Madras High Court
Regional Director, Employees' State ... vs Sundaram Clayton Ltd. And Ors. on 10 December, 2003
Equivalent citations: (2004)IILLJ30MAD
JUDGMENT S. Sardar Zackria Hussain, J.
1. These appeals have been filed by the Employees' State Insurance Corporation against the common Order, dated December 24, 1992 made in E.S.I.O.P. Nos. 77, 78 and 97 of 1987 on the file of the First Additional Judge, City Civil Court, Madras.
2. Civil Miscellaneous Appeal No. 1606 of 7995: The respondent Sundaram Clayton, Limited (Moppet Division) filed E.S.I.O.P.No. 77 of 1987 with the following averments: Employees' State Insurance Corporation caused notice, dated July 14, 1986/August 5, 1986, claiming Rs. 3,34,091.80 as contribution under the Employees' State Insurance Act (hereinafter referred to as the Act) for the period from 6/84 to 12/85 under various heads. In spite of the objections of the respondent herein, the order dated June 5, 1987, was made under Section 45-A of the Act demanding a sum of Rs. 2,23,400.25. As per chalan, dated August 7, 1987, the respondent paid Rs. 26,060.10 in respect of items (4) and (5) as claimed. The respondent has disputed the claim made by E.S.I. Corporation also in respect of fixed conveyance allowance and contribution toward labour charges for construction of the buildings. In respect of fixed conveyance allowance according to the respondent, it is only reimbursement of the expenses incurred by the employee and the amount is not an allowance and it is payable under an agreement entered into with the employees union and it cannot be "wages". The respondent has undertaken construction of building through outside contractors on rate contract basis. While doing so, the contract was entrusted for different items like excavation work, laying foundation, plinth work, brick work, flooring, terracing, woodwork, etc., and fixing the contract rates accordingly. The amount paid is inclusive of huge amounts towards purchase of materials like iron and cement. As such, construction works will not form part of the existing manufacturing activities. The respondent also produced receipts for Rs. 8,22,091 paid to Ideal Builders for the work done by them before June 24, 1984 and also the bill, dated May 31, 1985, of Harita Engineering. The order of the E.S.I. Corporation without considering the documents produced by the respondent that 25 per cent of the total amount of these works is to be treated as wages, is erroneous since in building maintenance work the same is carried out by employees of the company already covered by E.S.I. and since the respondent entered into contract with contractors on rate contract basis and whose labourers are not under the supervision or control of the respondent. Contribution to E.S.I. should be worked out on the basis of the guidelines of the P.W.D. which works out to 13 per cent to 16 per cent of the total value of the bill. Therefore, the respondent filed petition under Section 75 of the Act to set aside the order of the appellant, dated June 5, 1987, under Section 45-A of the Act and to declare that the respondent- company is not liable to pay any amount towards contribution in respect of the said items.
3.The E.S.I. Corporation opposed the petition in E.S.I.O.P. No. 77 of 1987 that the statutory inspector, who verified the records of the respondent-company on January 28, 1986, January 29, 1986 and February 10, 1986 found that the respondent-company failed to take into account certain categories of employees for the purpose of calculating the contributions towards fixed conveyance allowance and wages paid to civil works, repair and maintenance of buildings under construction. The claim of the respondent-company that overtime allowance is to be excluded from the definition of wages is incorrect. The fixed conveyance allowance is wages as defined under the Act and so, the amount paid is to be included for the purpose of calculation of contribution. Further the petition was opposed in the written statement that the employees engaged in construction work is also covered under the Act and so the same is to be taken into account for the purpose of calculation of contribution. The E.S.I. Corporation only after considering the documents and other aspects after excluding the amounts towards cost of materials, has taken into account only the layout charges at 25 per cent for calculating the contribution payable by the respondent.
4. C.M.A.No. 1607 of 1995: The respondent T.V.S. Suzuki, Ltd., filed E.S.I.O.P.No. 78 of 1987 with the following averments: E.S.I. Corporation caused notice, dated July 11, 1986/August 5, 1986, claiming Rs. 1,00,459.79 as contribution under the Employees' State Insurance Act (hereinafter referred, to as the Act) for the period from 6/84 to 2/86 under various heads. In spite of the objections of the respondent herein, the order, dated February 12, 1987, was made under Section 45-A of the Act demanding a sum of Rs. 71,819.91. The respondent has disputed the claim made by E.S.I. Corporation in respect of fixed conveyance allowance and contribution towards labour charges for construction of buildings. The order in respect of the said items of the E. S. I. Corporation is erroneous according to the respondent as set out above in C.M.A. No. 1606 (E.S.I.O.P. No. 77 of 1987).
5. The E.S.I. Corporation opposed the petition in E.S.I.O.P. No. 78 of 1987 raising the same averments of the written statement in E.S.I.O.P. No. 77 of 1987.
