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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S MOHAN
E.I.D. Parry (India) Limited - Appellant
Versus
Regional Commissioner Epf Tamilnadu and Another - Respondent
Case No : W.P. No. 103 of 1977
Decided On : 20 August 1982
EMPLOYEES' PROVIDENT FUNDS AND FAMILY PENSION FUND ACT, 1952 - S. 2(B), 6 - BASIC WAGES - FLAT AD HOC ALLOWANCE - WHETHER FORMS PART OF BASIC WAGES - INTERPRETATION OF STATUTE - INTENTION OF PARTIES.
Fact of the Case:
The writ petitioner, the management, and the employees entered into a settlement under S.18(1) of the Industrial Disputes Act, 1947, agreeing to pay a flat ad hoc allowance of Rs. 15/- per month to all employees, irrespective of their probationary or confirmed status. The issue arose whether this allowance could be included in the computation of provident fund contribution under the Employees' Provident Funds and Family Pension Fund Act, 1952.
Finding of the Court:
The court held that the flat ad hoc allowance did not form part of basic wages and could not be included in the computation of provident fund contribution. The court interpreted S. 2(b) of the Act, which defines basic wages, and S. 6, which provides for the contribution to the provident fund, and found that the intention of the parties was to exclude the allowance from the definition of basic wages.
Issues: Whether the flat ad hoc allowance paid to employees was part of basic wages for the purpose of provident fund contribution under the Employees' Provident Funds and Family Pension Fund Act, 1952.
Ratio Decidendi: The court relied on the definition of basic wages in S. 2(b) of the Act, which excludes certain allowances, including dearness allowance, house rent allowance, overtime allowance, bonus, commission, and any other similar allowance. The court also considered the provisions of S. 6, which provides for the contribution to the provident fund, and found that the intention of the parties was to exclude the allowance from the definition of basic wages.
Final Decision: The court quashed the order of the Regional Provident Fund Commissioner, which had directed the writ petitioner to pay provident fund contribution on the flat ad hoc allowance.
Mohan, J.
The writ petition is for the certiorari to quash the order of the Regional Commissioner, Employees' Provident Funds, made in Proceedings No. D7/TN/4101/Regl./76 dated 21st December, 1976. The writ petitioner, the Management and the Employees entered into a settlement under S.18(1) of the Industrial Disputes Act, 1947 in the following terms :
"MEMORANDUM OF SETTLEMENT.
(Under S.18(1) of the Industrial Disputes Act, 1947 and Rule 25(1) of the Madras Industrial Disputes Rules, 1958).
Parties to E.I.D. Parry Limited, Ennore Settlement : (Compound Fertiliser Factory) and its workmen represented by the E.I.D. Parry Employees' Union, Ennore.
Representing 1. Mr. C. G. Ramanathan Employer : Special Director, E.I.D. Parry Limited, Madras.
2. Mr. S. H. Kanga, Works Manager, E.I.D. Parry Limited, Compound Fertiliser Factory, Ennore.
3. Mr. R. Ramanujam, Manager, E.I.D. Parry Limited, Personnel Department, Madras.
Representing 1. Mr. R. Kuchelan, President, employees : E.I.D. Parry Employees' Union, Ennore.
2. Mr. V. Rangan, Vice President, E.I.D. Parry Employees Union, Ennore.
3. Mr. V. Ramachandran, Vice President, E.I.D. Parry Employees' Union, Ennore.
4. Mr. P. V. Issac, General Secretary, E.I.D. Parry Employees' Union, Ennore.
No. of workmen covered by the settlement. Approximately 670.
SHORT RECITAL OF THE CASE
Whereas the E.I.D. Parry Employees' Union, Ennore (hereinafter referred to as the Union) by their letter dated 7th May, 1970 submitted a Charter of Demands.
Whereas following a strike/lock-out, the Labour Commissioner issued a communication Ref : A3 106667/70 dated 16th January, 1971, the strike/lock-out was called off with effect from 20th January, 1971,And whereas further direct negotiations were held with the Union and the Management of E.I.D. Parry Ltd. (hereinafter referred to as the 'Company') on several dates and finally on 23rd March, 1972 at 'Dare House', Madras, a settlement was reached as recorded hereunder :
TERMS OF SETTLEMENT
I. i) The Union, with a view to give its full co-operation in maintaining maximum production and productivity hereby agrees to the introduction and operation in good faith of the Productivity Oriented Scheme attached to this Settlement marked Annexure 'A' which will be in effect from 1st March, 1971.
ii) In view of the foregoing, the Company will extend to each employee on the factory's probationary and confirmed rolls, a flat ad hoc allowance of Rs. 15/- per month with effect from 1st March, 1971.
iii) The flat ad hoc allowance and incentive earnings under (i) and (ii) above shall not be reckoned for purposes of the Provident Fund, Bonus, Gratuity, E.S.I. etc.
II. Employees on the canteen rolls will be only eligible for a flat ad hoc allowance of Rs. 12.50 per month with effect from 1st March, 1971. This ad hoc allowance shall not be reckoned for purposes of Provident Fund, Bonus, Gratuity, E.S.I. etc." *
The question arose whether flat ad hoc allowance of Rs. 15/- per month paid to all the employees with effect from 1st March, 1971, irrespective of the fact whether they were on the probationary or confirmed rolls can partake the character of basic wages so as to make it a liability for contribution, under the employees' Provident Funds and Family Pension Fund Act, 1952 (19 of 1952). The contention of the writ petition was that the 'ad hoc' allowance was pursuant to the agreement and that being special in nature cannot be included for the purpose of computation of liability under the provident fund contribution, since it would not tantamount to basic wages nor can it be called an emolument. By the order sought to be quashed, the Regional Commissioner of the Employees' Provident Funds, held that the agreement between the writ petitioner, the management and the employees' union that ad hoc allowance will not count for provident fund deduction is not of any importance. Therefore, he decided to assess the provident fund contribution on ad hoc allowance and, therefore, proceeded to work out th
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