Madras High Court
Employees State Insurance Corporation ... vs Mount Mettur Pharamaceutical Ltd., ... on 25 November, 1998
Equivalent citations: 1999(3)CTC105, (2000)ILLJ1415MAD
ORDER
1. The Employees State Insurance Corporation has filed this appeal as against the order dated 6.3.1990 passed by the E.S.I. Court, Madras in E.S.I.O.P. No. 18 of 1985.
2. The appellant-Corporation demanded contribution from the respondent in respect of the following heads:
1. Contribution on incentive bonus:
1.7.1976 to 30.6.1977 4,589.11 1.7.1977 to 31.3.1979 6,437.49
2. Contribution on sales representatives:
Upto 30.11.1977 9,415.09
Upto 31.3.1979 27,463.72
3. Contribution on security staff:
1.7.1976 to 31.3.1977 1,338.13
803.70
4. Interest on above items:
Upto 31.12.1981 9,614.28
3. The respondent denied its liability and filed an application under section 75(1) of the E.S.I. Act, before the E.S.I. Court in E.S.I.O.P. No. 18 of 1985. The appellant's Corporation resisted the same. The E.S.I. Court, after having taken into consideration of all the aspects of the case and the materials placed before it, came to the conclusion that the respondent is not liable to pay contribution in respect of the amounts spent on the above said heads. Aggrieved by the same, the E.S.I. Corporation has preferred this appeal.
4. The respondent is carrying on its business in the manufacture of medicine etc. There are different classes of employees employed under the respondent. There are medical representatives who go from place to place to carry on the propaganda and canvass outside the office premises and all of them are away from the headquarters. The respondent also entered into an agreement with its workers by way of settlement under Section 18(1) of the Industrial Disputes Act on 4.3.1978 and the same was marked as Ex.P1. As per the said settlement, the respondent has to provide certain amenities as setforth in the said settlement.
5. Only in the said context, the respondent denies its liabilities in respect of the demand made by the appellant. Now let us deal with the items in seriatum.
(i) Contribution on incentive bonus: A sum of Rs. 13,841.10 was demanded by the appellant as contribution on incentive bonus. Actually, it was not an incentive bonus. The said amount was spent towards meals and tiffin expenses. The respondent has to set op a canteen for the workers and in the absence of the same, they have to spend for their meals and tiffin expenses. This is supported by the documents Ex.P7 and P8, It is argued on behalf of the respondent that these amounts, paid to the employees, have got to be considered as "special expenses" and the same is exempted under section 2(22)(c) of the E.S.I. Act. Section 2(22) defines "wages" as follows:
"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 and includes any payment to an employee in respect of any period of authorized 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) any travelling allowance or the value of any travelling concessions;
(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;"
(c)(22) of Section 2 of the E.S.I. Act exempt special expenses from wages and when that is the case, the appellant is not entitled to demand contribution in respect of special expenses. The respondent also relied upon a decision rendered by this Court in the case of E.S.I. Corporation v. Enfield India Ltd. 1994 LAB I.C. 2507 wherein, this Court has held, that the amounts paid by way of allowance towards tea, meal and egg' to the employees by the employer cannot be considered as wages, coming under the definition of Section 2(22) of the E.S.I. Act. Hence, the findings of the E.S.I. Court that the respondent is not liable to pay the contribution is hereby confirmed.
(ii) Incentive: The word incentive connotes "something that arouses feeling or incites to action". The incentive amount is not paid regularly every month. The incentive amount is calculated according to the work turn-out by the workers. Ex.P3 would disclose that the persons who have received incentives in the months of July or August, 1996 are not the same persons receiving incentives in the subsequent months. Hence, it depends upon the work turn out by the individual worker and the said amount is paid at the end of the year as one time payment and therefore the same does not fall within the definition of wages as defined in Section 2(22) of the E.S.I. Act and it does not attract the payment of contribution. The findings of the E.S.I. Court to that effect are hereby confirmed.
(iii) Contribution on sales representatives: Sales representatives go from place to place and canvass orders outside the office premises and they are not staying in the respondent's factory and therefore the amounts paid to them do not attract payment of contribution. Section 88 of the E.S.I. Act provides, exemption of persons or class of persons which states "The appropriate Government may, by notification in the Official Gazette and subject to such conditions, as it may deem fit to impose, exempt any person or class of persons employed in any factory or establishment or class of factories or establishments to which this Act applies from the operation of the Act." The respondent also filed a xerox copy of G.O.Ms.No. 40, dated 12.10.1983, which was marked as Ex.P5 issued under Part II Section 2 by the Labour Department granting exemption of certain categories of employees, employed in the factories and establishments under the Employees State Insurance Act. Clause (b) states "employees of factories or establishments which are situated in an area. Where the provisions of Chapters IV and V are in force, who are ordinarily employed in areas where the provisions of the said chapters are not in force, on any work connected with the administration of the said factory or establishment or any part, department or branch thereof or with the purchase of raw materials or the distribution or sale of the products, of the said factory or establishment." By pointing out the said G.O., it is submitted that the amounts paid to the sales representatives are exempted from payment of contribution and hence order passed by the E.S.I, has got to be upheld. The said submission has got to be accepted in view of the G.O. referred to above.
(iv) Contribution on security staff: A sum of Rs. 2,141.83 has been demanded by the appellant as the contribution amount for the wages paid to the security guards. Learned counsel for the appellant has submitted that in respect of the wages paid to the security guards employed for period 1.7.1976 to 31.3.1977 the respondent is liable to pay contribution. The said contention of the appellant was resisted on the ground that the security guards were covered by the Act by their employer for which they relied upon Ex.P6, dated 4.7.1985. The said letter was given by the Madras Security Service Bureau to the" respondent in which, it is stated "Our establishment is covered by the E.S.I. Act with effect from 1.3.1977. Our Code number is 51-18741-102- sf. We have paid the ESI contribution in respect of the person employed by us in your concern for the period 1977-78." From the letter, it is evident that the security guards were covered only from the period 1977 and the contribution was demanded for the earlier period 1.7.1976 to 31.3.1977 and the respondent has not placed any document to show that the security guards were covered for the period 1.7.1976 to 31.3.1977 also. In the absence of the same, the respondent is liable to pay contribution for the security guards for the said period and hence the findings of the Tribunal that the respondent is not liable to pay contribution under this head is not correct and the same is hereby set aside.
(v) Interest on above items upto 31.12.1981: As I have already come to the conclusion that the respondent is not liable to pay the contribution in respect of the amounts paid as incentives, and amount paid to sales representatives, the payment of interest does not arise. As far as the contribution payable for the security guards, the respondent is liable to pay interest and the appellant is entitled to calculate the interest for a sum of Rs. 2,141.83 and the same may be recovered from the respondent.
6. In the result, C.M.A. is allowed partly. In respect of the contribution demanded for the payment of incentive and for the amount paid to sales representatives, C.M.A. is dismissed. In respect of the contribution demanded for the amount paid to security guards, C.M.A. is allowed and the appellant is entitled to recover the said amount of Rs. 2,141.83 together with interest thereon as applicable under the Act. No costs.