Employees'' State Insurance Corporation vs Braithwaite and Company (India) Ltd.

Chatterjee, J.—This is an appeal u/s 82 of the Employees'' State Insurance Act from an order of the Employees'' State Insurance Court. The Employees'' State Insurance Corporation is the Appellant.

The question involved is whether certain amounts payable in terms of the scheme known as "Inam Scheme" would be wages within the meaning of the Employees'' State Insurance Act. An appeal would lie only when there was a substantial question of law. Wages has been defined in Section 2(22) of the Act and it is as follows:

"Wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes other additional remuneration, if any, paid at intervals not exceeding two months, but does not include--

(a) any contribution paid by the employer to any pension fund or provident fund under this Act;

(b) any travelling allowance or the value of any travelling concession;

(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or

(d) any gratuity payable on discharge.

The trial authority has found that the amount paid to the workers under the Inam Scheme is not wages. According to the trial" authority the Inam Scheme was introduced some time in 1955 whereby the Applicant before the trial authority offered to make to its employees certain incentive payments upon certain specified conditions being fulfilled. The Applicant reserved the right to withdraw the scheme altogether without assigning any reason or revise its conditions at its sole discretion. This withdrawal or revision of terms would not in any way affect the terms or conditions of service. The trial authority found whether the workers fulfil the conditions as set out in the Inam, Scheme or not, the conditions of service would remain unaltered and unaffected. The trial authority further found if the payment of Inam had nothing to do with the terms of employment, it cannot be said that payment of Inam came under the definition of wages as set forth in Section 2(22) of the Employees'' State Insurance Act, 1948. According to the trial authority, the very meaning of the word "Inam" is "reward" or "prize" and by no stretch of imagination can reward or prize come under the definition of "wages". The trial authority, therefore, found that it was no wages; against that order of the trial authority, this appeal has been filed and it has been admitted as majority of Judges who heard the matter were of opinion that the matter involved a substantial question of law.

The Inam Scheme has been described by certain notices of the company. There were two Inam periods--one was from January 2, 1956 to March 4, 1956 and the second Inam period was from March 5, 1956 to April 29, 1956 and Inam would be paid at certain rates referred to in the Notice dated December 28, 1955. It: would be payable to those workers who worked for not less than 365 hours in the first Inam period and for not less than 333 hours in the second Inam period. The condition for the award or Inam was also described in Notice dated December 28, 1965. It would be awarded to hourly rated workers only; it would be a warded on certain outputs in certain departments of the factory. There were various terms and it was provided that Inam would be paid only to workers who worked for at least 90% of the working hours specified in the Notice for the period. Finally, it was provided that the Company made it clear to all workmen that this scheme was being made effective for an experimental period from January 2, 1956 to, April 29, 1956. The Company further reserved absolute right to abandon the scheme during the continuance of this period or withdraw it completely without assigning any reason whatsoever. In any case, the Scheme would automatically cease at the end of the period and it is at the sole discretion of the Company whether to reintroduce it for a further period or periods. The Secretary to the Company, Mr. J.S. Tayal, deposed and said that under certain misunderstanding contributions were made in respect of the Inam period. Later on, they were advised that the said amounts were not payable. Therefore, they stated that these amounts were paid under misconception of law. The authority concerned having considered the matter made the following order:

It is declared that payments already made or are likely to he made in future by the Applicant Messrs Braithwaite and Company Ltd. to the workers as Inam payments are not wages within the meaning of the definition of ''wages'' as in Section 2(22) of the Employees'' State Insurance Act, 1948. The Employees'' State Insurance Corporation is restrained from recovering any contribution from the Applicant on Inam payments. It is further decreed that the Applicant shall realize a sum of Rs. 32,761/- from the Employees'' State Insurance Corporation.

Evidently, there is a question whether the amount paid under a mistake of law was recoverable in accordance with law or not. But this question was not considered by the Employees'' State Insurance Court. Mr. Ray who appeared for the Appellant Corporation did not urge that point before us. We need not, therefore, consider the matter. The only point urged before the authority below as also before this Court was whether the amount paid or payable under Inam Scheme would be wages within the meaning of the Act. Mr. Ray, on behalf of the Appellant, urges that the authority below was wrong; the meaning of the word "Inam" may be "reward" or "prize"''. According to Mr. Ray, remuneration includes reward. Therefore, the dictionary meaning of the word Inam does not improve matters. According to Mr. Ray, the payments under the Inam Scheme are (i) payments of money in cash to an employee, (ii) such payments are referable directly to employment and (iii) they are payable on the terms of contract being fulfilled. In fact, unless the terms of contract are fulfilled the payment cannot be made. Therefore, according to Mr. Ray, the payment depends upon the fulfilment of the terms of the employees. Inam is not payment as described in (a), (b), (c) and (d) of Section 2(22) of the Employees'' State Insurance Act. According to Mr. Ray, Inam will be wages.

