K.T.SANKARAN v. Malabar Cashewnut & MFA 1479/19982 Allied Products (1993(1) LLJ 596) that wages & Ors.

K.T.SANKARAN, J --------------------------------------------- M.F.A.No.1479 of 1998 ---------------------------------------------Dated this the 11th day of January, 2007 JUDGMENTIn this appeal, the Employees State Insurance Corporationchallenges the order dated 25th August, 1997 in I.C.No.25 of 96passed by the Employees Insurance Court, Palakkad. Therespondent herein runs a factory covered under the ESI Act. The ESI Corporation demanded contributions for the period from1.4.1994 to 31.3.1995 on amounts paid as holiday wages and interim relief. The respondent herein challenged the demand made by the ESI Corporation before the Insurance Court.

The Employees Insurance Court held that the interim relief paid to the employees is “wages” within the meaning of Section 2(22) of the Act and that the applicant before the court was liable to pay the contribution amounting to Rs.31,300/- in respect of the period from 1.4.1994 to 31.3.1995 as demanded by the Corporation. However, the Employees Insurance Courtheld, relying on the Full Bench decision of this court in Employees State Insurance Corporation v. Malabar Cashewnut & MFA 1479/19982Allied Products (1993(1) LLJ 596) that wages paid for national and festival holidays will not form part of the wages. On that finding, the court below held that the demand made by the ESICorporation for contribution of Rs.23,191/- on holiday wages for the period from 1.4.1994 to 31.3.1995 is unsustainable. Theproceedings initiated by the Corporation to recover that amount were quashed. The E.I. court also held that interest is payable by the applicant. As per order dated 4th May 1998 in I.A. No. 24of 1998 filed by the ESI Corporation, the E.I. court modified the period during which the respondent herein is liable to pay interest.

As per the judgment dated 16th October 2001, the Miscellaneous First Appeal was dismissed. That judgment was reviewed by the order dated 26.10.2006 in R.P.No.626 of 2001and the appeal was directed to be posted for hearing and disposal afresh.

The E.I. court held that holiday wages would form part of the wages only on the basis of the decision reported in1993 (1) LLJ 596 in Malabar Cashewnut & Allied Products case. MFA 1479/19983The judgment of the Full Bench was challenged by the Corporation before the Supreme Court. The Supreme Courtallowed the appeal by judgment dated 3.12.1997 and it was held thus:

It is not in dispute that the decision of this Court in RegionalDirector, Employees State Insurance Corpn. vs. PopularAutomobiles & Ors. [(1997) 7 SCC 665] answers the point raised in these appeals. Accordingly, we hold that the wages paid asper the Kerala Industrial Establishments National and FestivalHolidays Act, 1958 on holidays to the employees would form part part of 'wages' as per Section 2(22) of the Employees' StateInsurance Act, 1948. The order of the High Court taking a contrary view is setaside. The appeals are allowed. No order as to costs.

In view of the decision of the Supreme Court reversing the FullBench decision in E.S.I. Corpn. v. Malabar Cashewnut & AlliedProducts, the order passed by the E.I. court holding that holiday wages will not form part of wages is liable to be interfered with. The finding rendered by E.I. court in paragraph 28 of the MFA 1479/19984judgment is set aside and the application filed by the respondent herein, challenging the demand made and the proceedings initiated by the Corporation, is dismissed.MFA is allowed as above. K.T.SANKARAN,JUDGEcsl MFA 1479/19985