http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: PRANTIYA VIDHUT MANDAL MAZDOORFEDERATION ETC. ETC.

       Vs.

RESPONDENT: RAJASTHAN STATE ELECTRICITY BOARDAND ORS. ETC.ETC.

DATE OF JUDGMENT23/04/1992

BENCH: KULDIP SINGH (J) BENCH: KULDIP SINGH (J) YOGESHWAR DAYAL (J)

CITATION:  1992 AIR 1737            1992 SCR  (2) 757  1992 SCC  (2) 723        JT 1992 (3)    51  1992 SCALE  (1)922

ACT:     Employee’s Provident Funds and Miscellaneous  Provisions Act, 1952     Sections  2(b)  and 6-‘‘Basic wages for the  time  being payable’’-Interpretation of-Award under Industrial  Disputes Act-Gives revised pay scales to employees with retrospective effect-Arrears  of wages paid to  employees-Provident  fund- Contribution-Employees liability to pay-Deduction from  wage arrears of employees-Whether arises.

HEADNOTE:     A dispute regarding wages and other conditions of  serv- ice  arose  between the State  Electricity  Board-Respondent No.1,  and its workmen. The parties arrived at a  settlement as  a result of which the dispute was referred to the  arbi- trators under the Industrial Disputes Act.     The  arbitrators entered upon the reference and gave  an award dated May 20, 1980, according to which various catego- ries  of  workmen were to be paid higher wages  with  effect from  April 1, 1980. The arrears of pay and  other  benefits accrued to the workmen were to be paid in four equal instal- ment.  The first instalment was payable on December 1,  1985 and the remaining three at an interval of six months each.     The  Provident Fund authorities issued  directions  that the  provident fund contributions be deducted from  the  ar- rears  paid  to  the workmen. Accordingly,  when  the  first instalment  was disbursed, the Board deducted the  employees contribution and also made its own contribution as  required under  the Provident Fund Act. However, at the time  of  the second  instalment,  the Board filed a Writ  Petition  under Article 226 challenging the directions of the Provident Fund authorities, contending that arrears payable to the  employ- ees as a result of the award of the arbitrators were not the ‘‘basic  wages’’  under section 2(b) of the  Provident  Fund Act.                                                        758     A  single  Judge of the High Court  dismissed  the  Writ Petition,  but  on  appeal a Division Bench  set  aside  the judgement  and allowed the Writ petition, holding  that  the contribution  is  to be paid on wages ‘for  the  time  being payable to the employees’ and not on  wages, the payment  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

which,  even  at a future date, is undecided  and  does  not arise  out  of the contract of employment,  and  that  wages payable  under an award of the arbitrators cannot be  termed as  deferred wages so as to mean that they had accrued at  a particular  time but were payable at a later date  according to the terms of the contract.     Two  appeals  were filed against the  judgement  of  the Division Bench to this Court, one by the Regional  Provident Fund Commissioner and the other by the workmen of the Board.     Allowing the appeals, and setting aside the judgement of the Division Bench, this Court,     HELD:  1.(i) The expression ‘‘basic wages for  the  time being payable to each of the employees’’ under section 6  of the  Industrial  Disputes Act means the basic wages  at  the relevant time. When the existing pay-scales are revised with effect from the back-date, then the revised-wages  posterior to  that date are the ‘‘basic wages for the time being  pay- able’’. The High Court fell into error in giving a  strained interpretation  to the provisions of the Provident Fund  and Miscellaneous Provisions Act. [764 C]     1.(ii) When the original emoluments earned by an employ- ee  were ‘‘basic wages’’ under the Provident Fund  Act,  the substituted  emoluments as a result of the award are  to  be regarded as‘‘basic wages’’.[763 E]     2. When an award gives revised pay-scales, the employees become entitled to the revised emoluments and where the said revision is with the retrospective effect, the arrears  paid to employees, as a consequence, are the emoluments earned by them while on duty. [763 C]     3.  The reference to the arbitration, the acceptance  of the  award  by the parties and the resultant  wage  increase with retrospective effect are the direct consequences of the settlement  between the workmen and the Board.  Revision  of wage structure as a result of an award under the  Industrial Disputes  Act, has to be taken as a part of the contract  of employment in the context of the Provident Fund and  Miscel- laneous                                                        759 Provisions Act. [763 E]     Harihar Polyfibres v. The Regional Director ESI Corpora- tion, [1985]1 SCR, referred to.     4.  The workmen have inherent right to  collective  bar- gaining  under  the  Industrial Disputes  Act.  The  demands raised  by the workmen through their unions are  decided  by conciliation,  settlement  or adjudication  under  the  Act. These  are time-consuming proceedings. When  ultimately  the dispute  is settled/decided in workers’ favour, the  accrued benefit may be made available to them from a back date. [764 A]     In  the instant case, the award given in the  year  1985 has  been made operative from April 1, 1980. It would be  in conformity  with the objects of the Provident Fund and  Mis- cellaneous Provisions Act, which is a social welfare  legis- lation, to hold that the revised pay-scales have become part of  the  contract of employment with effect  from  April  1, 1980. [764 B]

