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PETITIONER: INDIAN DRUGS & PHARAMECUTICALS LTD. ETC.

       Vs.

RESPONDENT: EMPLOYEES STATE INSURANCE CORPORATION ETC.

DATE OF JUDGMENT:       06/11/1996

BENCH: K. RAMASWAMY, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:                THE 6TH DAY OF NOVEMBER, 1996 Present:               Hon’ble Mr. Justice K. Ramaswamy               Hon’ble Mr. Justice G.B. Pattanaik      V.V. Vaze, Sr. Adv.., Kailash Vasdev, C.K. Sasi, A.T.M. Sampath, Kailash  Vasdev, C.K.  Sasi, Indra  Sawhney, Deepak Dewan, C.V.S.  Rao and  V.J. Francis, Advs. with him for the appearing parties.                          O R D E R      The following Order of the Court was delivered:                             WITH             CIVIL APPEAL NOS.2784/80 AND 1087/81                             AND              WRIT PETITION (C) NO. 1554 OF 1987                          O R D E R      These  appeals   are  by  certificate  granted  by  the Division Bench  of  the  Andhra  Pradesh  High  Court  under Article 133  of the  Constitution. The  question of  law  of public importance  is; whether the overtime wages paid to an employee by the appellants are "wages" within the meaning of Section 2(22)  of the  Employees State  Insurance Act,  1948 (for short,  the ‘Act’).  It is  not necessary to record the facts in all these cases. Suffice it to state that the facts in C.A. No.2784/80 are sufficient for disposal of the common controversy. Admittedly,  the appellants have taken overtime work from  their existing  employees. The employees had done work during  the stipulated working time and thereafter they were asked  to perform  overtime work  which  they  did  and accordingly, the overtime rate of wages was paid in terms of the agreement between the appellants and the workmen.      Therefore, the  question has arisen; whether absence of stipulation  for  payment  of  the  overtime  wages  in  the original  contract  of  employment,  would  take  away  such remuneration  paid   towards  the  overtime  work  from  the definition of the word ‘wages’ within the meaning of Section 2(22) of the Act. The said section reads as under:      "‘Wages’  means   all  remuneration      paid  or  payable  in  cash  to  an      employee,  if   the  terms  of  the      contract of  employment, express or

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    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) an, 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;      Shri Kailash Vasdev, learned counsel for the appellants in two  appeals and Shri Sampath, learned counsel in another appeal  representing  Agarwal  Industries,  raised  two-fold contention.  According   to   Shri   Kailash   Vasdev,   the Legislature having  taken care to exclude the overtime wages from the  purview of the definition of "employee" within the meaning of  Section 2(9)  of  the  Act  and  equally  having defined  the   "wages"  under  Section  2(22)  of  the  Act, necessary  intended   therefrom  is   that  the  Legislature intended to  exclude overtime  wages from  the  remuneration paid for  overtime work  done by  the employer. Unless it is part  of   contract  of   appointment,  it  is  outside  the definition of  "wages". Admittedly,  there  is  no  contract between the  appellants and  the workmen to pay the overtime wages. It  is not  obligatory for  the appellants  to  offer overtime wages  nor is  it obligatory  for the  employees to work overtime.  In the  absence of  such mutual  obligations under a  contract, it  cannot be  considered to  be  "wages" within the meaning of Section 2(22) of the Act. Shri Sampath further elaborated  spinning that  in the light of statutory operation, unless  there is  any agreement  in  writing,  it cannot be  construed to  be an implied contract. Since it is not obligatory  for the employees to work, remuneration paid towards overtime  work amounts to mutual payment not as part of wages  but as  remuneration for services rendered outside the contract  of employment  of the employees. Therefore, it will not  come within  additional remuneration, if any, paid at intervals  not exceeding two months within the meaning of Section 2(22)  of the  Act. In  support  thereof,  both  the learned counsel have placed strong reliance on the judgments of the Calcutta High Court in M/s. Hindustan Motors Ltd. vs. E.S.I.  Corporation  &  Ors.  [(1979)  LAB.  I.C.  852]  and Karnataka High  Court in  Hind Art  Press, Mangalore vs. ESI Corporation & Anr. [(1990) LLJ 195].      The question  is; whether  the view  taken by  the said High Courts  is correct in law and whether the High Court of Andhra  Pradesh   has  committed   any  error   of  law   in interpreting of  the word ‘wages’ under Section 2(22) of the Act? It is seen that Section 2(9) defines "employee" thus:      "Employee means any person employed      for wage  in or  in connection with      the   work    of   a   factory   or      establishment  to  which  this  Act      applies and-      (i) who is directly employed by the      principal employer  or any work of,

