was that the employee must be under a present duty to work and unless he was under such an obligation the employer could not be held to be under a consequential duty to pay.

Therefore, it is clear that if the relationship of master and servant does not exist and even if he is temporarily suspended, that must necessarily result in the obligation of the employer to pay wages also being suspended.

On the same page while construing the definition of 'wages' we pointed out that the expression 'if the terms of the contract of employment, express or implied, were fulfilled' means that there should be a subsisting contract of employment and that the relationship of master and servant should exist and there should be mutual rights and obligations of the parties to the contract existing.

While rejecting the contention urged by the Government Pleader on behalf of the ESI Corporation that during the period of lay oil the relationship of master and servants continued, the Division Bench observed that 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 or implied, were fulfilled, and therefore it is not every payment by the employer which would come within this definition. It must be. according to the Division Bench, a payment which should be remuneration, and remuneration must mean that it is payment for services rendered or to be rendered by the employee. The observation made at page 339 is useful for our purposes. It reads as under:

It is perfectly true that in fact the employee may not render services and yet the payment made to him would bewages. That would be the case where the employee would be ready and willing to render services, would be under an obligation to render services, and yet he may not do so because the employer for any reason does not give him an opportunity to render those services.

But under this definition it is clear that if in fact no services are rendered and if in fact there is no obligation upon the employee to reader services, then whatever else the payment by the employer may be it would not be remuneration. Further, under this definition the payment must be made as a result of the terms of the contract being fulfilled, and if the payment is made when the terms of the contract are not fulfilled then clearly the payment would not satisfy this definition.

13. We do not think, therefore, that this decision can be of any assistance in solving the problem with which we are concerned in the present group of appeals. As observed by the Division Bench in Kulkarni's case (supra), lay off compensation paid to worker is not payable to him in respect of his employment or work done in such employment but is paid to him for terminating the employment temporarily, or for that matter permanently, in a given case.

14. The second decision of the Bombay High Court on which reliance has been placed by Mr. Vyas is in Model Mill's case (supra). In Model Mill's case, the Division Bench was concerned with the question as to whether payment made for authorised leave to a worker under Sections 79 & 81 of the Factories Act, 1948 would be wages within the definition of the term under the Act. It should be recalled that this question had arisen before the amendment made in the definition of the term 'wages' by Act No. 44 of 1966. The Division Bench considered the payment of wages for privilege leave as merely a benefit de hors the services. The second circumstance which weighed with the Division Bench in so construing the nature of payment is set out at pages 784-785. The Division Bench observed as under:

Admittedly, the employee is recompensed for the services rendered by him when he is paid wages for the day or the month for which he has worked. But then the question arises whether the provisions incorporated in the Factories Act, which entitled the employee to earn certain quantum of leave because he has worked in the factory in the previous year, can be said to be a recompense for the services rendered by him. It cannot be seriously disputed that the provisions relating to grant of leave with wages really provide for a benefit given to an employee for having worked for a particular number of days in the past. It is to be noted that it is quite possible in a given case that the employee who has earned the leave on the basis of his services rendered by him in the past may not avail of that benefit or concession given to him under the Act. This may, for instance, arise in the case where the employee retires from service voluntarily without making an application for leave. Such a contingency may also arise where age of superannuation is prescribed under the standing orders of the factory and he may not have made an application for grant of leave which he has earned during the continuance of his service. The fact that the employee may or may not choose to exercise his right to take leave is a circumstance to indicate that leave with wages contemplated by Sections 73 and 80 of the Act are in the nature of a benefit which the employee earns on account of his having rendered services in the past....

The circumstance which heavily weighed with the Division Bench in construing the nature of payment for privilege leave is of the fact that the employee may or may not choose to exercise his right to take leave. None-the-less, the Division Bench has clearly recognised that privilege leave which is granted to a worker under Sections 79 and 80 of the Act is in consideration of the services which he has rendered in the past. On reading this decision, we are fortified in our view that the payment made for the unsubstituted holidays cannot be anything less than the wages since it is a part of the remuneration for the services which a worker has rendered in the past.

