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The Employees State Insurance Corporation, Represented by Its Regional Director Vs. E.i.D. Parry (India) Ltd., Company Registered Under the Companies Act - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtChennai High Court
Decided On
Reported in(1984)1MLJ45
AppellantThe Employees State Insurance Corporation, Represented by Its Regional Director
RespondentE.i.D. Parry (India) Ltd., Company Registered Under the Companies Act
Cases Referred(India) Ltd. v. The Employees State Insurance Corporation
Excerpt:
- k.b.n. singh, c.j. 1. this appeal by the employees state insurance corporation has been filed against an adverse order of the employees, state insurance court.2. the respondent, a joint stock company; filed an application under sections 75 and 77 of the employees' state insurance act xxxiv of 1948 (hereinafter referred to as the act), alleging that on 11th april, 1972, a settlement was entered into between the respondent and its workmen under which an incentive scheme was introduced for payment of incentive earnings to the workmen depending upon the increased production. the scheme also provided for payment of ad hoc allowance. in the settlement it has been further agreed that the abovesaid two categories of payment will not be reckoned for purposes of provident fund, bonus, gratuity,.....
Judgment:

K.B.N. Singh, C.J.

1. This appeal by the Employees State Insurance Corporation has been filed against an adverse order of the Employees, State Insurance Court.

2. The respondent, a joint stock company; filed an application under Sections 75 and 77 of the Employees' State Insurance Act XXXIV of 1948 (hereinafter referred to as the Act), alleging that on 11th April, 1972, a settlement was entered into between the respondent and its workmen under which an Incentive Scheme was introduced for payment of incentive earnings to the workmen depending upon the increased production. The scheme also provided for payment of ad hoc allowance. In the settlement it has been further agreed that the abovesaid two categories of payment will not be reckoned for purposes of provident fund, bonus, gratuity, Employees' State Insurance contribution, etc. In had been further agreed that the other conditions governing the incentive payment will be published separately. Following the same, the said scheme was published on 14th April, 1972, Clause (g) of the said scheme was to the effect that the Management reserves its right to amend or suspend or withdraw the scheme altogether at its discretion. On those averments the respondent claimed that the incentive earnings and the ad hoc allowance are not liable to be taken into account for the Employees' State Insurance coverage or deduction of Employees' State Insurance subscription. In spite of that, the appellant demanded payment of the subscription with reference to these amounts also. The respondent who objected to this claim, filed the said application for a declaration that the incentive earnings and ad hoc wages are not to be taken into account as wages for the purpose of payment of contribution and also for a declaration that the employees in the Head Office and Branch offices are not employees as defined in Section 2(9) of the Act, and for consequential reliefs restraining the appellant from enforcing the demands.

3. The claim of the respondent was refuted by the appellant. The First Additional Judge, City Civil Court. Madras, who had the necessary jurisdiction to entertain the dispute, came to the conclusion that the employees in the Head office and the Branch offices are employees as defined in Section 2(9) of the Act. There being no appeal against that order by the respondent, that order has become final.

4. The learned Additional Judge further came to the conclusion that the incentive earnings as well as the ad hoc allowance are not part of 'wages' as defined in Section 2(22) of the Act and hence the said sums cannot be taken into consideration for calculating the contribution claimed. It is against this part of the order that the appellant, the Employees, State Insurance Corporation has filed the present appeal.

5. The question that arises for consideration, therefore, is whether the ad hoc allowance and incentive earnings are part of 'wages' for purposes of contribution under the Act or not.

6. There is no dispute before us that the settlement, dated 11th April, 1972 (Exhibit P-l) is binding between the parties and has not been terminated. The terms of the settlement, relevant for our consideration, are as follows:

I (i) The Union, with a view to give its co-operation in maintaining maximum production and productivity hereby agree to the introduction and operation in good faith of the productivity oriented scheme attached to this settlement marked Annexure 'A' which will be in effect from 1st March, 1971.

(ii) In view of the foregoing, the company will extend to such employee on the factory's probationary and confirmed rolls, a flat ad hoc allowance of Rs. 15 per month with effect from 1st March, 1971.

(iii) The flat ad hoc allowance and incentive earnings under (i) and (ii) above shall not be reckoned for purposes of provident fund, bonus, gratuity, Employees, State Insurance etc.

7. Clause 6 of the settlement, which is also relevant, reads as follows-

The production and efficiency norms under the Productivity Scheme are fixed for the current productive methods, equipment and process conditions and work allocation and should there be any changes in the above, the scheme will be subject to review or modification in the changed circumstances.

In pursuance of clause 6, as already mentioned, the Management notified a scheme on 14th of April, 1972, and inserted under paragraph IV of the Productivity Scheme Clause (9) which reads as follows-

The Management reserves the right to amend or suspend or withdraw the scheme altogether at its discretion.

