Indian
Drugs & Pharamecuticals Ltd. Vs. Employees State Insurance Corporation
[1996] INSC 1404 (6
November 1996)
K. Ramaswamy,
G.B. Pattanaik
ACT:
HEAD NOTE:
THE
6TH DAY OF NOVEMBER, 1996 Present:
Hon'ble
Mr. Justice K. Ramaswamy Hon'ble Mr. Justice G.B. Pattanaik V.V. Vaze, Sr.
Adv.., Kailash Vasdev, C.K. Sasi, A.T.M. Sampath, Kailash Vasdev, C.K. Sasi, Indra
Sawhney, Deepak Dewan, C.V.S. Rao and V.J. Francis, Advs. with him for the
appearing parties.
O R D
E R
The
following Order of the Court was delivered:
WITH CIVIL
APPEAL NOS.2784/80 AND 1087/81 AND WRIT PETITION (C) NO. 1554 OF 1987
O R D
E R
These
appeals are by certificate granted by the Division Bench of the Andhra Pradesh
High Court under Article 133 of the Constitution. The question of law of public
importance is; whether the overtime wages paid to an employee by the appellants
are "wages" within the meaning of Section 2(22) of the Employees
State Insurance Act, 1948 (for short, the `Act'). It is not necessary to record
the facts in all these cases. Suffice it to state that the facts in C.A.
No.2784/80 are sufficient for disposal of the common controversy. Admittedly,
the appellants have taken overtime work from their existing employees. The
employees had done work during the stipulated working time and thereafter they
were asked to perform overtime work which they did and accordingly, the
overtime rate of wages was paid in terms of the agreement between the
appellants and the workmen.
Therefore,
the question has arisen; whether absence of stipulation for payment of the
overtime wages in the original contract of employment, would take away such
remuneration paid towards the overtime work from the definition of the word
`wages' within the meaning of Section 2(22) of the Act. The said section reads
as under:
"`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) an,
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;
Shri Kailash
Vasdev, learned counsel for the appellants in two appeals and Shri Sampath,
learned counsel in another appeal representing Agarwal Industries, raised
two-fold contention. According to Shri Kailash Vasdev, the Legislature having
taken care to exclude the overtime wages from the purview of the definition of
"employee" within the meaning of Section 2(9) of the Act and equally
having defined the "wages" under Section 2(22) of the Act, necessary
intended therefrom is that the Legislature intended to exclude overtime wages
from the remuneration paid for overtime work done by the employer. Unless it is
part of contract of appointment, it is outside the definition of
"wages". Admittedly, there is no contract between the appellants and
the workmen to pay the overtime wages. It is not obligatory for the appellants
to offer overtime wages nor is it obligatory for the employees to work
overtime. In the absence of such mutual obligations under a contract, it cannot
be considered to be "wages" within the meaning of Section 2(22) of
the Act. Shri Sampath further elaborated spinning that in the light of
statutory operation, unless there is any agreement in writing, it cannot be
construed to be an implied contract. Since it is not obligatory for the
employees to work, remuneration paid towards overtime work amounts to mutual
payment not as part of wages but as remuneration for services rendered outside
the contract of employment of the employees. Therefore, it will not come within
additional remuneration, if any, paid at intervals not exceeding two months
within the meaning of Section 2(22) of the Act. In support thereof, both the
learned counsel have placed strong reliance on the judgments of the Calcutta
High Court in M/s. Hindustan Motors Ltd. vs. E.S.I. Corporation & Ors. [(1979)
LAB. I.C. 852] and Karnataka High Court in Hind Art Press, Mangalore vs. ESI
Corporation & Anr. [(1990) LLJ 195].
