Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2019 Supreme(SC) 237

SUPREME COURT OF INDIA
ARUN MISHRA, NAVIN SINHA, JJ.
THE REGIONAL PROVIDENT FUND COMMISSIONER (II) WEST BENGAL – APPELLANT(S)
Versus
VIVEKANANDA VIDYAMANDIR AND OTHERS – RESPONDENT(S)
CIVIL APPEAL NO. 6221 OF 2011
WITH
SURYA ROSHNI LTD. – APPELLANT(S)
VERSUS
EMPLOYEES PROVIDENT FUND AND OTHERS – RESPONDENT(S)
CIVIL APPEAL NOS. 3965-3966 OF 2013
UFLEX LTD. – APPELLANT(S)
VERSUS
EMPLOYEES PROVIDENT FUND AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NOS. 3969-3970 OF 2013
MONTAGE ENTERPRSES PVT. LTD. – APPELLANT(S)
VERSUS
EMPLOYEES PROVIDENT FUND AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NO(S). 3967-3968 OF 2013
THE MANAGEMENT OF SAINTGOBAIN GLASS INDIA LTD. – PETITIONER(S)\
VERSUS
THE REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES’ PROVIDENT FUND ORGANISATION – RESPONDENT(S)
TRANSFER CASE (C) NO. 19 OF 2019 (ARISING OUT OF T.P.(C) NO. 1273 OF 2013)
Decided on : 28-02-2019

Advocates Appeared:
For Appellant(s) : Mr. Harvinder Singh,Adv. Mr. Gagan Gupta, AOR Ms. Archana Pathak Dave, AOR Ms. Sana Hashmi,Adv. Mr. Salman Hashmi,Adv. Ms. Liz Mathew, AOR Mr. T. Harish Kumar, AOR
For Respondent(s): Mr. Varun Agarwal,Adv. Ms. Saroj Bala,Adv. Mr. Chandra Prakash, AOR Mr. M. Shoeb Alam, AOR Mr. Sarad Kumar Singhania, AOR Ms. Alka Agrawal,Adv. Mr. Raj Bahadur,Adv. Mrs. Anil Katiyar, AOR

IMPORTANT POINT
Any variable earning which may vary from individual to individual according to their efficiency and diligence will stand excluded from term “basic wages”.

Headnote:(A) Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 – Section 2(b)(ii) read with Section 6 – Special allowances – Computation of deduction towards Provident Fund – Basic wage, would not ipso facto take within its ambit salary breakup structure to hold it liable for provident fund deductions when it was paid as special incentive or production bonus given to more meritorious workmen who put in extra output which has a direct nexus and linkage with output by
       eligible workmen – When a worker produces beyond base or standard, what he earns was not basic wage – This incentive wage will fall outside purview of basic wage. (Para 7)
       (B) Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 – Section 2(b)(ii) read with Section 6 – Special allowances – Computation of deduction towards Provident Fund – Test adopted to determine if any payment was to be excluded from basic wage is that payment under the scheme must have a direct access and linkage to payment of such special allowance as not being common to all – Crucial test is one of universality – Employer, under the Act, has a statutory obligation to deduct specified percentage of contribution from employee’s salary and make matching contribution – Any variable earning which may vary from individual to individual according to their efficiency and diligence will stand excluded from term “basic wages” – No material has been placed by establishments to demonstrate that allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee and that allowances in question were not paid across board to all employees in a particular category or were being paid especially to those who avail opportunity –
       In order that amount goes beyond basic wages, it has to be shown that workman concerned had become eligible to get this extra amount beyond normal work which he was otherwise required to put in – There is no data available on record to show what were norms of work prescribed for those workmen during relevant period – Allowances in question were essentially a part of basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to provident fund account of employees – Appeals by establishments dismissed and appeal preferred by Regional Provident Fund Commissioner deserves to be allowed. (Paras 9, 10, 14 and 15)
       Facts of Case:
       Instant appeals raise a common question of law, if the special allowances paid by an establishment to its employees would fall within the expression “basic wages” under Section 2(b)(ii) read with Section 6 of the Act for computation of deduction towards Provident Fund.
       Findings of Court:
       It is therefore not possible to ascertain whether extra amounts paid to workmen were in fact paid for the extra work which had exceeded normal output prescribed for the workmen. Wage structure and components of salary have been examined on facts, both by authority and appellate authority under the Act, who have arrived at a factual conclusion that allowances in question were essentially a part of basic wage camouflaged as part of an allowance so as to avoid deduction and contribution
       accordingly to provident fund account of employees. There is no occasion for us to interfere with concurrent conclusions of facts. Appeals by the establishments therefore merit no interference. Conversely, for same reason appeal preferred by Regional Provident Fund Commissioner deserves to be allowed.
       Result : Appeals Partly allowed.

