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PETITIONER: M/S.  WHIRLPOOL OF INDIA LTD.

       Vs.

RESPONDENT: EMPLOYEES’ STATE INSURANCE CORPORATION

DATE OF JUDGMENT:       08/03/2000

BENCH: S.B.Majumdar, Y.K.Sabharwal, S.N.Phukan

JUDGMENT:

     SABHARWAL J.

     Leave granted.

     The  appellant  under a ‘Production Incentive  Scheme’ pays  to  its  workers  production incentive  at  the  rates specified  in  the  Scheme besides normal  wages.   For  the purpose  of  calculating  contributions  towards  Employees’ State Insurance Fund, the payment of production incentive by the appellant to its workers is not treated by it as ‘wages’ within  the meaning of the term as defined in Section  2(22) of  the Employees’ State Insurance Act, 1948 (for short ‘the Act’).     The    respondent-Employees’    State   Insurance Corporation  (for short ‘the Corporation’) treating the said payment  as  ‘wages’  issued a demand to the  appellant  for payment  of  contributions  towards   the  Employees’  State Insurance  Fund.  This led to filing of an application under Section  75  of the Act by the appellant  before  Employees’ Insurance Court challenging the said demand.  The said court allowed  the  application and quashed the demand.   It  held that  the  payment  was made quarterly and was  not  ‘wages’ under the Act as it did not fall either under the first part of  Section 2(22) or under third part thereof.  The  payment made  by the appellant, it was held, did not fall under  the first  part  of  the definition of ‘wages’ as there  was  no agreement  between the appellant and its workers for payment of  production incentive and also that it did not fall under the  third part of the definition as the actual payment  was made  quarterly  which  means  at  intervals  exceeding  two months.

     The  appeal filed by the Corporation against the order of  the Employees’ Insurance Court was allowed by a  learned Single  Judge of the High Court holding that the  production incentive was calculated on the basis of the extra work done by the workers in each month but to avoid contribution under the  Act, the payment was postponed and was made  quarterly. The  Letters  Patent Appeal of the appellant  was  dismissed and, therefore, the present appeal.

     The  question for decision is whether payments towards production  incentive  made by the appellant to its  workers

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under  the  ‘Production Incentive Scheme’ falls  within  the scope  and  ambit of ‘wages’ as defined in Section 2(22)  of the Act and also the effect of payments being made quarterly i.e.  at intervals exceeding two months.

     The  Act  is a social legislation enacted  to  provide benefits  to  employees in case of sickness,  maternity  and employment  injury and to make a provision for certain other matters  in  relation thereto.  Broadly this is the  purpose for which the Corporation has been established under Section 3  of  the  Act.  The main source of  the  Employees’  State Insurance  Fund is the contributions paid to the Corporation (Section  26).   The  benefits  to be  provided  to  insured persons  and  others  are  as  provided  in  Chapter  V,  in particular,  Section 46 thereof.  The words and  expressions used  but  not  defined  in  the  Act  and  defined  in  the Industrial  Disputes  Act,  1947, are to have  the  meanings respectively  assigned  to them in the  Industrial  Disputes Act.     Undoubtedly,   any    provision    of   which   two interpretations   may  be  possible   would   deserve   such construction  as  would be beneficial to the  working  class but,  at the same time, we cannot give a go by to the  plain language of a provision.

     Under   first   part  of   Section  2(22),   all   the remuneration  paid or payable in cash to an employee, if the terms  of  the contract of employment, express  or  implied, were  fulfilled  would be ‘wages’.  Under this part  neither the  actual  payment nor when the payment is made is of  any relevance.   The  last  part  of Section  2(22)  relates  to payment   of   additional   remuneration.   The   additional remuneration,  if  any, paid at intervals not exceeding  two months  and not falling in clauses (a) to (d) would also  be wages within the meaning of the term as defined.  Under this part of the definition, there has to be payment and not only payability  and  the  payment  has to be  at  intervals  not exceeding two months.

