Gujarat High Court
Shakti Sizing Industries Limited vs Regional Director on 30 July, 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
C/FA/3817/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 3817 of 2017
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SHAKTI SIZING INDUSTRIES LIMITED
Versus
REGIONAL DIRECTOR
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Appearance:
MR HARSHAD K PATEL(2844) for the PETITIONER(s) No. 1
MR SACHIN D VASAVADA(3342) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 30/07/2018
ORAL ORDER
1. This first appeal under section 82 of the Employees' State Insurance Act, 1948 is at the instance of the original applicant before the ESI Court and is directed against the judgment and order dated 29th August, 2016 passed by the ESI Court in the ESI Application No.27 of 2003 filed by the appellant herein under section 75 of the ESI Act, 1948.
2. It appears from the materials on record that in January, 2000, an officer of the respondent-corporation visited the premises of the appellant and verified the Muster Roll and Ledgers for the period between April, 1995 and March, 2000 and found that the appellant had paid wages to its workers/employees under the head of ((1)Office Salary, (2) Ex- Gratia, (3) Leave Travel Concession (LTC), and (4) Service Charges. However, the ESI contribution was not deducted and deposited though it falls within the definition of the term "wages" paid to the workers. The case of the Corporation is Page 1 of 17 C/FA/3817/2017 ORDER that although the amount paid to the employees/workers do fall within the definition of the term "wages" as defined under section 2(22) of the ESI Act, yet the appellant herein, being the employer, by misinterpreting the law, failed to deposit the contribution to the tune of Rs.85,121/- with the Corporation.
3. On 4.12.2001, the ESI Corporation initiated proceedings under section 45(A) by issuing C-18 notice, i.e., the show- cause notice to the employer and sought an explanation with regard to failure to deposit the ESI contribution on the unpaid amount of wages towards (1) Office Salary, (2) Ex-Gratia, (3) Leave Travel Concession (LTC), and (4) Service Charges.
4. The appellant herein was given various opportunities of hearing before passing the order under section 45(A) of the Act. The appellant filed its reply dated 23rd September, 2002, but did not deem fit to avail the opportunity of hearing or produced any documentary evidence to justify its action of not depositing the contribution on the unpaid wages towards the office salary and service charges. It also appears that the appellant failed to remain present before the authorized officer of the corporation at the time of hearing of the proceedings under section 45(A) of the ESI Act.
5. In January, 2003, as the appellant failed to remain present on the dates of the hearing, the authorized officer proceeded to initiate the proceedings on the basis of the material and the reply available on record.
6. It appears that the authorized officer, having regard to the reply of the Corporation about the payment made towards Page 2 of 17 C/FA/3817/2017 ORDER Ex-Gratia and Leave Travel Concession (LTC), dropped the proceedings of recovery of contribution. However, the authorized officer of the Corporation proceeded to pass an order to recover the contribution on the amount paid towards the office salary and the service charges being the wages under section 2(22) of the ESI Act. While passing the order under section 45(A), the authority observed as under;
"Employee vide his letter dated 16.09.2002 requested to grant sometime and considering his request he was allowed to produce documentary evidence in support of his contentions on 23.09.2002. Shri. K.N. Patel, Partner of the Factory visited the office on 23.09.2002 alongwith the letter dated 23.09.2002, but no records were produced by him. He requested to grant time for a week and considering his request the next date was fixed as 8.10.2002. But none appeared on 8.10.2002 alongwith documentary evidences.
It is seen that ample opportunities have been given to the employer but has failed to produce documentary evidence in support of his contest. However, on the basis of the copy of ledger regarding Ex-gratia and L.T.C the contention of the employer is upheld, & I determine that contribution is not payable on these two amount i.e, Rs.77,321 and 43,000/-"
7. The Corporation passed three separate speaking orders under section 45(A) of the Act for the years 1995-97, 1998-99 and 1999-2000. As the appellant failed to comply with those orders passed under section 45(A) of the Act, the Corporation initiated recovery proceedings under section 45(C) to 45(I) against the appellant. In such circumstances, referred to above, the appellant approached the ESI Court by filing the EI Application No.27 of 2003 under section 75 of the Act, challenging the action of the Corporation to recover the amount of Rs.85,121/- towards the unpaid wages on office Page 3 of 17 C/FA/3817/2017 ORDER salary and service charges.
