IN THE HIGH COURT OF KARNATAKA AT BANOALoR,E»_
OATEO THIS THE 25?" DAY OF JANUARY, 2o_;o_":
BEFORE ' l '
THE HONBLE MR. 3UST1CE C.R,;'k'U'i~iA,RjASw.A,{vs%_
C[V\-" '
MISCELLANEOUS FIRST APPEAL No,9lOQ3/2oo?.i'ES~1)'
MISCELLANEOUS FIRST A.DREA.LfA:o.9oo4[2oof7 u(''E;"S'i'')' 1' V
BETWEEN:
1. E.S.I. Corporation, "
Regional Office (E<a'r"n.atal:a) '' ' »
No.10, Binny Fie3'idS',1.,_,.' =i
Binnypet, Ba nga'iore.:.5f.6O V
Represented by é:tS'_.Reg'ion_a'lEfi:=ireCAtor},
2. The Recovery,OfvFa_*Ceif,"«., * _"
E,S.i. Cor"'§)Oi'ati'On,'
Regional Off,ECe.(KaArnata!«;a')--,_
No.10, Binny"i?iel'dS, , V
Binnypet, Banga'lo_re'--56G' O23. " Appellants
' ..... .. (Common in both the appeals)
('By SAri'.v\,/1. N_ar=AaS--iTn-ha Holla, Advocate)
ANDT" ~_
M/S. Surfa' Co'--atS"(Bangalore) Ltd,
-jj;S3,9',-.465" 'A' Cfioss,
4. EloCl<,..Rajajinagar,
V._E5a.n"g~ai-o_rge¥'gS6O O10.
."R...Re_pfreSented by its
"Joint Managing Director. Respondent
(Common in both the appeals)
(»»B,\Z’Sri. D. Leelakrishna, Advocate for OR)
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These Miscellaneous First Appeals are filed under Section
82(2) of ESI Act 1948, against the Order dated_H;”2:[%i;a2QVOi7.
passed in ESI Application i\los.10/2005 and 21/200,3on::th,e’*if}’ie ‘
of Judge, ESI Court, Bangalore, aliowing the ESI_–ap’p!–i,c_at’i’o.n.’-_
These Miscellaneous First Appeals cgovrhinggon fo’r_»_,he»ar’~ing.4 ‘thisfi,
day, the Court delivered the following”:-…V_
MFA 9003/2007 is ri1é’ed._”8’r.,dféi’ of the
Employees’ State Act’ for short)
against the order” in ESI Application
No.10/2005 ofESI Court, Bangalore,
aliowirig the n
(2) iviFA,,9ooéi;*-2.,O07″ is’l”iled under section 82(2) of the ESI
Ai:t_ ag’a.ins’t order dated 12.4.2007 passed in ESI Application
N0.2’Vii,i..5_VO.G_$lA of the Budge, ESE Court, Bangalore,
C’ ‘wv_.’Cal’l’owing Athe E51 application.
A”4’V.t~h_e”‘lC0u’;§t below.
‘V~,Cf(T3V}VlCi3–arties will be referred with reference to the status in
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(4) The case of the applicant in the Court below fi:.n>uESI
Application No.10/2005 is as under:
4.1 M/s Surfa Coats (Bangalore) Limited iS__,
this application. The applicant W coggnpaiiy’
manufacture and marketing of decorative’-paints. y.T.he:’com:pa’riy”Q
has its manufacturing units in E3an§aVVl.o’re_ H The
employees of the company Office at
Bangalore and in various units are
covered under the ;_pro’v.cii1Sion:s’of; 110 employees
out of 170 under the purview
of the E81 of both employer and
employees are respondent — Corporation in
respect of _these e”mp’lo~ye’es.”‘-
.’4:.’2–. In they co”r~–porate office of the applicant company there
is a ll/larl:.e’tin’g”.”_D.iv’i;;si’on wherein 26 employees were working
vfyduring yyea.r’f1998~99. Out of these employees, 21
4: came within the purview of the ESI Act and 5
lint.”v..em.p_lo’y-eesllfeil outside the purview of the said Act having regard
salary {irawn by each of them at that time. The
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applicant W company recovered contribution from 21 zehgible
employees at 1.75% of their salary and paid the
respondent W Corporation aiongwith its COl’ltl’lblJtl0li”…avfivA.’.:4.0755/C”!
In respect of 5 employees who wereg.not0_0a’L;
covered, no ESI contribution was die_ducte’dA.l”‘rom the-ir’..s’ai’aryj
no contribution was paid by the appiviicant – co’i.»p;::m-y.
4.3 When the matter ‘4t’n.e_…’,l§:)epiity Director of
the respondent ~ Cor_p’oratio:n”‘b’y 20.5.2000 called
upon the appHC¢nti’X’f “r’3VV0:I’Wcontribution on the
sales commi_ss.i_on”‘ip:a’idV*<go!the staff of the company.
