M/s.Gordon Woodroffe Ltd.,No.36, Rajaji Salai, Madras v. The Regional CommissionerEmployees Provident Fund,Tamil Nadu and Pondicherry States,20, Royapettah High Road,Madras

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 26.10.2009CORAM :THE HONOURABLE MR.JUSTICE F.M.IBBRAHIM KALIFULLAandTHE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMWrit Appeal No.1284 of 2000M/s.Gordon Woodroffe Ltd.,No.36, Rajaji Salai, Madras... Appellant-vs-The Regional CommissionerEmployees Provident Fund,Tamil Nadu and Pondicherry States,20, Royapettah High Road,Madras... RespondentAppeal against the order dated 5.1.2000 passed in W.P.No.9500of 1992 on the file of this Court.This Writ Petition presented to this Court under Article 226 ofthe Constitution of India to issue a writ of certiorari to call forthe records in proceedings No.C4/TN/2622/Regl/91 dated 9.8.1991 onthe file of the respondent and quash the same.* * * * *For Appellant:Mr.S.JayaramanFor Respondent:Mr.K.Gunasekar, ACGSC* * * * *J U D G M E N T(Delivered by F.M.IBRAHIM KALIFULLA, J.)The appellant is an employer. The challenge in the writpetition was to an order of the Employees Provident FundCommissioner dated 9.8.1991 passed under Section 7-A of theEmployees Provident Fund and Miscellaneous Provisions Act(hereinafter called as 'the Act'), determining the contributionpayable by the appellant on 'Saturday Allowance' and 'SpecialAllowance' paid to its employees. The writ petition having beendismissed, the appellant has come forward with this appeal. https://hcservices.ecourts.gov.in/hcservices/

2.Arguing for the appellant, Mr.S.Jayaraman, the learnedcounsel, after referring to the definition of 'basic wages' asdefined under Section 2(b) of the Act and after referring to theconcerned clause in the settlements dated 15.9.1976, 27.12.1979 and12.11.1982 reached under Section 12 (3) of the Industrial DisputesAct, contended that the payment of 'Saturday Allowance'/'SpecialAllowance' will not form part of the substantive part of definitionof basic wages and it would fall within the excluded categoryfalling under Section 2(b)(ii) of the Act and therefore, the orderof the respondent as well as that of the learned single Judge areliable to be set aside. In support of his submission, the learnedcounsel relied upon Bridge & Roof Co. (India) Ltd. v. Union ofIndia (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 ofIndia & Anr. [(2001) 2 SCC 519].3.As against the above submissions, Mr.Gunasekar, the learnedstanding counsel appearing for the respondent, contended that bymerely adding a clause in the settlements to the effect that paymentof 'Saturday Allowance'/'Special Allowance' being an adhoc payment,need not be taken into computation for any other benefits, would notentitle the appellant to exclude the payment of contribution onthose allowances. According to the learned standing counsel, such aclause in the settlements would be contrary to the statutoryprovision and consequently, the said clause in the settlement cannotenure to the benefit of the appellant. 4.Having heard the learned counsel for the respective partiesand having bestowed our consideration to the relevant contentions,we feel that the definition of basic wages needs to be extracted forrendering our decision. Section 2(b) along with sub-clause (ii)reads as under:-"2.Definitions. - In this Act, unless the contextotherwise requires, -(a) ..(aa) ..(b) "basic wages" means all emoluments which are earned byan employee while on duty or on leave or on holidays withwages in either case in accordance with the terms of thecontract of employment and which are paid or payable incash to him, but does not include -(i) ..(ii) any dearness allowance (that is to say, all cashpayments by whatever name called paid to an employee onaccount of a rise in the cost of living), house-rentallowance, overtime allowance, bonus, commission or anyother similar allowance payable to the employee in respect https://hcservices.ecourts.gov.in/hcservices/ of his employment or of work done in such employment;... "Under Section 6 of the Act, the rate of contribution payable hasbeen provided, by which such contribution is to be recovered fromthe basic wages, dearness allowance and retaining allowance if any.At the outset, therefore, we have to point out that though dearnessallowance stands excluded from the category of basic wages, byvirtue of the provision contained in Section 6 of the Act, for thepurpose of contribution, the dearness allowance payable to anemployee has got to be taken into account. The rest of the exceptedcategories mentioned in sub-clause (ii) of Section 2(b) mentionsthat the same would not form part of basic wages, viz., house-rentallowance, overtime allowance, bonus, commission or any othersimilar allowance payable to an employee in respect of hisemployment or of work done in such employment. Therefore, in orderto find out as to whether any payment would fall within exceptedcategories, we have to strenously apply the last set of expressionscontained in sub-clause (ii) of Section 2(b) of the Act.5.In the case on hand, in the year 1976 when the settlementdated 15.9.1976 was signed, the payment of 'Saturday Allowance' cameto be introduced under clause 4 of the said settlement. The saidclause 4 reads as under:-"4. Saturday Allowance.