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PETITIONER: MANAGING DIRECTOR, CHALTHAN VIBHAG SAHAKARIKHAND UDYOG, CHAL

       Vs.

RESPONDENT: GOVERNMENT LABOUR OFFICER & ORS.

DATE OF JUDGMENT04/02/1981

BENCH: SEN, A.P. (J) BENCH: SEN, A.P. (J) VENKATARAMIAH, E.S. (J)

CITATION:  1981 AIR  905            1981 SCR  (2) 738  1981 SCC  (2) 147        1981 SCALE  (1)234

ACT:      Payment of  Bonus Act,  1965-Section  2(21)-Whther  the expression ‘salary  or wage’  in s.2(21)  of the  Act covers retaining allowance  during the  off season  granted to  the workmen in  the seasonal  establishment of the sugar factory of the Udyog.

HEADNOTE:      The appellant  which runs  a sugar factory, treated the retaining allowance  paid to  the workmen  during  the  off- season as  part of  their  wages  for  the  purpose  of  the Employees’ Provident Fund Act, 1972, but not for the purpose of the  Payment of  Bonus Act,  1965. On  a reference  of an industrial dispute,  the Industrial  Court, Gujarat  made an award holding that the allowance cannot be included in wages or remuneration for the purpose of calculation of bonus. The Gujarat High  Court set aside the award in writ petition and held that  the allowance  fell within  the definition of the expression ‘salary  or wage’  in s.  2(21) of  the Act.  The appellant sought  special leave  to appeal under Art. 136 of the Constitution.      Dismissing the special leave petition, the Court. ^      HELD :  The retaining  allowance paid  to the employees during the  off-season in  the sugar  industry partakes  the nature of  deferred wages  on a lower scale and falls within the definition of the expression ‘salary or wage’ within the meaning of  s.2(21) of  the Payment  of Bonus Act, 1965 and, therefore, must  be taken  into account  for the  purpose of calculation of  bonus payable  under s.10  of the  Act.  The definition of  the expression  ‘salary or  wage’ as given in s.2(21) of  the Act  is wide  enough to  cover the retaining allowance granted  to the workmen during the off-season. The retaining allowance  is nothing  but remuneration correlated to service  and it  would  be  a  misnomer  to  call  it  an allowance. It does not fall within the purview of clause (i) of the  exclusionary clause  of s.2(21) but comes within the substantive part of the definition of ‘salary or wage’ in s. 2(21) of the Act. [741A-D]

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JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Special Leave Petition (Civil) No. 1122 of 1981.      From the  Judgment and  Order dated  28-11-1980 of  the Gujarat High Court in Special Application No. 2003/80.      F. S.  Nariman, H.  K. Puri  and Arun  B. Desai for the Petitioner.      Charanlal Sahu for Respondent No. 3. 739      The Order of the Court was delivered by      SEN, J.-The controversy in this case is whether for the purpose of  bonus to  the workmen  employed in  the Chalthan Vibhag Sahakari  Khand Udyog,  Chalthan, which is a seasonal establishment, retaining  allowance  paid  to  such  workmen should be  regarded  as  remuneration  or  wages  under  the Payment of  Bonus Act,  1965. The  question arises under the following circumstances :      The Industrial  Court, Gujarat, by its Award dated July 11, 1980  held that  the retaining  allowance  paid  to  the workmen could not be included for the purpose of calculation of bonus  and, therefore  the demand  of the workmen was not justified. Thereupon,  the workmen challenged the Award by a Writ Petition  in the  Gujarat High Court. The High Court by its judgment  dated December 15, 1980 set aside the Award of the Industrial  Court and  held that the retaining allowance falls within  the definition  of the  expression ‘salary  or wage’ given in s. 2(21) of the Payment of Bonus Act, 1965 so as to  attract the  payment of  bonus in the context thereof under s. 10 of the Act.      For a proper understanding of the question involved, it is necessary  to state a few facts. Chalthan Vibhag Sahakari Khand Udyog  runs a seasonal factory which crushes sugarcane and produces  sugar. It  does not work for all the 12 months in year. There is an off-season during the year during which the factory remains closed. For this off-season during which the workmen suffer forced idleness, full wages are not paid. There are  several categories  of workmen  employed  by  the management. There  are unskilled workmen who are paid 10% of the  basic   wages  and   dearness  allowance  as  retaining allowance during the off-season. There are also semi-skilled workmen  who  get  25%  of  the  basic  wages  and  dearness allowance as  retaining allowance.  The rest,  i.e., skilled ‘C’ to supervisory class of workmen, are paid at the rate of 50% of  basic wages  and  dearness  allowance  as  retaining allowance during  the off-season. The retaining allowance is paid to  these workmen  after 40  days of  work in  the next crushing season.  Workmen in sugar factories in the State of Gujarat usually come from the State of Uttar Pradesh. During the  off-season,   they  engage   themselves  in   different occupation. Retaining allowance is a sort of incentive which is offered  to the  workmen to attract them to return to the factory after the expiry of the off-season.      The retaining  allowance is  paid in  pursuance of  the Report of  the Second  Central Industrial  Wage Board on the Sugar Industry  and subsequently  in implementation  of  the Award  of  the  Industrial  Court.  Gujarat,  based  on  the adoption of  the U.P.  Pattern Scales  of Wages and Dearness Allowance for workmen employed in all sugar factories 740 working  by   vacuum  Pan   Manufacturing  Process.  In  the Management of  Shri Chalthan  Vighab  Khand  Udyog  Sahakari Mandali  Ltd.  etc.  v.  B.  S.  Barot  and  Anr.  etc.  the Management challenged the Award on other grounds but did not question its  liability to  pay retaining  allowance to  the seasonal workmen.  The payment of the retaining allowance by

