{"id":157734,"date":"1999-04-29T00:00:00","date_gmt":"1999-04-28T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/handloom-house-ernakulam-vs-regional-director-esi-on-29-april-1999"},"modified":"2016-11-30T21:12:28","modified_gmt":"2016-11-30T15:42:28","slug":"handloom-house-ernakulam-vs-regional-director-esi-on-29-april-1999","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/handloom-house-ernakulam-vs-regional-director-esi-on-29-april-1999","title":{"rendered":"Handloom House Ernakulam vs Regional Director, Esi on 29 April, 1999"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">Handloom House Ernakulam vs Regional Director, Esi on 29 April, 1999<\/div>\n<div class=\"doc_author\">Author: Thomas<\/div>\n<div class=\"doc_bench\">Bench: S.Saghir Ahmad, K.T.Thomas<\/div>\n<pre>           PETITIONER:\nHANDLOOM HOUSE ERNAKULAM\n\n\tVs.\n\nRESPONDENT:\nREGIONAL DIRECTOR, ESI\n\nDATE OF JUDGMENT:\t29\/04\/1999\n\nBENCH:\nS.Saghir Ahmad, K.T.Thomas\n\n\n\n\nJUDGMENT:\n<\/pre>\n<p>THOMAS,J.\n<\/p>\n<p>\tLeave granted.\n<\/p>\n<p>\tHandloom House\tis  a  Co-operative  Society  engaged  in<br \/>\nmanufacturing and  selling handloom fabrics.  It disburses to its<br \/>\nemployees, besides the normal wages, special  amounts  under  two<br \/>\ncounts.\t   One\t is   incentive\t bonu  and  the\t other\tis  sal<br \/>\ncommission. Thereupon, the Employees State Insurance Corporation<br \/>\n(for sort  the\tCorporation)  deman  from  the\tHandloom  House<br \/>\nadditional  contribution  towards  insurance  fund on the premise<br \/>\nthat such extra benefits given to the employees fall  within  the<br \/>\nambit  of  wages under the Employe e s State Insurance Act 1948<br \/>\n(for short the Act).  When the Handl oom House\tchallenged  the<br \/>\nsaid demand before the Employees Insurance Court it was held that<br \/>\nsuch  benefits\tdo not form part of wages and hence the demand is<br \/>\nunsustainable.\tThe Corporation filed statutory appeal before the<br \/>\nHigh Court of Kerala and a Division  Bench  thereof  quashed  the<br \/>\njudgment  of the Insurance Court and permitted the Corporation to<br \/>\nproceed with the demand.\n<\/p>\n<p>\tThe Handloom House, having lost even a motion for  review<br \/>\nof the said judgment, has filed this appeal by special leave.\n<\/p>\n<p>\tIt was first thought  that  appellant  cannot  re-canvass<br \/>\nagainst\t settled  position  since  this court had held on earlier<br \/>\noccasions that wages as defined i n Section 2(22)  of  the  Act<br \/>\nwould  include, among others, incentive allowances and production<br \/>\nbonus paid to the employees <a href=\"\/doc\/21620\/\">(Harihar  Polyfibres  vs.\t Regional<br \/>\nDirector,  ESIC<\/a>\t [1984(4)  SCC\t324]; Regional Director, ESIC vs.<br \/>\nEnfield India Ltd.  (1997 (11) SCC 752.\n<\/p>\n<p>\tSri T.L.  Viswanatha Iyer, learned Senior Counsel made an<br \/>\nendeavour to distinguish the said decisions from the instant case<br \/>\non the premise that incentive bonus and sale commission\t paid  to<br \/>\nthe  employees\tof  the\t appellant  society are paid at intervals<br \/>\nexceeding two months and, therefor e, they cannot form part  of<br \/>\ntheir wages as defined in the clause.\n<\/p>\n<p>\tIn Modella Woollens  Ltd.   vs.\t ESIC [1994 Suppl (3) SCC<br \/>\n219]  a\t two  judge  bench  of\tthis  court  considered\t  whether<br \/>\nproduction bonus paid to the workmen would fall within wages as<br \/>\ndefined in  the\t Act.\t The  employer\tin  that case projected a<br \/>\nparticular  term  in  the  agreement  (between\tworkmen\t and  the<br \/>\nemployer, which provides for payment of such bonus) that bonus is<br \/>\nto  be\tpaid  at  the  end  of each quarter, and contended on its<br \/>\nstrength that it  would\t not  be  wages.    However,  this  court<br \/>\nhighlighted  another term of the same agreement which stated that<br \/>\nan employee can claim advances against such bonus  and\talso  the<br \/>\nfact   that  the  employees  were  availing  themselves\t of  such<br \/>\nadvances.  