Mr. Ginwala, who appears for the Company, does not deny that reward may be remuneration. He says, it is not "remuneration payable in terms of the contract of employment". Mr. Ginwala further says, payment under the Inam Scheme is not dependent on the fulfilment of the terms of contract of the employees. The terms of contract of the employees may be fulfilled, yet the money may not be payable. Mr. Ginwala further says that this is payable not in terms of the contract of employment as between the employer and any particular employee. It is dependent on various factors. The employee in question may be efficient. He may work during 90 per cent, of the working period, he might have worked hard, but still it may be that no Inam is payable for no fault of his--suppose raw materials are not available and the production may not reach that standard for which the prize is to be given, or suppose the machinery goes wrong for no fault of the workers and the rate of production as defined in the scheme is not achieved; in such cases no Inam is payable. Suppose, further, the employee in question has attained 90 per cent, of the working hours but has not at all worked with any greater efficiency than it/is usual with him but his co-employees worked hard, the machine fortunately did not go wrong, raw materials fortunately were available in time, still that employee, for no better efficiency but because of other favourable factors, may be entitled to the prize.

Inam, it is urged, payable to a worker does not depend solely upon his contribution or his services but depends upon the services rendered by himself along with others; it depends on factors outside the control of the employers or the employees. Therefore, Inam is payable if workers are fortunate or, in other words, the prize is dependent on chances and not on services. Therefore, this is not wages within the meaning of the Employees'' State Insurance Act.

We have to consider the aforesaid definition of wages in the Employees'' State Insurance Act. This is an Act to provide for certain benefits to employees in case of sickness, maternity and employment injuries and to make provision for certain other matters in relation thereto. The provisions of the Act make it compulsory that all employees should be insured; certain contributions have to be made for financing the said Scheme. These contributions have to be made by the employers and the employees. The idea behind the definition of "wages" is to determine such contribution for financing the Scheme. This definition of the word "wages" in the said statute is not to define the actual benefit which a workman would get for his services to an employer. But it is intended for the determination of his contribution to the fund in the Scheme as well as the contribution of the employer to the said fund. Therefore, the definition of the word "wages" in the context of the Employees'' State Insurance Act may not be equated with the total benefit that an employer grants to a workman for the services rendered.

The definition of the word "wages" as in Section 2(22) has the following ingredients:

(a) It includes all types of remuneration, (b) it must be paid or payable in cash to the employees, (c) it must be paid or it must have been payable if the terms of the contract of employment, (i) express or (ii) implied, were fulfilled.

Mr. Ginwala has not disputed that reward is remuneration; but the authority below considered that the meaning of the word "Inam" being "prize" it is not remuneration. "Remuneration is a wider term than salary; remuneration means a quid-pro-quo" and "whatever consideration he gets for giving his services seems to me a remuneration for them. Consequently, I think if a person was in receipt of a payment or in the receipt of a percentage, or any kind of payment which would not be an actual money payment, the amount he would receive annually in respect of this, would be ''remuneration" per Blackburn, J. in Rex v. Post Master General (1876) 1 Q.B.D. 658 (663). The dictionary meaning of the word includes a reward or a prize. The Supreme Court has held in Bala Subrahmanya Rajaram Vs. B.C. Patil and Others, :

Remuneration is only a more formal version o� "payment" and payment is recompense for service rendered.

Therefore, simply because the word "Inam" literally means "prize" or "reward" it does not necessarily follow that it is no remuneration. However, as Mr. Ginwala does not contest this proposition, we need not consider the matter further. Hence, the first ingredient is satisfied. The second ingredient is that it must be payable in cash or it must have been paid in cash. It is not disputed that the amount is payable in cash and has been paid in cash. Thirdly, the amount is to be payable if the terms of the contract of employment were fulfilled. If the terms of contract of employment are actually fulfilled, the payment is remuneration, but even if the terms of contract of employment are deemed to have been fulfilled, this would still be wages. We may refer to the explanation in Section 41 of the said Act which reads as follows:

For the purposes of Sections 40 and 41, wages shall be deemed to include payment to an employee in respect of any period of authorised leave, lock-out or legal strike.

