The question involved in this appeal is whether travelling allowance paid to an employee as a consolidated amount would constitute 'wages' within the meaning of Section 2 (22) of the Employees' State Insurance Act, 1948. The Employees' Insurance Court held that it does not form part of wages.

2. The learned counsel for the appellant relied on the decision of a learned Single Judge in Insurance Appeal No.40 of 2007. In that case, the question which arose for consideration was whether conveyance allowance given to the employees under the terms of the contract of employment becomes part of the wages. Relying on the decision of the Karnataka High Court in M/s. Rajashree Cement v. Deputy Director (I), ESI Corporation (2004 LAB 1C 2244), the learned Single Judge held that conveyance allowance given to the employees under the terms of contract would form part and parcel of wages within the meaning of Section 2 (22) of the Act and it shall be taken into consideration for the purpose of fixing the ESI contribution. The Karnataka High Court relied on the decision of the Hon'ble Supreme Court in M/s. Harihar Polyfibres v. The Regional Director, E.S.I. Corporation (AIR 1984 SC 1680) and held that conveyance allowance under the terms of the contract would fall within the term 'remuneration' under Section 2 (22) of the E.S.I. Act and therefore it has to be taken into account for the purpose of making contribution.

3. In M/s.Harihar Polyfibres v. Regional Director, E.S.I. Corporation (AIR 1984 SC 1680), the question which arose for consideration was whether 'House Rent Allowance', 'Night Shift Allowance', 'Heat, Gas and Dust Allowance' and 'Incentive Allowance' would constitute 'wages' within the definition of Section 2 (22).

4. The Madras High Court in Management of Oriental Hotels Ltd. v. Employees State Insurance Corporation (2002 (1) LLJ 14) held that in view of the specific exclusion of travelling allowance in the definition of Section 2 (22) itself and since conveyance allowance was of the same character as travelling allowance, conveyance allowance would not constitute wages within the definition of Section 2 (22). It was held thus:

"8. In so far as the conveyance allowance is concerned, even though it forms part of the wages being the amount payable in terms of the contract of employment, having regard to the settlement and even de hors the settlement, the payment of the amount would fall within the ambit of "additional remuneration". Nevertheless, that amount will have to be excluded having regard to the specific exclusion provided in the definition itself for travelling allowance or the value of any travelling concession. The conveyance allowance paid is in the nature of travelling allowance as the object of that payment is to enable the employee to reach his place of work and to defray a part of the cost incurred on the travel from his place of residence to the place of work. If instead of paying the conveyance allowance, the employer had provided free transport to the employees, the monetary value of that benefit of free travel from his residence to the place of work would not have been capable of being regarded as forming part of the wages. The conveyance allowance paid in cash for the purpose of being utilised on the travel from place of residence to the place of work, is of the same character and there is no reason why it should not be regarded as travelling allowance for the purpose of Section 2(22)(b), of the Employees' State Insurance Act."

5. Another Division Bench of the Madras High Court in S. Ganesan v. The Regional Director, E.S.I. Corporation (Civil Miscellaneous Appeal No.156 of 1996) held that the travelling batta paid to the employees is covered by exclusion Clause (c) of Section 2 (22) of the Act and it is outside the scope of "wages".

6. Section 2 (22) of the Employees State Insurance Act reads as follows:

"wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of