2014 judis.nic.in/s.c/filename=41130
Industrial Dispute - Govt. order to pay Hill Development allowance to its employees working at specified hill areas at the rate of 15% of the basic wage - Worker demanded to pay not only on basic wage but also on other allowances - Tribunal decided in favour of workers, High court confirmed - Apex court set aside the Orders - Holding that Basic wage does not include other allowances =
The Government of Uttar Pradesh, by its order dated 5th of January,
1981, had directed for payment of Hill Development Allowance to its
employees working at specified hill areas at the rate of 15% of the basic wage.
The workmen
demanded calculation of 15% of the said allowance by taking into account the amount paid as overtime, leave encashment and all other allowances.
Whether the exclusion of payment of overtime, leave encashment,
bonus and retaining allowance while calculating the Hill
Development Allowance by the Employer is legal and justified?
If not, to what relief, the workmen concerned are entitled
to get?
The
expression ‘basic wage’ has not been explained by the Government in the
order granting Hill Development Allowance. It has been defined only under
Section 2(b) of the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952. Therefore, we have to see what meaning is to be given to this
expression in the present context. Section 2(b) of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 defines ‘basic
wages’ as follows:
“2. Definitions. - In this Act, unless the context otherwise
requires, -
(a) xxx xxx xxx
(b) “basic wages” means all emoluments which are earned by an
employee while on duty or on leave or on holidays with wages in
either case in accordance with the terms of the contract of
employment and which are paid or payable in cash to him, but
does not include-
i) the cash value of any food concession;
ii) any dearness allowance that is to say, all cash
payments by whatever name called paid to an employee
on account of a rise in the cost of living, house-rent
allowance, overtime allowance, bonus commission or any
other similar allowance payable to the employee in
respect of his employment or of work done in such
employment;
iii) any presents made by the employer;”
According to http://www.merriam-webster.com (Merriam Webster
Dictionary) the word ‘basic wage’ means as follows:
“1. A wage or salary based on the cost of living and used as a
standard for calculating rates of pay
2. A rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime.”
It also finds support from a judgment of this Court in the case of
Manipal Academy of Higher Education v. Provident Fund Commr.,(2008) 5 SCC
428 in which it has been held as follows:
“10. The basic principles as laid down in Bridge & Roofs case,
AIR 1963 SC 1474, on a combined reading of Sections 2(b) and 6
are as follows:
(a) Where the wage is universally, necessarily and ordinarily
paid to all across the board such emoluments are basic wages.
(b) Where the payment is available to be specially paid to
those who avail of the opportunity is not basic wages. By way
of example it was held that overtime allowance, though it is
generally in force in all concerns is not earned by all
employees of a concern. It is also earned in accordance with
the terms of the contract of employment but because it may not
be earned by all employees of a concern, it is excluded from
basic wages.
(c) Conversely, any payment by way of a special incentive or
work is not basic wages.”
In view of what we have observed above, the impugned award and the
judgment of the High Court are illegal and cannot be allowed to stand.
In the result, we allow this appeal, set aside the award and the
judgment of the High Court and hold that overtime allowance and leave
encashment are not fit to be taken into account for calculating the Hill
Development Allowance. No costs.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.77 OF 2014
(@SPECIAL LEAVE PETITION (CIVIL.) NO. 16382 OF 2009)
KICHHA SUGAR COMPANY LIMITED
TH. GEN. MANG. … APPELLANT
VERSUS
TARAI CHINI MILL MAJDOOR
UNION, UTTARKHAND …RESPONDENT
J U D G M E N T
CHANDRAMAULI KR. PRASAD, J.
Kichha Sugar Company Limited aggrieved by the order dated 24th of
June, 2008 passed by the Uttarakhand High Court in WPMS No. 3717 of 2001,
affirming the award dated 12th of November, 1992
directing payment of Hill Development Allowance after taking into account the amount received as
“leave encashment and overtime wages”, has preferred this special leave
petition.
Leave granted.
Facts lie in a narrow compass;
The Government of Uttar Pradesh, by its order dated 5th of January,
1981, had directed for payment of Hill Development Allowance to its
employees working at specified hill areas at the rate of 15% of the basic wage.
Kichha Sugar Company Limited, the appellant herein (hereinafter
referred to as ‘the employer’), being a unit of a subsidiary of U.P.
Government Corporation, adopted the same and started paying Hill
Development Allowance at the rate of 15% of the basic wage.
The workmen
demanded calculation of 15% of the said allowance by taking into account the amount paid as overtime, leave encashment and all other allowances.
When the employer did not agree to the calculation of the Hill Development
Allowance as suggested by the workmen, a dispute was raised.
It was
referred to conciliation and on its failure, the competent Government made
the following reference.
Whether the exclusion of payment of overtime, leave encashment,
bonus and retaining allowance while calculating the Hill
Development Allowance by the Employer is legal and justified?
If not, to what relief, the workmen concerned are entitled
to get?
It is common ground that while calculating Hill Development Allowance,
the employer has not taken into account any other amount including amount
received as bonus, leave encashment, retaining allowance or overtime wages.
It is the claim of the workmen that 15% of the Hill Development Allowance
is to be calculated and paid after taking into account the payments made
under the aforesaid headings. The employer repudiated their claim and
according to it, the workmen shall be entitled to 15% of the basic wages as
Hill Development Allowance.
The Industrial Tribunal gave opportunity to
both the employer and the workmen to file their claim and produce material and on consideration of the same, gave award dated 12th of November, 1992 directing the employer to “give Hill Development Allowance to their permanent and regular workers on the amount received regarding leave
encashment and overtime wages.” However, the Tribunal observed that “Hill Development Allowance shall not be payable on bonus and retaining allowance
or on any other allowances”.