     The High Court while coming to the conclusion that the payment  of  production  incentive  to its  workers  by  the appellant  is  ‘wages’  within the meaning of  the  Act  has relied  upon  the decision of this Court in Wellman  (India) Pvt.   Ltd.   v.   Employees’  State  Insurance  Corporation [(1994) 1 SCC 219] and Modella Woollens Ltd.  V.  Employees’ State  Insurance  Corporation and Anr.  [1994 Supp  (3)  SCC 580].

     Wellman’s case deals with the attendance bonus payable to  the employees under the terms of settlement which became part  of  contract  of employment and was thus  held  to  be remuneration payable under the contract of employment.  That fell  under the first part of the definition.  In this case, it  was  held  that the expression ‘if any paid’  after  the words  ‘other additional remuneration’ will be  inconsistent if  the  remuneration  is  payable  under  the  contract  of employment  since such payment is not dependent on the  will of  the employer but on the fulfillment of the terms of  the contract.   Every  remuneration payable under  the  contract would  fall  under  the first part of the  definition.   The payment  in Wellman’s case fell within the first part of the definition  of  ‘wages’.   In   the  present  case,  neither Insurance  Court nor learned Single Judge nor Division Bench has  held  that  the  payment of  production  incentive  was contractual  falling within the first part of the definition of wages.

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     In  Modella  Woollens’  case   also,  the  payment  of production  bonus to the employees though made at the end of each  quarter was held to be wages as the amount was payable under  the agreement.  Thus this case too was concerned with the first part of the definition of wages.

     None  of the aforesaid decisions has any applicability to the facts of the present case.

     In M/s.  Harihar Polyfibres v.  Regional Director, ESI Corporation  [(1984) 4 SCC 324], affirming the Full Bench of the  Andhra Pradesh High Court holding that under third part of the definition to constitute ‘wages’, it has to be actual factum  of  payment  made  at intervals  not  exceeding  two months,  ‘House  Rent Allowance’, ‘Night  Shift  Allowance’, ‘Incentive  Allowance’  and ‘Heat, Gas and  Dust  Allowance’ were  held  to  be covered by the definition of  ‘wages’  in Section  2(22).   In  this case, it was held  that  for  the aforesaid allowances to be covered by definition of ’wages’, it was not necessary that the payments should be in terms of employment.

     In  Handloom  House, Ernakulam v.  Regional  Director, ESI  [(1999) 4 SCC 7], it has been held that any  additional remuneration paid at intervals exceeding two months has been excluded  from  the purview of the definition.  It is  clear that  if  the amount paid or payable is not remuneration  on fulfillment  of  the terms of employment falling  under  the first part and is also not covered by the second part of the definition,  it  would  be wages if the payment is  made  at intervals not exceeding two months.

     Learned  counsel  for  the respondent  made  a  feeble attempt  to  contend  that the payment in the  present  case would fall within the first part of definition of ‘wages’ as there is an implied contract for payment of the said amount. As  already  noticed, none of the Courts has held  that  the amount in question was paid or was payable on fulfillment of terms  of  contract of employment.  Further learned  counsel fairly  conceded that the payment under the scheme cannot be termed a payment under settlement as contemplated by Section 2(p) of the Industrial Disputes Act.  It also cannot be held that  the payment in question under the scheme would  amount to a condition of service requiring compliance of Section 9A of  the Industrial Disputes Act for effecting any change  in the  conditions of service.  The payment thus does not  fall within the first part of definition of ‘wages’.

     It  is  evident  that the additional  remuneration  to become wages has to be "paid" at intervals not exceeding two months  as distinguished from ‘being payable’.  Thus,  under the  last  part  there has to be actual payment.   The  High Court  has found that the payment was made quarterly.  It is not  for  us to rewrite the definition of wages even  if  we assume that there is a possibility of misuse by employers by making the payment at a period exceeding two months and thus circumventing  the provisions of the Act.  When in the  last part  of  Section 2(22), the word used is ‘paid’, we  cannot add the word ‘payable’ or other similar expression thereto.

     In  view  of the aforesaid, the payment of  production incentive,  on  the  facts of present case,  does  not  fall either  under the first part or last part of the  definition of term ‘wages’ as defined in Section 2(22) of the Act.

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     For the aforesaid reasons, we allow the appeal and set aside  the  judgment of the High Court and restore  that  of Employees’  Insurance Court.  Parties are, however, left  to bear their own costs.