JUDGMENT

Navin Sinha, J.

The appellants with the exception of Civil Appeal No. 6221 of 2011, are establishments covered under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the "Act"). The appeals raise a common question of law, if the special allowances paid by an establishment to its employees would fall within the expression "basic wages" under Section 2(b)(ii) read with Section 6 of the Act for computation of deduction towards Provident Fund. The appeals have therefore been heard together and are being disposed by a common order.

2. It is considered appropriate to briefly set out the individual facts of each appeal for better appreciation.

Civil Appeal No. 6221 of 2011: The respondent is an unaided school giving special allowance by way of incentive to teaching and non-teaching staff pursuant to an agreement between the staff and the management. The incentive was reviewed from time to time upon enhancement of the tuition fees of the students. The authority under the Act held that the special allowance was to be included in basic wage for deduction of provident fund. The Single Judge set aside the order. The Division Bench initially after examining the salary structure allowed the appeal on 13.01.2005 holding that the special allowance was a part of dearness allowance liable to deduction. The order was recalled on 16.01.2007 at the behest of the respondent as none had appeared on its behalf. The subsequent Division Bench dismissed the appeal holding that the special allowance was not linked to the consumer price index, and therefore did not fall within the definition of basic wage, thus not liable to deduction.
Civil Appeal Nos. 3965-66 of 2013: The appellant was paying basic wage + variable dearness allowance(VDA) + house rent allowance(HRA) + travel allowance + canteen allowance + lunch incentive. The special allowances not having been included in basic wage, deduction for provident fund was not made from the same. The authority under the Act held that only washing allowance was to be excluded from basic wage. The High Court partially allowed the writ petition by excluding lunch incentive from basic wage. A review petition against the same by the appellant was dismissed.
Civil Appeal Nos. 3969-70 of 2013: The appellant was not deducting Provident Fund contribution on house rent allowance, special allowance, management allowance and conveyance allowance by excluding it from basic wage. The authority under the Act held that the allowances had to be taken into account as basic wage for deduction. The High Court dismissed the writ petition and the review petition filed by the appellant.
Civil Appeal Nos. 3967-68 of 2013: The appellant company was not deducting Provident Fund contribution on house rent allowance, special allowance, management allowance and conveyance allowance by excluding it from basic wage. The authority under the Act held that the special allowances formed part of basic wage and was liable to deduction. The writ petition and review petition filed by the appellant were dismissed.
Transfer Case (C) No. 19 of 2019 (arising out of T.P. (C) No. 1273 of 2013): The petitioner filed W.P. No. 25443 of 2010 against the show cause notice issued by the authority under the Act calling for records to determine if conveyance allowance, education allowance, food concession, medical allowance, special holidays, night shift incentives and city compensatory allowance constituted part of basic wage. The writ petition was dismissed being against a show cause notice and the statutory remedy available under the Act, including an appeal. A Writ Appeal (Civil) No. 1026 of 2011 was preferred against the same and which has been transferred to this Court at the request of the petitioner even before a final adjudication of liability.

3. We have heard learned Additional Solicitor General, Shri Vikramajit Banerjee and Shri Sanjay Kumar Jain appearing for the Regional Provident Fund Commisioner and

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2019 Supreme(SC) 237

IMPORTANT POINTAny variable earning which may vary from individual to individual according to their efficiency and diligence will stand excluded from term “basic wages”.

Cases Referred (5)

IMPORTANT POINT
Any variable earning which may vary from individual to individual according to their efficiency and diligence will stand excluded from term “basic wages”.