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    or incidental  or preliminary to or      connected with work of, the factory      or establishment, whether such work      is done  by the  employee  in  this      factory or establishment elsewhere;      or      (ii) who  is employed or through an      immediate employer  on the premises      of the  factory or establishment or      under supervision  of the principal      employer or his agent on work which      is ordinarily  part of  the work of      the  factory  or  establishment  or      which is  preliminary to  the  work      carried on  in or incidental to the      purpose   of    the   factory    or      establishment; or      (iii)    whose     services     are      temporarily lent  or let on hire to      the  principal   employer  by   the      person with  whom the  person whose      services are so lent or let on hire      his  entered  into  a  contract  of      service;      and include any person employed for      wages on  any work  connected  with      the administration  of the  factory      or  establishment   or  any   part,      department  or  branch  thereof  or      with the  purchase of raw materials      for, of the distribution or sale of      the  products  of  the  factory  or      establishment,  *[or   any   person      engaged as an apprentice, not being      an  apprentice  engaged  under  the      Apprentices Act, 1961, or under the      standing     orders      of     the      establishment;   but    does    not      include-      (a) any member of the Indian naval,      military or air forces; or      (b) any  person so  employed  whose      wages (excluding  remuneration  for      Overtime work)  exceed *[such wages      as may be prescribed by the Central      Government].      Provided  that  an  employee  whose      wages (exceeding  remuneration  for      overtime work)  exceed *[such wages      as may be prescribed by the Central      Government] at  any time after (and      not before)  the beginning  of  the      contribution period, shall continue      to be  an employee until the end of      that period;      The Legislature  while defining  "employee"  has  taken care to  see that  a person  employed for  wages  in  or  in connection with  the work  of a  factory or establishment to which the Act applies was covered as employee in one ore the other enumerated  items (i)  to (iii).  In  addition,  other persons employed  for wages  on any  work connected with the administration of  the factory or establishment or any part, department or  branch thereof  or with  the purchase  of raw materials of,  or the  distribution or  sale of the products or, the factory or establishment or any person engaged as an

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apprentice,  not  being  an  apprentice  engaged  under  the Apprentice Act,  1961 or  under the  Standing Orders  of the establishment, are  employees. The exclusionary clauses have been enumerated in clauses (a) and (b) thereof with which we are not  concerned. Under  the proviso,  the employee  whose wages excluding  remuneration for overtime work exceeds such wages as  may be prescribed by the Central Government at any time after  and not before the beginning of the contribution period, shall  continue to  be an  employee until the end of that period.  It would thus be seen that the Legislature has taken  care   to  bring  the  employer  within  the  net  of beneficial   provisions   of   the   Act.   Employee   whose remuneration does  not exceed the prescribed remuneration by the Central  Government for  a month  or any  time after the beginning of  the contribution  period, will  be governed by the  provisions  of  the  Act.  In  other  words,  from  the exclusion of  the  overtime  work,  in  computation  of  the remuneration  to  the  workmen,  it  does  appear  that  the Legislature intended  not to  exclude employee  who receives overtime wages  from the  purview of  the Act  though he did overtime work  and had  received remuneration.  On the other hand, it  would appear  that the  Legislature recognised the fact of  the  employer  engaging,  by  contract  express  or implied, the  services of  the existing  employee for  doing overtime work  and paying  the remuneration. In this behalf, it is  relevant to note that the definition of "wages" under Section 2(22)  of the  Act, the main part of the definition, without taking  aid of  the inclusive  part, would  indicate that 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. It would, thus, be seen that if  there is  any contract  of  employment  express  or implied and  the terms of contract have been fulfilled, then the remuneration  paid for  performance  of  the  duty,  the employer is  obligated to  pay remuneration  as wages to the employee. Herein, we have to consider whether overtime wages would be  part of  the wages.  It is  settled legal position that the  word ‘include’  would be given wide interpretation so as  to bring  within its  ambit exhaustively  all entries akin to or analogous to the main part of wage, except to the extent  the   enumerated  entities  except  those  expressly excluded by  the legislation  would be  within its sweep. In other words,  by employing  the  inclusive  definition,  the Legislature  intended   to  bring   in,  by  legal  fiction, something  within   the  accepted   connotation  though  not strictly included  within its  ambit. It  is seen  that  the Legislature has  expressly excluded  items A  to D  from the purview of  the definition  "wages".  In  other  words,  the Legislature suggested  that all  other categories  which are not excluded,  fall within the inclusive wider definition of ‘wages’. The  Legislature by defining ‘employee’, having had the  knowledge  of  the  payment  of  the  remuneration  for overtime work done by the employee and having excluded it in Section 2(9),  the omission  thereof in  the  definition  of Section 2(22)  excluding items A to D, would be eloquent and meaningful.  Whatever  remuneration,  paid  or  payable  for overtime work,  forms wages  under an  implied term  of  the contract. The object thereby is clear that the overtime work done by  the employee  is an implied contract to do overtime and the  remuneration paid  therefore does  form part of the wages under  Section 2(22).  Concomitantly, the  employer is enjoined to pay the contribution under the Act and should be required  to   be  complied  with.  This  Court  in  Harihar Polyfibres  vs.   The  regional  Director,  ESI  Corporation [(1985), 1 SCR 712] was to consider whether HRA, Night Shift

