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CASE NO.: Appeal (civil)  695 of 2004

PETITIONER: EMPLOYEES STATE INSURANCE CORPORATION    

RESPONDENT: GNANAMBIGAI MILLS LTD.                   

DATE OF JUDGMENT: 19/07/2005

BENCH: S.N. Variava & Dr. AR. Lakshmanan

JUDGMENT: JUDGEMENT O R D E R

       This Appeal is against the Judgment of the Madras High Court dated 7th  August, 2002. Briefly stated the facts are as follows:-

       The Employees of Respondent Company raised a demand for increase  of wages.  The dispute was referred to the Special Tribunal, Madras for  adjudication.  By virtue of Section 10-B, Industrial Disputes Act, 1947  which had been introduced in the State of Tamil Nadu, the Government  passed orders dated 15th July, 1985 and 29th July, 1985 directing certain  payments to be made to the workmen pending the disputes. Both orders  contained a clause that any money paid in pursuance of the order could  be deducted by the employer from out of the monetary benefits to which  the employee would become entitled under the Award which may be  passed by the Tribunal.

       At this stage, it would be convenient to set out Section 10-B of the  Industrial Disputes Act,1947, under which the Orders were passed.  Section 10-B reads as follows:-

       "10-B  Power to issue order regarding terms and  conditions of service pending settlement of disputes. -

       (1)     Where an industrial dispute has been referred  by the State Government to a Labour Court or a Tribunal  under  sub-section (1) of Section 10 and if, in the opinion  of the State Government it is necessary or expedient so to  do for securing the public safety or convenience or the  maintenance of public order or supplies and services  essential to the life of the community or for maintaining  employment or industrial peace in the establishment  concerning which such reference has been made, it may,  by general or special order, make provision, -  

       (a)for requiring the employer or workman or both to  observe such terms and conditions of employment as may  be specified in the order or as may be determined in  accordance with the order, including payment of money by  the employer to any person who is or has been a  workman;  

       (b) for requiring any public utility service not to close  or remain closed and to work or continue to work on such  terms and conditions as may be specified in the order; and  

       (c) for any incidental or supplementary matter which  appears to it to be necessary or expedient for the purpose

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of the order;  

       Provided that no order made under this sub-section  shall require any employer to observe terms and  conditions of employment less favourable to the workman  than those which were applicable to them at any time  within three months immediately preceding the date of the  order.

       Explanation. - For the purpose of this sub-section,  "public utility service" means -  

       (i)     any section of an industrial establishment on  the working of which the safety of the establishment or the  workman employed therein depends;

       (ii)    any industry which supplies power, light or  water to the pubic;

       (iii)   any industry which has been declared by the  State Government to be a public utility service for the  purpose of this Act.  

(2)     An order made under sub-section (1) shall cease to  operate on the expiry of a period of six months from the  date of the order or on the date of the award of the Labour  Court or the Tribunal, as the case may be, whichever is  earlier.  

(3)     Any money paid by an employer to any person in  pursuance of an order under sub-section (1), may be  deducted by that employer from out of any monetary  benefit to which such person becomes entitled under the  provisions of any award passed by the Labour Court or the  Tribunal as the case may be."

       The Respondent paid the amounts as directed by the Government.  Ultimately, the Respondent Company entered into a Memo of Compromise  with the employees and in terms of the Memo of Compromise an Order  was taken from the Special Tribunal which reads as follows:-

"To the workmen in the textile mills falling in Group (D) the  relief granted shall be in the terms contained in Annexures  I and III to the memorandum of compromise, dated 21st  March, 1986 (Appendix III), which have been adopted by me  as my own findings and adjudication on the relevant  issues and the same shall be effective from 1st May, 1986."

Thus, the Special Tribunal never went into the question and did not decide  whether or not the amounts paid (under the Government order) were  wages or not.  It merely gave its  imprimatur to a compromise arrived at  between the parties.  Clause 3(c) of the Memorandum of Compromise,  which has been strongly relied upon, reads as follows:-

"It is agreed that the lump sum payment of Rs.500/-Rs.260/-  and Rs.75/-, Rs.65/- per month, as the case may be paid or  payable to the workmen upto April 30, 1986 as per the  Government orders No.1399, dated 15th July, 1985 and  No.1546, dated 29th July, 1985 under Section 10-B of the  Industrial Disputes Act and consent letter, dated 14th  February, 1986 by the Special Industrial Tribunal, be  treated as an ex-gratia payment and shall not be adjusted  against the future benefits covered under this settlement."

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       The Employees State Insurance Corporation claimed contributions, on  the amounts paid under the afore-mentioned two Government orders. The  Employees State Insurance Corporation then sought to recover the  contribution.  A Writ Petition was thus filed before the High Court. A Single  Judge of the High Court held that the amounts paid did not amount to  "wages".  The LPA filed by the Corporation has been dismissed by the  impugned Judgment.  The Judgments of the High Court proceed on the  footing that the amounts paid under the orders of the Government would  be "wages" within the meaning of the definition of the term "wages" as  given under Section 2(22) of The Employees’ State Insurance Act, 1948.  However, they conclude that as the Award of the Tribunal terms these  payments as "ex-gratia payments", therefore they cannot now be  considered to be ’wages’.          We have heard parties at great length.  In our view, the High Court was  absolutely right in concluding that the payments made pursuant to the  orders of the Government were ’wages’ within the meaning of the term as  defined under The Employees’ State Insurance Act, 1948.  We are unable  to agree with the submissions made on behalf of the Respondent that  even at that stage these were not ’wages’.  The term ’wage’ as defined in  Section 2(22) reads as follows:-

"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;"

Thus, any remuneration paid or payable in cash to an employee if the  terms of the contract of employment, express or implied, are fulfilled  would be a ’wage’. The Government order clearly indicates that the  payment was to be adjusted towards the ’wages’ after the Award is  passed.  By virtue of the Government order it is a payment in terms of the  contract of employment and therefore it would be a wage.  

       In our view the High Court has gone completely wrong in concluding  that by virtue of the Award it ceases to be wages.  As stated above, the  Tribunal has not applied its mind as to whether or not the payments were  wages. All that the Tribunal did was to give its imprimatur to a  compromise between the parties.  Merely because the parties in their  compromise chose to term the payments as ’ex-gratia payments’ does not  mean that those payments cease to be wages if they were otherwise  wages. As stated above, they were wages at the time that they were paid.   They did not cease to be wages after the Award merely because the terms  of Compromise termed them as ’ex-gratia payment’.  We are therefore  unable to accept the reasoning of the Judgments of the High Court.  The  Judgment of the Division Bench as well as that of the Single Judge  accordingly stand set aside.  It is held that the amounts paid are wages  and contribution will have to be made on those amounts also.  We,  however, make it clear that payments of the interest will be as per the  statutory provisions.

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       In this view of the matter, the Appeal stands allowed.  There will be no  order as to costs.