S. Siri Jagan v. Regional P.F. Commissioner

S. Siri Jagan, J.=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-=O.P. No. 21636 of 2001=-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=Dated this, the 7th September, 2009.J U D G M E N TThe Regional Provident Fund Commissioner,Thiruvananthapuram is the petitioner in this original petition. He ischallenging Ext. P4 order of the Employees Provident Fund AppellateTribunal, wherein the Tribunal set aside Ext.P1 order of the petitionerholding that the interim relief and special allowance paid to theemployees of the 1st respondent is not exigible to contribution underthe Employees Provident Funds and Miscellaneous Provisions Act,based on a judgment of the Madras High Court in E.I.D. Parry(India) Ltd., v. Regional P.F. Commissioner, Tamilnadu, 1984 (1)LLJ, 300. On an inspection of the books of accounts of the 1strespondent, the 2nd respondent found that the 1st respondent had paidto their employees interim relief at the rate of Rs. 300/- per monthand Rs. 50/- per month as special allowance in respect of which nocontributions have been paid under the Act. By Ext. P1 order, thepetitioner directed the 1st respondent to pay contributions in respectof those amounts also. The 1st respondent filed Ext. P3 appeal, whichwas allowed by the Employees P.F. Appellate Tribunal by Ext. P4order holding that contributions are not payable in respect of thatamounts. That order is under challenge before me.2. According to the petitioner, the interim relief is paid aswages and special allowance is being paid as remuneration for specialservices rendered by the employees and therefore the same formspart of basic wages as defined under Section 2(b) of the EmployeesProvident Funds and Miscellaneous Provisions Act, 1952. Simplybecause in the agreement between the 1st respondent and theiremployees, there is a clause that the said payment would not becounted for the purpose of payment of provident fund, bonus etc, thatwould not take the amounts out of the purview of 'basic wages'. O.P. No. 21636/2001 -: 2 :-Learned counsel for the petitioner submits that the decision in E.I.D.Parry's case (supra) is distinguishable on facts and even otherwise,the said judgment is against the express provisions of the Act.3. Counsel for the 1st respondent argues in support of Ext. P4order. According to the 1st respondent, the payments in question areidentical to the allowances paid in E.I.D. Parry's case (supra) and inboth cases, the agreement between the employer and employeescontains a provision to the effect that payment would not be countedfor the purpose of payment of P.F contributions. Therefore, the ratioof that decision is squarely applicable to the present case, is thecontention raised by the learned counsel for the 1st respondent.4. I have considered the rival contentions in detail.5. It is admitted by the 1st respondent that Rs. 300/- p.m. waspaid to the employees of the 1st respondent from 1st August, 1998 asinterim relief and an amount of Rs. 50/- p.m. was being paid as specialallowance from 1-4-1996. This was paid under an agreement, whereinthe employer and employees agreed that such payment would not becounted for provident fund contributions, bonus, gratuity, ESIcontribution etc. I am of opinion that the liability to pay contributionsunder the Act cannot be governed by the agreement between theemployer and employees. Notwithstanding such agreement, if apayment comes within the definition of 'basic wages' as defined underSection 2(b) of the Act, contributions are payable in respect of thatamount. 6. Section 2(b) reads thus:“(b) “basic wages” means all emoluments which are earnedby an employee while on duty or on leave or on holidays withwages in either case in accordance with the terms of the contractof employment and which are paid or payable in cash to him, butdoes not include-- O.P. No. 21636/2001 -: 3 :-(i) the cash value of any food concession;(ii) any dearness allowance (that is to say, all cash payments bywhatever name called paid to an employee on account of a rise inhe cost of living), house rent allowance, overtime allowance, bonuscommission or any other similar allowance payable to theemployee in respect of his employment or of work done in suchemployment;(iii) any presents made by the employer.”In this case, Rs. 300/- p.m. paid to the employees is described asinterim relief. Interim relief essentially means increase in wagessubject to final agreement regarding the actual increase to begranted. It is admitted that in the agreement, there is a specificprovision that the interim relief and special allowance being paid shallcease to be paid from the date of implementation of increaseminimum wages notification in respect of private hospital issuance ofwhich is expected soon. That being so, it is more than evident thatsuch payment is in lieu of increase in wages. If it is increase wages,then I do not think that that can be taken out of the purview of thedefinition of 'basic wages' in Section 2(b), in which case the 1strespondent is liable to pay contributions on those payments also. Soalso, the special allowance is paid for special services rendered by theemployees, which are emoluments earned by the employees inaccordance with the terms of the contract between the employer andemployees. Therefore, the special allowance also answers thedefinition of 'basic wages', in which case, contributions are payableby the employer on that payment also.7. I am satisfied that the decision relied on by the Tribunal andthe 1st respondent is clearly distinguishable insofar as in thatjudgment, the court was considering the case of payment of an ad hocallowance and not any payment towards wages at all. Even O.P. No. 21636/2001 -: 4 :-otherwise, simply because the employer and employee, by agreement,decide that contribution is not payable in respect of a payment,liability under the Act cannot be avoided, if such payment answersthe definition of 'basic wages' as defined under the Act. If it is heldthat the employer and employee can, by agreement, avoid payment ofcontributions in respect of certain payments, that would be againstthe provisions of the Employees Provident Funds and MiscellaneousProvisions Act, 1952 and in fact would lead to very disastrous results.Therefore, even if the facts of the case in the Madras decision arecomparable, I am not inclined to follow that judgment, insofar asI have no doubt in my mind that the payments in question answer thedefinition of 'basic wages' under Section 2(b) of the Act. Therefore, Ext. P4 order is clearly perverse and accordingly thesame is set aside, restoring Ext. P1. It is made clear that the 1strespondent is liable to pay contributions in respect of payment ofinterim relief and special allowance as directed in Ext. P1 order andthe petitioner can recover the same from the 1st respondent as per theprovisions of the Act.The original petition is allowed as above. Sd/- S. Siri Jagan, Judge.Tds/