http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: BAREILLY HOLDINGS LTD.

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT16/02/1979

BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, Y.V. ((CJ) SARKARIA, RANJIT SINGH UNTWALIA, N.L. REDDY, O. CHINNAPPA (J) SEN, A.P. (J)

CITATION:  1979 AIR 1211            1979 SCR  (3) 236  1979 SCC  (3) 257

ACT:      Employees State  Insurance Act,  1948, Section  72  and Regulation 97 framed under Section 97(1) of the E.S.I., Act, 1948, purpose  and effect  of-Whether the  deduction of half day’s wages  corresponding to  the sickness benefit to which the workmen were entitled under the E.S.I. Act, in the event of their  not availing  themselves of the benefits under the E.S.I. scheme in order.

HEADNOTE:      By virtue  of the  award in Adjudication case No. 33 of 1952 given by the State Tribunal Allahabad, respondents were entitled to  fifteen days’  sick leave  on full  wages as  a condition  of  their  service.  The  appellant  adopted  the Employees  State  Insurance  Act  in  1957.  The  appellant, therefore, paid to the workmen full wages for two day’s sick leave out  of 15  days’ sick  leave for  the reason that the workmen did  not get  cash benefit for the first two days of the waiting  period of sickness on account of the provisions of section  49 of  the E.S.I.  Act. For  the balance  of the thirteen days  only  half  the  wages’  were  paid.  In  the industrial  dispute   referred  for   adjudication  to   the Industrial  Tribunal   under  section   4(k)  of   the  U.P. Industrial Disputes  Act, the  award went  in favour  of the workmen.      Dismissing the appeal by special leave, the Court, ^      HELD :  1. The general purpose and effect of section 72 is to  deny to the employers the right or power to reduce or discontinue the  benefit payable  to the workmen under their conditions of  service  on  the  ground  that  the  benefits available under  the conditions  of service  and  under  the E.S.I. Act  being similar  the workmen would not be entitled to a double benefit. [240 A-B]      Section 72 provides in terms that the mere circumstance that an  employer is liable to make a contribution under the E.S.I. Act  will not entitle him, directly or indirectly, to reduce the  wages of  an employee  or,  in  so  far  as  the Regulation  permits,  discontinue  or  reduce  the  benefits

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

payable to  him under  the conditions of his service even if those benefits  are similar to the benefits conferred by the E.S.I. Act.  The purpose  of  Section  72  is  evidently  to discourage employers  from using the benefits provided under the E.S.I. Act as an excuse or justification for reducing or discontinuing the  benefits available  to the  workmen under their conditions  of service  on the  ground  of  similarity between the two types of benefits. The case of the appellant before the  Industrial Tribunal  was that  it was  making  a contribution to  the E.S.I.  Corporation for  the benefit of its employees  and if  any individual  employee chose not to avail of  the benefits  due to  him from  the Corporation on account of  the sickness  benefit, it  is he  who  ought  to suffer and  there would be no justification for obliging the employer to spend for his sickness benefit twice over. It is precisely this  type  of  argument  and  attitude  that  the legislature anticipated and guarded against by incorporating the particular provision in section 72. [240 B-E] 237      2. The  contention that it is enough for justifying the deduction from  wages due to the workmen for sick leave that the employee is covered by the E.S.I. Act is not correct. In the first  place, section  46 of  the E.S.I.  Act would show that employees  who  are  covered  by  the  E.S.I.  Act  are entitled to certain benefit subject to the provisions of the E.S.I. Act.  It is,  therefore, not  as if  the workmen  are entitled to  the benefits  absolutely and without compliance with the  conditions laid down by the Act or the Regulation. Secondly,  the  proviso  to  Regulation  97  says  that  the employer shall  be entitled  to deduct from the leave salary of the  employee, "the amount of benefit" to which he may be entitled under  the E.S.I.  Act for the corresponding period of his  sickness. A  workman does not become entitled to the "amount" payable  to him  by way of sickness benefit unless, in the  first instance,  he chooses  to avail himself of the sickness benefit. That benefit cannot be forced on him. This would show  that the  employer’s right  to make  a deduction from the  employee’s sick  leave wages can only be exercised in respect  of those  days of  sickness leave  for which the workmen has  actually availed  of the sickness benefit. [240 F, H, 231 A-C]      3. Benefits  which are  available under  the E.S.I. Act are not  intended as  substitutes for  benefits to which the workmen are  entitled under the conditions of their service. A workman becomes entitled to sickness benefit only if he is qualified for  it and  he gets  a cash  benefit only  if  he avails himself of the sickness benefit. Thus it is only when a workman,  in fact  obtains or receives a cash benefit that the employer can exercise his right to make a deduction from wages due  to him  by way  of leave salary. In providing for periodical  payments   to  an  insured  worker  in  case  of sickness, the  legislature did  not intend to substitute any of those  benefits for  the workmen’s  right to get leave on full pay on the ground of sickness. [241 B-D, F]      Hindustan Times Ltd. v. Their Workmen, [1964] 1 SCR 234 applied in part.

