The Supreme Court established that basic wage does not include leave encashment, impacting provident fund contributions and related damages.

JUDGMENT

Mr. Harsh Bunger, J.

Petitioner (M/s Nicks India (Tools)) has filed the instant writ petition under Articles 226/227 of the Constitution of India, seeking issuance of a writ in the nature of certiorari for setting aside the order dated 15.11.2000 (Annexure P-2) passed by the Regional Provident Fund Commissioner as well as an order dated 05.05.2005 (Annexure P-4) passed by the Employees' Provident Funds Appellate Tribunal, New Delhi.

2. Briefly, the petitioner-Establishment is covered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (here-in-after referred to as 'the Act, 1952') under Code 'PN-10334' and as such, it was required to pay the provident fund dues under the Act as well as the Scheme framed thereunder within 15 days of the close of every month, in terms of Section 6 of the Act, 1952.

3. It appears that a notice dated 13.09.2000 (Annexure P-1) was issued to the petitioner under Section 14B of the Act, 1952 relating to default in payment of contribution by the employer. The petitioner is stated to have appeared before the concerned authority on receipt of the aforesaid notice and a stand was taken by the petitioner that there was no delay in depositing of Provident Fund dues. It appears that the concerned authority, vide order dated 15.11.2000 (Annexure P-2) levied damages to the tune of Rs.62,467/-.

4. Being dissatisfied, the petitioner herein filed the statutory appeal before the Employees Provident Funds Appellate Tribunal (in short 'the Appellate Tribunal') under the Act, 1952; wherein, it was inter alia submitted that the department had levied damages with regard to deposit of Provident Fund Contribution on wages in lieu of leave, which is contrary to the provisions of law. Accordingly, it was prayed before the Appellate Tribunal to waive off the damages levied against the petitioner herein with regard to payment of wages in lieu of un-availed leave and administration charges by setting aside the order dated 15.11.2000 (Annexure P-2).

5. The aforesaid appeal was dismissed by the Employees Provident Fund Appellate Tribunal, New Delhi vide its order dated 05.05.2005 (Annexure P-4).

6. In the afore-mentioned circumstances, the petitioner has filed the instant writ petition before this Court.

7. Learned senior counsel appearing for the petitioner has submitted that vide impugned order dated 15.11.2000 (Annexure P-2), while imposing/levying damages to the tune of Rs.62,467/-, the authority below had levied penalty on the amount paid on account of leave encashment to the extent of 37%. It is the stand of the petitioner that the Provident Fund contribution on leave encashment cannot be applied and accordingly, there was no occasion for calculating damages on account of Provident Fund contribution on leave encashment.

8. In support of the afore-said contentions, learned senior counsel for the petitioner has referred to the judgment rendered by the Hon'ble Supreme Court in the case of Manipal Academy of Higher Education v. Provident Fund Commissioner 2008 (2) SCT 421; wherein, it has been held that the basic wage was never intended to include amounts received for leave encashment. The relevant extract of the aforesaid judgment reads as under :-

"11. In TI Cycles of India, Ambattur v. M.K. Gurumani and Ors., 2001 (3) SCT 1139 : (2001(7) SCC 204) it was held that incentive wages paid in respect of extra work done is to be excluded from the basic wage as they have a direct nexus and linkage with the amount of extra output. It is to be noted that any amount of contribution cannot be based on different contingencies and uncertainties. The test is one of universality. I the case of encashment of leave the option may be available to all the employees but some may avail and some may not avail. That does not satisfy the test of universality. As observed in Daily Partap v. Regional Provident Fund Commissioner, 1999 (1) SCT 216 : (1998 (8) SCC 90) the test is uniform treatment or nexus under-dependent