On the basis of such clauses in the agreement  learned<br \/>\nJudges observed thus :\n<\/p>\n<p>\tThe mere term in the agreement that the payment of<br \/>\n\tbonus  would  be  made\tat  the end of the quarter,<br \/>\n\ttherefore, does not make the bonus, a payment other<br \/>\n\tthan remuneration for the labour put in during\tthe<br \/>\n\tsaid quarter.\t   Hence  the  stipulation  in\tthe<br \/>\n\tagreement that the payment of the  bonus  would\t be<br \/>\n\tmade  at the end of the quarter is not material for<br \/>\n\tdeciding the question whether the payments would be<br \/>\n\tcovered by the first  part  of\tthe  definition\t or<br \/>\n\tnot.\n<\/p>\n<p>\tThe  definition\t of  wages  in section 2(22) of the Act<br \/>\nreads thus:-\n<\/p>\n<p>\tWages means all remuneration paid or payable, in cash to<br \/>\nan employee, if the terms of the contract of employment,  express<br \/>\nor  implied,  were  fulfilled  and  includes  any  payment  to an<br \/>\nemployee in respect of any period of authorised leave,\tlock-out,<br \/>\nstrike\twhich  is  not\tillegal\t or  lay-off and other additional<br \/>\nremuneration, if any, paid at intervals not exceeding two months,<br \/>\nbut does not include<\/p>\n<p>\t(a)\tany contribution paid by  the  employer\t to<br \/>\n\tany  person  fund  or provident fund, or under this<br \/>\n\tAct;\n<\/p>\n<p>\t(b) any travelling allowance or the  value  of\tany<br \/>\n\ttravelling concession;\n<\/p>\n<p>\t(a)  any  sum paid to the person employed to defray<br \/>\n\tspecial expenses entailed on him by the\t nature\t of<br \/>\n\this employment.\n<\/p>\n<p>\tThe main body of the definition\t encompasses  within  its<br \/>\nfold three  kinds  of  payments made to the employees.\tFirst is,<br \/>\nall remuneration paid or payable in cash  on  fulfilment  of  the<br \/>\nterms of  employment.\t The  second  is  any  payment made to an<br \/>\nemployee in respect of any period of authorised leave etc.    The<br \/>\nthird  is  other  additional remuneration paid at intervals not<br \/>\nexceeding two months<\/p>\n<p>\tIt  is\tcontended  that\t if  incentive\tbonus  and  sales<br \/>\ncommission  would  fall\t within\t the  scope of the first category<br \/>\nmentioned above it is immaterial that  the  payment  is\t made  at<br \/>\nintervals or  in  a lump.  But that aspect is no more res integra<br \/>\nin the light of the decision in <a href=\"\/doc\/21620\/\">Harihar\t Polyfibres  vs\t Regional<br \/>\nDirector, ESIC<\/a>\t[1984  (4)  SCC\t 484].\t In that case a two judge<br \/>\nbench (Chinnappa Reddy and AN Sen JJ) dealt with the decision  of<br \/>\na Full Bench of the High Court of Andhra Pradesh which held thus:\n<\/p>\n<p>\tThe word other appear ing at the commencement  of  the<br \/>\nthird  part  of\t the  definition  of  wages  under Section 2 (22)<br \/>\nindicates that it must be remuneration or additional remuneration<br \/>\nother than the remuneration which is referred to in  the  earlier<br \/>\npart of the definition viz., all remuneration paid or payable, in<br \/>\ncash  to an employee, if the terms of the contract of employment,<br \/>\nexpress or implied, were fulfilled and\tincentive  bonus  in  the<br \/>\npresent scheme\tis certainly additional remuneration.  It must be<br \/>\nemphasised at this  stage  that\t under\tthe  third  part  of  the<br \/>\ndefinition  of\twages\t it  is\t actual factum of payment which<br \/>\ncounts because the word used is\t ppaid\tas  distinguished  from<br \/>\nppaid or   payable.\t The  moment  you  get\tany  additional<br \/>\nremuneration  other  than  the\tremuneration  payable  under  the<br \/>\ncontract  of  employment  and  if this additional remuneration is<br \/>\npaid at intervals not exceeding two months, it becomes wages by<br \/>\nvirtue of the third part of the definition of wages.\n<\/p>\n<p>\tThis court approved the said statement of law as  correct<br \/>\nby  observing that we express our respectful agreement with what<br \/>\nhas been said by the High Court of Andhra Pradesh  in  the  above<br \/>\nextracted passage.\n<\/p>\n<p>\tSo  the\t only  question\t to be determined in this case is<br \/>\nwhether incentive bonus and sales commission  would  fall  within<br \/>\nthe ambit of the aforesaid third category of remuneration or not.