8. The ESI Court, vide order dated 29th August, 2016, rejected the application. The findings recorded by the ESI Court are extracted hereunder;
"As per the above provision, the Respondent Corporation demanded contribution for various trades vide Exh - 57, Exh - 58 and Exh - 59. On perusal of above mentioned Exh - 57, Exh - 58 and Exh - 59, it is clearly found that after the inspection was carried out by the Respondent Corporation, adequate opportunity was given for defence and make representation as per the principles of natural justice and after giving adequate opportunity to the applicant, the Respondent Corporation passed order as per section - 45 (a) for the contribution amount. Moreover, if we take into consideration the submissions of the applicant regarding contribution amount of office staff salary, it is required as per provisions of Payment of Wages Act that payment of salary of office staff should be done by seventh of each month and under such circumstances, the payment should not have been made for the staff salary amount as submitted by the applicant. Therefore, there is no reason to interfere in the amount assessed for contribution by the Respondent Corporation. Moreover, if we take into consideration the case record regarding contribution demanded by the Respondent Corporation for service charges, it is found that in support of his application, the applicant has not produced necessary record or documents during hearing before the Respondent Corporation and this issue is specified with reasons and demand has been made for the money of contribution to be paid as per section - 45(a). Moreover, documents have been produced by the applicant vide Exh - 39 regarding the contribution of service charge. On evaluation of all the records, it is not clear as to whom and how much amount of service charge is paid and for what purpose the amount has been paid and it is also found that payment has been made every month under the head of service charge. Thus, overall it is found that the contribution levied by the Respondent Corporation on the amount of service charge is just, proper and lawful.Page 4 of 17 C/FA/3817/2017 ORDER
(10) Thus, taking into consideration all the issues as discussed above, the Court clearly believes that the orders passed by the Respondent Corporation as per section - 45(a) of the E.S.I. Act vide Exh - 57, Exh - 58 and Exh - 59 to pay the contribution are just, proper and lawful. Under such circumstances, no substance is found in the application of the applicant and the application is liable to be rejected and therefore, the following order is passed."
9. Being dissatisfied with the order passed by the ESI Court, the appellant has come up with this first appeal under section 82 of the Act formulating the following substantial questions of law in the memorandum of the first appeal;
"(a) Whether the ESI Court can ignore the provision of Sec. 2(22) of the Act while passing the impugned order?
(b) Whether the ESI Court can pass the impugned order in ignorance of the fact that the respondent has not followed the provisions of sec. 45(A) of the Act?
(c ) Whether the ESI Court is right and justified in confirming the action of respondent in seeking recovery towards contribution of ESI, more particularly when the amount sought to be recovered is seriously disputed and the appellant has paid the undisputed amount?
(d) Whether the impugned judgment and order is right, justified and sustainable in law and/or in the facts of the present case?
(e) Whether the findings and conclusions of ESI Court are right and justified and based on evidence obtaining on record or they are contrary to the weight of evidence on record?
(f) Whether the ESI Court is right and justified in ignoring the fact that the respondent corporation had issued recovery certificate without giving any opportunity of hearing to the appellant and in gross violation of principles of natural justice?
Page 5 of 17 C/FA/3817/2017 ORDER(g) Whether the ESI Court was justified in not considering the defence raised by the appellant?
(h) Whether the ESI Court justified in relying on the inspector's report and surveyor's report, which was not relied upon by the applicant?"
10. Mr. Patel, the learned counsel appearing for the appellant submitted that the impugned judgment and order is erroneous in law. It is further submitted that the respondent issued recovery certificates without giving any opportunity of hearing to the appellant. Mr. Patel, in support of his submissions, placed reliance on the decision of the Supreme Court in the case of ESI Corpn. v. Bhakra Beas Management Board & Anr., 2009 (10) SCC 671.
11. In such circumstances, referred to above, Mr. Patel prays that there being merit in this first appeal, the same may be admitted.
12. On the other hand, this first appeal has been vehemently opposed by Mr. Sachin Vasavada, the learned counsel appearing for the Corporation. Mr. Vasavada submitted that no error, not to speak of any error of law, could be said to have been committed by the ESI Court in passing the impugned judgment and order.
13. It is also submitted that none of the questions formulated in the memorandum of the first appeal could be termed as the substantial questions of law. They are all questions of fact. According to Mr. Vasavada, no interference is warranted in this first appeal.Page 6 of 17 C/FA/3817/2017 ORDER
14. Mr. Vasavada, therefore, prays that there being no merit in this first appeal, the same may not be admitted and the first appeal be dismissed in limine.
15. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether this first appeal involves any substantial question of law.
16. It is a settled position of law that the term "wages" as defined under section 2(22) of the ESI Act is exhaustive and not limited to the items mentioned in the definition. The Supreme Court, in the case of M/s. Haithar Polyfibers Vs. Regional Director, ESIC, AIR 1994 SC 1680, has held as under;
"2 The Employees State Insurance Act is a welfare legislation and the definition of 'wages' is designedly wide. Any ambiguous expression is, or course, bound to receive a beneficent construction at our hands too. Now, under the definition first, whatever remuneration is paid or payable to an employee under 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 a settlement arrived at between the employer and the employees which by necessary implication becomes part of the contract of employment it is wages: second, whatever payment is made to an employee in respect of any period of authorised leave, lock out: strike which is not illegal or lay-off is wages; and third, other additional remuneration, if any paid at intervals not exceeding two months is also wages; this is unqualified by any requirement that it should be pursuant to any term of the contract of employment, express or implied. However, 'wages' does not include any contribution paid by the employer to any pension fund or provident fund, or under the Act, any travelling allowance or the value of any travelling concession, any sum paid to the person Page 7 of 17 C/FA/3817/2017 ORDER employed to defray special expenses entailed on him by the nature of his employment and any gratuity payable on discharge. Therefore wages as defined includes remuneration paid or payable under the terms of the contract of employment, express or implied but further extends to other additional remuneration, if any, paid at intervals not exceeding two months, though outside the terms of employment. Thus remuneration paid under the terms of the contract of the employment lexpress or implied) or otherwise if paid at intervals not exceeding two months is wages. The interposition of the clause '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' between the 715 first clause, 'all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express of implied, was fulfilled' and the third clause, 'other additional remuneration, if any, paid at intervals not exceeding two months, 'makes it abundantly clear that while 'remuneration' under the first clause has, to be under a contract of employment, express or implied, 'remuneration' under the third clause need not be under the contract of employment but may be any 'additional remuneration' outside the contract of employment. So, there appears to our mind no reason to exclude 'House Rent Allowance', Night Shift Allowance', Incentive Allowance' and 'Heat, Gas and Dust Allowance' from the definition of 'wages'. A Full Bench of the Karnataka High Court in N.G.E.F. Ltd. v. Deputy Regional Director, E.S.I.C., Bangalore considering the question at some length held that the amount paid by way of incentive under the scheme of settlement entered into between the Management and its workman was wages' within the meaning of s. 2(22) of Employees' State Insurance Act. It was observed by the Full Bench of the Karnataka High Court as follows:-
"It is true that the word 'remuneration' is found both in the first and second parts of the definition. But the condition attached to such payment in the first part cannot legitimately be extended to the second part. The other 'additional remuneration' referred to in the second part of the definition is only qualified by the condition attached thereto (that is, paid at intervals not exceeding two months). That was also the view Page 8 of 17 C/FA/3817/2017 ORDER taken by a Full Bench of the Andhra Pradesh High Court in Employees State Insurance Corpn. Hyderabad v. Andhra Pradesh Paper Mills Ltd. and also the Bombay High Court in M/s Mahalaxmi Glass Works Pvt. Ltd. v. Employees' State Insurance Corpn. But this aspect of the matter has been completely overlooked by this Court in Kirloskar's case."
3. In Employees State Insurance Corporation, Hyderabad v. Andhra Pradesh Paper Mills Ltd., Rajahumundry, a Full Bench (Divan, C.J., Raghuvir and Gangadhara Rao, J.) of the Andhra Pradesh 716 High court held that incentive bonus paid to an employee (which the Court, on the facts of the case, found was not remuneration in terms of the contract of employment, express or implied) fell within the third part of the definition of 'wages' that is 'additional remuneration' if any, paid at intervals not exceeding two months'. The Full Bench said:-
"The word 'other' appearing at commencement of the third part of the definition of wages under s.2(22) indicates that it must be remuneration or additional remuneration other than the remuneration which is referred to in the earlier part of the definition viz., all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and incentive bonus in the present scheme is certainly additional remuneration. It must be emphasized at this stage that under the third part of the definition of 'wages' it is actual factum of payment which counts because the word used is 'paid' as distinguished from 'paid' or payable. The moment you get any additional remuneration other than the remuneration payable under the contract of employment and if this additional remuneration is paid at intervals not exceeding two months, it becomes wages by virtue of the third part of the definition of 'wages'."