JUDGMENT:     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1790  of 1992.     From  the  Judgement and Order dated  30.6.1987  of  the Rajasthan High Court in D.B. Special Appeal (Writ) No.305 of 1986.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

   A.K. Goel for the Appellant.     Vijay Bahuguna, V.C. Mahajan, S.K. Jain, Ms.Sushma  Suri and Ms.C.K. Sucharita for the Respondents.     The Judgement of the Court was delivered by KULDIP SINGH, J. Special leave granted. The  question  for  our consideration in  these  appeals  is whether  arrears of wages, as result of  wage-increase-award under the Industrial Disputes Act, 1947(The Act), would come within the definition of ‘‘basic wages’’ under Section  2(b) of  the  Provident Fund and  Miscellaneous  Provisions  Act, 1952(The Fund Act).     A dispute regarding wages and other conditions of  serv- ice arose between the Rajasthan State Electricity Board (The board) and its workmen. The parties arrived at a  settlement as result of which the                                                        760 dispute  was referred to the arbitrators under the Act.  The arbitrators  entered  upon the reference and gave  an  award dated  May 20, 1985. The relevant part of the award  is  re- produced as under:-               ‘‘The matters in dispute (terms of  reference)               are as under:-               (1) Wages increase :               (a)  What  should  be the  Minimum  wages  for               regular  unskilled workmen of Rajasthan  State               Electricity  board  in pay  Scales  No.1  with               effect from April 1, 1980 ?               (b)  What  should be the  wages  structure  of               different  categories of workmen of  Rajasthan               State  Electricity  Board  covered  under  pay               scale  Nos.1  to 6 with effect from  April  1,               1980 ?               Decisions  on  matters in  dispute  (terms  of               reference)               After  hearing the arguments on behalf of  the               parties and considering the documents supplied               by  them, and taking into account other  rele-               vant matters, our decisions on the matters  in               dispute are given below:-               The minimum wages for regular unskilled  work-               men  of   RSEB in pay scale No.1  with  effect               from  1st  April, 1980 shall be  Rs.400  (Four               hundred  only) with NIL Dearness Allowance  or               any  other addition to wages in the nature  of               Dearness Allowance, henceforth referred to  as               D.A.               Revised  pay scales: on the basis  of  minimum               basic  pay of Rs.400 with NIL DA, Revised  pay               scales  Nos.1 to 6 shall be as per  Annexure-I               to this Award with NIL DA with effect from 1st               April, 1980.’’     According  to  the award various categories  of  workmen were to be paid higher wages with effect from April 1, 1980. The arrears of pay and other benefits accrued to the workmen were  to be paid in four equal instalments. The   first  in- stalment  was payable on December 1, 1985 and the  remaining three at an interval of six months each. The Provident  Fund authorities issued directions that provident fund  contribu- tions be deducted from the arrears paid to workmen.  Accord- ingly when the first instalment was disbursed                                                        761 the Board deducted the employees contribution and also  made its own contributions as required under the Fund Act. Howev- er, at the time of the second instalment, the Board filed  a writ petition under Article 226 of the Constitution of India

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

before  the Rajasthan High Court challenging the  directions of the Provident Fund authorities on the ground that arrears payable  to  the employees as a result of the award  of  the arbitrators were not the ‘‘basic wages’’ under Section  2(b) of  the Fund Act. A learned Single Judge of the  High  Court dismissed the writ petition. On appeal, a Division Bench  of the High Court set aside the judgement of the learned Single Judge and allowed the writ petition on the following reason- ing:-           "If a contract of employment provides for  payment          of wages at a future date then it may  fall  within          the definition of wages as the same becomes payable          under  the  contract of employment,  wages  payable          under  some  statute or payable under orders  of  a          Court  cannot be said to be wages payable  under  a          contract  of  employment. The Scheme  framed  under          Section 6 of the P.F. Act provides for  calculation          of  the  contribution on basis  of  the  emoluments          actually drawn during a whole  month. The  employer          has  to  submit  a consolidated  statement  of  the          employees   who are members of the  fund  alongwith          their basic wages and this return is to be  submit-          ted within a prescribed time. If subsequently there          is  a  change in the basic wages then there  is  no          provision  in the scheme for preparing  an  amended          statement.  The  contribution  recovered  from  the          employees  has  to be entered every  month  by  the          employer in the contribution card. A monthly  entry          once  made  will have to  remain  there  unchanged.          Unless there is a specific provision in the  scheme          for  payment of contribution to the fund, the  same          cannot  be  said  to be  payable   by  implication.          Contribution  is to be paid on wages ’for the  time          being  payable to the employees’ and not on  wages,          the  payment  of which, even at a future  date,  is          undecided and does not arise out of the contract of          employment.  Wages  payable under an award  of  the          arbitrators  cannot be termed as deferred wages  so          as  to mean that they had accrued  at a  particular          time but were payable at a later date according  to          the  terms  of the contract. It has also  not  been          shown  that the reference of disputes to the  arbi-          trators  was under the terms of the  employment  so          as to include wages                                                     762            Payable  under the award into the  definition  of          wages  under  S.2(b)of the P.F.Act,  wages  payable          under the award are neither in the nature of incre-          ments  payable to an employee nor wages which  have          remained unpaid due to some reason".      These  two  appeals   by the  regional  Provident  Fund          Commissioner,  Jaipur Rajashtan and by the  workmen          of the Board are against the Judgment of the  Divi-          sion bench of the High Court.      Sections 2 (b) and 6 of the act which are relevant  are reproduced hereunder:-           2(b) "BASIC WAGES" means all emoluments which  are          earned  by an  employee while on duty  or on  leave          with  wages  in accordance with the  terms  of  the          contract  of employment and which are paid or  pay-          able in cash to him, but does not include -           (i) cash value of any food concession;           (ii)  any dearness allowance (that is to say,  all          cash  payments by what ever name called paid to  an          employee  on account of a rise in the cost of  liv-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