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1606 of 1970.      From the  Award  dated  28-11-1969  of  the  Industrial Tribunal (II)  Lucknow in  Adjudication Case No. 120 of 1968 published in U.P. Gazette dated 21-3-1970.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

    G.B. Pai, D.N. Misra and Shri Narain for the Appellant.      Gobind Das  (A.C.) and  Mrs. Sunanda  Bhandare for  the Respondent.      The Judgment of the Court was delivered by      CHANDRACHUD, C.J.  This appeal  by special leave arises out of  the award  of the Industrial Tribunal, Lucknow, U.P. dated November 28, 1969. On September 7, 1968 the Government of U.P.  referred the  following dispute for adjudication to the Industrial  Tribunal under  section 4  (K) of  the  U.P. Industrial Disputes Act, 28 of 1947.           "Whether the  action of the employers in deducting      half wages  corresponding to  the sickness  benefit  to      which workmen  are entitled under the E.S.I. Act in the      event of the 238      workmen not  availing the  services of  the  E.S.I.  is      legal and/or justified ? If not, to what relief are the      workmen entitled and with what details ?"      The respondent-workmen  contended  that  the  Employees State Insurance  Act, 1948  (hereinafter called  the  E.S.I. Act) was  adopted by the appellant, M/s Bareilly Electricity Supply Co.  Ltd., in  1957, that  the workmen used to enjoy, prior to  1957, 15  days’ sick  leave with  full wages every year in  accordance with  the terms of an award given by the State Tribunal,  Allahabad, in  Adjudication Case  No. 33 of 1952, that  under that  award, the  workmen were entitled to sick leave  on full  wages as  a condition of their service, that they also became entitled to sickness benefit under the Employees State  Insurance Scheme and that the appellant was not justified  in reducing the wages to the extent of a half day’s wages in respect of employees availing of sick leave.      The appellant  contested the  demand of  the workmen on the grounds,  inter alia,  that its action in deducting half wages corresponding  to the  sickness benefit  to which  the workmen were  entitled under  the Act  in regard to the sick leave was in accordance with the provisions of Regulation 97 of the Employees State Insurance (General) Regulations 1950, that if  any individual  employee choose not to avail of the benefit due to him from the E.S.I. Corporation on account of his sickness, a deduction of half the wages corresponding to the sickness  benefit could be made by the employer and that the sickness  benefit provided  under the E.S.I. Act and the Scheme was  in substitution  of the benefits provided by the employer and  not in  addition thereto. The appellant raised an objection  to the maintainability of the reference on the ground that  the dispute referred by the State Government to the Tribunal  was not  an industrial  dispute and  contended further that  the subject  matter of the dispute fell within the exclusive  jurisdiction of the Employees State Insurance Court set up under section 74 of the E.S.I. Act, as a result of which the Industrial Tribunal had no jurisdiction to deal with the dispute.      The objection  to the  maintainability of the reference and to  the jurisdiction  of the Industrial Tribunal to deal with it  not having been pressed by the appellant’s counsel, the only  question which  we have to consider is whether the appellant can  deduct half-day’s  wages corresponding to the sickness benefit to which the workmen are entitled under the E.S.I. Act, in the event of their not availing themselves of the benefits under the E.S.I. Scheme. 239      Before dealing  with this question, it may be mentioned that the appellant has no objection to paying full wages for two days  of sick  leave to  the workmen and in fact, it has been paying  full wages  for two  days out  of 15 days’ sick