Relying on this very clause the learned first Additional Judge of the City Civil Court came to the following conclusion-

It is in view of such a condition that the Supreme Court as well as the Andhra Pradesh and Karnataka High Courts had held in the decisions cited supra that the production bonus or incentive earnings or inam, by whatever name it may be called, were not part of wages as defined in the Act.

8. The learned Counsel on behalf of the appellant has contended that the learned Additional Judge was wrong in relying on clause 6 for holding that clause 6 of the terms of settlement authorised the Management to insert clause 9 in the productivity scheme notified on 14th April, 1972, namely 'to withdraw the scheme altogether at its discretion', cannot be sustained. There is substance in this contention of the learned Counsel for the appellant. Clause 6 of the settlement gave option to the Management to review or modify the scheme in circumstances mentioned in clause 6, that is to say, if there was any change in the current production methods, equipment and process conditions and work allocation, then a power was given to the Management to review or modify the Scheme settled between the parties. It is not the case of the Management that there had been any change, as contemplated in clause 6 of the paragraph III of the Productivity Scheme, and acting under this clause the Management could not insert in the Scheme published on 14th April, 1972, a clause -reserving a right to the Management to amend or suspend or withdraw the Scheme altogether at its discretion and that could not have been the basis for holding that the respondent-employer was not liable to pay contribution on the ad hoc allowance and incentive earnings as they were not part of wages. But, under the very, terms of the settlement, which is banding between the parties, the parties agreed under clause I (iii) that the ad hoc allowance and incentive earnings shall not be reckoned for purposes of provident fund, bonus, gratuity, Employee's State Insurance etc. That agreement being a binding agreement between the employer and the employee, the appellant could not claim ad hoc allowance and incentive earnings for contribution under the Act.

9. The learned Counsel for the appellant submitted that this condition was an invalid condition and placed reliance on the definition of the expression 'wages' under Section 2(22) and Section 39 (1) and the Schedule to the Act.

10. Section 2(22) of the Act defines 'wages' to mean-

All remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled....

Section 39 (1) speaks about contribution payable by the employer. Section 39 (2) lays down that contribution shall be paid at the rates specified to the First Schedule and the First Schedule gives the rates. The definition of the expression 'wages' includes all remuneration paid or implied. The express terms of the settlement did not make the ad hoc allowance and incentive earnings as part of the wages and expressly excluded them for the purposes of contribution under the Act. The settlement being a good settlement made under Section 18(1) of the industrial Disputes Act, 1947 and Rule 25 (1) of the Madras Industrial Disputes Rules, 1958, is binding between the parties. It does not become invalid for purposes of the Employees State Insurance Act, on the provisions relied on by the learned Counsel for the appellant.

11. The argument of the learned Counsel for the appellant is that the legislation being a benevolent piece of legislation intended for the benefit of the worker, should receive a liberal interpretation. That does not mean that something could be read in the legislation which is not at all there. Firstly, the ad hoc allowance and incentive earnings are not part of the wages, as held by the Supreme Court in the case of Braithwate and Co., (India) Ltd. v. The Employees State Insurance Corporation : (1968)ILLJ550SC , wherein it has been held:

It was also made clear to the workmen in the scheme that this payment of reward was in no way connected with or part of wages. It was on these conditions that the employees were receiving the inam. Thus, though there was a payment to the employees and since the payment depended on their achieving certain targets, it has to be held to be remuneration, this payment of inam cannot be held to have become a term of the contract of employment.

Secondly, it was perfectly legitimate for the employee, while settling their disputes, to come to a settlement, that such payment shall not be reckoned for purposes' of provident fund, bonus, gratuity, Employees State Insurance contributions, etc., and to clarify the matter when the provisions of the Industrial Disputes Act do not forbid such a settlement or makes such a provision in a settlement invalid.

12. We are, therefore, unable to accept the contention raised by the learned Counsel on behalf of the appellant that the incentive earnings and ad hoc allowance received by the employees must be taken into account as part of the wages for the purpose of the Employee's State Insurance Act, even if the employees and the employer specifically agreed in a settlement duly arrived at under Section 18 of the Industrial Disputes Act, not to treat ad hoc allowance and incentive earnings as part of wages for purposes of Employee's State Insurance Act. It also cannot be held to be a separable condition of settlement as these payments were specifically made subject those conditions.

13. In the result, there is no merit in this appeal and it is dismissed. But in the circumstances of the case we make no order as to costs.

14. After the judgment has been delivered, an oral request is made by the learned Counsel on behalf of the appellant for grant of a certificate for leave to appeal to the Supreme Court. As we have relied on the decision of the Supreme Court for decision of this case we are not satisfied that there is any substantial question of law of general importance involved in this case, which in our opinion, needs to be decided by the Supreme Court. Accordingly, the request for a certificate for leave to appeal to the Supreme Court is rejected.


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