3:} responseiityhe'.retAo."'thfe–.:app'l'ic.a"r'i«tcompany by its letter dated
16.6.2000 deniedluitsv ESE contribution on the sales
co..m«missv_i..o§ri tg….t1l'l§'__Arriarketing personnel. The first
relspyonident the.reaf'te__r by order dated 21.12.2000 directed the
secoréd:2"r.e'spon.dy-entvllv- Recovery Officer attached to the
V'7T__respohden'tzCorporation to recover from the applicant ~
.1-.comp,ahyi–.ESl"'contribution on the sales commission paid to the
.,__A.:¢__4ma.r.keting"Apersonnel. The second respondent — Recovery
thereupon issued notice dated 20.12.2000 to the
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appiicant W company calling upon it to pay Rs.2O,667/1-?"»t.On
5.1.2001 the appiicant — Company paid Rs.1o,49~s, to i’3¥’a._rcl’.,~100990;.:_Ii1.’::_t’esp0nse thereto, the applicant –
co.vmgpany.»h_yVvits letter””dat__e_d,29.8.2000 intimated the respondent
–VCorp:o’ratio.,n’th’at”‘th_e sales commission paid to the marketing
Staff and the same was being paid to them
was an incei}tE”vge.’based on their performance. it was further
.1 -pvoihjted ‘tout that a majority of the marketing personnel of the
“_V-.iap-pEica’nt ~ company were drawing emoluments far in excess of
per month and hence not covered under the ESI Act.
61/
The first respondent by its Eetter dated 11.10.2000 clarified that
sakes commission attracts ESI contribution and therefo’reV.ESI
contribution was payable by the appiicant — companyrin_jr.esp£e_ct~.
of the sales commission paid to its empEoyees_…._L:~Ap’pA.E.i:ca_ntf’4
company caicutated the ESI contijiibutiion;
commission paid to 10 of its rnVar_l4<eting*y_personnérlrwho izvé'r'e"'g
covered rsnder the E81 Act and paid sr;n"…oQ_V'f§"<V's.E3':;::}15/– for
the period from Apri|*§996 first respondent
– Corporation. The first ._it:s letter dated
21.12.2000 calledf the€;appE.i'<:ant'"»r~….5company to pay
Rs.S2,34t1:.:§t3 ttr-emperiod from April-1996 to
March-1998. A'TVhereu'p.Q.h.fi1e"a.p"p!i'cant — company paid a sum of
Rs.12,-417/–… _
t:tie._vrnatter stood thus, the first respondent has
passe"d_a-Toyordei_~v.,oriAV.f':;'1w'i.1.2005 under section 45-C to 454 of the
Act di"rect.ing=the second respondent A Recovery Officer of the
Vétcorporation to recover from the appiicant –
V"'-.:_'Vco_nn__pa.ny' Rs.52,386/– together with interest. This order was not
the first respondent to the applicant W company directly,
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but the second respondent has enclosed this letter aEongw_i_t_h his
order dated 18.1.2005 directing the applicant ~ company'–t.o–«_:p"a,y
the said sum within 15 days.
54 Being aggrieved by the V-o’rde.rs
respondents, the applicant ~ compaiinyirehals
Application No.21/2005 before Court i”o_r asidelt
the order dated 11.1.2005 is-sued first respondent to the
second respondent and the orde_r’ issued by the
second respondent t_o.t:he_ -e–.4:c’o’f9..paVny~;.
(6) legs: ‘ApVp”licf§..tioeqv44″i\io.”10/2005, the respondent «- ESI
Corporation has5.._fi%le.d VVthe’A.o”bj:e’Ctions before the ESE Court as
under llllll –
6.1-» The a.op.l%iAc~a_nt — company is chalienging recovery notice
dated 2&2.’-11;2x005f:foAi:=’V’Fts.10,172/M for the period from Aprilw1998
V’7′,_l:o <March'l'1z9'_<;;"i"'<1'{0\';,:.)'___:'
perusal of the ietter and Insurance IFlSp€CtOl"_S-…,rAépQvr"t§, ._itlis
observed that commission is paid with ternwsyarid'cohoi–i:i0ns.__aftetr'
60 days. The payment of c0i'riVn'.issé0n"'.wii-! f0rr_n7~thVleA.pail;'t
wages under section 2(22) of the ltielnce appiicant ~
company was requested to' Rs.I9",874/~ on
above wages by addressing a_lV_e'tt.er.v'dated"'~8".Ei.';;'v0V'00 and aiso by
subsequent reminde:9'Acijyai.t'ed. 'I-V."Appiicant vide letters
dated commission was not
wages. Adilptiyeant vv'a_.s.VAeiii-3;04r"tII:éd""Vide letter dated 11.10.2000
that sales :.::ommlias'sE.0n"falis-ulnftder the definition of first part of
yun;deri..y"csec't.iori .'3v3f(v2'2")AVand hence contribution is payable
andiactuj-alto' lA'IQf'.l'C("3 was issued _for the above dues on
there was no payment, C-19 ciaim for
"'~f'i2»s;2'0»,ssy7/W"-was issued on 21.12.2000 vide ietter dated
At that juncture, applicant M company reported that
"c0:'m.mission paid as reported by the Insurance Inspector is
07-._inc«!ust've of commission paid to exempted employees and paid
(/
10
contribution of Rs.1o,495/» on 9.1.2001′ Applicant hwa..s’-.ynot
furnished the full records to prove that commissi~0n4’_p’_ai-4ri;~i’s._
inclusive of commission paid to exempted»””~.eri1:pl~oyeesQ_é7-»
Therefore applicant is liable to »’pAaiarice’i”
Rs.10,162/W + Rs.10/– – Rs.1O,172/5.
