(Delivered by F.M.IBRAHIM KALIFULLA, J.) The appellant is an employer. The challenge in the writ petition was to an order of the Employees Provident Fund Commissioner dated 9.8.1991 passed under Section 7-A of the Employees Provident Fund and Miscellaneous Provisions Act (hereinafter called as 'the Act'), determining the contribution payable by the appellant on 'Saturday Allowance' and 'Special Allowance' paid to its employees. The writ petition having been dismissed, the appellant has come forward with this appeal.
2.Arguing for the appellant, Mr.S.Jayaraman, the learned counsel, after referring to the definition of 'basic wages' as defined under Section 2(b) of the Act and after referring to the concerned clause in the settlements dated 15.9.1976, 27.12.1979 and 12.11.1982 reached under Section 12 (3) of the Industrial Disputes Act, contended that the payment of 'Saturday Allowance'/'Special Allowance' will not form part of the substantive part of definition of basic wages and it would fall within the excluded category falling under
Section 2(b)(ii) of the Act and therefore, the order of the respondent as well as that of the learned single Judge are liable to be set aside. In support of his submission, the learned counsel relied upon Bridge & Roof Co. (India) Ltd. v. Union of India (1962-2-LLJ-490); E.I.D. Parry v. Reg.Comm. EPF T.N. & Anr. (1984-1-LLJ-300); and Sri Changdeo Sugar Mills & Anr. v. Union of India & Anr. [(2001) 2 SCC 519].
3.As against the above submissions, Mr.Gunasekar, the learned standing counsel appearing for the respondent, contended that by merely adding a clause in the settlements to the effect that payment of 'Saturday Allowance'/'Special Allowance' being an adhoc payment, need not be taken into computation for any other benefits, would not entitle the appellant to exclude the payment of contribution on those allowances. According to the learned standing counsel, such a clause in the settlements would be contrary to the statutory provision and consequently, the said clause in the settlement cannot enure to the benefit of the appellant.
4.Having heard the learned counsel for the respective parties and having bestowed our consideration to the relevant contentions, we feel that the definition of basic wages needs to be extracted for rendering our decision.
Section 2(b) along with sub-clause (ii) reads as under:-
"2.Definitions. - In this Act, unless the context otherwise requires, -
(a) ..
(aa) ..
(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) ..
(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;
... "
Under
Section 6 of the Act, the rate of contribution payable has been provided, by which such contribution is to be recovered from the basic wages, dearness allowance and retaining allowance if any. At the outset, therefore, we have to point out that though dearness allowance stands excluded from the category of basic wages, by virtue of the provision contained in
Section 6 of the Act, for the purpose of contribution, the dearness allowance payable to an employee has got to be taken into account. The rest of the excepted categories mentioned in sub-clause (ii) of
Section 2(b) mentions that the same would not form part of basic wages, viz., house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to an employee in respect of his employment or of work done in such employment. Therefore, in order to find out as to whether any payment would fall within excepted categories, we have to strenously apply the last set of expressions contained in sub-clause (ii) of
Section 2(b) of the Act.
5.In the case on hand, in the year 1976 when the settlement dated 15.9.1976 was signed, the payment of 'Saturday Allowance' came to be introduced under clause 4 of the said settlement. The said clause 4 reads as under:-
"4. Saturday Allowance.
(a) As from Saturday the 9th October 1976 Saturdays will be resumed as working days.
(b) A special allowance of Rs.20/- per month called 'SATURDAY ALLOWANCE' will be paid to each employee for resumption of Saturdays as working days. The Saturday allowance is payable only to those confirmed in service as on the day of signing of the agreement. The Saturday allowance is a purely adhoc payment and shall not be taken into computation for any other benefits."