<br \/>\nIt  is\tclear  that any additional remuneration paid at intervals<br \/>\nexceeding two months has been excluded by  specific  terms,  from<br \/>\nthe purview  of\t the  definition.    What  is  the  rationale for<br \/>\nexcluding such\tremuneration  paid  at\tintervals  exceeding  two<br \/>\nmonths from the scope of wages?\t Though we did not get any clue<br \/>\nfrom  the  Statement  of  Objects and Reasons for the Bill (which<br \/>\nbecame Employees  State\t Insurance  (Amendment)\t Act  1951),  the<br \/>\nrationale  could be discerned as inter-linked with the definition<br \/>\nclause wage period in Section 2(23).  It reads thus:\n<\/p>\n<p>\t&#8220;wage period in relation to an employee means the<br \/>\n\tperiod in respect of  which  wages  are\t ordinarily<br \/>\n\tpayable\t to him whether in terms of the contract of<br \/>\n\temployment, express or implied or otherwise.&#8221;\n<\/p>\n<p>\tSection 40 of the Act casts liability  on  the\tPrincipal<br \/>\nEmployer  to  pay the contribution to the Corporation, whether it<br \/>\nis of employers or of employees contribution.\tOf  course  the<br \/>\nPrincipal Employer is allowed to recover that part of employers<br \/>\ncontribution  by making deduction from his wages.  Section 39(4)<br \/>\nof the Act states:\n<\/p>\n<p>\tThe  contributions payable in respect of each wage<br \/>\n\tperiod shall ordinarily fall due on the last day of<br \/>\n\tthe wage period, and where an employee is  employed<br \/>\n\tfor  part  of  the wage period or is employed under<br \/>\n\ttwo or more employers during the same wage  period,<br \/>\n\tthe  contributions  shall  fall due on such days as<br \/>\n\tmay be specified in the regulations.\n<\/p>\n<p>\tNo employer shall have the permission to dodge\tthe<br \/>\n\tpayment\t of contribution on the premise that annual<br \/>\n\tpayments have to be worked out.\t Normally, the wage<br \/>\n\tperiod is one month, but the Parliament would  have<br \/>\n\tthought\t that  such wage period may be extended a<br \/>\n\tlittle more, but no employer shall make\t it  longer<br \/>\n\tthan two  months.    This  could  be the reason for<br \/>\n\tfixing a period of two months as the maximum period<br \/>\n\tfor counting additional remuneration as to make\t it<br \/>\n\tpart of wages under the Act.\n<\/p>\n<p>\tIt is a question of fact in each case whether sales<br \/>\n\tcommission  and\t incentive  bonus  are\tpayable\t at<br \/>\n\tintervals not exceeding two months.  The  Insurance<br \/>\n\tCourt  has,  in this case, found that such payments<br \/>\n\twere not made within a period  of  two\tmonths\tand<br \/>\n\tare, therefore,\t not  includible as wages.  But the<br \/>\n\tHigh Court did not say anything about that  factual<br \/>\n\tposition.  The question whether incentive bonus and<br \/>\n\tsales  commission  would  fall within the aforesaid<br \/>\n\tthird category of wages\t as  defined  in  Section<br \/>\n\t2(22) of Act has to be considered by the High Court<br \/>\n\tafresh\tin the light of the observations made above<br \/>\n\tthe High Court for disposal of\tthe  writ  petition<br \/>\n\tWe  do\tso,  and  for that purpose we set aside the<br \/>\n\timpugned judgment.\n<\/p>\n<p>\tAppeal is thus allowed.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India Handloom House Ernakulam vs Regional Director, Esi on 29 April, 1999 Author: Thomas Bench: S.Saghir Ahmad, K.T.Thomas PETITIONER: HANDLOOM HOUSE ERNAKULAM Vs. RESPONDENT: REGIONAL DIRECTOR, ESI DATE OF JUDGMENT: 29\/04\/1999 BENCH: S.Saghir Ahmad, K.T.Thomas JUDGMENT: THOMAS,J. Leave granted. Handloom House is a Co-operative Society engaged in manufacturing and selling handloom fabrics. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-157734","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Handloom House Ernakulam vs Regional Director, Esi on 29 April, 1999 - Free Judgements of Supreme Court &amp; High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/handloom-house-ernakulam-vs-regional-director-esi-on-29-april-1999\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Handloom House Ernakulam vs Regional Director, Esi on 29 April, 1999 - Free Judgements of Supreme Court &amp; 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