4. The learned judges of the Full Bench referred to the judgment of a learned Single judge of the Calcutta High Court in Bengal Potteries Ltd. v. Regional Director, W. Bengal Region, Employees, State Insurance Corporation and others, where the learned Judges had held that "the additional remuneration sought to be included by the Page 9 of 17 C/FA/3817/2017 ORDER expression' and includes other additional remuneration' must be remuneration which though no part of the wages could be paid as part of the terms of contract of employment." The Full Bench did not agree with the view expressed by the learned Single Judge and said:-
"We are unable to agree with this part of his reasoning and for the reason which we have set out hereinabove we disagree with this part of his judgment in para (3)".
5. We express our respectful agreement with what has been said by the Full Bench of the Andhra Pradesh High Court in the above extracted passage and their dissent from the view expressed by the learned Single Judge of the Calcutta High Court. The Full Bench further held that 'House Rent Allowance' paid by an employer to his workmen would constitute wages within the meaning of the s. 2(22) of the Act.
10. The Employees' State Insurance Act is a piece of social welfare legislation enacted for the benefit of the employees. The Act has to be necessarily so construed as will serve its purpose and objects.
11. I entirely agree with my learned brother that on a proper interpretation of the term 'wages' the legislative intent is made manifestly clear that the term 'wages' as used in the Act will include House Rent Allowance Night Shift Allowance, Heat, Gas and Dust Allowance and Incentive Allowance. The definition, to my mind, on its plain reading is clear and unambiguous. Even if any ambiguity could have been suggested, the expression must be given a liberal interpretation beneficial to the interests of the employees for whose benefit the Employees State Insurance Act has been passed. "
17. In a very recent pronouncement of the Supreme Court, in the case of ESIC vs. Mangalam Publications (I) Pvt. Ltd., AIR 2017 SC 4525, section 2(22) of the ESI Act came to be interpreted in favour of the ESI Corporation. I may reproduce the observations as under;
"7. Before proceeding further, it would be relevant to Page 10 of 17 C/FA/3817/2017 ORDER note the definition of wages, as defined under Section 2(22) of the ESI Act. The same is extracted hereunder:
"Section 2 (22) of the Employees' State Insurance Act, 1948 defines Wages. It 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 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 concession;
(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."
A plain reading of the afore-mentioned definition of Section 2(22) of the ESI Act makes it amply clear that "wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of the employment, expressed or implied, were fulfilled and includes other additional remuneration, if any, paid at intervals not exceeding two months. But payments made on certain contingencies under Clauses (a) to (d) of Section 2(22) of the ESI Act, do not fall within the definition of "wages".
8. The Employees' State Insurance Act is a welfare legislation. It has been enacted to protect and safeguard the rights of the working class. Its preamble states that it is meant to "provide for certain benefits to employees in case of sickness, maternity and 'employment injury' and to make provision for certain other matters in relation thereto". The Employees' State Insurance Fund set up under this Act survives primarily on contributions paid to Page 11 of 17 C/FA/3817/2017 ORDER the Employees' State Insurance Corporation (the appellant). All employees insured in accordance with this Act are entitled to benefits under the Act. Undoubtedly, the literal meaning of statutory provisions cannot be ignored. However, in cases where there may be two or more ways to interpret a statutory provision, the spirit of this legislation warrants a construction that benefits the working class. The inclusive part and exclusive portion of the definition of "wages" clearly indicate that the expression "wages" has been given wider meaning. As mentioned supra, under the definition, firstly whatever remuneration is paid or payable to an employee under the terms of the contract of the employment, expressed or implied, is "wages". Secondly, whatever payment is made to an employee in respect of any period of authorized leave, lock-out etc. is "wages". Thirdly, other additional remuneration, if any, paid at intervals not exceeding two months is also "wages". Any ambiguous expression, according to us, should be given a beneficent construction in favour of employees by the Court. If the definition of "wages" is read in its entirety including the inclusive part as well as the exclusive portion, it appears that inclusive portion is not intended to be limited only of items mentioned therein, particularly, having regard to the objects and reasons for which the Employees' State Insurance Act is enacted. The Act has to be necessarily so construed as to serve its purpose and objects. This Court in the case of M/s Harihar Polyfibres vs. Regional Director, ESI Corporation, (1984) 4 SCC 324 has held that the definition of "wages" contained in Section 2(22) of the ESI Act is wide enough to include House Rent Allowance, Night Shift Allowance, Incentive Allowance and Heat, Gas and Dust Allowance. To come to the aforesaid conclusion, this Court observed thus:
"2. The Employees' State Insurance Act is a welfare legislation and the definition of 'wages' is designedly wide. Any ambiguous expression is, of course, bound to receive a beneficent construction at our hands too. Now, under the definition, first, whatever remuneration is paid or payable to an employee under 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 a settlement arrived at between the employer and the employees Page 12 of 17 C/FA/3817/2017 ORDER which by necessary implication becomes part of the contract of employment it is wages ; second, whatever payment is made to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay-off is wages; and third, other additional remuneration, if any, paid at intervals not exceeding two months is also wages; this is unqualified by any requirement that it should be pursuant to any term of the contract of employment, express or implied. However, 'wages' does not include any contribution paid by the employer to any pension fund or provident fund, or under the Act, any travelling allowance or the value of any travelling concession any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment and any gratuity payable on discharge. Therefore wages as defined includes remuneration paid or payable under the terms of the contract of employment, express or implied but further extends to other additional remuneration, if any, paid at intervals not exceeding two months, though outside the terms of employment. Thus remuneration paid under the terms of the contract of the employment (express or implied) or otherwise if paid at intervals not exceeding two months is wages. The interposition of the clause "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" between the first clause, "all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, was fulfilled" and the third clause, "other additional remuneration, if any, paid at intervals not exceeding two months," makes it abundantly clear that while 'remuneration' under the first clause has to be under a contract of employment, express or implied, 'remuneration' under the third clause need not be under the contract of employment but may be any 'additional remuneration' outside the contract of employment. So, there appears to our mind no reason to exclude 'House Rent Allowance', 'Night Shift Allowance', 'Incentive Allowance' and 'Heat, Gas and Dust Allowance' from the definition of 'wages'. A Full Bench of the Karnataka High Court in N.G.E.F. Ltd. v. Deputy Regional Director, E.S.l.C. considering the question at some length held that the amount paid by way of incentive under the scheme of settlement entered into between the Management and its workmen was wages within the meaning of Section 2(22) of the Employees' State Insurance Act. It was observed by Page 13 of 17 C/FA/3817/2017 ORDER the Full Bench of the Karnataka High Court as follows:
It is true that the word 'remuneration' is found both in the first and second parts of the definition. But the condition attached to such payment in the first part cannot legitimately be extended to the second part. The other 'additional remuneration' referred to in the second part of the definition is only qualified by condition attached thereto (that is, paid at intervals not exceeding two months). That was also the view taken by a Full Bench of the Andhra Pradesh High Court in E.S.I. Corpn., Hyderabad vs A.P Paper Mills Ltd., and also the Bombay High Court in Mahalaxmi Glass Works Pvt. Ltd. v. E.S.I. But this aspect of the matter has been completely overlooked by this Court in Kirloskar case (1974) 1 Kant LJ 358.
Justice Amarendra Nath Sen, concurred with the aforementioned observations of Justice O. Chinnappa Reddy and supplemented as under:
"8. I entirely agree that on true interpretation of the word 'wages' defined in Section 2(22) of the Employees' State Insurance Act, 'wages' must necessarily include 'House Rent Allowance, Night Shift Allowance, Heat, Gas and Dust Allowance and Incentive Allowance'.
9. The definition of 'wages' has been set out in the judgment of my learned brother. The inclusive part and the exclusive portion in the definition clearly indicate, to my mind, that the expression "wages" has been given a very wide meaning. The inclusive part of the definition read with exclusive part in the definition clearly shows, to my mind, that the inclusive portion it not intended to be limited only to the items mentioned therein. Taking into consideration the excluding part in the definition and reading the definition as a whole the inclusive part, to my mind, is only illustrative and tends to express the wide meaning and import of the word 'wages' used in the Employees' State Insurance Act.
10. The Employees' State Insurance Act is a piece of social welfare legislation enacted for the benefit of the employees. The Act has to be necessarily so construed as will serve its purpose and objects.
11. I entirely agree with my learned brother that on a Page 14 of 17 C/FA/3817/2017 ORDER proper interpretation of the term 'wages' the legislative intent is made manifestly clear that the term 'wages' as used in the Act will include House Rent Allowance, Night Shift Allowance, Heat, Gas and Dust Allowance, Night Shift Allowance, Heat, Gas and Dust Allowance and Incentive Allowance. The definition, to my mind, on its plain reading is clear and unambiguous. Even If any ambiguity could have been suggested, the expression must be given a liberal interpretation beneficial to the interest of the employees for whose benefit the Employees' State Insurance Act has been passed."