It is quite apparent that in order to persuade the employees and make them agree to resume Saturday working, the appellant appeared to have agreed for payment of a specified sum of Rs.20/- per month by way of 'Special Allowance' by calling it as 'Saturday Allowance'. By agreeing to such payment, the appellant was able to resume Saturday working on and from 9.10.1976. The payment of the said allowance was restricted to those who agreed for resumption of Saturday working and that too, to those who were confirmed employees as on the date of signing of the said settlement. The parties, however, agreed to the position that the said allowance being adhoc payment need not be taken into account for any other benefits. The said settlement was enforced for a period of three years and was replaced by a subsequent settlement dated 27.12.1979. Clause 4 of the 1979 settlement is to the following effect:-
"4. SPECIAL ALLOWANCE An allowance of Rs.20/- (Rupees twenty only) per month called special allowance will be paid from 1st January 1979 to all employees confirmed in permanent services. In the case of probationers, this allowance will be extended on confirmation. This special allowance is purely an adhoc payment and shall not be taken into computation for any other benefit such as Provident fund, overtime, bonus, gratuity, etc."
In the 1979 settlement, what was earlier agreed to by way of 'Saturday Allowance' came to be re-introduced by way of 'Special Allowance'. The rate, which was in force under 1976 settlement, viz., Rs.20/- per month, was continued even from 1.1.1979 to all confirmed employees. In the case of probationers, the appellant agreed that the payment would be extended on their confirmation. Here again, the parties agreed that the special allowance being adhoc payment, the same need not be taken into account for any other benefits, such as provident fund, overtime, bonus, gratuity, etc.
6.In the third settlement dated 12.11.1982, the provision for special allowance was provided in clause 5, which reads as under:-
"5. SPECIAL ALLOWANCE.
The Existing allowance of Rs.20/- per month will be increased to Rs.40/- from 1st January 1982 to all employees confirmed in permanent service. In the case of probationers this allowance of Rs.40/- will be extended on confirmation."
Under the said clause, the rate of special allowance came to be increased from Rs.20/- to Rs.40/- from 1.1.1982. In the said settlement, at the end, it was specifically stipulated that the terms and conditions of service concerning the employment of employees of the company covered by the said settlement and those not covered by this settlement shall remain unaltered and binding on both the parties except in so far as they are altered in accordance with legislation.
7.In the above stated background of the specific terms agreed between the appellant and its workmen in regard to the employees working in the registered office and the godown, when we apply the definition of basic wages, in particular, sub-clause (ii) of the said section, we find that the settlement specifically provides for a payment of 'Saturday Allowance/Special Allowance' and such payment is made to all the confirmed permanent employees and thereby, it is in respect of the employment with the appellant company, the allowances became payable. Further in the 1976 settlement, when the payment of special allowance was first introduced, all the confirmed permanent employees agreed to resume Saturday working, for which the appellant came forward to pay the special allowance. Here again, when we examine the specific provisions contained in sub-clause (ii) of
section 2(b), we find that apart from the payment being made to those covered by the settlement by virtue of their employment, such payment is also referable to the work, which they agreed to perform in the course of such employment on a Saturday, on which day prior to the introduction of such payment, no work was being carried on. In other words, when the payment of special allowance came to be made for resumption of Saturday working, such payment satisfied the specific stipulation contained in sub-clause (ii) of
section 2(b) insofar as it related to the employment of the employees covered by the settlement as well as their agreement to work on 'Saturday', on which day, prior to the said agreement, they were not working.
8.In the above stated factual scenario, which we are able to discern from the terms of the settlements, vis-a-vis the definition clause contained in section 2(b), we are convinced that such a category of special allowance paid by the appellant is squarely covered by the excepted category as defined under
Section 2(b)(ii) of the Act. Having regard to our above conclusion, we find that the order of the Provident Fund Commissioner dated 9.8.1991 and the confirmation of the same by the learned Judge in the order dated 5.1.2000 cannot be sustained.