Sections 40 and 41 refer to the contribution which is to be made and that contribution is to be made with reference to the wages. Hence, even if a particular workman has not rendered any service whatsoever, during the period of lock-out or during the period of a legal strike, he may be entitled to certain sums and those sums would still be considered to be wages within the meaning of this Act.

A distinction is made by Mr. Ginwala as regards sums payable "in terms of employment" and sums payable "in terms of the contract for, employment". In this connection he has referred to the decision of the Supreme Court in a case reported in Bala Subrahmanya Rajaram v. B.C. Patil Supra. Their Lordships considered the meaning of the word "wages" as in the Payment of Wages Act. We have noticed that the wages for the purpose of the Payment of Wages Act may be different from the definition of the word "wages" in the Employees'' State Insurance Act. The former Act is a statute to guarantee all payments which the employer is lawfully bound to make to the employees, whereas the latter Act would refer to such payment as will be considered wages for the purpose of determining the contribution to be made either by the employer or by the employee. The distinction is also evident from an analysis of the definition of the word "wages" in the Payment of Wages Act as also in the Act in question. The definition of the word "wages" in the Payment of Wages Act is as follows:

Wages means all remuneration expressed in terms of money....

Whereas for the purpose of the Employees'' State Insurance Act "wages" means all remuneration payable "in cash". Therefore, the definition of the word "wages" in the Act in question is narrower than that in the Payment of Wages Act, as it now stands after amendment.

Coming now to the argument of Mr. Ginwala that the phrase "terms of employment" and the "terms of the contract for employment" mean differently, we would say that they may appear to be different. But the question is whether there is any substantial difference. It is urged that the phrase "terms of the contract for employment" which appeared in the definition of "wages" in the Payment of Wages Act refers only to the terms which are agreed to by the parties or which are offered by one and accepted by the other; on the other hand, the phrase "terms of employment" includes not merely contractual terms of employment but-also terms imposed by statute for the benefit of the employee in relation to his employment. The Supreme Court held in the aforesaid case that the sum awarded would not be remuneration payable on the fulfilment of the "terms of the contract of employment." But by explanation to Section 41, payment made to an employee for no service rendered during the period of lock-out or during the period of legal strike would be wages. Therefore, even if "terms of the contract for employment" is not fulfilled'' but a payment is made because of law, such payment would be deemed to be wages under the statute in question. It is difficult for us to say, in the context of the statute in question, that the phrase "terms of employment" means anything more than "the terms of contract for employment" which may be agreed to, between the parties or terms which may be offered by one party and accepted by the other party during the continuance of employment; but suppose that the phrase "terms of the contract for employment" means something less than the phrase "the terms of employment", the payments made under the Inam Scheme are payments which are offered by the employer for the service, of an employee and which is accepted by the employee, the notice signifies an offer by the employer which was accepted impliedly by the workmen by having worked on the terms of the notice and having being paid on that basis; there is no doubt that after the notice the company actually made the payment on the terms of the notice to the workmen. Therefore, the ''Notice'' describes the additional "terms of the contract of employment". These additional terms do not make the amount an additional remuneration. These terms are merely in addition to the then existing terms of the contract of employment; but they do not constitute additional remuneration. Additional remuneration will imply additional service. Under the terms of employment a worker may not have to work on holidays; but if he does, he gets additional remuneration for additional services not contemplated or expressly excluded from the terms of the employment.

Hence, Inam is wages because,

(i) it is remuneration which includes award,

(ii) it is paid in cash and payable in cash,

(iii) it is paid or payable if the terms of the contract of employment, express or implied, are fulfilled. Unless the express terms of the contract of employment, as originally made, be fulfilled, Inam does not become payable under the Scheme and cannot be paid. Hence, it is payable and was paid not merely on the fulfilment of the contract of employment as expressly made originally but on the fulfilment of the additional terms of employment offered by the work notice and impliedly accepted by the workmen.

The result is that the appeal is allowed and the order of the authority below is set aside; there will be no order for costs.

Gupta, J.

I agree.