6.2 Applicant did not prove of”itns._pection or at
the time of inspection or ciaim sent by
respondent ~ Corporation tti’at”‘vvere exempted
by virtue of contention is
not accepta_b.ie.uoto pay contribution as
ciaimed. :”Sintte payable, revenue recovery
action initiatediiundevr §’e_c.tion is proper and justified.
Appiication No.21/2085, the respondent –
Cor”por:at.io’rt “file.dv:”i.3bjections in the E331 Court as under:
Tyne’ applicant is disputing demand of amount of
.: –v..con.t»:ibution in respect of sales commission paid to its employees
‘A’~4″_i~._fo~ri.’tl”ieperiod from April-1996 to March–1998 on the plea that he
“paid an amount of Rs.20,532/– (Rs.€>,161/– + Rs.1,954/» «+~
€/’
11
Rs.12,417/–), which is actually due on the saies commisswiontpaid
to covered employees. The applicant is contending«’.fth.a:t’5
including sales commission many employees are,V_§o.iVVng.l.:’o:;t oi,
coverage and hence no contribution is p_aya.bl’e “on-._ttie._sa.ies’
commission paid to ‘not coveted.4_einp’loy’ees’ ewhosve.
exceeded Rs.3,000/– or Rs.E3,500/–‘0]=.rt_3x%ut_heiiasineitnier given
proper justification nor f3f’OCii_;’l”C.@.Cl the substantiate the
correctness of the payment ..
7.2 Sales –i..fgie.”_trieperiod from April–1996
to Decen1ber.~–1–99Au€S=iVs sales commission paid
for the to March–1998 is
Rs,6,-47,086/~_’ , jalill ” sales commission paid is
Rs-i8.r34r0ili3/«Ii
who verified the records on 27.4.2000
pointed out the employer has failed to pay contribution
“~-iin’~r_espect otsales commission. Hence the applicant has been
to pay the contributions. Though the employer has
“jm’adeV___some part payments totaling Rs.20,532/~, he has not
1″«-..’:fu~rnished the details as to how certain employees go out of
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coverage and he has not produced any records before’ the
insurance Inspector in order to substantiate the correct:n’ef’iss..”of
the payment made by him. Therefore the E551 Co-rporatiyonl
adjusted the amount of Rs..20,S32/~ and’-clain%ied_.;.”thVei_bVa’l–la’nce
amount alongwith interest.
7.4 The respondent further has
been issued to the ltioirgaoration,
action has been initiated b’y_._t”he 019 is
addressed to the :a’:colJ’r”ionly is Sent to the
appiicant. The d:el;.ai’1i.sa’;-of the ..r;r’a~i.rnijarr”‘arfi,ount of Rs.5.2,386/– has
been furnished ‘l ‘
7.5 ,”-me applicant” has not given proper justification nor
p-rfoVdurced”rr~the5.–.’records toévsuwbistantiate the correctness of the part
payrh-enta.rhna.d’e,byfhim, Hence revenue recovery action has
ll’litl’i3’if€dr.~v”.aifii:’Cfl is legal and in accordance with law.
“‘..j*..{8)”Ti’.hevVsum and substance of the findings of Court below
A’ as; urxderi:
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13
8.1 in ESE Appiication N010/2005, the E531 Co.t}r.t”‘ehas
raised the foiiowing Issues. I
(i) Whether the appiicant proves .
itabie to pay ESI contVr’t’tA)ot:”or.i Hon:
commission paid to tTta’r.¥€et’i,t1Q
Dersonnei as the saiiTT£>.,..i~WiJi”‘-not .3’_'”\V’i7:y’K\j,?i?*t.oVVV
wages under the ESEuuA:_t’ahd th’e.refo’re the
recovery noti,c'”e.,_date’d”‘2′?.–.i4.Z005 is iiiaibie” to
be set aside. _
(it) To whatareiiefi.th’e…;j:ppiitcyantii to ?
8.2 In issr~Ap1p:2i.e;itieh_No’.zifpzopds, the E51 Court has
raised the rot]ow_ihg’V’tis’sees2.
(i) ‘Whether-th’eVA’a..pp–!é.icaiit proves that he is not
yi’tat)i’e..,At0~”‘pa.y contribution on the sales
_ ;_…cornmissio’n——–paid to the marketing staff ?
»(i;i’)~ WtieAthe_r the applicant further proves that
t”‘r~.,.;._§.’ C}1’9 notice and recovery notice dated
v_.~i1.3.=.A2OO5 and 18.1.2005 are not
sustaihabie and therefore iiabie to be set
aside. ?
What order ?
t/’
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8.3 The Court below has observed that.-‘–.__the
Correspondence in E><.A3 and A~2 probablise applicantthaéyicynlg.
disputed the liability to pay contribution in regard
commission. When there is a dispute u'nder«.Se"ction:?i5_–»¥§,'it is;
mandatory for the Corporation to detetrnfiinie the,a*mouht"'–.of"~_
contribution payable by the concerhehdil» But in ofllthe it
case, no such determination has" 5:30, the
contention of the applicant ral justice
are not complied is:..acce:ptecil;i" below held
that the Corpora§t'i'ojfl_"~–hfais"3V'.ijot":.c–o:rti–p_ll'ed:"»SeVction 45~A of the ESE
ACE.
