Madras High Court
Dalmia Cement Bharat Limited vs The Regional Provident Fund on 14 June, 2002
Author: P. Sathasivam
Bench: P. Sathasivam
In the High Court of Judicature at Madras
Dated: 14/06/2002
Coram
The Hon'ble Mr. Justice P. SATHASIVAM
Writ Petition No.2467 of 1990
Dalmia Cement Bharat Limited
Dalmiapuram 621 651
Thiruchirappalli District. .. Petitioner
vs.
The Regional Provident Fund
Commissioner, PBNo.588 W.B. Board
Thiruchirappalli 620 008. .. Respondent
Petition filed under Article 226 of the Constitution of India praying
for issuance of writ of certiorari and mandamus as stated therein.
For petitioner : Mr. S. Jayaraman
For respondent : Mr. V. Vibhishnan
:ORDER
Dalmia Cement Bharat Limited, Tiruchirappalli, aggrieved by the order of the Regional Provident Fund Commissioner, Tiruchirappalli dated 14 December, 1989, calling upon them to remit Employees Provident Fund arrears, has filed the above writ petition to quash the same on various grounds.
2. The case of the petitioner is briefly stated hereunder:-
The petitioner Company is engaged in the manufacture of cement and its factory is situated at Dalmiapuram, Tiruchy District. The Federation of various Unions in cement factories in India made a Charter of Demands on the management of cement factories in India on 09.05.198 6. In the Charter of Demands, the Federation of all the workers' Association have claimed increase in basic wages, various allowances and other benefits. It was agreed by both sides for referring the issues to arbitration. Pending the arbitration, the workmen pressed for their demand for interim relief as forming part of the original demand i.e., Demand No.47. Even for this interim payment, a settlement was arrived at between the workmen and the management on 10.05.1989, under Section 12 (3) of the Industrial Disputes Act. As per this agreement, particularly as per Clause I, the interim advance paid from 01 .07.1986 to 31.12.1988 will be deemed to be a adhoc lump sum payment and this will not be adjusted or otherwise recovered and will not qualify for any of the fringe benefit statutorily or otherwise. It is unnecessary to refer the other clauses. As per Clause II, on and from 01.01.1989, there will be an increase of Rs.100/- per month in the basic wage of all eligible employees.
Thus, as per these two clauses, the payment made from 01.07.1986 to 31.12.1988 was deemed as ad hoc lump sum payment and that the payment of Rs.100/- from 01.01.1989 to 30.04.1989 as interim payment, which comes to Rs.400/- will be adjusted against the basic wages increase of Rs.400/- payable from 01.01.19 89 to 30.04.1989.
3. While so, based on the report of the Inspector of Provident Fund, the respondent herein issued a notice on 16.06.1989, for payment of provident fund contributions and administrative charges in respect of those payments. The petitioner sent a suitable reply repudiating their claim. Personal hearing was effected on 05.10.1989, wherein both parties have participated. After hearing both parties, the respondent - Regional Provident Fund Commissioner held that the interim advance paid at the rate of Rs.100/per month to all the employees of the establishment including the contractor's employees from 01.07.1986 to 31.12.1986 is liable for payment of provident fund contributions and other dues. The respondent has further held that the settlement benefit at the rate of Rs.50/- per month paid to all the employees of the establishment including the contractor's employees from 01.01.19 89 and Rs.40/- per month from 01.01.1990 and Rs.40/- per month from 0 1.01.1991 is liable for provident fund contributions and other dues. After quantifying the amount, the respondent has directed the petitioner to deposit the entire sum within 15 days of the assessment order. The total amount which is directed to be paid comes to roughly Rs.6.5 lakhs. At this juncture, having no other remedy, has filed the above writ petition.
4. The respondent has filed a counter affidavit reiterating its stand taken in the impugned order. Hence, it is unnecessary to refer the same.
5. In the light of the above pleadings, I have heard Mr. S. Jayaraman, learned counsel for the petitioner and Mr. V. Vibishinan, learned counsel for the respondent.
6. The respondent has accepted the stand taken by the management in so far as demand of "double wages", hence it is unnecessary to consider the same.
7. In the present writ petition we are concerned with the interim advance paid for the period from 01.07.1986 to 31.12.1988 and the settlement benefit of Rs.50/- per month from 01.01.1989 and for Rs.40/- per month from 01.01.1990 and another sum of Rs.40/- per month from 01 .01.1991. The main question is, " Whether the interim advance paid at the rate of Rs.100/- per month from 01.07.1986 to 31.12.1988 and the payment of settlement benefits are to be construed as basic wages so as to caste the liability for the payment of E.P.F. Contributions? "
8. In order to appreciate the said question, it is paramount to see the definition of " basic wages ". Section 2 (b) of Employees Provident Funds and Miscellaneous Provisions Act, 1959 defines basic wages.
