Madras High Court
Management Of Oriental Hotels Ltd. vs Employees' State Insurance ... on 14 November, 2000
Equivalent citations: (2002)ILLJ14MAD
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R. Jayasimha Babu, J.
1. The appellant before us who is an employer filed an application before the E. S. I. Court for a declaration that the HRA and conveyance allowance are not 'wages' within the meaning of Section 2(22) of the Employees State Insurance Act, 1948, and that the claim made for contribution in respect of house rent assistance and conveyance allowance from July 1981 is illegal. The appellant is the owner of the Taj Coromandel Hotel which commenced its operation with effect from April 1, 1974. By a notification dated December 22, 1976, issued by the Government of Tamil Nadu, the application of the Employees' State Insurance Act was extended to wages and the contributions cannot be claimed in respect of those two items.
2. The appellants application was allowed by the E.I. Court. The order of the Court having been challenged by the Corporation, the appeal of the Corporation has been allowed by a learned single Judge. The appellant being aggrieved is now before us, in this appeal.
3. It was contended by the learned counsel for the appellant that the house rent allowance is not 'wages' as the workmen and the employer have agreed not to treat it as wages for the purpose of calculating the wages under Section 2(22) of the ESI Act.
4. It was submitted by the counsel for the appellant that in view of the clause in the agreement, providing for exclusion of house rent allowance and conveyance allowance from the calculation of wages for the purpose of ESI Act, the contribution cannot be claimed in respect of those items. In respect of conveyance allowance it was further contended that having regard to the exclusion of the definition of 'wages' in Section 2(22) of the ESI Act, "any travelling allowance or the value of the travelling concession" the conveyance allowance which is in the nature of travelling allowance or concession cannot be included in the computation of wages.
5. The argument that the employer and workmen can contract out of the provisions of the ESI Act is wholly an untenable argument. The Employees' State Insurance Act was enacted with a view to provide certain benefits to the employees in case of sickness, maternity, injury as also to make provision for certain other matters in relation thereto. The Act contemplates contribution being made by the employees and employer based on the wages paid to employees to a fund from out of which facilities required to be provided under the Act, to the workmen eligible to claim such benefits, are to be provided. The Act does not contemplate and no employer or workman has a right to insist that he be given benefits in direct proportion to the amount of contribution paid or that in the event of facility not being utilised the contribution will not be collected and if collected is to be refunded. All the contributions made by all the employees and or workmen governed by this Act go into a common pool from out of which facilities and benefits are provided to those eligible for the same. Needless to say, the persons who come forward to avail of the facilities, the facilities are made available. There is however no insistence that facilities must be availed. The employee or employer however has no option in the matter of payment of contribution. Neither can withhold the amount on the ground that he does not wish to avail the facilities provided under the Act.
6. There is no doubt at all in this case that the terms of the employment does contemplate and require the employer to pay HRA and conveyance allowance. The very settlement relied upon by the employer obliges the employer to make such payment. It creates a right in the employee to insist on the payment being made. It cannot therefore be said that HRA and conveyance allowances are not amounts which are required to be paid in terms of the contract of employment. They are clearly wages required to be paid having regard to the terms of employment.
7. Even if these HRA and conveyance allowance had not been made, specific term in the contract of employment payment of such allowance would still fall within the definition of wages as that definition includes not merely the amount payable in term of the express or implied term of the contract of employment, but also the additional remuneration, if such additional remuneration is paid, at intervals not exceeding two months. The Supreme Court in the case of Harihar Polyfibres v.
Employees' State Insurance Corporation considered the scope of the term "additional remuneration" in Section 2(22) of the Employees' State Insurance Act. It was held by the Court that the additional remuneration referred to in the definition may fall outside the scope in the contract of employment, but so long as the remuneration is paid to the employee, it would form part of the wages being additional remuneration. The Court in that case upheld the stand of the Employees' State Insurance Corporation that HRA, night shift allowance, incentive allowance, heat and gas and dust allowance form part of the wages and those allowances were in the nature of additional remuneration.
8. In so far as the conveyance allowance is concerned, even though it forms part of the wages being the amount payable in terms of the contract of employment, having regard to the settlement and even de hors the settlement, the payment of the amount would fall within the ambit of "additional remuneration." Nevertheless, that amount will have to be excluded having regard to the specific exclusion provided in the definition itself for travelling allowance or the value of any travelling concession. The conveyance allowance paid is in the nature of travelling allowance as the object of that payment is to enable the employee to reach his place of work and to defray a part of the cost incurred on the travel from his place of residence to the place of work. If instead of paying the conveyance allowance, the employer had provided free transport to the employees, the monetary value of that benefit of free travel from his residence to the place of work would not have been capable of being regarded as forming part of the wages. The conveyance allowance paid in cash for the purpose of being utilised on the travel from place of residence to the place of work, is of the same character and there is no reason why it should not be regarded as travelling allowance for the purpose of Section 2(22)(b)MPLOYEE STATE INSURANCE ACT, 1948~^, of the Employees' State Insurance Act.
9. While confirming the judgment of the learned single Judge in so far as the house rent allowance is concerned, we set aside that part of the judgment which holds that conveyance allowance is also part of wages on which contributions are payable. The L.P. Appeal is allowed in part.