8.4 The VVC«.(4)_l’Ji’.t further observed that sales
co–vm’missv_i~o5n ivsdpaid to”–the___workmen for the work undertaken by
them’ un’ci.ter,th’e”sche_rhe i.e. the target achieved by individual
workman1»’It.Visu–h:otA’cI=pVaid uniformly to all the workmen. It is not
V7._«pai'<jV at an ziritlervlal of 60 days. it is paid according to the
'So, the contention that the sales commission in the
the case is a wage is rejected. Therefore the Court
Abeiowuheld that the saies incentive given to the workmen is not
3/
15
the wage and the appiicant in each of the cases are entit’io’e’d.for
refund of the amount deposited by them towards
after the period fixed for appeai.
(9) Feeling aggrieved by the order’:.of1t_he’iVCourt
ESE Corporation has preferred these_vt*wo ap’pe:ais._
(10) I have heardthe’:iearneVdmcAo’u.i_is’ei~.for axppeilants
as weil as the iearned cousnei fo~r_the”‘résp–o.nd–é_nts~.
(11) Learned ‘i”o.r_t1t*.e a;–;rpe:.1arits’VVsubmits as under:
:1.1 LearVn’ed{5v_Cou;’nVse_l:”for th.e%appeJ|ant ~ Corporation
invited the attention Ex_.R1(a) dated 19.1.2000
which is as.Letter”‘written applicant — company to the
C’orp”orati’on’ v,i=here.iAn it is”‘i’n’dVicated that the sales commission is
paid’ personnei at the r.ate specified in the
Vi”ri..a’;3pointn”i,e’nt or.der_. Learned counsel aiso invited the attention
Court _to’1-Ex.R1(d) which is the appointment order issued
Parnpana, Sales Representative. In Ex.R1(d) it is
. v-V:i”p.-d’iV’c’ateTd that he is entitied for saies _comi”nission at 0.25% on
D’
16
net collection as per the terms and conditions prescribed iiy”‘»t.he
company, after confirmation of service.
11.2 Learned cottnsei further invited the atte_n_jt.i.on:.C.:of4_this”
Court to the definition of ‘wages’ as §}E:*i’:;:.’S€CVtL::i.<Q'r]':,
Act. 'Wages' means aii remunerati_on paid or pay.a".i;;§e'; in Cjash
to an emplovee, if the terms of th"e««V.:.:Contract*.o'f:e'i'i'ii$ipyment,
express or impiied, were fuitm-ed. that
the payment of saiesycommissi'o.n'is':par"'t.:VVo'i.:'."t:ifi'e appointment
order. So the term épiettainiinyg commission
is mentioned in Therefore saies
commission appi.-Canpcompany is
tiable to pay the to the ESE Corporation.
11..3.i.i#earnedV”coi.in_sei. aiso invited the attention of this
Court» to -E_V>V<.A:–1.2v.Vst'atement, wherein it is indicated that sates
commission monthly basis. Therefore the contention
Wpf the apupii.cant"t'hat the sates commission is paid beyond 60
.1 .dfa\,%'g.camot'i;e accepted since Ex.A–12 statement cteariy
C"~"gind.i.t.–ate:sCthat the sales commission is paid on monthiy basis.
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17
11.4 Learned counsel for the appeélants further submits
that the figures or the calculations in the records maint4a..in~e_d~.i’n
the applicant office are not in dispute. The question.lV_ls”Whe–the-:__” _
the sales commission paid to an employee constitutv-esflwlaigesg or “=
not. Therefore Section~45 of the E31 Act mia>,i.:’no’t..be’ Vap’p’ii:ca’b’ie_r’
to the facts and circumstances of vtheacasel.’-.. In Wofl his
contention, he relies on the decision__<of-_t_hi–s_g Couitinl the} case of
M/s SIDDESHWAR AND c'orMfPAAN'§r, ;irLJ'aLj1.'jugs. EMPLOYEES'
STME INSURANCE CQRPOR/ii-1.oi\i,'–sAsN€§Av_Loii.E"'ANo OTHERS
reported in it isheld as under:
5* (c) ” iig:t?~l.PL€f4§>§EE:s”{_’ srA5rE”‘ INSURANCE ACT,
1948, W Contributions ~
Determinafrl.40″». of arrears of –
Rec;ui’r’ement o»§_gVi’v”ir3gV’employer opportunity of being
iJbef’o.re ilnitlatiyng certificate action under
of Act — Such requirement
ifcoVntem’p’lAa”ted’iiinder Act, where figures pertaining to
pa~)’mer?q’t’of<i"wages and other relevant particulars for
V'-».detern:viVn':ation of amount of arrears of contributions
areculled out from books of accounts maintained by
employer himself — Certificate issued cannot be held
~~-bad m_ereEy because employer was not heard before
it was issued.