2. (b) "basic wages" means all emoluments which are earned by an employee while on duty or (on leave or on holidays with wages in either case) in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-
(i) the cash value of any food concession;
(ii) any 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), house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any presents made by the employer; "
The above definition contains not only substantive part to explain as to what will amount basic wages, but also an exclusive part indicating what will not amount to basic wages. The substantive half of the definition may be simplified as under-
1. basic wages shall be by way of emoluments;
2. the emoluments shall be earned by the employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of employment;
3. the emoluments are paid or payable in cash.
Sub-clauses (i), (ii) and (iii) enumerate a list of payments which do not form part of "basic wages" for the purposes of the definition. The sums which are expressly excluded from the definition of " basic wages" are as under:
(1) the cash value of any food concession; (2) any dearness allowance that is to say cash payments to an employee on account of rise in the cost of living; (1)house rent allowance;
(2)bonus;
(3)overtime allowance;
(4)commission;
(5)any other similar allowance; and lastly (6)any presents made by the employer.
9. I have already referred that we are concerned only with payment made as interim advance and settlement benefit. Mr. S. Jayaraman, learned counsel for the management by drawing my attention to the settlement dated 10.05.1989, executed under Sections 12(3) and 18 (3) of the Industrial Disputes Act, 1947 contended that in the light of the Clauses therein, particularly Clause 1, interim advance paid is being a ad hoc lump sum payment, it cannot be construed as back wages in terms of Section 2 (b) of the Act. He also contended that the amount paid towards settlement benefit cannot also be taken into consideration and the impugned demand made by the respondent cannot be sustained. It is also useful to refer Clause 1 of the terms of settlement, which reads as follows:
"
The interim advance paid with effect from 1.7.86 to 31.12.1988 will be deemed to be an ad hoc lump sum payment. This payment will not be adjusted or otherwise recovered and will not qualify for any of the fringe benefits, statutory or otherwise. "
10. In the light of the definition of basic wages in Section 2 (b) of the Act and Clause (1) of the Settlement executed between the parties, Mr. S. Jayaraman contended that the respondent committed an error in holding that both the payments are nothing but increase in basic wages and as such, the employee is liable to pay provident fund contributions and other dues on such payment. In support of his claim he relied on the decision of the Apex Court in the case of Employees State Insurance Corporation, Madras vs. E.I.D. Parry (India) Ltd., reported in 1984 (1) L.L.N. 159. In that their Lordships have held that, "the ad hoc allowance and incentive earnings are not part of the wages, as held by the Supreme Court in the case of Braithwate and Company (India) Ltd., vs. Employees' State Insurance Corporation (AIR 1968 SC 413). The Division Bench has also held, " it was perfectly legitimate for the employees, while settling their dispute, to come to a settlement, that such payment shall not be reckoned for purposes of provident fund, bonus, gratuity, Employees' State Insurance contributions, etc., and to clarify the matter when the provisions of the Industrial Disputes Act do not forbid such a settlement or make such a provision in a settlement invalid. "
It is clear from the said decision that ad hoc allowance and incentive earnings are not part of the wages and it is open to both parties to arrive a settlement for exclusion of those payments from the purview of the basic wages.
11. The other decision, namely, The Regional Commissioner, Employees Provident Fund, Tamil Nadu and Pondicherry States vs. The Management of Southern Alloy Foundries (P) Ltd., Madhavaram reported in Vol.93 Law Weekly 797, the Division Bench of this Court has held that when there is a specific agreement between the employer and the employees that the special allowance need not be treated as part of the basic wages or dearness allowance, it cannot be included for computation of the contribution payable by the employer under the provisions of the Employees Provident Fund and Family Pension Fund Act, 1952.
12. By referring the earlier decision of the Supreme Court, namely Braithwate and Company (India) Ltd., vs. Employees' State Insurance Corporation (AIR 1968 SC 413) learned Judge of this Court (Y. Venkatachalam,J.,) in 1998 (3) L.L.N. 402 (Gnanambigai Mills Ltd., Coimbatore vs. Employees' State Insurance Corporation, Madras) has held that ad hoc allowance and incentive earnings are not part of the wages.
13. In the case of The Coimbatore Pioneer Mills Ltd., Coimbatore vs. The Regional Director, Regional office (Tamil Nadu) Employees State Insurance Corporation reported in 1998 (3) M.L.J. 761 (Shivraj Patil,J., (as he then was) has held that interim payments made to the employees could be brought within the definition of wages as per Section 2 (22) of the Employees State Insurance Act.
14. The above decisions referred to by Mr. S. Jayaraman support the claim of the petitioner. However, as rightly discussed by the Regional Provident Fund Commissioner, certain material facts which are relevant are to be noted. There was a dispute between the cement industry represented by the Indian National Cement Worker Federation, Bombay and the Employers in the Cement Industry represented by the Cement Manufacturers Association, Bombay and the same was referred to the arbitrators appointed under Section 10-A of the Industrial Disputes Act, 1947. The Charter of Demands referred for arbitration contains 50 demands including among others, increase in basic wages, dearness allowance, house rent allowance and other allowances. Demand No.47 of the Federation's Charter of the Demand deals with demands for interim relief, which reads as follows:
" All employees shall be given interim relief of Rs.800/- p.m. With effect from 1.7.1986 (i.e.) the day following the expiry of the previous award."