6. C.M.A.No. 1608 of 1995: The respondent Sundaram Clayton Ltd., Railway Product Division, Hosur, filed E.S.I.O.P. No. 97 of 1987 with the following averments; E.S.I. Corporation caused notice, dated March 26, 1986, claiming Rs. 1,67,521.20 as contribution under the Employees' State Insurance Act for the period from 6/84 to 7/85 under various heads. Since the respondent submitted that Rs. 3,836.34 was paid, a revised show-cause notice was issued calling for contribution on omitted heads. In spite of the objections of the respondent herein, the order, dated September 22, 1987/September 23, 1987 was made under Section 45-A of the Act. demanding a sum of Rs. 37,240.88 towards arrears of contribution in respect of the labour charges for construction of the buildings. The order according to the respondent is erroneous as set out above in E.S.I.O.P. No. 77 of 1987.
7. The E.S.I. Corporation opposed the petition in E.S.I.O.P. No. 97 of 1987 raising the same averments of the written statement in E.S.I.O.P. No. 77 of 1987.
8. Before the Employees' Insurance Court, viz., the first Additional Judge, City Civil Court, Madras, in E.S.I.O.P. No. 77 of 1987, P. Ws. 1 to 3 were examined and Exhibits A1 to A5 were marked on the side of the Sundaram Clayton, Ltd., Mopped Division; in E.S.I.O.P.No. 78 of 1987, P.Ws. 1 and 2 were examined and Exhibits A1 to A4 were marked on the side of the T.V.S. Suzuki Ltd.; and in E.S.I.O.P.No. 97 of 1987, P. Ws.1 and 2 were examined and Exhibits A1 and A2 were marked. In all the three petitions common evidence was let in on behalf of the E.S.I. Corporation, i.e., R.W.1 was examined and common documents were marked, i.e., Exhibits B1 to B6.
9. Considering that the fact and law involved in all the three petitions are similar and also same statutory inspector file report, after verifying the records, the learned First Additional Judge, City Civil Court, tried all the petitions together and pronounced common order also directing the petitioner in E.S.I.O.P. No. 77 of 1987, to pay the sum of Rs. 97,042.55 by way of contribution towards labour charges for construction of buildings with future interest to the E.S.I. Corporation. The Employees' Insurance Court further directed the petitioner in E.S.I.O.P. No. 78 of 1987 to pay the sum of Rs. 7,307.90 towards labour charges for construction of buildings with future interest to the E. S. I. Corporation further directed the petitioner in E.S.I.O.P. No. 97 of 1987 to pay the sum of Rs. 21,072.43 by way of contribution towards labour charges for construction of buildings with future interest to the E.S.I. Corporation. As per the common order, the Employees' Insurance Court found that the respondent in all the three petitions is liable to pay 17 per cent instead of 25 per cent as claimed by the E.S.I. Corporation by way of contribution towards labour charges for construction of buildings. The Employees' Insurance Court also found that conveyance allowance is not liable for contribution since it does not fit in the definition of wages. Hence, the E.S.I. Corporation has filed these three appeals.
10. With respect to the overtime charges, even the Employees' Insurance Court held that it will come within the definition of "wages" and the respondents are liable to pay the contribution. Against the said findings of the Employees' Insurance Court, the respondents have not filed any Appeal.
11. In all the three appeals, the following substantial questions of law are framed for consideration:
(1) Whether the finding of the E.I. Court that conveyance allowance is excluded from the purview of definition "wages" is sustainable?
(2) Whether the finding of the E.I. Court that labour charges would constitute 17 per cent of the total cost for construction is arbitrary and not sustainable?
12. The learned counsel for the appellant in these appeals argued that inasmuch as by virtue of the settlement entered into between the employees and the employer, viz., the respondents, fixed amount is paid towards conveyance allowance along with the wages.
The amounts so paid as conveyance allowance is also to be taken as wages within the meaning of Section 2(22) of the E.S.I. Act. In this regard the learned counsel also pointed out that there have been no reimbursement of the conveyance allowance and fixed amount had been paid towards conveyance allowance along with wages. The learned counsel for the appellant then argued that despite the fact that the accounts in respect of the wages paid for construction or repairs or maintenance of buildings had not been produced and relying upon solely the evidence of P.W.2, the E.I. Court fixed the contribution at 17 per cent towards labour charges for the buildings and so it is not proper.
The learned counsel further argued that liability fixed at 17 per cent instead of 25 per cent as claimed by the E.S.I. Corporation by way of contribution towards labour charges for construction of the buildings by the Employees' Insurance Court is incorrect.
13. To decide the first issue with respect to conveyance allowance, we have to appreciate the definition of "wages" as defined under Section 2(22) of the Act which reads 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 authorised 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 concession;
(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment."
According to the learned counsel for the appellant-Corporation, the said conveyance allowance comes within the third limb of the definition, namely, additional remuneration. He also submitted that the said conveyance allowance cannot be construed as travelling allowance which comes under the exclusion clause. But the Division Bench of this Court in the decision in Management of Oriental Hotels, Ltd. v. Employees' State Insurance Corporation 2002-I-LLJ-14 (Mad-DB) while dealing with the definition of "wages" with reference to payment of HRA and conveyance allowance, held as follows at p. 16:
"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) of the Employees' State Insurance Act."