5/”
18
HELD : In the present case, there is no dispute that
the Insurance Inspector inspected the records…__
reiating to the matter in the premises of
appellant’s factory and the appeiiant aiiowed it_;’i:’o
inspected. The Inspector, thereafter, found I
actuai figure with reference to eachCOntri_’butio’ns’4 as._’x
has to be made without any o.b}e:;:tion
employer, The Inspector d.ird__ performed of to
énsilecting records and on th’e_R’t>asis of._Vre»co.rdsr:he
assessed from the amount pa–i–d…’to_w*ards thev–.wa<'_::;es
amounting 'to Rs.6,9"€i,V:€a2A5€93j_b'7vpaiosfenmduring the
reievant period.' In such"circumsta'nces',jV«there was
no quie'stiion;':ii,ofAo;:fS'ect'i*o'n- 4S"f'A""oo4being applied or
beconi'mg'– 'app'licf;,.b}:ie..,v4'to_l"the' facts of the case.
Recourseamay be adde,.d:"'to4'§ection 45"/A proceedings
oniyin cases ._where either no returns or particuiars
.__or .fre'gisters_ or reoco—rd«s' are submitted or furnished or
»ma»!nta.,in'ed'«.,_oby__ the Company or in cases where
o"'I.ns'pect'oraQ_rfofficial of the Corporation referred to
under S.e~c't;i4{:.–no 45 are prevented by the principal or
immediate employer or any other person from
:f..ex'e~r_cising his powers and discharge his duties. In
the present case, neither of these circumstances do
__appear nor has been reported. So there was no such
circumstance and conditions in existence in which
3/
19
question of obligation under Section 45–A would
have arisen.”
11.5 Learned counsel for the appellant further vsul’ljrn.i.ts
that no issue was framed by the Court oelow thatjthefr’e..’__:was
denial of opportunity to the applicant to case.”
Proceedings under section–75 of the ESI Aéctjj.areithe4’or’vi.o’in.al1′
proceedings and therefore the applicant ha_d”full to
establish their case.
(12) Learned counsel .fo’l=..ythefreispond:e’n.t/applicarlt in both
th e a p p ea l s so l3i’TE s;’ij§:.ri’cl ei i
12.1 Court is invited to Section
2(22)(c) of’theu’E”S%IM to Section 2(22)(c), wages
doesy”notffinc_l_ude paid to the person employed to
dei’r–ay.=specia.ly:_’e${pen-ses entailed on him by the nature of his
hm”i»–._employme’nt”.A sales coihinissioripaid by the applicant ~
_:%_i&r~.c.onépany to~.the employees come under defray special expenses.
‘1._’_’Tlj1eirér§Vrie”it is not wages.
e//
26
12.2 Learned counsel for the respondent/applicant further
submits that the incentive or the sales commission is.._no4t”o_n
monthly basis. It is purely paid on the performa1fi.ce”i».oVf–.:t:l1.e__’_
individual employee. Amounts pertaining to sa–le’sv–c:on1’rnissVion4
are paid only after 60 days. The contents’of’ E«:«:…i’–\li–.’:1″;”‘2’arei..__n’o:t_*A
disputed by the applicant. This E>€.A_-x12 fugrniishecl.._inWo_i3’dedr
to indicate that the five employees not un’de_r theipurview
of ESE Act because of the wag_eif|im;:_t. ; ”
(13) In both applicat«ion.s’;~?theVPersonal Manager of
the applicant ~ ie>(a.;rri.ii’ied as AWW1 and he
has filed chievf~e’xamvinatiognl an affidavit. Its contents
are as under:
itV.”–.1’3′;lv3.€’A5li’»la1″l’statesvviiiiinivhis evidence that the applicant —
comipahyg.”fe’g_istered office at Bangalore. The applicant
v:’._iz””‘4’vCompany in the manufacturing and marketing of
….i’§d-e««co.<.ative liffitnts. The company has its manufacturing units in
it"–.l3a._rig'aAlore:.and Chennai. He further states that 110 employees
7o'ut..Qf__i7O employees of the company come under the purview
ofthe E81 Act. He further states that in the Corporate Office
9/'
21
of the applicant »~ company there is a Marketing iDiv’l–E.__sion
wherein 26 employees were working during the yearwi9:982§99’~…
Out of these employees, 2: employees came withinthe.pdryilewlg’ 9′
of the ESI Act and 5 employees fell ouitsidei«theppiiryligew
said Act having regard to the salary draiwni’-by’ each-.l.of..then:€’*a0t”~
that time. in respect of’ 5 employeegs w”ho.wer_”e all
eligible to be covered, no ES; con.l;i’r’i’im’ti’on”-was de’cl’Lrc’ted from
their salary and no contribution;_was.l3et1ai_re:d0’_’t.o’ be paid by the
applicant ~ company
13.2 AW–:;i.._ ldrfithellr ‘ the respondent —
Corporation by ‘-its .let’té:if».,g:da,t4edc:_:V’1*–8’.8.2000 as per Ex.A4 called
upon the applicantito pvay’uE:S’1″contribution at 6.5% on the sales
commission. of”Rs.3,n0″5-;7{l_5/.- for the period from April~1998 to
Ma’r_ch-Vjj9»99 ‘sliVii*.<i___of Rs.19,873/'~ failing which the same will
'."»._be recoyheirieduvil'ri"i;l.e'ii:=hV'section 4S–I of the Act. The applicant
Vfcorrigpany.asen"t_a.'"repiy thereto by its letter dated 29.8.2000
.1-avlvohgiixvitliiacopy of the Salary Muster of the company for the
"March 1999 showing the salary particulars of its
'V'-.._Ma'«ri§eting Personnel for whom sales commission was payable.
