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PETITIONER: HARIHAR POLYFIBRES

       Vs.

RESPONDENT: THE REGIONAL DIRECTOR, ESI CORPORATION

DATE OF JUDGMENT04/09/1984

BENCH: REDDY, O. CHINNAPPA (J) BENCH: REDDY, O. CHINNAPPA (J) SEN, AMARENDRA NATH (J)

CITATION:  1984 AIR 1680            1985 SCR  (1) 712  1984 SCC  (4) 324        1984 SCALE  (2)295  CITATOR INFO :  F          1992 SC1737  (9)

ACT:      Employees’ State  Insurance Act  1948, Section  2 (22)- "Wages"-’House  rent   allowance’-’Night  shift  allowance’- ’Heat, gas and dust allowance’-’Incentive allowance’-Payment of-Whether "wages".      Words &  Phrases: "Wages"-  Meaning of-Section  2  (22) Employees State Insurance Act 1948.

HEADNOTE:      The question  was whether  the  expression  ’wages’  as defined in  s. 2  (22) of the Employees State Insurance Act, 1948  includes   ’House’  Rent   Allowance’,   Night   Shift Allowance’ ’Heat,  Gas and  Dust Allowance’  and  ’Incentive Allowance’ paid by an employer to his employees, ^      HELD: By the Court      1. Employees’  State Insurance  Act, 1948 is a piece of social welfare  legislation. The  definition of  ’wages’  is designedly wide.  The definition  on its  plain  reading  is clear and  unambiguous. Even  if there is any ambiguity, the expression has  to be  given a  liberal  interpretation  and receive beneficent construction.[714C]      2. ’Wages’  as defined  in s.  2 (22) of the Employees’ State Insurance  Act, 1948  must necessarily  include ’House Rent Allowance’,  ’Night Shift  Allowance’, ’Heat,  Gas  and Dust Allowance ’ and ’Incentive Allowance’. [715C]      Braithwaite &  Co. (India) Ltd. v. The Employees’ State Insurance Corporation, [1968]1 S.C.R. 771, referred to      N.G.E.F. Ltd.  v. Deputy  Regional Director,  E.S.I.C., Bangalore, [1980]  1 LAB.  I.C,  431  and  Employees’  State Insurance Corporation,  Hyderabad v.  Andhra  Pradesh  Paper Mills Ltd., Rajahamundry, 1978 LAB. I.C. 19, approved.      Bengal Potteries  Ltd. v.  Regional Director, W. Bengal Region, Employees 713 State Insurance  Corporation and  others, [1973]  LAB.  I.C. 1328 (V 6 P 295), over-ruled. Per Chinnappa Reddy, J.      Wages as  defined in  s. 2 (22) of the Act includes not only remuneration  paid or  payable under  the terms  of the

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contract of  employment,  express  or  implied  but  further extends to  other additional  remuneration, if  any paid  at intervals not exceeding two months, though outside the terms of employment.           [714G]      ’Remuneration’ under the first clause has to be under a contract   of   employment,   express   or   implied   while ’remuneration’ under  the third clause need not be under the contract  of   employment  but   may  be   any   ’additional remuneration’ outside the contract of employment, [715B] Per Amarendra Nath Sen, J.      The inclusive  part and  the exclusive  portion in  the definition of ’wages’ in s. 2 (22) clearly indicate that the expression ’wages’  has been  given a very wide meaning. The inclusive part  of the  definition read  with the  exclusive part in  the definition  clearly shows  that  the  inclusive portion is  not intended  to be  limited only  to the  items mentioned therein.  Taking into  consideration the excluding part in the definition and reading the definition as a whole the inclusive  part,  is  only  illustrative  and  tends  to express the  wide meaning  and import  of the  word ’wages’. [717H; 718A-B]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Special  Leave  Petition (Civil) No. 9795 of 1983.      From the  Judgment and Order dated the 20th April, 1983 of the Karnataka High Court in Misc. First Appeal No. 639 of 1983.      K.R. Nagaraj, Naresh Kaushik, R.S. Hegde and B. Krishna Prasad, Miss CS Lalitha for the Petitioners.      The following Orders were delivered      CHINNAPPA REDDY,  J. The  question for consideration in this petition  for special leave to appeal under Article 136 of the  Constitution of  India  is  whether  the  expression ’wages’, defined by s.2(22) of the Employees State Insurance Act,  includes   ’House  Rent   Allowance’,   ’Night   Shift Allowance, paid  to those  employees who are obliged to work in the  night shift  and the  ’Heat, Gas and Dust Allowance’ and  ’Incentive  Allowance’  paid  by  an  employer  to  his employees. Section 2(22) defines ’wages’ as meaning:           "all remuneration  paid or  payable in  cash to an      employee, if the terms of the contract of employment, 714      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      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."      The  Employees   State  Insurance   Act  is  a  welfare legislation and  the definition  of  ’wages’  is  designedly wide. Any  ambiguous expression  is,  or  course,  bound  to receive a  beneficent construction  at our  hands too.  Now, under the definition first, whatever remuneration is paid or payable to  an employee  under the  terms of the contract of the  employment,  express  or  implied  is  wages;  thus  if

