1977 Supreme(AP) 57

Andhra Pradesh High Court
Judges : A.V.KRISHNA RAO, K.MADHAVA REDDY
Employees State Insurance Corporation, Hyderabad THROUGH ITS REGIONAL DIRECTOR - Appellant
Versus
A.P. PAPER MILLS LTD., RAJAHTNUNDRY THROUGH ITS PERSONAL MANAGER - Respondent
Decided On : 02-24-77

Headnote:

INCENTIVE BONUS - EMPLOYEES STATE INSURANCE ACT, 1948 - SECTION 2(22) - WAGES - HOUSE RENT ALLOWANCE - WAGES - INTERPRETATION - FULL BENCH REFERENCE - RATIO DECIDENDI - FINAL DECISION: 1. Incentive bonus paid to workmen under a scheme formulated by the employer and employees under a memorandum of settlement is 'wages' within the meaning of Section 2(22) of the Employees' State Insurance Act, 1948. 2. House rent allowance paid by the employer to its workmen would constitute 'wages' within the meaning of Section 2(22) of the Act.

Fact of the Case:

The question that arose for consideration in CM A. No. 94/75 is whether incentive bonus paid by the Company constitutes wages within the meaning of S. 2 (22) of the Employees State Insurance Act. "in Regl. Director ESI. C. Vs. M/s. Vazir Sultari] Bench of this court to which one of us was a party took the view that remuneration takes in only all payments paid or payable every month as per the terms of the contract irrespective of the work done, such as wages, daily allowance, house rent allowance etc. But contingent payments like bonus for increase of production of profit bonus will not. . . . . . . . . . . . . . . . . . . . . come within this definition". In this view the court held that the comprehensive annual bonus paid or payable to the employees as per the terms of Ex. ( 2 ) 2 which is a document of settlement relating to the terms and conditions of service for the year 1970 was not wages within the meaning of S. 2 (22) of the Act. The court purported to arrive at this conclusion having regard to the view expressed in Braithwaite andco. V Employees state Insurance Corporation] In a later judgment dated 13-4-76 another bench of this Court in CM A. 331/74 felt that the view expressed in regl. Director E. S. I. C. Vs. Mis. Vazir Sultan] was directly opposed to what the Supreme Court laid down in Braithwaite and Co. Vs. Employees state Insurance Corporation and came to the conclusion that "incentive bonus" paid to the workmen as per the Memorandum of settlement arrived at between the employer and the workmen was wages within the meaning of S 2 (22) of the Employees State Insurance Act. In view of this difference of opinion, we refer the matter to a Full bench for consideration of the question whither incentive bonus paid by the Company in pursuance of the settlement arrived at between the employers and the workmen constitutes wages within the meaning of section 2 (22) of the Act. C. M. A. 229/74 involves the consideration of a question whether house Rent paid by the Company to its workmen would constitute "wages within meaning of S, 2 (22) of the Act. This CM. A. was posted along with C. M,a. 94/75 for hearing and hence this is also referred to the full Bench. As the decision of these questions would be sufficient to dispose of the Civil Miscellaneous Appeals, these appeals are referred to the Full bench. Papers may be placed before the Hon ble the Chief Justice for constitution of a Full Bench.

Finding of the Court:

The Full Bench has answered the question in the affirmative holding that they do constitute wages within the meaning of the Act.

Issues: 1. Whether incentive bonus paid to workmen under a scheme formulated by the employer and employees under a memorandum of settlement is 'wages' within the meaning of Section 2(22) of the Employees' State Insurance Act, 1948? 2. Whether house rent allowance paid by the employer to its workmen would constitute 'wages' within the meaning of Section 2(22) of the Act?

Ratio Decidendi: 1. The incentive bonus paid to workmen under a scheme formulated by the employer and employees under a memorandum of settlement is 'wages' within the meaning of Section 2(22) of the Employees' State Insurance Act, 1948, as it is additional remuneration paid at intervals not exceeding two months. 2. House rent allowance paid by the employer to its workmen would constitute 'wages' within the meaning of Section 2(22) of the Act, as it is remuneration paid or payable, in cash to the employees, if the terms of the contract of employment, express or implied, were fulfilled.

Final Decision: Both the appeals are allowed with costs. C. M. As. Allowed.