From the above said decision, it is clear that though such a payment towards conveyance allowance falls within the ambit of additional remuneration, it will come under the exclusion clause as provided under the above said definition. The conveyance allowance paid to the employees for the purpose of being utilised on the travel from the place of residence to the place of work has to be construed as travelling allowance and thereby it cannot be construed as wages, as travelling allowance has been excluded from the purview of the said definition. We agree with the said decision reported (supra), and so the Employees' Insurance Court is correct in holding that the conveyance allowance cannot be construed as "wages" and the respondents are not liable to pay contribution taking into consideration the said amount as "wages."
14. With reference to the contribution of the labour charges, learned counsel for the appellant-Corporation relied on the decision of this Court in Management of Jawahar Mills Ltd. v. Regional Director Employees' State Insurance Corporation 2001-II-LLJ-793 (Mad) the unreported judgment in C.M.A. No. 1178/1990 dated June 5, 2002, pronounced by one of us (K. GOVINDARAJAN, J.) and another unreported judgment in C.M.A.No. 82/1991, dated December 15, 1998, in support of his submission that if the accounts are not produced to find out the quantum of labour charges paid by them, 25 per cent of the total amount paid for construction of the building has to be taken as labour charges. In all those judgments, the learned Judges have come to the conclusion that in the absence of any accounts and break-up figures for payment of wages to the workers engaged for the purpose of constructing buildings, the request of the respondent-Corporation therein to fix the same at 25 per cent was reasonable.
15. In this case, P.W.2, who worked as an Engineer for 24 years in Public Works Department and who was working as Civil Engineer in the company of the respondent at the time of construction of the buildings of the respondent-company, has stated in his evidence that he has prepared the statement Exhibit A3 in accordance with State P.W.D. Standard data book, Central P.W.D. All India Standard schedule of rates and based on actual observation and contractors rate. He has also stated that the labour charges will come between 11 per cent to 15 per cent. Considering all these aspects, the Employees' Insurance Court has fixed the labour charges at 17 per cent of the total cost of construction.
16. As regards the finding of the Employees' Insurance Court that labour charges in respect of the respondent-company would constitute 17 per cent of the total cost for the construction, which is challenged in this appeal by Employees' State Insurance Corporation, the Employees' Insurance Court mainly considering the evidence of P.W.2 and the statement Exhibit A3 found that no hardship will be caused if 17 per cent is fixed on that basis towards labour charges despite the fact the Employees' Insurance Court has observed that the sufficient documents have not been filed in respect of State P. W. D. Standard Date book, Central P.W.D. All India Standard schedule of rates and based on actual observation and contractors rate, which said to have been adopted by P.W.2, as per the statement Exhibit A3 and the contractors have not been examined and that there have been no evidence that the contractors as to regarding the amounts received by them for the wages paid to the employees alone.
17. As per the order Exhibit A1, dated June 5, 1987 under Section 45-A of the Act, pursuant to the inspection made by the Inspector for the Employees' State Insurance Corporation, it was noticed that various amounts have been paid towards wages in civil work, various amounts have been spent towards repair and maintenance of building and about the amount spent towards building under construction. Not accepting the explanations put forth for the respondent-company, the respondent-company was directed to pay 25 per cent of the total amount as labour charges and determined the contributions, in the absence of segregated labour charges furnished by the respondent-company.
18. P.W.2, Civil Engineer of the respondent-company has admitted in itscross-examination that as per Exhibit A1 marked in E.S.I.O.P. No. 77 of 1987, the amount mentioned towards labour charges is not correct. It is also his evidence that only the contractor or the respondent would know about the amount paid by way of labour charges.
19. R.W.1, examined on the side of Employees' State Insurance Corporation, has stated in his evidence that in the account of the construction, repair and maintenance charges, cost of materials and labour charges are included and the same has not been separately shown in the account book of the respondent-company. It is also his evidence that though he requested the company to give the break up figures, the same has not been furnished to him.
20. In Exhibit A3, marked in E.S.I.O.P.No. 77 of 1987, the total value of the work is shown in which 10.21 per cent is shown towards labour charges and in the same petition under Exhibit A4, the total value of the work is shown in which 11.17 per cent is shown towards labour charges, but no evidentiary value can be attached to the same, in that they have been prepared by P.W.2, the Civil Engineer of the respondent-company. The fact remains that break up figures had not been furnished and shown in the account book of the respondent-company in respect of labour charges and the cost of construction of the buildings of the respondent-company for the relevant period. In such case, the claim of the Employees' State Insurance Corporation that such labour charges should constitute 25 per cent in the total cost of construction is well founded. Therefore, the order of the Employees' Insurance Court that such labour charges would constitute only 17 per cent is not proper. In that view, the respondent-company is to make contribution at 25 per cent which is not unreasonable.
21. In the result, the common order of the Employees' Insurance Court is set aside only with respect to the labour charges fixed at 17 per cent and consequently these appeals are allowed to that extent and the respondent-company is liable to make contribution at 25 per cent in respect of labour charges of the total cost of the buildings of the respondent-company for the relevant period and in other respect the order of the Tribunal is confirmed. No costs.