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remuneration is  paid in  terms of  the original contract of employment or  in terms  of a  settlement arrived at between the  employer   and  the   employees  which   by   necessary implication becomes part of the contract of employment it is wages: second,  whatever payment  is made  to an employee in respect of  any period of authorised leave, lock out: strike which is  not illegal  or lay-off is wages; and third, other additional  remuneration,  if  any  paid  at  intervals  not exceeding two  months is  also wages; this is unqualified by any requirement  that it  should be  pursuant to any term of the contract  of employment,  express or  implied.  However, ’wages’ does  not  include  any  contribution  paid  by  the employer to any pension fund or provident fund, or under the Act, any travelling allowance or the value of any travelling concession, any  sum paid  to the  person employed to defray special expenses  entailed on  him  by  the  nature  of  his employment and  any gratuity payable on discharge. Therefore wages as defined includes remuneration paid or payable under the terms  of the contract of employment, express or implied but further  extends to  other additional  remuneration,  if any, paid  at intervals  not exceeding  two  months,  though outside the  terms of  employment.  Thus  remuneration  paid under the  terms of  the contract of the employment lexpress or implied)  or otherwise if paid at intervals not exceeding two months  is wages.  The interposition  of the clause ’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’ between the 715 first clause,  ’all remuneration  paid or payable in cash to an employee,  if the  terms of  the contract  of employment, express of  implied, was  fulfilled’ and  the third  clause, ’other additional  remuneration, if  any, paid  at intervals not exceeding  two months,  ’makes it  abundantly clear that while ’remuneration’ under the first clause has, to be under a contract of employment, express or implied, ’remuneration’ under the  third clause  need not  be under  the contract of employment but  may be any ’additional remuneration’ outside the contract of employment. So, there appears to our mind no reason  to  exclude  ’House  Rent  Allowance’,  Night  Shift Allowance’, Incentive  Allowance’ and  ’Heat, Gas  and  Dust Allowance’ from  the definition  of ’wages’. A Full Bench of the Karnataka High Court in N.G.E.F. Ltd. v. Deputy Regional Director, E.S.I.C.,  Bangalore considering  the question  at some length  held that  the amount  paid by way of incentive under the  scheme of  settlement entered  into  between  the Management and  its workman was wages’ within the meaning of s. 2(22)  of Employees’ State Insurance Act. It was observed by the Full Bench of the Karnataka High Court as follows:-           "It is  true that the word ’remuneration’ is found      both in  the first  and second parts of the definition.      But the condition attached to such payment in the first      part cannot  legitimately be  extended  to  the  second      part. The  other ’additional  remuneration’ referred to      in the  second part of the definition is only qualified      by the  condition attached  thereto (that  is, paid  at      intervals not  exceeding two months). That was also the      view taken  by a  Full Bench of the Andhra Pradesh High      Court in  Employees State Insurance Corpn. Hyderabad v.      Andhra Pradesh  Paper Mills  Ltd. and  also the  Bombay      High Court  in M/s  Mahalaxmi Glass  Works Pvt. Ltd. v.      Employees’ State  Insurance Corpn.  But this  aspect of      the matter has been completely overlooked by this Court      in Kirloskar’s case."      In Employees  State Insurance Corporation, Hyderabad v.