        ing),  house rent allowance,  over-time  allowance,          bonus,  commission or any other  similar  allowance          payable to the employee  in respect of his  employ-          ment or of work done in such employments.           (iii)  any presents made by the employer".           (6)  "  contributions  and matters  which  may  be          provided  for  in scheme;- the  contribution  which          shall be paid by the employer to the Fund shall  be          six   and   a  quarter  per  cent  of   the   basic          wages[dearness  allowance and  retaining  allowance          (if any)] for the time being payable to each of the          employees  (whether employed by him directly or  by          or through a contractor) and the employees’ contri-          butions shall be equal  to the contribution payable          by  the employer in respect of him and may, if  any          employee so desires and if the scheme makes  provi-          sion  therefore, be an amount not  exceeding  eight          and one-third per cent of his basic  wages(dearness          allowance and retaining allowance (if any)....."                                                    763      Reading  the  above quoted two  sections  together  the expression "basic wages" means:-      (i)  All  emoluments which are earned by   an  employee while on duty or on leave;      (ii)  with  wages in accordance with the terms  of  the contract of employment;      (iii) which are paid or payable in cash; and      (iv)  are  payable for the time being to  each  of  the employees.      When  an  award gives revised pay-scale  the  employees become entitled to the revised emoluments and where the said revision  is with retrospective effect, the arrears paid  to the  employees, as a consequence, are the emoluments  earned by them while on duty.       We do not agree with the Division Bench of High  court that  the  wages which are substituted from back-date  as  a result of an award under the Act are  not the basic wages as defined  under  the  Fund Act. If  the  original  emoluments earned by an employee were "basic wages" under the Fund act, there  is  no justification to hold   that  the  substituted emoluments  as  a result of the award  are  not  the  "basic wages".  The reference to the arbitration, the acceptance of the  award  by the parties and the  resultant  wage-increase with  retrospective effect, are the direct  consequences  of the settlement between the workmen and the Board. We are  of the view that revision of wage-structure, as a result of  an award  under the Act, has to be taken as a part of the  con- tract  of  employment in the context of the Fund  Act.  This court  in  Harihar Polyfibres v. The regional  Director  ESI Corporation [1985] 1 SCR 712 while dealing with the  defini- tion of wages under Employees’ State Insurance Act 1948 held as under:-          "Now  , under the definition first, whatever  remu-          neration  is paid or payable to an  employee    the          terms of the contract of the employment, express or          implied  is wages; thus if remuneration is paid  in          terms of the original contract of employment or  in          terms of settlement arrived at between the employer          and  the employees which by  necessary  implication          becomes  part of the contract of employment  it  is          wages".                                                     764      The workmen have inherent right to  collective-bargain- ing under the act. The demands raised by the workmen through their  unions  are decided by  conciliation,  settlement  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

adjudication  under the Act. These are  time-consuming  Pro- ceedings. When ultimately the dispute is settled/decided  in workers  favour the accrued -benefit  may be made  available to  them  from back-date. This is what has happened  in  the present case. The award given in the year 1985 has been made operative  from  April 1,1980. Under  the  circumstances  it would  be  in conformity with the objects of the  Fund  Act, which  is  a social welfare legislation, to  hold  that  the revised  pay-scales  have  become part of  the  contract  of employment with effect from April 1,1980.      The expression" basic wages for the time being  payable to  each of the employees" under Section 6 of the Act  means the  ’basic wages" at the relevant time. When  the  existing pay-scales  are revised with effect from back-date then  the revised-wages  posterior to that date are the  "basic  wages for the time being payable". The High Court in our view fell into error in giving a strained interpretation to the provi- sions of the Fund Act.      We,  therefore, allow the appeals, set aside the  judg- ment of the Division bench of the High court and dismiss the writ petition of the Board with costs. We quantify the costs as Rs.10000 to be paid to  the workmen. N.V.K.                                      Appeals allowed                                                   765