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2013 Supreme(Online)(KER) 43435
HIGH COURT OF KERALA
S. SIRI JAGAN, BABU MATHEW P.JOSEPH, JJ
M/S K P L OIL MILLS S(P) LTD – Appellant
Versus
EMPLOYEES STATE INSURANCE CORPORATION – Respondent
INSURANCE APPEAL 6/2007
Payments defined as 'wages' under the Act mandate contributions by employers, even if the payments are made at irregular intervals or to third-party employees.
Headnote:
Contributions - Employees State Insurance - Act Section 2(22) - The court upheld the definition of 'wages' under Section 2(22), emphasizing that various payments made by the employer qualify as wages for contribution purposes, thereby affirming the EI Court's demand for contributions.
Fact of the Case:
The applicant is contesting an order by the Employees Insurance Court which deemed three types of payments as 'wages' under the Employees State Insurance Act, necessitating contribution payments. The items include sales incentives, payments to a packing contractor's employees, and a City Compensatory Allowance.
Issues: The primary issues revolved around whether the sales incentive, payments to the packing contractor, and City Compensatory Allowance qualify as 'wages' under the Act, impacting the obligation to make contributions.
Ratio Decidendi: The court reaffirmed that payments are considered 'wages' if they fulfill the contract of employment and that the employer has control over the conditions under which the payments are made.
Final Decision: The appeal is dismissed.
JUDGMENT
---------------- S.Siri Jagan,J.
The applicant in I.C No.81/2005 before the employees Insurance Court, Palakkad, is the appellant herein. They are challenging the order of the E.I. Court, in that I.C. where three items of payments made by the applicant were held to be wages for the purpose of demanding contributions under the Employees State Insurance Act (‘Act for short’). The Inspector of the Employees State Insurance Corporation inspected the premises of the appellant and found out that certain payments which actually come within the definition of 'wages' under the Act have not been taken into account for the purpose of paying contributions. In respect of the same a demand was issued to the appellant by the respondent directing payment of arrears of contribution in respect of the same. The appellant challenged the demand by filing the I.C. After considering the evidence adduced by the parties the E.I.Court, by the impugned judgment, upheld the demand. The appellant is challenging that judgment.
2. The dispute arises by the appellant relates to three items of payments, one is sales incentive paid to the employees. The second is wage element of packing contract and the third is City Compensatory Allowance paid to two of the employees. In respect of the sales incentive, the appellant took the contention that, the sales incentive does not form part of the wages, since the same was paid at intervals exceeding two months and therefore the same is taken out of the purview of definition of 'wages' and consequently, no contributions are payable in respect of such payments. As far as the wage element of payments made to the packing contractor is concerned, the appellant took the contention that the packing contractor is an independent contractor doing the packing work in a different premises, where the appellant did not have any control or supervision over the packing process and therefore, no contributions are payable in respect of wages paid by the packing contractor to his employees. As far as the City Compensatory Allowance is concerned, the contention is that the payment is for defraying special expenses entailed by the employees, by the nature of his employment and therefore, by virtue of Sub Clause (C) of Section 2 (22) of the Act defining 'wages', the said payment is excluded from the definition of 'wages'. The arguments of the appellant did not find favour with the EI Court and EI Court found that all the payments come within the purview within wages as defined in (22) of the Act.
3. According to the appellant, the sales incentive is paid not pursuant to the terms of contract of employment between the appellant and their employees,either expressed or implied and has been paid at intervals not exceeding two months and therefore, the payment is clearly excluded from the purview of definition of 'wages' under the Act. As far as the wages paid to the employees of the packing contractor is concerned, the contention is that the appellant does not have any control over the packing of the materials, the same is done under a contract executed between the packer and appellant and the packing process is not supervised by the appellant. Therefore, the packing contractor does not come within the definition of 'immediate employer' under Section 2 (13) of the Act. Consequently, the appellant is not liable to pay contributions in respect of the wages paid by the contractor to his employees is the contention.
4. As far as the City compensatory Allowance is concerned, it is submitted that the same is paid to the employees to defray a special expenditure entailed on account of the nature of their employment and therefore the same is not included in the definition of 'wages'.
5. The counsel for the respondent Employees Insurance Corporation is not present to defend the appeal.
6. We have considered the case on the basis of the records available in this case.
7. We shall first deal with the question of liability of the appellant to pay co