(a)As from Saturday the 9th October 1976 Saturdays willbe resumed as working days.(b)A special allowance of Rs.20/- per month called'SATURDAY ALLOWANCE' will be paid to each employeefor resumption of Saturdays as working days. TheSaturday allowance is payable only to those confirmedin service as on the day of signing of the agreement.The Saturday allowance is a purely adhoc payment andshall not be taken into computation for any otherbenefits."It is quite apparent that in order to persuade the employees andmake them agree to resume Saturday working, the appellant appearedto have agreed for payment of a specified sum of Rs.20/- per monthby way of 'Special Allowance' by calling it as 'Saturday Allowance'.By agreeing to such payment, the appellant was able to resumeSaturday working on and from 9.10.1976. The payment of the saidallowance was restricted to those who agreed for resumption ofSaturday working and that too, to those who were confirmed employeesas on the date of signing of the said settlement. The parties,however, agreed to the position that the said allowance being adhocpayment need not be taken into account for any other benefits. Thesaid settlement was enforced for a period of three years and was https://hcservices.ecourts.gov.in/hcservices/ replaced by a subsequent settlement dated 27.12.1979. Clause 4 ofthe 1979 settlement is to the following effect:-"4. SPECIAL ALLOWANCEAn allowance of Rs.20/- (Rupees twenty only) permonth called special allowance will be paid from 1stJanuary 1979 to all employees confirmed in permanentservices. In the case of probationers, this allowancewill be extended on confirmation. This special allowanceis purely an adhoc payment and shall not be taken intocomputation 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 'SpecialAllowance'. The rate, which was in force under 1976 settlement,viz., Rs.20/- per month, was continued even from 1.1.1979 to allconfirmed employees. In the case of probationers, the appellantagreed that the payment would be extended on their confirmation.Here again, the parties agreed that the special allowance beingadhoc payment, the same need not be taken into account for any otherbenefits, such as provident fund, overtime, bonus, gratuity, etc.6.In the third settlement dated 12.11.1982, the provision forspecial allowance was provided in clause 5, which reads as under:-"5. SPECIAL ALLOWANCE.The Existing allowance of Rs.20/- per month will beincreased to Rs.40/- from 1st January 1982 to all employeesconfirmed in permanent service. In the case ofprobationers this allowance of Rs.40/- will be extended onconfirmation."Under the said clause, the rate of special allowance came to beincreased from Rs.20/- to Rs.40/- from 1.1.1982. In the saidsettlement, at the end, it was specifically stipulated that theterms and conditions of service concerning the employment ofemployees of the company covered by the said settlement and thosenot covered by this settlement shall remain unaltered and binding onboth the parties except in so far as they are altered in accordancewith legislation.7.In the above stated background of the specific terms agreedbetween the appellant and its workmen in regard to the employeesworking in the registered office and the godown, when we apply thedefinition of basic wages, in particular, sub-clause (ii) of thesaid section, we find that the settlement specifically provides fora payment of 'Saturday Allowance/Special Allowance' and such paymentis made to all the confirmed permanent employees and thereby, it isin respect of the employment with the appellant company, theallowances became payable. Further in the 1976 settlement, when the https://hcservices.ecourts.gov.in/hcservices/ payment of special allowance was first introduced, all the confirmedpermanent employees agreed to resume Saturday working, for which theappellant 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 tothose covered by the settlement by virtue of their employment, suchpayment is also referable to the work, which they agreed to performin the course of such employment on a Saturday, on which day priorto the introduction of such payment, no work was being carried on.In other words, when the payment of special allowance came to bemade for resumption of Saturday working, such payment satisfied thespecific stipulation contained in sub-clause (ii) of section 2(b)insofar as it related to the employment of the employees covered bythe settlement as well as their agreement to work on 'Saturday', onwhich day, prior to the said agreement, they were not working. 