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Allowance, Heat, Gas and Dust allowance, incentive allowance paid by  the employer  to his  employee are wages within the meaning of  Section 2(22)  of the Act. This Court considered elaborately  and   had  held  that  the  Act  is  a  welfare legislation and  the definition of wages is designedly wide. Any ambiguous  expression is,  of course, bound to receive a beneficent construction at the hands of the Court. Under the definition, 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 remuneration is paid to the  employee  in  terms  of  the  original  contract  of employment or  in terms  of a  settlement which by necessary implication becomes  part of  the contract of employment, it is wages.  It was also further held that this inclusive part as against  the exclusionary  part in the definition clearly indicates that  the expression  wages has  been given a very wide meaning.  The inclusive  part of  the  definition  read along with  the exclusionary part in the definition, clearly shows that  the inclusive part is not intended to be limited only  to   the  items   mentioned   therein.   Taking   into consideration the  exclusionary 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’ used  in the  Act. It  was held therein that HRA, Night, Shift Allowance, Heat, Gas and Dust allowance, incentive  allowance are wages within the meaning of Section 2(22) of the Act. The facts in this case squarely fall within  the above  ratio laid  by this  Court. When the admitted position  is that an employee has done the overtime work and  received or is due to receive remuneration towards the work  done for his rendering service, necessarily, it is a wage  paid or  payable by  virtue of the implied contract. The contract  of employment  is entered  into  only  at  the initial entry  into  the  service.  In  the  course  of  the employment, as  and when the employer finds the need to have work done  expeditiously, in  addition to  the  normal  work during the  course of the working hours, the employer offers to the employee to do overtime work after the working hours. When  an   employee  does   overtime  work,  it  amounts  to acceptance of  the same.  There  emerges  concluded  implied contract between the employer and employee. There is no need to write  on each  occasion  separately  on  the  letter  of appointment. It becomes integral part of original or revised contract of  employment from  time to  time. The employer is obligated to  pay wages  when the  employee does  work. This will be, in addition to payment of the wages he receives for normal work.  In other words, both the remuneration received during the working hours and overtime constitute a composite wages and thereby it is a wage within the meaning of Section 2(22) of  the Act. The Calcutta High Court and the Karnataka High Court  have applied  technical rules  of  construction, namely, the  Legislature does  not  expressly  say  so  and, therefore, remuneration  paid for  overtime work  is  not  a wage. We  think that  the approach  adopted  by  these  High Courts is  clearly unsustainable  and illegal.  On the other hand, the view expressed by the Bombay High Court in Shivraj Fine Art  Litho Works,  Nagpur v.  Director, Regional Office Maharashtra, Bombay  & Ors. [1974 Lab. IC 328) (V 7 C72), by Delhi High  Court in  E.S.I.C. New  Delhi v.  Birla  Cotton, Spinning &  Weaving Mills  Ltd., Delhi [1977 II LLJ 420] and by the  Andhra Pradesh  High Court  in  M/s.  The  Hyderabad Allwyn  Metal   Works  Ltd.  v.  Employees  State  Insurance Corporation [1981  Lab. IC  457] and  the  earlier  decision referred to  are correct  in law. The ratio in Braithwaite & Co. (India)  Ltd. vs.  ESI [1968)  1 SCR  771], is no longer

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applicable, since  it was  prior to  the  amendment  of  the definition. As  a result,  it no longer operates as a ratio. Thus, we  hold that  the view  taken by  the High  Court  of Andhra Pradesh  is in  accordance with law laid down by this Court. We do not find any ground warranting interference.      The appeals are dismissed. No costs.      IN WP (C) NO.1554/87      Writ Petition is dismissed as withdrawn.