The General Manager, Indwell Construction Private Limited H I G-18, Sardar Vallabh v. Shri Rambharos Yadav

For Petitioner For Respondent No.1 : Mr. Punit Ruparel, Advocate : Mr. Devesh Chandra Verma, Advocate Hon'ble Shri Justice Rakesh Mohan Pandey Order on Board

29.04.2025

The petitioner has filed this petition seeking the following relief(s):-

a. This Hon'ble Court may be pleased to call for the records of the authorities below pertaining to the case of the petitioner for perusal of this Hon'ble Court. b. This Hon'ble Court may be pleased to quash the order dated 7.6.2016 (Annexure P-1) passed by the appellate Labour authority-cum-Deputy Commissioner, Raipur so far as it relates to calculation of gratuity amount by including site allowance in the wages and be further pleased to hold that the amount paid as 'site allowance' cannot -2- be taken into account for computation of gratuity as it did not come within the meaning of wages as defined under the law. c. Cost of the proceedings. d. Any other writs and directions that may be deemed fit and just in the facts & circumstances of case.

The facts of the present case are that respondent No.1 moved an application under Section 4 of the Payment of Gratuity Act, 1972 (for short ‘the Act of 1972’) before the Controlling Authority on the ground that he worked continuously under the petitioner for a period of 32 years from

23.06.1980 to 04.02.2012 to the post of Mechanic. The petitioner herein raised an objection to the effect that site allowance would not form part of wages. The Controlling Authority passed an order on 07.05.2013 and directed the petitioner to make the payment of Rs.2,32,615/- considering the length of services of 32 years and the last drawn wages of Rs.11,200/- including Rs.7,000/- as site allowance.

The petitioner preferred an appeal before the Appellate Authority under the Act of 1972 and it was dismissed vide order dated 07.01.2014 and against both orders, this petition has been preferred.

Mr. Verma, the learned counsel appearing for the petitioner/employer would submit that Section 2(s) of the Act of 1972 defines “wages”. He would further submit that the wages include all emoluments payable to the workman in cash and include dearness allowance but do not include any bonus, commission, house rent allowance, overtime wages and any other allowances. He would contend that the learned Controlling 3 Authority and the Appellate Authority committed an error of law by including site allowance as part of wages while computing the amount of gratuity. He would further contend that both orders may be quashed. In support of his submissions, he placed reliance on the judgment passed by the Hon’ble Supreme Court in the matter of Straw Board Mfg. Co. Ltd. Vs. The Workmen, 1977 AIR 941 and the judgment passed by the High Court of Bombay in the matter of Voltas Limited Vs. Chandrakant Y. Bhramhane and others, 2008 ILLJ 416 Bom, wherein it is held that the wages will mean and include basic wages and dearness allowance and nothing else. He would further argue that bonuses, commissions, and other allowances are not admissible in wages. He would also argue that the petitioner was receiving site allowance and it was not a part of wages as it was a temporary allowance.

On the other hand, Mr. Ruparel, the learned counsel appearing for respondent No.1 would oppose. He would submit that respondent No.1 worked for 32 years with the petitioner. He would further submit that the last drawn wages of respondent No.1 were Rs.11,200/- and accordingly, the Controlling Authority computed the amount of gratuity. He would contend that as respondent No. 1 was working on the particular site, therefore, he was being paid site allowance and it was a part of wages, therefore, the Controlling Authority rightly included it while computing wages. In support of his contention, he placed reliance on the judgment passed by the Madras High Court in the matter of United Shippers and Dredgers, Ltd. Nilgiris Vs. Labour Court, Coimbatore, 1992 (1) LLN -4- 848, wherein it is held that the food allowance and site allowance would be part of ‘salary or wages’ within the meaning of Section 2(21) of the Payment of Bonus Act, 1965 (for short ‘the Act of 1965’).

Heard learned counsel appearing for the parties and perused the documents placed on the record.

In the present case, respondent No.1 was working under the petitioner. He worked for 32 years. His basic salary was Rs.4200/-. He was getting a site allowance as he was working at a particular site therefore he was getting wages of Rs.11,200/- per month. Application moved by respondent No.1 for payment of gratuity was allowed by the learned Controlling Authority. The Controlling Authority included the amount of basic salary of Rs.4200/- and site allowance of Rs.7,000/- while computing the monthly wages and accordingly passed an order. The Appellate Authority affirmed the findings recorded by the Controlling Authority.

In Section 2(s) of the Act of 1972, there are inclusions and exclusions. The wages include basic salary and dearness allowances but exclude bonus, commission, house rent allowance, overtime wages and any other allowance.

Section 2(s) of the Act of 1972 is reproduced herein below:- S.2(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but 5 does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

A bare reading of this Section would make it clear that the site allowance is not a part of wages according to the definition.

Section 2(21) of the Act of 1965 also defines ‘salary or wage’. The same is reproduced herein below:- “S.2(21) “salary or wage” means all remuneration (other than remuneration in respect of over-time work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes 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), but does not include— (i)any other allowance which the employee is for the time being entitled to; (ii)the value of any house accommodation or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles; (iii)any travelling concession; (iv)any bonus (including incentive, production and attendance bonus); (v)any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force; (vi)any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him (vii)any commission payable to the employee.”

A bare reading of this provision would make it clear that the salary or wage includes various bonus, commission and allowances including -6- concession, traveling allowances overtime and site allowances. The object of payment of the Bonus Act and the Payment of Gratuity Act are entirely different.

With regard to the Payment of Gratuity Act, the wages have been given restricted meaning and the provisions of the Bonus Act would not apply in the case of the Act, 1972, therefore, the contention raised by Mr. Ruparel appears to be misconceived.

The Hon’ble Supreme Court in the matter of Straw Board Mfg. Co. Ltd. (supra), has categorically held that the amount of basic wages will mean and include basic wages and dearness allowance and nothing else, therefore, in the opinion of this Court, the Controlling Authority and the Appellate Authority committed an error of law by including the amount of site allowance in wages for computing the amount of gratuity. Consequently, the orders passed by the Controlling Authority and the Appellate Authority under the Act of 1972 are hereby quashed. Respondent No.1 would be entitled to receive an amount of gratuity treating his wages to Rs.4,200/- only.

The amount of gratuity is revisited herein below:- Amount of Gratuity 15 x 32 x 4200 = 77,539/- 26

Respondent No.1 shall be entitled to receive the amount of gratuity of Rs.77,539/- with applicable interest.

There is an interim order dated 22.08.2016 whereby respondent 7 No.1 was permitted to withdraw Rs.1,00,000/- out of Rs.1,59,923/-. If respondent No.1 has already withdrawn the said amount, no recovery shall be made. The petitioner shall be at liberty to withdraw the balance amount.