Claim for E. S. I. contribution on these amounts.

K.B.N. Singh, C.J.

1. This appeal by the Employees State Insurance Corporation has been filed against an adverse order of the Employees, State Insurance Court.

2. The respondent, a joint stock company; filed an application under Sections 75 and 77 of the Employees' State Insurance Act XXXIV of 1948 (hereinafter referred to as the Act), alleging that on 11th April, 1972, a settlement was entered into between the respondent and its workmen under which an Incentive Scheme was introduced for payment of incentive earnings to the workmen depending upon the increased production. The scheme also provided for payment of ad hoc allowance. In the settlement it has been further agreed that the above said two categories of payment will not be reckoned for purposes of provident fund, bonus, gratuity, Employees' State Insurance contribution, etc. In had been further agreed that the other conditions governing the incentive payment will be published separately. Following the same, the said scheme was published on 14th April, 1972, Clause (g) of the said scheme was to the effect that the Management reserves its right to amend or suspend or withdraw the scheme altogether at its discretion. On those averments the respondent claimed that the incentive earnings and the ad hoc allowance are not liable to be taken into account for the Employees' State Insurance coverage or deduction of Employees' State Insurance subscription. In spite of that, the appellant demanded payment of the subscription with reference to these amounts also. The respondent who objected to this claim, filed the said application for a declaration that the incentive earnings and ad hoc wages are not to be taken into account as wages for the purpose of payment of contribution and also for a declaration that the employees in the Head Office and Branch offices are not employees as defined in Section 2(9) of the Act, and for consequential reliefs restraining the appellant from enforcing the demands.

3. The claim of the respondent was refuted by the appellant. The First Additional Judge, City Civil Court. Madras, who had the necessary jurisdiction to entertain the dispute, came to the conclusion that the employees in the Head office and the Branch offices are employees as defined in Section 2(9) of the Act. There being no appeal against that order by the respondent, that order has become final.

4. The learned Additional Judge further came to the conclusion that the incentive earnings as well as the ad hoc allowance are not part of 'wages' as defined in Section 2(22) of the Act and hence the said sums cannot be taken into consideration for calculating the contribution claimed. It is against this part of the order that the appellant, the Employees, State Insurance Corporation has filed the present appeal.

5. The question that arises for consideration, therefore, is whether the ad hoc allowance and incentive earnings are part of 'wages' for purposes of contribution under the Act or not.

6. There is no dispute before us that the settlement, dated 11th April, 1972 (Exhibit P-l) is binding between the parties and has not been terminated. The terms of the settlement, relevant for our consideration, are as follows:

I (i) The Union, with a view to give its co-operation in maintaining maximum production and productivity hereby agree 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 such 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 provident fund, bonus, gratuity, Employees, State Insurance etc.

7. Clause 6 of the settlement, which is also relevant, reads as follows-

The production and efficiency norms under t