Whirlpool of India Ltd. Vs. Employees' State Insurance Corporation  INSC
114 (8 March 2000)
appellant under a `Production Incentive Scheme' pays to its workers production incentive
at the rates specified in the Scheme besides normal wages. For the purpose of
calculating contributions towards Employees' State Insurance Fund, the payment
of production incentive by the appellant to its workers is not treated by it as
`wages' within the meaning of the term as defined in Section 2(22) of the
Employees' State Insurance Act, 1948 (for short `the Act'). The
respondent-Employees' State Insurance Corporation (for short `the Corporation')
treating the said payment as `wages' issued a demand to the appellant for
payment of contributions towards the Employees' State Insurance Fund. This led
to filing of an application under Section 75 of the Act by the appellant before
Court challenging the
said demand. The said court allowed the application and quashed the demand. It
held that the payment was made quarterly and was not `wages' under the Act as
it did not fall either under the first part of Section 2(22) or under third
part thereof. The payment made by the appellant, it was held, did not fall
under the first part of the definition of `wages' as there was no agreement
between the appellant and its workers for payment of production incentive and
also that it did not fall under the third part of the definition as the actual
payment was made quarterly which means at intervals exceeding two months.
appeal filed by the Corporation against the order of the Employees' Insurance
Court was allowed by a learned Single Judge of the High Court holding that the
production incentive was calculated on the basis of the extra work done by the
workers in each month but to avoid contribution under the Act, the payment was
postponed and was made quarterly.
Letters Patent Appeal of the appellant was dismissed and, therefore, the present
question for decision is whether payments towards production incentive made by
the appellant to its workers under the `Production Incentive Scheme' falls
within the scope and ambit of `wages' as defined in Section 2(22) of the Act
and also the effect of payments being made quarterly i.e. at intervals
exceeding two months.
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.
first part of Section 2(22), all the remuneration paid or payable in cash to an
employee, if the terms of the contract of employment, express or implied, were
fulfilled would be `wages'. Under this part neither the actual payment nor when
the payment is made is of any relevance. The last part of Section 2(22) relates
to payment of additional remuneration. The additional remuneration, if any,
paid at intervals not exceeding two months and not falling in clauses (a) to
(d) would also be wages within the meaning of the term as defined. Under this
part of the definition, there has to be payment and not only payability and the
payment has to be at intervals not exceeding two months.
High Court while coming to the conclusion that the payment of production
incentive to its workers by the appellant is `wages' within the meaning of the
Act has relied upon the decision of this Court in Wellman (India) Pvt. Ltd. v.
Employees' State Insurance Corporation [(1994) 1 SCC 219] and Modella Woollens
Ltd. V. Employees' State Insurance Corporation and Anr. [1994 Supp (3) SCC
case deals with the attendance bonus payable to the employees under the terms
of settlement which became part of contract of employment and was thus held to
be remuneration payable under the contract of employment. That fell under the
first part of the definition. In this case, it was held that the expression `if
any paid' after the words `other additional remuneration' will be inconsistent
if the remuneration is payable under the contract of employment since such
payment is not dependent on the will of the employer but on the fulfillment of
the terms of the contract. Every remuneration payable under the contract would
fall under the first part of the definition. The payment in Wellman's case fell
within the first part of the definition of `wages'. In the present case,
neither Insurance Court nor learned Single Judge nor
Division Bench has held that the payment of production incentive was
contractual falling within the first part of the definition of wages.
Woollens' case also, the payment of production bonus to the employees though
made at the end of each quarter was held to be wages as the amount was payable
under the agreement. Thus this case too was concerned with the first part of
the definition of wages.
of the aforesaid decisions has any applicability to the facts of the present
M/s. Harihar Polyfibres v. Regional Director, ESI Corporation [(1984) 4 SCC
324], affirming the Full Bench of the Andhra Pradesh High Court holding that
under third part of the definition to constitute `wages', it has to be actual factum
of payment made at intervals not exceeding two months, `House Rent Allowance',
`Night Shift Allowance', `Incentive Allowance' and `Heat, Gas and Dust
Allowance' were held to be covered by the definition of `wages' in Section
2(22). In this case, it was held that for the aforesaid allowances to be
covered by definition of 'wages', it was not necessary that the payments should
be in terms of employment.
Handloom House, Ernakulam v. Regional Director, ESI [(1999) 4 SCC 7], it has
been held that any additional remuneration paid at intervals exceeding two
months has been excluded from the purview of the definition. It is clear that if
the amount paid or payable is not remuneration on fulfillment of the terms of
employment falling under the first part and is also not covered by the second
part of the definition, it would be wages if the payment is made at intervals
not exceeding two months.
counsel for the respondent made a feeble attempt to contend that the payment in
the present case would fall within the first part of definition of `wages' as
there is an implied contract for payment of the said amount.
already noticed, none of the Courts has held that the amount in question was
paid or was payable on fulfillment of terms of contract of employment. Further
learned counsel fairly conceded that the payment under the scheme cannot be
termed a payment under settlement as contemplated by Section 2(p) of the
Industrial Disputes Act. It also cannot be held that the payment in question
under the scheme would amount to a condition of service requiring compliance of
Section 9A of the Industrial Disputes Act for effecting any change in the
conditions of service. The payment thus does not fall within the first part of
definition of `wages'.
evident that the additional remuneration to become wages has to be
"paid" at intervals not exceeding two months as distinguished from
`being payable'. Thus, under the last part there has to be actual payment. The
High Court has found that the payment was made quarterly. It is not for us to
rewrite the definition of wages even if we assume that there is a possibility
of misuse by employers by making the payment at a period exceeding two months
and thus circumventing the provisions of the Act. When in the last part of
Section 2(22), the word used is `paid', we cannot add the word `payable' or
other similar expression thereto.
view of the aforesaid, the payment of production incentive, on the facts of
present case, does not fall either under the first part or last part of the
definition of term `wages' as defined in Section 2(22) of the Act.
the aforesaid reasons, we allow the appeal and set aside the judgment of the
High Court and restore that of Employees' Insurance Court. Parties are, however, left to bear their own costs.