Employees State Insurance Corporation and Ors. Vs. Mangalam Publications (I) Private Limited - (Supreme Court) (21 Sep 2017)

Interim relief paid by the Employer to its employees is not a "gift" or "inam", but is a part of wages

MANU/SC/1198/2017

Service

The judgment passed in Insurance Appeal by the High Court of Kerala is called in question in present appeal. By the impugned judgment, the High Court allowed the appeal filed by the Respondent and set aside the order dated passed by the ESI Court. The only question to be considered and decided in present appeal is as to whether the interim relief paid by the Respondent to its employees, during the period from 1st April, 1996 to 31st March, 2000, is to be treated as "wages" as defined under Section 2(22) of Employees State Insurance Act, 1948 and if so, whether the Respondent is liable to pay the ESI contribution.

A plain reading of definition of Section 2(22) of the ESI Act makes it amply clear that "wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of the employment, expressed or implied, were fulfilled and includes other additional remuneration, if any, paid at intervals not exceeding two months. But payments made on certain contingencies under Clauses (a) to (d) of Section 2(22) of the ESI Act, do not fall within the definition of "wages". The interim relief paid to the employees of the Respondent in the matter on hand, will definitely not fall within the excluded part of Clauses (a) to (d) of Section 2(22) of the ESI Act, as such payment is not travelling allowance or the value of any travelling concession, contribution paid by the employer to any pension fund or provident fund; sum paid to an employee to defray special expenses entailed on him by the nature of his employment; or any gratuity payable on discharge.

The Employees' State Insurance Act is welfare legislation. It has been enacted to protect and safeguard the rights of the working class. Its preamble states that, it is meant to "provide for certain benefits to employees in case of sickness, maternity and 'employment injury' and to make provision for certain other matters in relation thereto". The Employees' State Insurance Fund set up under this Act, survives primarily on contributions paid to the Employees' State Insurance Corporation (the Appellant). All employees insured in accordance with this Act are entitled to benefits under the Act. Undoubtedly, the literal meaning of statutory provisions cannot be ignored. However, in cases where there may be two or more ways to interpret a statutory provision, the spirit of this legislation warrants a construction that benefits the working class.

The inclusive part and exclusive portion of the definition of "wages" clearly indicate that, the expression "wages" has been given wider meaning. Under the definition, firstly whatever remuneration is paid or payable to an employee under the terms of the contract of the employment, expressed or implied, is "wages". Secondly, whatever payment is made to an employee in respect of any period of authorized leave, lock-out etc. is "wages". Thirdly, other additional remuneration, if any, paid at intervals not exceeding two months is also "wages". Any ambiguous expression should be given a beneficent construction in favour of employees by the Court. The Act has to be necessarily so construed as to serve its purpose and objects. This Court in the case of M/s. Harihar Polyfibres v. Regional Director, ESI Corporation, has held that, the definition of "wages" contained in Section 2(22) of the ESI Act is wide enough to include House Rent Allowance, Night Shift Allowance, Incentive Allowance and Heat, Gas and Dust Allowance.

The High Court while allowing the appeal filed by the Respondent has mainly relied upon the office memorandum dated 19th August, 1998 issued by the Department of Public Enterprises, Ministry of Industry, New Delhi, which is not applicable to the facts of this case. The said notification makes it abundantly clear that, the instructions contained in the said office memorandum are applicable to Central Public Sector Enterprises (PSES) only. Admittedly, the Respondent is a private limited company and hence, the instructions contained in office memorandum are not applicable to the Respondent Company.

In the matter on hand, the Appellant claimed ESI contribution only on the amount paid by the Respondent as interim relief to its employees, treating the same as "wages" as per Section 2(22) of the ESI Act. The amount paid as interim relief by the Respondent to its employees definitely falls within the definition of "wages" as per Section 2(22) of the ESI Act. On the other hand, the High Court has observed that, the interim relief paid for the period from 01.04.1996 to 31.03.2000 can only be treated as "ex-gratia payment" paid by the employer to its employees and cannot be treated as "wages" for the purpose of ESI contribution. The High Court has ignored to appreciate that the effect of ESI Act enacted by the Parliament cannot be circumvented by the department office memorandum. The High Court has also failed to appreciate that the payment of interim relief/wages emanates from the provisions contained in terms of the settlement, which forms part of the contract of employment and forms the ingredients of "wages" as defined under Section 2(22) of the ESI Act and that the Respondent paid interim relief, as per a scheme voluntarily promulgated by it as per the notification dated 20.04.1996, issued by the Government of India, in view of the recommendations of "Manisana' Wage Board, pending revision of rates of wages. It was not an ex-gratia payment.

In the case of Employees State Insurance Corporation v. Gnanambigai Mills Limited, Supreme Court observed that, merely because the parties in their compromise chose to term the payment as "ex gratia payments" does not mean that, those payments cease to be wages if they were otherwise wages. As stated above, they were wages at the time that they were paid. They did not cease to be wages after the award merely because the terms of compromise termed them as "ex gratia payments".

The interim relief paid by the Respondent to its employees is not a "gift" or "inam", but is a part of wages, as defined under Section 2(22) of the ESI Act. In view of the above, Supreme Court held that, payment made by way of interim relief to the employees by the Respondent for the period from 1.04.1996 to 31.03.2000 comes within the definition of "wages", as contained in Section 2(22) of the ESI Act, and hence the Respondent is liable to pay ESI contribution. Accordingly, the instant appeal is allowed, the impugned judgment of the High Court is set aside, and that of the ESI Court is restored. The Appellant is held to be entitled to recover the ESI contribution from the Respondent for the period from 01.04.1996 to 31.03.2000 as per demand notice dated 02.11.2000.

Relevant : M/s. Harihar Polyfibres v. Regional Director, ESI Corporation, MANU/SC/0198/1984: (1984) 4 SCC 324, Employees State Insurance Corporation v. Gnanambigai Mills Limited, MANU/SC/0426/2005: (2005) 6 SCC 67

Tags : INTERIM RELIEF PAYMENT NATURE