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Andhra Pradesh  Paper Mills Ltd., Rajahumundry, a Full Bench (Divan, C.J., Raghuvir and Gangadhara Rao, J.) of the Andhra Pradesh 716 High court  held that  incentive bonus  paid to  an employee (which the  Court, on  the facts  of the case, found was not remuneration in terms of the contract of employment, express or implied)  fell within the third part of the definition of ’wages’ that  is ’additional  remuneration’ if  any, paid at intervals not exceeding two months’. The Full Bench said:-      "The word  ’other’ appearing  at  commencement  of  the      third part  of the  definition of  wages under  s.2(22)      indicates that  it must  be remuneration  or additional      remuneration  other  than  the  remuneration  which  is      referred to in the earlier part of the definition viz.,      all  remuneration   paid  or  payable  in  cash  to  an      employee, if  the terms  of the contract of employment,      express or  implied, were fulfilled and incentive bonus      in  the   present  scheme   is   certainly   additional      remuneration. It  must be emphasized at this stage that      under the third part of the definition of ’wages’ it is      actual factum  of payment which counts because the word      used is ’paid’ as distinguished from ’paid’ or payable.      The moment  you get  any additional  remuneration other      than the  remuneration payable  under the  contract  of      employment and  if this additional remuneration is paid      at intervals not exceeding two months, it becomes wages      by virtue  of the  third  part  of  the  definition  of      ’wages’."      The learned  judges of  the Full  Bench referred to the judgment of  a learned  Single judge  of the  Calcutta  High Court in  Bengal Potteries  Ltd. v.  Regional  Director,  W. Bengal Region,  Employees, State  Insurance Corporation  and others,  where   the  learned  Judges  had  held  that  "the additional  remuneration   sought  to  be  included  by  the expression’ and includes other additional remuneration’ must be remuneration  which though  no part of the wages could be paid as  part of  the terms  of contract of employment." The Full Bench  did not  agree with  the view  expressed by  the learned Single Judge and said:-      "We are unable to agree with this part of his reasoning      and for the reason which we have set out hereinabove we      disagree with this part of his judgment in para (3)". 717      We express  our respectful agreement with what has been said by  the Full  Bench of the Andhra Pradesh High Court in the above  extracted passage and their dissent from the view expressed by  the learned  Single Judge of the Calcutta High Court.  The   Full  Bench  further  held  that  ’House  Rent Allowance’  paid   by  an  employer  to  his  workmen  would constitute wages  within the  meaning of the s. 2(22) of the Act.      Our  attention   was  also   invited  to  the  case  of Braithwaite &  Co. (India)  Ltd.  v.  The  Employees’  State Insurance Corporation  (V. Bhargava  and C.A.  Vaidialingam, JJ). The case arose prior to the amendment of the Employees’ State Insurance  Act in  1966 when  the explanation to s. 41 was bodily  lifted from s. 41 into the definition of ’wages’ in s.2(22).  The case related to the payment of an ex-gratia reward styled  as an  ’Inam’ (a bounty) which was admittedly not claimed  to be ’additional remuneration, if any, paid at intervals not  exceeding  two  months’  but  claimed  to  be ’remuneration paid  or payable  to in cash to an employee if the terms  of the contract of employment, express or implied was fulfilled’  which the  Court found  it was not. The case

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has been  sufficiently explained  by the  Full Bench  of the Andhra Pradesh  High Court  in E.S.I.  Corpn., Hyderabad  v. A.P. Paper  Mills Ltd.  (supra) and by the Full Bench of the Karnataka  High   Court  in  N.G.E.F.  Bangalore  v.  Deputy Regional Director, E.S.I.C., Bangalore. We do not think that it is  necessary to  say anything further in this matter. In this view, the special leave petition is dismissed.      AMARENDRA NATH  SEN,J. I  have read  the judgment of my learned brother O. Chinnappa Reddy, J.      I entirely  agree that  on true  interpretation of  the word ’wages’  defined in  S.2(22) of  the  Employees’  State Insurance Act,  ’wages’ must necessarily include ’House Rent Allowance,  Night   Shift  Allowance,  Heat,  Gas  and  Dust Allowance and Incentive Allowance’.      The definition  of ’wages’  has been  set  out  in  the judgment of  my learned  brother. The inclusive part and the exclusive portion  in the definition clearly indicate, to my mind, that the expression ’wages’ has been given a very wide meaning. The inclusive part of 718 the definition  read with  exclusive part  in the definition clearly shows  to my mind, that the inclusive portion is not intended to  be limited only to the items mentioned therein. Taking  into   consideration  the   excluding  part  in  the definition  and  reading  the  definition  as  a  whole  the inclusive part,  to my  mind, is only illustrative and tends to express  the wide  meaning and import of the word ’wages’ used in the Employees State Insurance Act.      The Employees’ State Insurance Act is a piece of social welfare  legislation   enacted  for   the  benefit   of  the employees. The  Act has  to be  necessarily so  construed as will serve its purpose and objects.      I entirely  agree with  my learned  brother that  on  a proper interpretation  of the  term ’wages’  the legislative intent is  made manifestly  clear that  the term  ’wages’ as used in  the Act  will include  House Rent  Allowance  Night Shift Allowance,  Heat, Gas and Dust Allowance and Incentive Allowance. The  definition, to my mind, on its plain reading is clear  and unambiguous.  Even if any ambiguity could have been suggested,  the expression  must  be  given  a  liberal interpretation beneficial  to the interests of the employees for whose benefit the Employees State Insurance Act has been passed.      All other  aspects including  the various  decisions of the High  Courts on this question have been considered by my learned brother  in his  judgment. I entirely agree with the views of my learned brother and I have nothing more to add.      With these observations I agree with my learned brother that this Special Leave Petition has to be dismissed. N.V.K.    Petition dismissed. 719