The
question is; whether the view taken by the said High Courts is correct in law
and whether the High Court of Andhra Pradesh has committed any error of law in
interpreting of the word `wages' under Section 2(22) of the Act? It is seen
that Section 2(9) defines "employee" thus:
"Employee
means any person employed for wage in or in connection with the work of a
factory or establishment to which this Act applies and- (i) who is directly
employed by the principal employer or any work of, or incidental or preliminary
to or connected with work of, the factory or establishment, whether such work
is done by the employee in this factory or establishment elsewhere;
or
(ii) who is employed or through an immediate employer on the premises of the
factory or establishment or under supervision of the principal employer or his
agent on work which is ordinarily part of the work of the factory or
establishment or which is preliminary to the work carried on in or incidental
to the purpose of the factory or establishment; or (iii) whose services are
temporarily lent or let on hire to the principal employer by the person with
whom the person whose services are so lent or let on hire his entered into a
contract of service;
and
include any person employed for wages on any work connected with the
administration of the factory or establishment or any part, department or
branch thereof or with the purchase of raw materials for, of the distribution
or sale of the products of the factory or establishment, *[or any person
engaged as an apprentice, not being an apprentice engaged under the Apprentices
Act, 1961, or under the standing orders of the establishment; but does not include-
(a) any member of the Indian naval, military or air forces; or (b) any person
so employed whose wages (excluding remuneration for Overtime work) exceed
*[such wages as may be prescribed by the Central Government].
Provided
that an employee whose wages (exceeding remuneration for overtime work) exceed
*[such wages as may be prescribed by the Central Government] at any time after
(and not before) the beginning of the contribution period, shall continue to be
an employee until the end of that period;
The
Legislature while defining "employee" has taken care to see that a
person employed for wages in or in connection with the work of a factory or
establishment to which the Act applies was covered as employee in one ore the
other enumerated items (i) to (iii). In addition, other persons employed for
wages on any work connected with the administration of the factory or
establishment or any part, department or branch thereof or with the purchase of
raw materials of, or the distribution or sale of the products or, the factory
or establishment or any person engaged as an apprentice, not being an
apprentice engaged under the Apprentice Act, 1961 or under the Standing Orders
of the establishment, are employees. The exclusionary clauses have been
enumerated in clauses (a) and (b) thereof with which we are not concerned.
Under the proviso, the employee whose wages excluding remuneration for overtime
work exceeds such wages as may be prescribed by the Central Government at any
time after and not before the beginning of the contribution period, shall
continue to be an employee until the end of that period. It would thus be seen
that the Legislature has taken care to bring the employer within the net of
beneficial provisions of the Act. Employee whose remuneration does not exceed
the prescribed remuneration by the Central Government for a month or any time
after the beginning of the contribution period, will be governed by the
provisions of the Act. In other words, from the exclusion of the overtime work,
in computation of the remuneration to the workmen, it does appear that the
Legislature intended not to exclude employee who receives overtime wages from
the purview of the Act though he did overtime work and had received
remuneration. On the other hand, it would appear that the Legislature recognised
the fact of the employer engaging, by contract express or implied, the services
of the existing employee for doing overtime work and paying the remuneration.
In this behalf, it is relevant to note that the definition of "wages"
under Section 2(22) of the Act, the main part of the definition, without taking
aid of the inclusive part, would indicate that 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. It would, thus, be seen that if
there is any contract of employment express or implied and the terms of
contract have been fulfilled, then the remuneration paid for performance of the
duty, the employer is obligated to pay remuneration as wages to the employee.
Herein, we have to consider whether overtime wages would be part of the wages.