After prolonged discussion, the payment of interim relief had been concluded on 19.12.1987. Under a memorandum of Settlement under Section 12 (3) of the Industrial Disputes Act in connection with the threat of strike from the midnight of 12.09.1988 in the Cement Industry, regarding the demand of interim relief of Rs.100/- p.m. from 1.8.88 till the final award of the arbitrators is announced, it was agreed before the Chief Labour Commissioner (Central) on 12.09.1988, that an advance of Rs.1,000/- should be paid to the workers in installments. Again under memorandum of settlement dated 10.05.1989 it was settled that interim advance paid with effect from 01.07.1986 to 31.12.1988 will be deemed to be on ad hoc lump sum payment. On and from 01.01.19 89, there will be an increase of Rs.100/- p.m. in the basic pay of all eligible employees. As rightly discussed by the respondent, the perusal of various clauses in the agreement, particularly in the annexures (a) (b) and ¸, it is evident that the interim advance paid from 0 1.07.1986 to 31.12.1988 and again from 01.01.1988 to July, 1989 at the rate of Rs.100/- per month is in lieu of interim relief of Rs.800/- p.m. in response to Demand No.47 and other demands such as increase in basic wages, etc., of the Federation's Charter of Demands. It is also to be noted that the interim advance of Rs.100/- paid for the period from January, 1989 to April 1989 has been adjusted towards basic wage increase and the balance of Rs.200/- payable as interim advance for the months of May and June 1989 has been agreed to be paid as basic wage increase for the said months at the rate of Rs.100/- p.m. paid for the period from 01.07.1986 to June, 1989 is a recurring payment and paid to all the employees of the establishment including contractor's employees and it was earned by the employees, as the interim advance was paid on the basis of number of days worked in a month. Likewise, the special payment called settlement benefits was also paid pursuant to Demand No.47. All these factual details clearly show that the interim advance paid for the period from 01.07.1986 to 30.04.19 89 and subsequently treating the interim advance paid from January, 1 989 to April 1989 and the interim advance payable for the months of May, 1989 and June 1989 as increase in basic wages is undoubtedly increase in basic wages accordingly liable for payment of Provident Fund Contributions and other dues under the Act.
15. I have already referred to the fact that the payment of settlement benefit is also pursuant to the relief sought for by the workmen under Demand No.47. In the light of these special features, as rightly argued by the learned counsel for the respondent neither clause (1 ) of the terms and settlement does not alter the position nor the decisions referred to by the learned counsel for the petitioner are helpful to their case. In view of the peculiar facts and circumstances of the case that the interim payment and settlement benefit were agreed and paid pursuant to the demand, particularly Demand No.47, pending proceedings of the arbitration and also of the fact that from January, 1989 the management itself has added those amounts in the basic wages, there is no quarrel regarding the proposition of law laid down in those cases. Accordingly, they are not applicable to the present case.
16. Mr. V. Vibhishanan learned counsel for the respondent has also brought to my notice an unreported decision of N.V. Balasubramanian, J., rendered in W.P.No.12580 of 1990 etc., batch dated 23.11.1998. The learned Judge had an occasion to consider similar question. After considering various demands pending finalisation and in the light of the various clauses in the settlement, the learned Judge while construing those clauses arrived at a conclusion that the amounts paid form part of the back wages and the authorities under the Employees Provident Fund Act were justified in requiring the petitioners therein to pay the contributions due under the Act. The said decision of the learned Judge has been confirmed by the Division Bench in Writ Appeal No.619 of 1999 etc., dated 30.03.2001 holding that once it is held that the amount does form part of the back wages, it is impermissible for the employees to enter into an agreement either explicit or implicit that the amount paid would not be taken into consideration towards contribution to the Provident Fund and the provisions of the statute would prevail over the agreement.
17. It is also brought to my notice that Employees State Insurance Contributions have been paid by the management and all the above payments were made right from the dates and the same have been paid to the employees. Finally, the perusal of Charter of Demand, particularly, Demand No.47, elaborate discussion, ultimate agreement for payment of interim relief, pending finalisation of the arbitration, in my view the interim advance and settlement benefit retain the Character and form part of the back wages of the employees who received the money. Accordingly, I hold that the respondent was fully justified in coming to the conclusion that amounts paid are liable for provident fund contribution and other dues. The respondent was also justified in holding that benefit extended to the workmen was towards increase in the wages for the period in question. Accordingly, I do not find any infirmity in the impugned order passed by the respondent. Consequently, the writ petition fails and the same is dismissed. No costs.
Index:-Yes Internet:-Yes kh 14.06.2002 To The Regional Provident Fund Commissioner, PBNo.588 W.B. Board Thiruchirappalli 620 008.
P. Sathasivam,J., Order in W.P.No.2467 of 1990 Dated:-14.06.2002