Any additional remuneration paid at intervals not exceeding two months and by way of recompense for service rendered is considered as wages under Section 2 (22) of the Employees' State Insurance Act, 1948.

( 1 ) THE scope and ambit of the definition of wages as defined in Section 2 (22) of the Employees' State Insurance Act, 1948 ('the act' for short) arises for our consideration in this appeal.

( 2 ) THE facts giving rise to this appeal, briefly stated, are as under: the 1st respondent is a Private Limited Company registered under the Companies Act of 1956. It is a small scale industry situated at Industrial Estate, Shimoga. This company is covered by the provisions of the Employees' State Insurance Act. The management has been paying production incentive to its employees since 1982. It has paid a total production incentive of rs. 3,21,691-25.

( 3 ) ON 22-12-1987, one M. P. Coutiaccounts Officer, Employees' State Insurance Corporation, visited the respondent-factory and conducted a test inspection. He noticed that the Management has paid a sum of Rs. 3,21,691-25 as production incentive to its employees. Hence, he prepared a report as per Ex. Rl and submitted the same to the Corporation. The Corporation issued a show cause notice dated 13-6-1988 to respondent No. 1. The respondent wrote a letter dated 22-8-1988 stating that the so called incentive payments were paid as ex-gratia payments and they were not made regularly every month and that it was paid at the discretion of the management and not as wages as per employment service condition. However, the appellant passed the impugned order dated 27-2-1989 under section 45-A of the Act holding the respondent liable to pay contribution of Rs. 23,323/ -. The Management challenged the said order by filing an application before the Employees' insurance Court, Hubli, under Section 75 of the Act. Both the parties have let in oral and documentary evidence before the court below. On consideration of the rival contentions, the learned Judge of the Employees' Insurance Court held that the production incentive was paid to the employees pursuant to the agreement between the workmen and the Management once in 3 months or 4 months at the discretion of the Management and the payment of production incentive is not part of the contract of the employment. It further held, since the production incentive is paid beyond the period of 2 months, it does not fall under the definition of "wages' as defined in Section 2 (22) of the Act.

( 4 ) THE Employees' State Insurance Corporation has questioned the correctness of this order.

( 5 ) SRI R. Gururajanlearned counsel for the appellant contended that the view taken by the Insurance Court is contrary to the ratio laid down by the Full Bench of this Court in new Government Electric Factory v Deputy Regional Director, employees' State Insurance Corporation, Bangalore , Mis. Harihar Poly fibres v Regional Director, Employees' State insurance Corporation , and the unreported decision of the division Bench of this Court in The Employees' State insurance corporation v Mysore Kirloskar Limited (Second Kirloskar's case), in which is affirmed by the Supreme Court in C. A. No. 2545 of 1982. He further submits that the payment received under the incentive scheme and declared unilaterally by the management forms part of wages. As such, the same is liable for contribution.

( 6 ) HE has further contended that though the payment is madeon quarterly basis, it is only postponement of payment. The incentive so paid is an additional remuneration for the work done and therefore payment of incentive once in 2 or 3 months cannot be a ground to avoid contribution.

( 7 ) REBUTTING these contentions, the learned counsel for the 1st respondent contended that the production incentive unilaterally declared/granted by the Management is an ex-gratia payment and does not form part of wages as defined in Section 2 (22) of the act. Further it is contended that the production incentive granted is discretionary and is liable for withdrawal without notice. This production incentive is not granted under contract of employment or under any agreement between the parties. More ov