The Deputy Regional Director, Employees'' State Insurance Corporation vs Mizar Govind Annappa Pai and Sons

H.G. Ramesh, J.—This appeal is by the Employees'' State Insurance Corporation against the order dated 18-9-2001 passed on Employees'' State Insurance Application No. 70 of 1994 by the Employees'' State Insurance Court, Mangalore. The Employees'' State Insurance Court by the impugned order, has allowed the application of the respondent filed u/s 75 of the Employees'' State Insurance Act, 1948 (hereinafter referred to as ''the Act'') by setting aside the order dated 26-6-1989 passed by the Employees'' State Insurance Corporation directing it to pay a contribution of Rs. 12,810.00 in respect of payments made to its employees towards encashment of leave.

I have heard learned Counsels appearing for the parties.

As rightly submitted by the learned Counsels for the parties, the neat question of law that falls for determination is as to whether the payments made towards "encashment of leave" would fall within the ambit of ''wages'' as defined u/s 2(22) of the Act. It is relevant to notice the definition of wages as stated in Section 2(22) of the Act:

"2(22) ''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 any payment to an employee in respect of any period of authorised leave, lockout, strike which is not illegal or layoff and 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, or 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".

(emphasis supplied)

A plain reading of the definition of ''wages'' stated above would clearly show that any payment made to an employee in respect of any period of authorised leave would come within the ambit of ''wages'' and accordingly the employer would become liable to pay contributions under the Act on such payments. The language employed in Section 2(22) of the Act on this aspect is very wide and hence would take within its ambit any payment relatable to authorised leave. Hence, the payments would fall within the ambit of Section 2(22) of the Act. The evidence on record would also show that the payments in question were made to the employees towards encashment of leave pursuant to an arrangement entered into between the employer and the employees.

Learned Counsel appearing for the respondent submitted that to come within the ambit of Section 2(22) of the Act, the payment should be for a specific period of authorised leave. Obviously so, as the expression "encashment of leave" itself would connote that it should relate to a particular period of leave having not been availed of by the employee. It was not the case of the respondent that the payments in question did not relate to non-availing of authorised leave of a particular period. Even otherwise, the payments in question would fall within the ambit of Section 2(22) of the Act as the payments relate to authorised leave.

In view of the above, the Employees'' State Insurance Court has committed an error in law in not examining the definition of ''wages'' as stated in Section 2(22) of the Act. The impugned order was passed ignoring this relevant provision of law. The finding of the Employees'' State Insurance Court that the payments in question do not amount to "wages" is contrary to law. Accordingly, the impugned order is liable to be set aside.

In the result, I make the following order:

The appeal is allowed. The impugned order dated 18-9-2001 passed on Employees'' State Insurance Application No. 70 of 1994 is hereby set aside. However, there will be no order as to costs.