IMPORTANT POINT
A suspended employee and his employer are liable to remit under the Employees State Insurance Act, 1948 the requisite contributions under the Act in connection with the subsistence allowance amounts received by the suspended employee during the period of his suspension pending domestic enquiry.

Headnote:Employees State Insurance Act, 1948-Sections 2(22), 39 & 40-Suspended employee-Liability to remit requisite contributions under the Act during period of suspension pending domestic enquiry-Whether a suspended employee and his employer are liable to remit the contributions under the Act in connection with the subsistence allowance amounts received by suspended employee during period of his suspension?-(Yes)-Subsistence allowance paid to an employee during suspension pending domestic enquiry would be covered by the definition of the term Wages as found in sub-section (22) of Section 2 of the Act.
       Held that all employees are entitled to get the statutory coverage of the benefits being insured employees and any person employed for wages is to be treated as an employee for the purpose of the Act. Under these circumstances an employee who is admittedly covered by the Act and who is entitled to get the benefits under the Act as insured employee will not cease to be an employee covered by the Act if he is placed under interim suspension pending domestic enquiry on any alleged misconduct by his employer. It is axiomatic to say that during suspension period pending enquiry the employer-employee relationship does not come to an end. It would come to an end only when after enquiry his services on proof of misconduct are ordered to be terminated. Till then he continue to be an employee for all purposes subject to only two consequences flowing from such interim suspension, namely, in the first place the employee will remain prohibited from actually offering his services and discharging his duties as the employer does not want him to do so and secondly during the period of suspension pending enquiry the remuneration payable to the employee will get curtailed and will be treated as subsistence allowance as legally permissible under the rules and which may range from 50 at the lowest to even 100 of the wages at the highest if the suspension continues beyond the requisite period as contemplated by the service rules and regulations concerned. It is also to be kept in view and there is no dispute on this aspect that even during suspension when the employee is being paid subsistence allowance and not full wages he remains entitled to get all the benefits as available to working employees on the same basis as laid down by various provisions of Chapter V. It is not as if a suspended employee gets lesser benefits as compared to a working employee under the provisions of the said Chapter. They stand at par. It is also to be appreciated that subsistence allowance is not to be refunded by the suspended employee whatever may ultimately be the result of the domestic enquiry. Hence only because the total remuneration paid to the suspended employee gets reduced to 50 or to any higher percentage going up to 100 it is not possible to appreciate as to how it can be said that on the amount of subsistence allowance received by him permanently he is not bound to contribute any amount to the Corporation and equally the employer of such a suspended employee is also not bound to make his parallel contribution as per the rates provided under the Act especially when all the benefits of statutory insurance coverage are made available by the Corporation to such a suspended employee. The term wages as defined by Section 2 sub-section (22) of the Act means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled. Thus it is a more comprehensive definition which takes in its sweep in the first part all remuneration paid or payable to the employee. Therefore, the amount payable to an employee or actually paid to an employee if the terms of the contract of employment were fulfilled would constitute wages. A regular employee who is willing to work and whose services are taken by the employer gets the remuneration for the work actually done by him under the contract of employment. But in case of a suspended employee he gets lesser amount by way of subsistence allowance but that is also as a remuneration for being continued on the roll of employment as an employee and so far as he is concerned he cannot be said to have not fulfilled his part of the terms of contract of employment as he is willing to offer his services but it is the employer who prohibits him from actually giving his services under the contract of employment. The situation almost resembles to grant of half pay leave or leave on even more than half pay as the case may be. Therefore, it cannot be said that the suspended employee does not fulfil his part of the contract of employment or commits breach of any of the terms of the contract of employment. The prohibition, if any, is imposed by the employer against him and that prohibition in the absence of any rules and regulations governing the payment of remuneration during suspension to the concerned employee would have entitled the suspended employee to get the full remuneration because he was ready and willing to perform his part of the contract of employment but it was the employer who prohibited him from performing his duties. But if there is a valid service regulation which reduces the scale of remuneration, during suspension, the employee gets that reduced permissible scale of remuneration by way of subsistence allowance. All the same it cannot be said that it is not the remuneration paid to him though at a reduced rate. (Para 9)
       (ii) Employees State Insurance Act, 1948-Section 2(22)-Wages-Definition of-Should be liberally construed-The Act is a welfare piece of legislation-Subsistence allowance to an existing employee though suspended by employer-Forms part of wages as per sub-section (22) of Section 2 of the Act-On the said amount the employee will be liable to contribute u/s 39 by way of employee s contribution. (Para 13)

JUDGMENT

S.B. Majmudar, J.-Leave granted in all the cognate Special Leave Petitions.

2. By consent of learned advocates of parties all these appeals were heard finally and are being disposed of by this common judgment. The Employees State Insurance Corporation (in short the Corporation ) functioning in the State of Kerala as well as in the State of Karnataka in the appeals concerned, have posed for our consideration the following question of law:

"Whether a suspended employee and his employer are liable to remit under the Employees State Insurance Act, 1948 (hereinafter referred to as `the Act ) the requisite contributions under the said Act in connection with the subsistence allowance amounts received by the suspended employee during the period of his suspension pending domestic enquiry."

3. In the impugned judgments under appeal the High Courts of Kerala and Karnataka have taken the view that there is no such liability on the part of the suspended employee or his employer. The learned counsel for the appellant-Corporation submitted to the contrary for our consideration.

4. A few relevant facts leading to these appeals may be noted at the outset. It is not in dispute between the contesting parties that the respondents in these appeals are the employers and the suspended persons are their employees. Both of them are governed by the Act. It is also not in dispute between the parties that prior to the suspension of these employees the respondent-employers were remitting the requisite contributions under Sections 39 and 40 of the Act both by way of employees contributions and employers contributions to the Corporation which had insured all these employees concerned as per Section 38 of the Act in the manner provided thereunder. It is also not in dispute that even during the period of suspension the suspended employees were covered by the beneficial provisions of the Act and were entitled to all the benefits available to employees under Chapter V of the Act and the coverage of entire beneficial scheme provided by the Act in that Chapter from Section 46 to Section 73 was available even in cases of suspended employees who were getting only subsistence allowance as per the rules and regulations governing their conditions of service. The High Courts in the impugned judgments have taken the view that subsistence allowance paid to an employee during suspension pending domestic enquiry would not be covered by the definition of the term Wages as found in sub-section (22) of Section 2 of the Act. The said definition reads as under :

"(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, lock-out, strike which is not illegal or lay-off 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;

(d) any gratuity payable on discharge;"

5. It was held that before any payment made by the employer to the employee is covered by the said definition of wages it should be a remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled. That in case of a suspended employee the terms of contract of employment would not be fulfilled as he is not actually rendering any service during the period of suspension.

6. Learned counsel appearing for the appellant-Corporation contended that the aforesaid view of the High Courts is clearly erroneous in law. He submitted that the Act is a beneficial piece of l

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1997 Supreme(SC) 1290

Cases Referred (4)