Judgment

SAWANT, J. :- Special leave granted.

The appellant-company filed an application before the Employees Insurance Court under Section 75 of the Employees State Insurance Act, 1948 (hereinafter referred to as the Act) against the Employees State Insurance Corporation (the Corporation) for a declaration that the demand of the Corporation of the employees contribution and the employers contribution on the payment made under the companys quarterly attendance bonus Scheme (the Bonus Scheme) was not valid. The Insurance Court allowed the said application and against that decision the Corporation preferred an appeal to the High Court. The learned single Judge reversed the decision of the Insurance Court holding that the attendance bonus was payable under the terms of the contract and, therefore, was "wages" within the meaning of Section 2(22) of the Act. In the Letters Patent Appeal preferred by the appellant, the Division Bench of the High Court confirmed the said decision. Hence the present appeal.

2. To appreciate the controversy between the parties, it is necessary to understand the salient features of the Bonus Scheme. The Bonus Scheme was a part of a settlement entered into between the appellant-employer and the union of the workmen in 1966. According to this Scheme which was introduced w.e.f. 1-7-1966, if a worker is present for all the working days during a quarter, he is entitled to attendance bonus equivalent to four days wages. If he remains absent for one day in a quarter, he is to be paid attendance bonus equivalent to two days wages for the first four quarters. If he is absent for two days in a quarter, he is entitled to attendance bonus equivalent to one days wages in that quarter. If a worker is absent for more than two days during a quarter, he is not entitled to any attendance bonus in that quarter. For the purpose of attendance bonus, the quarters prescribed are April-June, July-September, October-December and January-March. If a worker is newly appointed in the middle of the quarter he is not entitled to attendance bonus for the relevant quarter. The attendance bonus is to be paid in the month following each year. For entitlement to the attendance bonus, further, casual leave or any kind of leave is to be treated as absence. Only privileged leave taken in a single quarter is to be treated as presence in that quarter.

For our purpose, what is necessary to note is that a settlement was arrived at in the course of the conciliation proceedings before the Conciliation Officer under Section 12 (3) of the Industrial Disputes Act, 1947 (the ID Act). It was, therefore, binding on all parties to the dispute as well as the successors and assignees of the appellant and the subsequently employed workmen under Section 18(3) of that Act. The settlement could not be put an end to by any of the parties unilaterally. In other words, the Bonus Scheme had become an express contract of employment since the date of the settlement.

3. In the light of this legal status of the Bonus Scheme, we have to examine the relevant provisions of the present Act. Subsection (22) of Section 2 of the Act defines "wages" as follows

"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, 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;

(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;"

Sub-section (23) of Section 2 defines "wage period" in relation to an employee to mean the period in respect