9.That apart, our conclusion is also supported by the decisions of the Hon'ble Supreme Court as well as Division Bench decisions of this Court. A Constitution Bench of the Hon'ble Supreme Court in Bridge & Roof Co. (India) Ltd. v. Union of India (1962-2-LLJ-490), that was a case where the Supreme Cour was concerned with the issue as to whether production bonus would fall within the excepted category of bonus as defined in
section 2(b)(ii) of the Act, held as follows:-
"... Therefore, house-rent allowance which may not be payable to all employees of a concern and which is certainly not paid by all concerns is taken out of the definition of "basic wage," even though the basis of payment of house-rent allowance where it is paid is the contract of employment. Similarly, overtime allowance, though it is generally in force in all concerns, is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment; but because it may not be earned by all employees of a concern, it is excluded from "basic wages". Similarly, commission or any other similar allowance is excluded from the definition of "basic wages" for commission and other allowances are not necessarily to be found in all concerns; nor are they necessarily earned by all employees of the same concern, though where they exist they are earned in accordance with the terms of the contract of employment. It seems therefore that the basis for the exclusion in Cl.(ii) of the exceptions in S.2(b) is that all that is not earned in all concerns or by all employees of a concern in excluded from basic wages. To this, the exclusion of dearness allowance in Cl.(ii) is an exception. But that exception has been corrected by including dearness allowance in S.6 for the purpose of contribution by S.6 and the real exceptions therefore in Cl.(ii) are the other exceptions beside dearness allowance, which has been included through S.6."
Applying the above ratio to the facts of this case, we find that the basis for the exclusion is that all that is not earned in all concerns or by all employees of a concern is excluded from basic wages. Under the specific clause contained in the settlements between the appellant and its employees, it is specifically provided that the payment of 'Saturday Allowance/Special Allowance' is not payable to all employees. Such payment was restricted only to confirmed permanent employees. In fact, in the 1976 settlement, the payment was extended to those who were confirmed permanent employees as on the date of the agreement. Therefore, unlike the normal basic wages payable to all employees, the payment of 'Saturday Allowance/Special Allowance' was restricted only to those employees who were confirmed and in the permanent rolls of the appellant company. Therefore, by applying the said decision, we are able to hold that the payment of 'Saturday Allowance/Special Allowance' will not form part of the basic wages. Consequently, no contribution would be payable.
10.We are also fortified by a Division Bench decision of this Court in E.I.D. Parry v. Reg.Comm. EPF T.N. & Anr. (1984-1-LLJ-300). In paragraph 4 of the said decision, the Division Bench has relied upon the earlier Division Bench decision in The Regional Commissioner, Employees' Provident Fund Commissioner v. The Management, Alloy Foundries (P) Ltd. (93 L.W. 797), which is quite apposite to the facts of this case. The said paragraph reads as hereunder:-
".. It is, in this connection we may make useful reference to The Regional Commissioner, Employees' Provident Fund, Pondicherry v. The Management, Alloy Foundries (P) Ltd. (93 L.W. 797). That was a case in which the Division Bench was confronted with the question whether the special allowance under an agreement can be treated as part of basic wages. The Court held:
"It had been agreed between the employer and the employees that the "special alloance" need not be treated as part of the basic wages or dearness allowance and, therefore, it cannot be included for compuation of the contribution payable by the employer under the provisions of the Employees' Provident Fund and Family Pension Fund Act, 1952. The Regional Commissioner of the Employees' Provident Fund cannot direct that the special allowance, which does not form part of the dearness allowance should be 'deemed t be dearness allowance'. Needless to say that an officer like him has no power to deem something to be something else which it is not, being the prerogative only of the Legislature."
Whatever stated in the above extracted portion of the said Division Bench decision applies in all fours to the facts of this case, where also the Division Bench was concerned with a special allowance which the parties agreed not to be taken into account for the purpose of other benefits including gratuity, provident fund, etc.
11. Having regard to our conclusion, the appeal stands allowed. The impugned orders are set aside. No costs.
sra To The Regional Commissioner Employees Provident Fund, Tamil Nadu and Pondicherry States, 20, Royapettah High Road, Madras