§
22
He also states that no ESI contribution was payable on the–“s_ales
commission paid to the four sales personnel viz. S. ;,3y~atgimna,k
M.R. Satish, R. Jayarao and C.l\l. Madhuranath
covered under the E81 Act.
13.3 In ESI Application No.21/2OOS’,__thenPers.o_na’l.lVi=an’ag–e:r”~_
further states that in the Marketingflllisivisiovszxof aipplllicawnt – 9
company 14 employees were.wor.i_’syaA9lai95y_ .’_c’ontvrIb.u’tion was payable by
the applicant’conipajr}_y in7_r’esp’e.c’t of those persons.
13.4 In NO.10/2005 during cross-
e;{_a.n1inat,io;ny AW»1 u¥~”Per_sonal Manager states that applicant —
co’mjpany., pai<l:R.s_.10,000/» and odd after the receipt of the
notice.~_l§'§–..VithVe'aC'orp;o'ration. This according to them is the
deacon-tribaition. towards the coverable employees regarding sales
4: .fc:'cm{i1fiiss'io4_r3, vV"'During 1998w99 salary was paid through bank.
V"of'lfifrneli'.-saAi'–dllprocedure is adopted to all the staff. Before crediting
3.929'»._VAth'e:VVVa'n§oLint, they prepare a wage bill. For the year 199899,
6/
23
wage bill is available. The said documents are not produceci
before the Court. It is true the wage bill will depict.é.a’btoE2ttj”t.heV
employee coming out of the coverage or not.
13.5 In ES1 Application 2
examination, AW–1 ~ Personal Manager staVtes..th.at_i no
acknowledgment of the respective wot E”>{§£\’1t’3~’:, letters
being served upon the respective items are
typed, certain items is not signed
by any of the perfson_~oi’*tlh?eir The account books are
not prod Ex./A2, they have not
produced any”doc-urhentsiifolr’v.e:r’i§’ication by ES: Corporation and
to probabiise ‘thé’u”i”%LilA”i”ibv.’:”F of workmen, who have gone out of
Cidk/V.€fil’ag§'”g..:-ii. aimp’nii’;i E><.A.6 7 is paid towards the
salesinVc.lAen'tciy:e»i..: "itgi.s_j.for the years 1996~97. Ex.A6 and 7 are
contribéutioinooaidlw in pursuance of a letter addressed by ESI
"–«iC»u«tpo.rationand that they are not regular contributions paid by
The contribution claimed by the Corporation is
"iTiucVh_higher than what is paid in Ex.A6 and /~'\.7. Ex./AS and
will give the particulars as to the basis on which they have
(/4.
24
arrived at the figures mentioned in Ex./i\6 and A8. is
the xerox copy of the document to show the
to SBI, but it is not clear. They have lost original…,’V_’4’FoVrV some l
the workmen, they have paid contribution:A4yi’ri;r:’i”udiirigv–.ifo.i:~.,§’aAle_si’
commission. It is not true to say: that th.e”‘ciaim:.rria.d:e:by:the
Corporation is proper and that thei’c’..aV’p;;;l_ican’t*_.h_as’:toligpay the
same.
(14) The respohndenltl” C.’oir.poVraVtio,n°’has examined
Insurance Inspector VRX/V-1 in both the E81
appl’ications.__..lri.e_’st.a’te’s1;;i_n_tiis’e§{ami-nation in–chief which is filed
by way of l ‘
Rvl/-1.State4s”tha’tV.ri*e h-adgvisited the applicant — company
arid’ es.tter’,.r.ianceregister from 1/97 to 11/99 and ledger
has prepared a report of his visit and
it to.._the ,R.eQional Office. He aiso found sales commission
*4-l«l..b,ein’g-».paid to._the employees and after enquiry, he has collected
yletter_ the employer. He has requested the employer to
some more documents. They have given a letter
ityisayiilng that they are not readily available. They have coilected
g,/”
the sample copy of the appointment order to know onVg””w,hat
basis the sales commission is paid. It is marked
C-18 notice was marked as E>)”llt:l.’ll’_).LA_J:’t.iVC\54l’l’ K V’
claimed on actual basis. According to h’im,'”sal_e’s_ comm’:-ssVio’n’ is7
part of wages. At the time of inspec-.f:on~,._ no recorci’s’g’sh’own”to’
him to show how many number oi”wuo”r’»kmen’Wll’l’go out of the
coverage.
(15) During crossj.e><a.n'i'i'riation; that he has
inspected the is the inspection
report and RJg.2__isV't'~h.Ve:"o1ay:eVri also states that it may
be true to in has contended that as the
amount is paid "asf_'t.er_7VS' wage. As on the date of
th.e.factsv_..cj.{f: case," ceiling was Rs.6,500/~. As per
A.S._Vadjdiressehdv.pt0:«"th__e Corporation, the applicant might have
conten'ded.l'as's«O'me;fof the workmen have gone to the ceiling
V1f__lim:t, tlieu"a.p"plVica"nt is liable to pay the contribution. The
.1 -.app'li<.A.6.
'*."V.._A.6.'.-showsi the coverable and non coverable employees list as
pe-rthle submission of the applicant in it.
6/.