9. This Court, in the case of Whirlpool of India Ltd. vs Employees' State Insurance Corporation, (2000) 3 SCC 185, has succinctly described the intention of the legislature in passing the E.S.I. Act, and the same reads as thus, "5. The Act is a social legislation enacted to provide benefits to employees in case of sickness, maternity and employment injury and to make a provision for certain other matters in relation thereto. Broadly this is the purpose for which the Corporation has been established under Section 3 of the Act. The main source of the Employees' State Insurance Fund is the contributions paid to the Corporation (Section 26). The benefits to be provided to insured persons and others are as provided in Chapter V, in particular, Section 46 thereof. The words and expressions used but not defined in the Act and defined in the Industrial Disputes Act, 1947, are to have the meanings respectively assigned to them in the Industrial Disputes Act, Undoubtedly, any provision of which two interpretations may be possible would deserve such construction as would be beneficial to the working class but, at the same time, we cannot give a go-by to the plain language of a provision."
10. As mentioned supra, the High Court while allowing the appeal filed by the respondent has mainly relied upon the office memorandum dated 19.08.1998 issued by the Department of Public Enterprises, Ministry of Industry, New Delhi, which is not applicable to the facts of this case. The said notification makes it abundantly clear that the instructions contained in the said office memorandum are applicable to Central Public Sector Enterprises (PSES) only. Admittedly, the respondent is a private limited company and hence the instructions contained in office memorandum dated 19.08.1998 are Page 15 of 17 C/FA/3817/2017 ORDER not applicable to the respondent company. In the matter on hand, the appellant claimed ESI contribution only on the amount paid by the respondent as interim relief to its employees, treating the same as "wages" as per Section 2(22) of the ESI Act. The amount paid as interim relief by the respondent to its employees definitely falls within the definition of "wages" as per Section 2(22) of the ESI Act. On the other hand, the High Court has strangely observed that the interim relief paid for the period from 01.04.1996 to 31.03.2000 can only be treated as "ex- gratia payment" paid by the employer to its employees and cannot be treated as "wages" for the purpose of ESI contribution. In our considered opinion, the High Court has ignored to appreciate that the effect of ESI Act enacted by the Parliament cannot be circumvented by the department office memorandum. The High Court has also failed to appreciate that the payment of interim relief/wages emanates from the provisions contained in terms of the settlement, which forms part of the contract of employment and forms the ingredients of "wages" as defined under Section 2(22) of the ESI Act and that the respondent paid interim relief, as per a scheme voluntarily promulgated by it as per the notification dated 20.04.1996, issued by the Government of India, in view of the recommendations of "Manisana' Wage Board, pending revision of rates of wages. It was not an ex- gratia payment. In this context, it is beneficial to note the observations of this Court in the case of Employees State Insurance Corporation vs. Gnanambigai Mills Limited, (2005) 6 SCC 67, which read thus:
"6. In our view the High Court has gone completely wrong in concluding that by virtue of the award it ceases to be wages. As stated above, the Tribunal has not applied its mind as to whether or not the payments were wages. All that the Tribunal did was to give its imprimatur to a compromise between the parties. Merely because the parties in their compromise chose to term the payments as "ex gratia payments" does not mean that those payments cease to be wages if they were otherwise wages. As stated above, they were wages at the time that they were paid. They did not cease to be wages after the award merely because the terms of compromise termed them as "ex gratia payments". We are therefore unable to accept the reasoning of the judgments of the High Court. The judgment of the Division Bench as well as that of the Page 16 of 17 C/FA/3817/2017 ORDER Single Judge accordingly stands set aside. It is held that the amounts paid are wages and contribution will have to be made on those amounts also. We, however, make it clear that payments of the interest will be as per the statutory provisions."
12. Accordingly, the instant appeal is allowed, the impugned judgment of the High Court is set aside, and that of the ESI Court is restored. The appellant is held to be entitled to recover the ESI contribution from the respondent for the period from 01.04.1996 to 31.03.2000 as per demand notice dated 02.11.2000. No order as to costs. "
18. Having regard to the position of law, referred to above, and the findings recorded by the ESI Court, noted above, I do not find any infirmity in the impugned order. No substantial question of law is involved in this first appeal.
19. In the result, this appeal fails and is hereby dismissed.
(J.B.PARDIWALA, J) Vahid Page 17 of 17