8.In the above stated factual scenario, which we are able todiscern from the terms of the settlements, vis-a-vis the definitionclause contained in section 2(b), we are convinced that such acategory of special allowance paid by the appellant is squarelycovered by the excepted category as defined under Section 2(b)(ii)of the Act. Having regard to our above conclusion, we find that theorder of the Provident Fund Commissioner dated 9.8.1991 and theconfirmation of the same by the learned Judge in the order dated5.1.2000 cannot be sustained.9.That apart, our conclusion is also supported by the decisionsof the Hon'ble Supreme Court as well as Division Bench decisions ofthis Court. A Constitution Bench of the Hon'ble Supreme Court inBridge & Roof Co. (India) Ltd. v. Union of India (1962-2-LLJ-490),that was a case where the Supreme Court was concerned with the issueas to whether production bonus would fall within the exceptedcategory of bonus as defined in section 2(b)(ii) of the Act, held asfollows:-"... Therefore, house-rent allowance which may not bepayable to all employees of a concern and which iscertainly not paid by all concerns is taken out of thedefinition of "basic wage," even though the basis ofpayment of house-rent allowance where it is paid is thecontract of employment. Similarly, overtime allowance,though it is generally in force in all concerns, is notearned by all employees of a concern. It is also earned inaccordance with the terms of the contract of employment;but because it may not be earned by all employees of aconcern, it is excluded from "basic wages". Similarly,commission or any other similar allowance is excluded fromthe definition of "basic wages" for commission and otherallowances are not necessarily to be found in allconcerns; nor are they necessarily earned by all employees https://hcservices.ecourts.gov.in/hcservices/ of the same concern, though where they exist they areearned in accordance with the terms of the contract ofemployment. It seems therefore that the basis for theexclusion in Cl.(ii) of the exceptions in S.2(b) is thatall that is not earned in all concerns or by all employeesof a concern in excluded from basic wages. To this, theexclusion of dearness allowance in Cl.(ii) is anexception. But that exception has been corrected byincluding dearness allowance in S.6 for the purpose ofcontribution by S.6 and the real exceptions therefore inCl.(ii) are the other exceptions beside dearnessallowance, which has been included through S.6."Applying the above ratio to the facts of this case, we find that thebasis for the exclusion is that all that is not earned in allconcerns or by all employees of a concern is excluded from basicwages. Under the specific clause contained in the settlementsbetween the appellant and its employees, it is specifically providedthat the payment of 'Saturday Allowance/Special Allowance' is notpayable to all employees. Such payment was restricted only toconfirmed permanent employees. In fact, in the 1976 settlement, thepayment was extended to those who were confirmed permanent employeesas on the date of the agreement. Therefore, unlike the normal basicwages payable to all employees, the payment of 'SaturdayAllowance/Special Allowance' was restricted only to those employeeswho were confirmed and in the permanent rolls of the appellantcompany. Therefore, by applying the said decision, we are able tohold that the payment of 'Saturday Allowance/Special Allowance' willnot form part of the basic wages. Consequently, no contributionwould be payable.10.We are also fortified by a Division Bench decision of thisCourt 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 hasrelied upon the earlier Division Bench decision in The RegionalCommissioner, Employees' Provident Fund Commissioner v. TheManagement, Alloy Foundries (P) Ltd. (93 L.W. 797), which is quiteapposite to the facts of this case. The said paragraph reads ashereunder:-".. It is, in this connection we may make useful referenceto 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 DivisionBench was confronted with the question whether the specialallowance under an agreement can be treated as part ofbasic wages. The Court held:"It had been agreed between the employer and theemployees that the "special alloance" need not betreated as part of the basic wages or dearness https://hcservices.ecourts.gov.in/hcservices/ allowance and, therefore, it cannot be included forcompuation of the contribution payable by theemployer 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 specialallowance, which does not form part of the dearnessallowance should be 'deemed t be dearnessallowance'. Needless to say that an officer likehim has no power to deem something to be somethingelse which it is not, being the prerogative only ofthe Legislature."Whatever stated in the above extracted portion of the said DivisionBench decision applies in all fours to the facts of this case, wherealso the Division Bench was concerned with a special allowance whichthe parties agreed not to be taken into account for the purpose ofother benefits including gratuity, provident fund, etc.11. Having regard to our conclusion, the appeal stands allowed.The impugned orders are set aside. No costs. sraSd/-Asst. Registrar//True Copy//Sub Asst. RegistrarToThe Regional CommissionerEmployees Provident Fund,Tamil Nadu and Pondicherry States,20, Royapettah High Road,Madras.+ 1 cc to Mr. S. Jayaraman, Advocate SR No.56725+ 1 cc to Mr. K.Gunasekar, ACGSC SR No.56780W.A.No.1284 of 2000MBS(CO)SR/12.11.2009