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

leave due  to the  workmen. The reason for this course seems to be that the workmen do not get cash benefit for the first two days  of the waiting period of sickness by reason of the provisions of  section 49  of the E.S.I. Act. The dispute in this appeal  is, therefore,  confined to a period of 13 days of sick  leave only,  for which  the workmen  are being paid half wages by the appellant.      To justify  the deduction of half wages from 13 days of sick leave,  the  appellant  relies  on  the  provisions  of section 72  of the E.S.I. Act and Regulation 97 framed under section 97(1) of the E.S.I. Act. Section 72 reads thus :           "Employer not  to reduce the wages. No employer by      reason only  of his  liability  for  any  contributions      payable under  this Act  shall directly  or  indirectly      reduce the wages of any employee, or except as provided      by the  regulations,  discontinue  or  reduce  benefits      payable to  him under  the conditions  of  his  service      which are  similar to  the benefits  conferred  by  the      Act." The relevant part of Regulation 97 is as follows:           "Discontinuance  or   reduction  of   benefit.  An      employer may discontinue or reduce the benefits payable      to his  employees under  conditions of  their  service,      which are  similar to the benefits conferred by the Act      to the extent specified below, namely :      (a) from  the date of commencement of the first benefit      period following  the appointed  day for his factory or      establishment-           (i)  sick leave on half pay to the full extent;           (ii) such  proportion   of  any  combined  general                purposes and sick leave on half pay as may be                assigned as  sick leave  but in  any case not                exceeding 50 per cent of such combined leave;      (b) ...................................           Provided that  where an employee avails himself of      any leave  from the employer for sickness, maternity or      temporary disablement,  the employer  shall be entitled      to deduct from 240      the leave  salary of the employee the amount of benefit      to which  he may  be entitled  under the  Act  for  the      corresponding period." The general  purpose and  effect of section 72 is to deny to the employers  the right  or power  to reduce or discontinue the benefits  payable to  the workmen under their conditions of service  on the  ground that the benefits available under the conditions  of service  and under  the E.S.I.  Act being similar, the  workmen would  not be  entitled  to  a  double benefit.  Section   72  provides  in  terms  that  the  mere circumstance  that   an  employer   is  liable   to  make  a contribution under  the E.S.I.  Act will  not  entitle  him, directly or  indirectly, to  reduce the wages of an employee or, in  so far  as the  Regulation permits,  discontinue  or reduce the  benefits payable  to him under the conditions of his service  even if  those  benefits  are  similar  to  the benefits conferred  by the  E.S.I.  Act.  The  case  of  the appellant before  the Industrial  Tribunal was  that it  was making a  contribution to  the E.S.I.  Corporation  for  the benefit of  its employees  and if  any  individual  employee chose not  to avail  of the  benefits due  to him  from  the Corporation on account of the sickness benefit, it is he who ought to  suffer and  there would  be no  justification  for obliging the  employer to  spend for  his  sickness  benefit twice over.  It is  precisely  this  type  of  argument  and attitude  that   the  legislature  anticipated  and  guarded

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

against by incorporating the particular provision in section 72. The purpose of that provision is evidently to discourage employers from  using the benefits provided under the E.S.I. Act  as   an  excuse   or  justification   for  reducing  or discontinuing the  benefits available  to the  workmen under their conditions  of service  on the  ground  of  similarity between the two types of benefits.      That leads  to the question as to whether Regulation 97 can justify  the deduction made by the appellant. Regulation 97 provides  that an  employer may discontinue or reduce the benefits payable  to his  employees under  the conditions of their service which are similar to the benefits conferred by the E.S.I.  Act but  only to the extent specified in clauses (a) and  (b) of  the Regulation.  We are  not concerned with clause (b)  and sub-clauses  (i) and (ii) of clause (a) have no application  in the  instant case.  The appellant  relies strongly on  the proviso to Regulation 97 under which, where an employee  avails himself  of any  leave from the employer for sickness,  the employer shall be entitled to deduct from his leave  salary the  amount of  benefit to which he may be entitled under  the Act  for the  corresponding period.  The case of  the appellant  is that  it is enough for justifying the deduction  from wages  due to the workmen for sick leave that the employee is covered by the E.S.I. Act or the E.S.I. Scheme. It is not possible 241 to accept this submission. In the first place, section 46 of the E.S.I.  Act would show that employees who are covered by the E.S.I.  Act are  entitled to certain benefits subject to the provisions  of the  E.S.I. Act. It is, therefore, not as if the  workmen are  entitled to the benefits absolutely and without compliance  with the conditions laid down by the Act or the  Regulation. Secondly,  the proviso  to Regulation 97 says that  the employer shall be entitled to deduct from the leave salary  of the  employee, "the  amount of  benefit" to which he  may be  entitled under  the  E.S.I.  Act  for  the corresponding period  of his  sickness. A  workman does  not become entitled  to the  "amount" payable  to him  by way of sickness benefit  unless, in  the first instance, he chooses to avail  himself of  the  sickness  benefit.  That  benefit cannot be forced on him. This would show that the employer’s right to  make a  deduction from  the employee’s  sick leave wages can  only be  exercised in  respect of  those days  of sickness leave for which the workman has actually availed of the sickness benefit. Benefits which are available under the E.S.I. Act  are not  intended as substitutes for benefits to which the workmen are entitled under the conditions of their service. As  stated earlier,  a workman  becomes entitled to sickness benefit  only if he is qualified for it and he gets a cash  benefit only  if he  avails himself  of the sickness benefit. Thus,  it is  only when a workman, in fact, obtains or receives  a cash  benefit that  the employer can exercise his right  to make  a deduction from wages due to him by way of leave salary.      The decision  of this  Court in Hindustan Times Ltd. v. Their Workmen(1)  is not  directly in  point but  it can  be cited in  support of  our reasoning  to the  extent which it holds that  in  providing  for  periodical  payments  to  an insured worker  in case of sickness, the legislature did not intend to substitute any of those benefits for the workmen’s right to get leave on full pay on the ground of sickness.      For  these   reasons,  we  confirm  the  award  of  the Industrial Tribunal and dismiss the appeal with costs. V.D.K.                                     Appeal dismissed. 242

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6