15. The decision on the Supreme Court on which reliance was placed by Mr. Vyas for some of the respondent-companies is in M/s. Braithwaite and Co. v. ESI Corporation : (1968)ILLJ550SC where the Supreme Court was concerned with the question as to reward given to workers under the scheme incentive payments amounted to wages within the definition of the said term under the ESI Act. The ESI Court had in that case held that the payment of INAM had nothing to do with the terms of employment and the workers were not entitled to claim INAM as a condition of service so that it cannot be held that this remuneration is payable or paid if the terms of contract of employment were fulfilled. On the other hand, the High Court was of the view that this remuneration was paid and became payable if the terms of contract of employment were fulfilled, and on interpretation of the Scheme, the High Court held that the right of the employee to receive INAM had become an implied term of contract of employment. The Supreme Court did not agree with the view of the High Court since on true construction of the Scheme, the Supreme Court found that having regard to a very significant circumstance that even though this offer of incentive payment was made, the Company in clear words reserved the right to withdraw the Scheme altogether without assigning any reason or to revise its conditions at its sole discretion and, therefore, it could not be held that a right to INAM had become implied condition of the contract of employment since the employer could not withdraw that right at his discretion unilaterally without assigning any reasons. The decision of the Supreme Court in Braithwaite & Co.'s case (supra) lands support to our view that if the right to claim wages and dearness allowance for unsubstituted holidays has become a part of the condition of services, the payment made inpursuance of such a right cannot be termed as anything else than remuneration.

16. Mr. Vyas, therefore, attempted to persuade us that on true construction of the agreement, and particularly having regard to Clause 6 as well as Clause I, the payment of wages and dearness allowance for unsubstituted holidays to a laid off worker at the lay off compensation rate, that is, half the wages, or the payment to a Badli worker who has become eligible for such payment having worked on preceding and succeeding day, which is a fortituous circumstance, in the sub-mission of Mr. Vyas, clearly establish that the true effect of the agreement is not to make such right of payment for unsubstituted holidays as a part of the condition of service. We are unable to agree with Mr. Vyas for the simple reason that so far as the laid offworker is concerned, the payment to him would not be wages on the same principle on which lay off compensation cannot be claimed to be the wages. The right granted to a Badli worker under Clause I who has become eligible by working on the preceding and succeeding day also does not negative the view which we are inclined to take. The reason is that even to eligible Badli worker the right which has been granted to him is for his services as a Badli worker. The agreement taken as a whole in the background of the dispute between the Millowners Association and the Textile Labour Association as revealed clearly from the order of the Industrial Court as well as the Award of the Arbitrators makes it clear that this was precisely the dispute between the parties that the right to claim wages and dearness allowance for unsubstituted holidays was or was not a condition of service and the fact that the attempt of the Millowners to change that practice which has ripen into condition of service was discouraged by the Labour Court, and ultimately the parties were required to arrive at an agreement by which this right was recognised. In that view of the matter, therefore, we must accept these appeals and reverse the Order of the learned Single Judge confirming the order of the ESI Court, and dismiss the applications of the respondent-Mill-companies for the declaration which they have sought for.

17. The result is that these appeals are allowed. The order of the learned Single Judge affirming the order of the ESI Court is reversed and the applications of the respondent companies are dismissed. There should be no order as to costs haying regard to the fact that this was a matter of interpretation of the definition of a provision of a statute.

M/s. Vyas and Trivedi make an oral application on behalf of the respondent-companies that they should be given certificate so as to enable them to file an appeal in the Supreme Court since in their submission this is a substantial question of law of general public importance which is required to be decided by the Supreme Court. We are unable to grant the certificate since the question is pertaining to the two quarters before the definition has been amended and we do not think, therefore, that it can be said to be a question of general public importance so as to justify a certificate. Oral application is therefore rejected.

18. M/s. Vyas and Trivedi, therefore, prayed that the respondent companies should be protected by granting ad-interim relief of injunction restraining the Corporation from enforcing the demands so as to enable the respondents to go to the Supreme Court and obtain appropriate orders. The Appellant Corporation is restrained for a period of 12 weeks from to-day so as to enable the respondent companies to prefer appeal to the Supreme Court.


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