Employees State Insurance Corporation v. Kings Intelligence Services

learned counsel pointed out that there is an implied contract to pay the minimum wages in terms of the Minimum Wages Act, 1948 and as such it is not open to the employer to pay any amount below such minimum wages. The learned counsel thereafter has taken me through the definition of Section 2(22) of the ESI Act, 1948 and pointed out that any amount which is payable expressly or by implication is to be treated as wages in terms of the said definition. The learned counsel further pointed out that it is not open to the respondent to pay any amount below the minimum wages as defined under the Minimum Wages Act and as such the question of fixing the amount payable to the appellant on the basis that such wages are below the minimum wages are :3: unsustainable. The learned counsel has laid lot of emphasis on the implied contract and pointed out that such implied contract can be established either by express term or by legislation and as such considering the provisions of the Minimum Wages Act, there is an implied contract between the employer and the workers to pay such wages. The learned Counsel has taken me through the impugned judgment and pointed out that the learned Judge was not justified to pass the impugned judgment and hold that the respondent is not liable to pay the ESI contribution. The learned Counsel has also taken me through the impugned judgment and pointed out that the learned Judge has excluded the amount of travelling allowance and the amount towards washing allowance from the wages payable by the respondent. The learned Counsel further pointed out that though as far travelling allowance is concerned, there is an express exclusion as per the definition under Section 2(22) of the said Act, nevertheless, the amount of washing allowance is liable to be included for the purpose of determining the ESI contribution. The learned Counsel further pointed out that the learned Judge whilst passing the impugned judgment has erroneously come to the conclusion that the washing allowance is a kind of allowance paid to the :4: workers to defray the special expenses by the nature of his employment. The learned counsel further pointed out that there is no material adduced by the respondent to establish that such allowance was paid to defray any special expenses incurred on account of the nature of work done by the workers. The learned Counsel has taken me through the application filed by the respondent under Section 75 of the said Act and pointed out that there was no averment on that count therein nor any material produced by the respondent to substantiate such contention. The learned Counsel as such submits that the impugned judgment be quashed and set aside.

4. On the other hand, Shri Kamat, learned counsel appearing for the respondent has supported the impugned judgment. The learned counsel though does not dispute that the implied term of the contract would mean payment of an amount which is otherwise payable under the Minimum Wages Act, nevertheless, it is his contention that the provision under the Minimum Wages Act cannot be read into the provisions of Section 2(22) of the ESI Act. The learned counsel further pointed out that the contention of Mrs. Agni, the learned Counsel on that count need not be gone into as :5: according to her the contribution paid by the respondent is in fact calculated on the assumption that the wages paid to the workers of the respondent was the minimum wages as stipulated in the notification issued by the Government after deducting the amount permissible in terms of the provisions of Section 2(22) of the ESI Act. The learned counsel further pointed out that the Act itself exclude the payment of travelling allowance and the amount towards any allowance given as special expenses dealing with the nature of the employment, and as such the respondent was also entitled to deduct the amount towards the washing allowance. The learned counsel further pointed out that considering that the amount has been paid on the assumption that the respondent is paying minimum wags after deducting the said two allowances, the contention of Mrs. Agni to the effect that the amount paid by the respondent is below the minimum wages cannot be accepted. The learned Counsel has thereafter taken me through the impugned judgment and pointed out that the learned Judge has rightly allowed the application under Section 75 of the said Act filed by the respondent. The learned counsel however points out that though the respondent have not produced any specific material to substantiate their contention that the washing :6: allowance was a special expenses given to the workers to defray such expenses payable considering the nature of the employment, the respondent are in position to produce the material on record to substantiate such contention. The learned Counsel as such submits that the impugned judgment be confirmed and the appeal preferred by the respondent be rejected.

5. I have duly considered the submissions of the learned Counsel and I have also gone through the records. The substantial questions of law framed by this Court while admitting the above appeal by order dated 11.09.2008 are as follows : (a) Whether the term wages as defined under sec. 2(22) of the Employees State Insurance Act mean minimum wages payable to a category of employees fixed in accordance with the Minimum Wages Act, 1948 ? (b) Whether allowances given to an employee such as conveyance allowance, washing allowance, house rent allowance are part of the term wages and whether it is :7: permissible to bifurcate wages into various components so as to exclude certain categories ?

6. With regard to the first substantial question of law, taking note of the contention of Shri Kamat, learned counsel appearing for the respondent to the effect that the amount of the contribution paid by the respondent is on the assumption that the wages paid to their employees was otherwise the minimum wages after deducting the allowable deduction under Section 2(22) of the ESI Act, 1948, I find that the said substantial question of law in the peculiar facts and circumstances of the case need not be gone into. Considering that the contribution of the amount has been worked out on the basis that the minimum wages are being paid to the employees after deducting the allowances as provided under Section 2(22) of the said Act, I find that the question of going into the aspect as to whether such minimum wages are to be read in the definition of Section 2(22) of the said ESI Act would not arise. Thus, the first substantial question of law stands answered accordingly.

7. With regard to the second substantial question of law, Section 2(22) of the ESI Act, provides thus : :8: Section 2(22). “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) 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; :9:

8. On plain reading of the said provisions, it cannot be disputed that any special allowance paid to the employees to defray the expenses which are incurred considering the nature of the employment are to be excluded from the amount of wages payable to the employees. In the present case, it is not in dispute that the respondent were also paying the travelling allowance and consequently in view of the provisions of Section 2(22) of the said Act, travelling allowance can be deducted. Hence, the learned Judge was justified to deduct the travelling allowance while considering the contribution payable by the respondent to the appellant herein.

9. With regard to the next allowance sought to be deducted by the respondent on account of washing allowance in view of exception in terms of provisions of Section 2(22) of the said Act, I find that on perusal of the application filed by the respondent under Section 75 of the said Act, there was no specific averment on that count therein. On perusal of the affidavit of AW1 Mr. Sandhu, there is an averment that such amount was being paid to defray the expenses payable to the employees on account of the nature of the employment. Though the appellant have disputed the said :10: contention, the respondent have not led any evidence to substantiate their contention that such amount was to defray the expenses taking into account the nature of the employment. Taking note of the submission of Shri Kamat, learned counsel appearing for the respondent that the respondent are in a position to lead evidence on that count, I find it appropriate that to that extent the impugned judgment passed by the learned ESI Court deserves to be quashed and set aside and the matter be remanded to the ESI Court to consider the said aspect afresh after hearing the parties in accordance with law. Shri Kamat, learned counsel points out that the respondent would file an appropriate application before the ESI Court to lead evidence and in case any such application is filed, the same shall be considered by the learned Judge after hearing the appellant in accordance with law.

10. The only point to be considered in such circumstances would be whether the respondent are entitled to deduct the washing allowance in terms of Section 2(22)(c) of the ESI Act. Mrs. Agni, learned Counsel appearing for the appellant has also pointed out that the respondent have not stated the actual amount deducted on account of travelling :11: allowance and towards washing allowance. This aspect would have to be considered by the learned Judge whilst disposing of the matter on merits as aforesaid.

11. In view of the above, I pass the following : O R D E R (i) The appeal is partly allowed. (ii) The impugned judgment dated 20.09.2007 to the extent of excluding the washing allowance from the amount of wages is quashed and set aside. (iii) The learned Judge would have to decide the point for determination referred to herein above in the light of the observations made herein above in accordance with law. (iv) The appeal stands disposed of accordingly with no order as to costs. (v) The parties are directed to appear before the learned ESI Court on 13.02.2013 at 10.00 a.m. at* F. M. REIS, J