E.S.I. Corporation v. Gnanambigai Mills Ltd., (SC) BS83605
SUPREME COURT OF INDIA

Before:- S.N. Variava and Dr. AR. Lakshmanan, JJ.

Civil Appeal No. 695 of 2004. D/d. 19.7.2005.

Employees State Insurance Corporation - Appellant

Versus

Gnanambigai Mills Ltd. - Respondent

For the Appellant :- C.S. Rajan, Sr. Advocate with V.J. Francis, Anupam Mishra and Jenis, Advocates.

For the Respondent :- E.C. Agrawala, Advocate.

Employees State Insurance Act, 1948, Section 2(22) - Industrial Disputes Act, 1947, Section 10B - "Wages" - An amount paid to the workmen by virtue of orders of the appropriate Govt. passed under Section 10B during the pendency of proceedings before the special Tribunal on the reference qua revision of pay scales, paid by whatever nomenclature, would form a part of wages within the meaning 'wage' defined under Section 2(22) of ESI Act - ESI Corpn. can legally claim contribution on such amount.

[Paras 6 & 7]

ORDER

This Appeal is against the Judgment of the Madras High Court dated 7th August, 2002. Briefly stated the facts are as follows :-

2. The Employees of Respondent Company raised a demand for increase of wages. The dispute was referred to the Special Tribunal, Madras for adjudication. By virtue of Section 10B, Industrial Disputes Act, 1947 which had been introduced in the State of Tamil Nadu, the Government passed orders dated 15th July, 1985 and 29th July, 1985 directing certain payments to be made to the workmen pending the disputes. Both orders contained a clause that any money paid in pursuance of the order could be deducted by the employer from out of the monetary benefits to which the employee would become entitled under the Award which may be passed by the Tribunal.

3. At this stage, it would be convenient to set out Section 10B of the Industrial Disputes Act, 1947, under which the orders were passed. Section 10B reads as follows :-

4. The Respondent paid the amounts as directed by the Government. Ultimately, the Respondent Company entered into a Memo of Compromise with the employees and in terms of the Memo of Compromise an order was taken from the Special Tribunal which reads as follows :-

Thus, the Special Tribunal never went into the question and did not decide whether or not the amounts paid (under the Government order) were wages or not. It merely gave its imprimatur to a compromise arrived at between the parties. Clause 3(c) of the Memorandum of Compromise, which has been strongly relied upon, reads as follows :-

5. The Employees State Insurance Corporation claimed contributions, on the amounts paid under the afore-mentioned two Government orders. The Employees State Insurance Corporation then sought to recover the contribution. A Writ Petition was thus filed before the High Court. A Single Judge of the High Court held that the amounts paid did not amount to "wages". The LPA filed by the Corporation has been dismissed by the impugned Judgment. The Judgments of the High Court proceed on the footing that the amounts paid under the orders of the Government would be "wages" within the meaning of the definition of the term "wages" as given under Section 2(22) of the Employees' State Insurance Act, 1948. However, they conclude that as the Award of the Tribunal terms these payments as "ex-gratia payments", therefore they cannot now be considered to be 'wages'.

6. We have heard parties at great length. In our view, the High Court was absolutely right in concluding that the payments made pursuant to the orders of the Government were 'wages' within the meaning of the term as defined under The Employees' State Insurance Act, 1948. We are unable to agree with the submissions made on behalf of the Respondent that even at that stage these were not 'wages'. The term 'wage' as defined in Section 2(22) reads as follows :-

Thus, any remuneration paid or payable in cash to an employee if the terms of the contract of employment, express or implied, are fulfilled would be a 'wage'. The Government order clearly indicates that the payment was to be adjusted towards the 'wages' after the Award is passed. By virtue of the Government order it is a payment in terms of the contract of employment and therefore it would be a wage.

7. In our view the High Court has gone completely wrong in concluding that by virtue of the Award it ceases to be wages. As stated above, the Tribunal has not applied its mind as to whether or not the payments were wages. All that the Tribunal did was to give its imprimatur to a compromise between the parties. Merely because the parties in their compromise chose to term the payments 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 payment'. We are therefore unable to accept the reasoning of the Judgments of the High Court. The Judgment of the Division Bench as well as that of the Single Judge accordingly stand set aside. It is held that the amounts paid are wages and contribution will have to be made on those amounts also. We, however, make it clear that payments of the interest will be as per the statutory provisions.

In this view of the matter, the Appeal stands allowed. There will be no order as to costs.

Appeal allowed.