26
(16) The contention of the learned counsel
appellant ~ Corporation is that the sales
under the purview of the wages. In thisconnectio’n;’-a’jre’i”ere.nce
has to be made to section 2(22) of the tESE.:VAct._._l 3
reads as under:
“Wages means all reniu.nera’tli’o’n’ payvablé, in
cash to an ernplovee, ot’rvV:tfne”‘contract of
emifiloyment, exmessor”»i-r%i&Dl’i’e.d”ic,_gw.e’_re:'”fuliiiiled and
inciudes any respect of
any periodiof au_th’o:r–is.e4dV:d’l.eAa’y’~eyi–lockout, strike which
is r1ot”l”itil’e.ug};:hl “:3; iayfoff other additionaé
remun’eration,V intervals not exceeding
two rnontuhs,iibutvdioeis r4i’.o–t,pginVclude-
contri’but–i-o«ri’ paid by the empioyer to any
peii.sio:n*–.fund, or under this Act;
allowance or the value of any
A V traveliliiniig allowance.
(c) ~~an*y sum paid to the person ernpioyed to defray
” speciai expenses eotaited on him by the nature
of his employment.
Any gratuity payable on di.si:harge.
€,/
27
(17) Ex.R1(a) clearly indicates that the sales commission is
paid at the rate specified in the appointment order.
an appointment order issued to Mr; \/ijay
applicant – company. In this appointmMen_t order,”‘-iit’_’:is””cle.ariiy
indicated that he will be entitled to sales cp’mr’niss_io’n:”‘at'”Q?’2yS’%:
of net collection as per the terms’a’n.d conditions’pres’cr.i.bVe-d by 2 L’
the Company, after confirmation of _thVe».yseiryice:’ ‘–«$vection 2(22)
of the E51 Act defines the anciidit means–.,all remuneration
paid or payable in cash to:.ian- terms of the
contract of emp|oy.men5t_”l,’V__.;_e><pre'ss {)E'..'«~§.":7¥;"tl!r')'ll€d'y"V'»'\lE'3l'€ fulfilled. In
the instant :case,"r*p.aym'c§n't oiflsales. Vcoinrnission is as per the
terms of the7contract_'off.em.pl'oyment and therefore it comes
u rider the purview' "0f:Vthe..'-wages}:
.A{‘1’8..)_ On’e..o-f_tla.e contentions urged by the learned counsel
for thle~res.p’on’de’n–t flhalppllcant is that the sales commission is not
Xnpairl on “°ino”nt.h’l’yi basis and that was paid only on the
4. .ypVe’rf’oi.rmance of the individual and hence it does not come under
of wages. But Ex.A«12 statement prepared by the
‘”<.__Vap'plic'a'nt M company clearly indicates that sales commission was
2;,/'
28
paid on monthly basis. Therefore it is difficult to accept the
contention of the learned counsei for the respondent – applicant
that the sales commission does not Come under the pt:vrv:i”e_ifv-._of
wages.
(39) it is also undisputed fact that…manage’m’ent:V.is’*pVayir:g
the sales commission to its employees. its “in.dicate~d’i.n:
terms of the contract of employme’nt”‘of theiapplicainitiiéfcompiany.
Such being the case, the__employ_ei*._holdino.'”that the sales
commission is not a wage ca’rino.t be Further the sales
Commission paid by the ap,p’l’ica-nit 9 a part of the
contract of eafnp–loy’oéev:.i’t-…_”iTherefore’ it comes under the purview
of Section 2(22)iorthees’i.”A»rc.£;”_;iv ‘
trial Court—mainly reiied upon the decision of the
irlonflale in the case of Whirlpool of Endia Limited
repoiéedcii in 2000-1 Lu 1101 wherein the Hon’ble
..h_if:Sup’rerne Court: has observed that the employees of the company
“..:wer’e.”gyive’n ‘production incentive’ under the scheme every
‘ V-‘:fq-iiJ’a’rter%ly and held’ that payment of ‘production incentive’ does
fl_”‘ino’4t”fall within the definition of wages. But the facts and
2/’
29
circuinstances of that case and the facts and circumstan’ce.s of
this case are distingiiishabie and hence the said deciis.i.o_n.’:’_i’s”;n»ot_
appiicabie to the facts and circumstances of the pre»s’e.nt’:5_a~se.% T
(21) Learned counsel for the app’e.i«ian_’tsi~’also o’ir–*.,tii’*.ie
decision of the Hon’b|e Supreme’Co”u.rt in”th:e .c_aseAof’.i~W.eE-~iimariif
(India) Private Limited ;__.s. insurance
Corporation reported in V wherein the
attendance bonus pay__ab|e:.””a’s tsettiliiement in the
conciliation proceeci»ing’s:iiie’ie:’t_re:a’te£;iV In the instant
case, the sales_””c.o’nfn:§i:’_sVsion per the terms and
Conditions the ovf’i.ei’i1–.pio:yment. Therefore the sates
commission can–_pe since it fails under the first
part of S.C.:tj.tiVOi’i 2(22n’)”of:Vt_h_e_:”:SI Act wherein the wage is defined.