It is settled legal position that the word `include' would be given wide
interpretation so as to bring within its ambit exhaustively all entries akin to
or analogous to the main part of wage, except to the extent the enumerated
entities except those expressly excluded by the legislation would be within its
sweep. In other words, by employing the inclusive definition, the Legislature
intended to bring in, by legal fiction, something within the accepted
connotation though not strictly included within its ambit. It is seen that the
Legislature has expressly excluded items A to D from the purview of the
definition "wages". In other words, the Legislature suggested that
all other categories which are not excluded, fall within the inclusive wider
definition of `wages'. The Legislature by defining `employee', having had the
knowledge of the payment of the remuneration for overtime work done by the
employee and having excluded it in Section 2(9), the omission thereof in the
definition of Section 2(22) excluding items A to D, would be eloquent and
meaningful. Whatever remuneration, paid or payable for overtime work, forms
wages under an implied term of the contract. The object thereby is clear that
the overtime work done by the employee is an implied contract to do overtime
and the remuneration paid therefore does form part of the wages under Section
2(22). Concomitantly, the employer is enjoined to pay the contribution under
the Act and should be required to be complied with. This Court in Harihar Polyfibres
vs. The regional Director, ESI Corporation [(1985), 1 SCR 712] was to consider
whether HRA, Night Shift Allowance, Heat, Gas and Dust allowance, incentive allowance
paid by the employer to his employee are wages within the meaning of Section
2(22) of the Act. This Court considered elaborately and had held that the 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 the hands of the Court. Under the definition, 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 to the employee in
terms of the original contract of employment or in terms of a settlement which
by necessary implication becomes part of the contract of employment, it is
wages. It was also further held that this inclusive part as against the
exclusionary part in the definition clearly indicates that the expression wages
has been given a very wide meaning. The inclusive part of the definition read
along with the exclusionary part in the definition, clearly shows that the
inclusive part is not intended to be limited only to the items mentioned
therein. Taking into consideration the exclusionary part in the definition and
reading the definition as a whole, the inclusive part is only illustrative and
tends to express the wide meaning and import of the word `wages' used in the
Act. It was held therein that HRA, Night, Shift Allowance, Heat, Gas and Dust
allowance, incentive allowance are wages within the meaning of Section 2(22) of
the Act. The facts in this case squarely fall within the above ratio laid by
this Court. When the admitted position is that an employee has done the
overtime work and received or is due to receive remuneration towards the work
done for his rendering service, necessarily, it is a wage paid or payable by
virtue of the implied contract.
The
contract of employment is entered into only at the initial entry into the
service. In the course of the employment, as and when the employer finds the
need to have work done expeditiously, in addition to the normal work during the
course of the working hours, the employer offers to the employee to do overtime
work after the working hours.
When
an employee does overtime work, it amounts to acceptance of the same. There
emerges concluded implied contract between the employer and employee. There is
no need to write on each occasion separately on the letter of appointment. It
becomes integral part of original or revised contract of employment from time
to time. The employer is obligated to pay wages when the employee does work. This
will be, in addition to payment of the wages he receives for normal work. In
other words, both the remuneration received during the working hours and
overtime constitute a composite wages and thereby it is a wage within the
meaning of Section 2(22) of the Act. The Calcutta High Court and the Karnataka
High Court have applied technical rules of construction, namely, the
Legislature does not expressly say so and, therefore, remuneration paid for
overtime work is not a wage. We think that the approach adopted by these High
Courts is clearly unsustainable and illegal. On the other hand, the view
expressed by the Bombay High Court in Shivraj Fine Art Litho Works, Nagpur v.
Director, Regional Office Maharashtra, Bombay & Ors. [1974 Lab. IC 328) (V
7 C72), by Delhi High Court in E.S.I.C. New Delhi v. Birla Cotton, Spinning &
Weaving Mills Ltd., Delhi [1977 II LLJ 420] and by the Andhra
Pradesh High Court in M/s. The Hyderabad Allwyn Metal Works Ltd. v. Employees
State Insurance Corporation [1981 Lab. IC 457] and the earlier decision
referred to are correct in law. The ratio in Braithwaite & Co. (India) Ltd. vs. ESI [1968) 1 SCR 771], is
no longer applicable, since it was prior to the amendment of the definition. As
a result, it no longer operates as a ratio.
Thus,
we hold that the view taken by the High Court of Andhra Pradesh is in
accordance with law laid down by this Court. We do not find any ground
warranting interference.
The
appeals are dismissed. No costs.
IN WP
(C) NO.1554/87 Writ Petition is dismissed as withdrawn.
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