IMPORTANT POINT
Payment made to employee, under a settlement between employer and, employee for period he has been deemed to be in employment would be basic wages within meaning of E.P.F. Act.

JUDGMENT

S.N. Variava, J.-These appeals are against the Judgment dated 23rd September, 1997.

2. Briefly stated the facts are as follows:

The Appellant claimed that they had ceased operation from 1984. In Suit No. 1937 of 1985, filed by Bank of Madura, Court Receiver, High Court Bombay was appointed as Court Receiver for all the assets of the Appellant s Company on 28th November, 1985. The workers, through their Unions filed various proceedings before the Labour Court, claiming their arrears of wages, retrenchment benefits, terminal benefits etc. A number of Awards came to be passed by the Labour Court. The workers carried their dispute all the way upto this Court. On 21st March, 1988, this Court passed an order wherein, inter alia, directions were issued to the High Court to look into the question whether there was any scope for restructuring the mill and if there was no scope for restructuring the mill, then to close down the same so that the employees could be retrenched with effect from a particular date to be indicated by the High Court in its Order. On 12th December, 1988, the High Court fixed 31st October, 1988 as the date when the services of the employees was to stand terminated/retrenched. The Court Receiver was directed to notify this date as the date of retrenchment of the workers.

3. On 2nd December, 1995 the Appellant Company entered into a Memorandum of Settlement with its workers, wherein it was agreed that the workmen whose services were terminated/retrenched with effect from 31st October, 1988 would be paid their dues on or before 31st March, 1996. It was also agreed that even though the amount payable was Rs.1,23,03,947.07 the Union would accept a sum of Rs. 1,10,00,000/- towards settlement of dues. Clause 5 of the Settlement is relevant. It reads as follows :

"5. The amount of Rs. 1,10,00,000/- to be paid by the Company shall be distributed in the following manner:

Total wages 35,00,000.00

Towards retaining (Seasonal Wages) 10,00,000.00

Towards Gratuity 50,00,000.00

Towards Retrenchment Compensation 15,00,000.00

Rs. 1,10,00,000.00

The Short fall under one head may be adjusted by paying from the excess amount under any other head. No other deduction except Union s contribution of 7% as stipulated hereinafter is permissible."

4. The 2nd Respondent declined to exempt the Appellant Company from payment of Provident Fund on the wages paid by the Company under the said Settlement. Thus Provident Fund was claimed on the sum of Rs. 35 lakhs i.e. the wages. The Company claimed that since this was an ad hoc payment, Provident Fund was not deductible on this sum. This was not accepted by the 2nd Respondent. The Appellants therefore preferred a Writ Petition in the High Court of Bombay which came to be dismissed on 12th August, 1997. Their Letters Patent Appeal came to be dismissed by the impugned Judgment dated 23rd September, 1997.

5. Mr. Sharma has submitted that with effect from 1984 the Company was closed. He submitted that admittedly Court Receiver, High Court Bombay took charge of all the assets with effect from 28th November, 1985. He submitted that the Workmen had, therefore, done no work and were not on duty from 1984. He submitted that on 22nd December, 1995, under the Settlement with the Union, the Workmen had agreed to accept a lump sum of Rs. 1,10,00,000/- in full and final settlement of all their claims. He submitted that this was an ad hoc amount being paid under the Settlement. He submitted that on such ad hoc payment there can be no provident fund. He relied upon definition of the term "basic wages" as given in Section 2(b) of the Employees Provident Funds Act and submitted that the basic wage only included emoluments which were earned by an employee while on duty. He submitted that therefore ad hoc payment made under a Settlement wou