1,’ (22) H.’i9.:’A.(:’iEJvSE3 of GEM AND COMPANY, MADRAS .\/s. Est
coizéiioR7Artovi\i”;_.._,’_Mri;i3’i:As reported in –2080-II-LL} 68 the High
Court oi” Madras has observed that the Management has
.:’ad’n’i,iv:tLie:i__’that the sales commission can be received by the
i’–.V_.er.njp|oivee’s even once in a month. Such a situation wouid
attract the latter portion of section 2(22) of the Act
V
30
being additional remuneration paid at the intervals not exceeding
two months. In the said decision, Madras High Cou’r.tj_h’a,s
observed that though there was no specific contract’..tietviee’n”lthe
company and its employees regarding vpayr-nent–‘_,of_.
commission, it was being paid for long r:un;.ber otyiears«.wi.th~ou’t._
any interruption. Where a con’d.lt’i~on of ~._service been”
implemented regularly, it coulggd assu’i’n.e_:’thVestatus’of implied
agreement between the parties._l_” ”
(23) I have” evidence of the
applicant as well..,.as._Vt’«_he V”resp’io.nd_e’nt and also the contentions
raised by thefllearnedco:e_nsegl”l’fo_:r”the appellant as well as learned
counsel for thel.__re3,pon.d’ent”sw..1:1.”The terms of the contract of
evm.ploym.e.nt’V clearlyu’i’nd.i,ca_tes that the sales commission will be
paid’ to;’irt»s_,Vemp«l.oyeev$_ once in a month. Therefore it is difficult to
accept’–t:he.’co’nt’e”ij.tlt:.nof the learned counsel for the respondent
V’7T__tha–t the corninission is not the wages. Therefore the
.1’ir_eco”rded by the Court below that the ‘sales
°’~4″_V-,(:o–:i5im’issE’on’ given to the workmen is not a ‘wage is not
V
3}.
sustainable in law and the same is liable to be se{e’..a”s.ide
and accordingly, the said finding is set aside.
(24) It is the contention of the learned :h’e–.,
respondent ~« company that eventhopgn so»mejj.o’§pth,e ’em.pi.Q’yees’
were not coming under the purview of th._e’ESI AcitiVVb,e_cau’§;ex’of:”‘;
the wage iimit, that evidence has adduced by
the appiicant. He also seei<s_"for toeistabiish this
fact. "{he applicant intend of employees
who are drawing the date amount
feil due to the i 'H
(25) The ire-arnVeuo'ifpojonsée-i_lfbr; the respondent–applicant has
taken a contention"that't_h4ere' denial of opportunity. Section-
4$_.–_A of "ESI /aict-s.h_a__s__.been made so as to enable the
Cor=po»rati-o_n to=.c1*e,tern"aine the al'l"lOE.Ei3.t' of contribution in cases
where thie—.em'pio'.yerfxrefuses to cooperate or fails to abide by the
Viflreie-yant p"r'o.vii"sio.n's of iaw. Section 45A of the ESI Act can be
.1 'mypthe event the immediate empioyer or the principai
is'v7fem.p'l–oy'er»'"obstructs the inspectors or any officiai of the
tii"-.__Co'rporation from exercising his functions or discharging the
0/
32
duties. it is relevant to observe that under Section of
the E51 Act, there arises a statutory presumption in
EI Court that the order it had passed under sect.ioAn”vi.;i’$iA.§:A(._1)3o”f._
the Act was sufficient proof as to]:theigégicialiimigof:4’ttierESi’
contribution. Again proceedings _a;nder’–usection:7″SiV.o:f tithe;
Act being the original proceedin’g’s.,z_V”the Vap.p’lVic’ant.’:’:§had full
opportunity to estabtish trieiricaset.itifijaliigrgge.the Vvglgfiientgon of
the learned cousnel for the tl’i’at is a denial of
opportunity has at this stage.
However in the employees who
were than Rs.6,500/- per
month at the VVreleva.nza-‘:point_:’oi'”time, an opportunity has to
be given, to tlhei’respondent/applicatrt. Therefore
have arr. opportunity to adduce
evirflancie to this point before the ES! Court.
this»…4__vIin1i’te”ciiAlpoint, he can adduce evidence and
” ~ ..éS«tabIish h}S__ ca se.
view of the above discussion, I pass the following:
I/
33
ORDER
1. These Misceiianeous First Appeals are aiiowed in
2. The finding of the Court beiow with regard—…
commission paid to the workmen is no’t”‘a’wage is_.set-7.asid’e;’.~
3. in the instant cases, paymentgof saies”‘comm,i~s.s.io’n”comes”
under the purview of wages i.e. S-eiction (VH2). . su.b_¥_seVCtiVon s(’22) it
of the Erripioyees’ State In;_s.urancge—.A:ct}._ i=9_48.
4. These Misceiianeous First to the Court
beiow. The appiic_a’nt_ “* Vperniitted to adduce
evidence with ;eEn§io’yiees who were not
coming under€tVhe:j_44_pi;rvv.i’eiN4:o’t.’iV’thA:e” in view of the wage
iimit during”‘iiniie_feie§}i:é;Vnt p’erV.i’od .”f’o’i{iy on this iimited point,
respondent -~* appi’iic;§nr’caViiaadi;ce evidence and estabiish its
case. Afte’rg4conciusi”on oi:°””t.h4e.’ti’iain and arguments, the triai
Court shail give’ aafiri’dvi’nQ.”‘on.”this aspect.
shaii dispose of the matters within six
of receipt of copy of this order.
Sd/=3
IUDGE