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the Management  to the  workmen  during  the  off-season  is obligatory. The  Management treated  the retaining allowance to be part of wages for purposes of the Employees’ Provident Funds Act, 1952 but not for purposes of the Payment of Bonus Act, 1965.      The obligation  to pay  bonus to the workmen is created by s.  10 of  the Act. Under s. 8 thereof, every employee is eligible for  payment of  bonus.  The  question  is  whether retaining allowance  should be  regarded as  remuneration or wages for  purposes of  computation of  bonus. The  decision whether the  retaining allowance  forms part  of ‘salary  or wage’ must  turn on  the construction  of the  definition of that expression  contained in  s. 2(21) of the Act which, in so far as it is relevant, reads :           2(1). "salary  or  wage"  means  all  remuneration      (other than  remuneration in  respect of overtime work)      capable of  being expressed  in terms  of  money  which      would, if  the terms of employment, express or implied,      were fulfilled,  be payable  to any employee in respect      of his  employment or  of work  done in such employment      and includes  dearness allowance  (that is  to say, all      cash payments,  by whatever  name called,  paid  to  an      employee on  account of  a rise in the cost of living),      but does not include-           (i)  any other allowance which the employee is for                the time being entitled to;           xx                  xx                    xx      There can be no doubt that the retaining allowance paid to the  workmen  during  the  off-season  falls  within  the substantive part of the definition of the expression ‘salary or wage’. It undoubtedly is remuneration which would, if the terms of  employment, express or implied, were fulfilled, be payable to  any employee  in respect  of his employment. The retaining allowance is a remuneration on a lower scale which is paid  to the  workmen by  the management  during the off- season for  their  forced  idleness.  The  payment  of  such allowance by  the management  to its workmen during the off- season when  there is  no work  and when  the factory is not working, is  indicative of  the fact that it wants to retain their services  for the  next crushing season. The very fact that retaining allowance is paid to the workmen clearly 741 shows that  their services  are retained and, therefore, the jural relationship  of employer  and the employee continues. It is  true that  a workman  may not  return to work and may take up  some other  job or  employment. In  that event,  he forfeits the  right of  payment of  the retaining allowance. But when  the workmen returns to work when the next crushing season starts, the payment of retaining allowance during the off-season,  partakes   the  nature   of  basic  wage  on  a diminished scale.  The definition  of the expression ’salary or wage’  given in  s. 2(21)  of the  Act is  wide enough to cover the  payment of retaining allowance to the workmen. It is nothing  but remuneration  correlated to  service and  it would be  a misnomer  to call it an allowance. The retaining allowance does  not fall within the purview of clause (i) of the exclusionary  clause of  s. 2(21),  but comes within the substantive part of the definition of ’salary or wage’ in s. 2(21)  of   the  Act.  The  retaining  allowance  cannot  be construed to  be any  other allowance which the employee is, for the time being, entitled. The High Court was, therefore, justified in  holding that  the retaining  allowance paid to the seasonal  employees was a part of their ’salary or wage’ within the  meaning of  s. 2(21)  of the Act and, therefore, must be taken into account for the purpose of calculation of

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bonus payable under the Payment of Bonus Act, 1965.      For these  reasons, the  judgment of  the High Court is upheld. S.R.                                     Petition dismissed. 742