The employer, aggrieved by the award
preferred writ petition before the High Court, which affirmed the same
without any discussion or assigning any reason in the following words:
“9. After going through the aforesaid finding recorded by the
tribunal concerned, I find no infirmity or illegality in the
impugned award passed by the tribunal concerned and the same is
hereby confirmed.”
Before we enter into the merit of the case, it is apt to understand
what Hill Development Allowance is.
In our opinion, Hill Development
Allowances is nothing but a compensatory allowance.
A compensatory
allowance broadly falls into three categories;
(i) allowance to meet the
high cost of living in certain, specially costly cities and other local
areas;
(ii) allowance to compensate for the hardship of service in certain
areas, e.g. areas which have a bad climate and/or difficult to access; and
(iii) allowances granted in areas, e.g. field service areas, where, because
of special conditions of living or service, an employee cannot, besides
other disadvantages, have his family with him.
There may be cases in which
more than one of these conditions for grant of compensatory allowance is
fulfilled. It seems that taking into account bad climate and remote and
difficult access, the decision was taken to grant the Hill Development
Allowance at the rate of 15% of the basic wage.
We have heard Mr. Tanmaya Agarwal for the appellant and Mr. Jatin
Zaveri for the respondent. Mr. Agarwal submits that basic wage will not
include the amount received as leave encashment and overtime wages.
According to him, basic wage would mean the wage which is paid to all the
employees. He submits that leave encashment and overtime wages would vary
from workman to workman and, therefore, those cannot be
included in the basic wage. In support of the submission he placed
reliance on a judgment of this Court in the case of Muir Mills Co. Ltd. v.
Workmen, AIR 1960 SC 985 and our attention has been drawn to the following
passage from Paragraph 11 of the judgment, which reads as follows:
“11. Thus understood “basic wage” never includes the additional
emoluments which some workmen may earn, on the basis of a
system of bonuses related to the production. The quantum of
earnings in such bonuses varies from individual to individual
according to their efficiency and diligence; it will vary
sometimes from season to season with the variations of working
conditions in the factory or other place where the work is
done; it will vary also with variations in the rate of supplies
of raw material or in the assistance obtainable from machinery.
This very element of variation, excludes this part of workmen's
emoluments from the connotation of “basic wages”.”
Mr. Garg, however submits that any amount including the amount paid as
leave encashment and overtime wages do come within the expression ‘basic
wage’ and, hence, have to be accounted for the purpose of calculating 15%
of the basic pay.
In view of the rival submissions, the question which falls for our
determination is as to the meaning of the expression ‘basic wage’. The
expression ‘basic wage’ has not been explained by the Government in the
order granting Hill Development Allowance. It has been defined only under
Section 2(b) of the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952. Therefore, we have to see what meaning is to be given to this
expression in the present context. Section 2(b) of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 defines ‘basic
wages’ as follows:
“2. Definitions. - In this Act, unless the context otherwise
requires, -
(a) xxx xxx xxx
(b) “basic wages” means all emoluments which are earned by an
employee while on duty or on leave or on holidays with wages in
either case in accordance with the terms of the contract of
employment and which are paid or payable in cash to him, but
does not include-
i) the cash value of any food concession;
ii) any dearness allowance that is to say, all cash
payments by whatever name called paid to an employee
on account of a rise in the cost of living, house-rent
allowance, overtime allowance, bonus commission or any
other similar allowance payable to the employee in
respect of his employment or of work done in such
employment;
iii) any presents made by the employer;”
According to http://www.merriam-webster.com (Merriam Webster
Dictionary) the word ‘basic wage’ means as follows:
“1. A wage or salary based on the cost of living and used as a
standard for calculating rates of pay
2. A rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime.”
When an expression is not defined, one can take into account the
definition given to such expression in a statute as also the dictionary
meaning. In our opinion, those wages which are universally, necessarily
and ordinarily paid to all the employees across the board are basic wage.
Where the payment is available to those who avail the opportunity more than
others, the amount paid for that cannot be included in the basic wage. As
for example, the overtime allowance, though it is generally enforced across
the board but not earned by all employees equally. Overtime wages or for
that matter, leave encashment may be available to each workman but it may
vary from one workman to other. The extra bonus depends upon the extra
hour of work done by the workman whereas leave encashment shall depend upon
the number of days of leave available to workman. Both are variable. In
view of what we have observed above, we are of the opinion that the amount
received as leave encashment and overtime wages is not fit to be included
for calculating 15% of the Hill Development Allowance. The view which we
have taken finds support from the judgment of this Court in Muir Mills Co.
Ltd. (supra), relied on by the appellant, in which it has been specifically
held that the basic wage shall not include bonus.
It also finds support from a judgment of this Court in the case of
Manipal Academy of Higher Education v. Provident Fund Commr.,(2008) 5 SCC
428 in which it has been held as follows:
“10. The basic principles as laid down in Bridge & Roofs case,
AIR 1963 SC 1474, on a combined reading of Sections 2(b) and 6
are as follows:
(a) Where the wage is universally, necessarily and ordinarily
paid to all across the board such emoluments are basic wages.
(b) Where the payment is available to be specially paid to
those who avail of the opportunity is not basic wages. By way
of example it was held that overtime allowance, though it is
generally in force in all concerns is not earned by all
employees of a concern. It is also earned in accordance with
the terms of the contract of employment but because it may not
be earned by all employees of a concern, it is excluded from
basic wages.
(c) Conversely, any payment by way of a special incentive or
work is not basic wages.”
In view of what we have observed above, the impugned award and the
judgment of the High Court are illegal and cannot be allowed to stand.
In the result, we allow this appeal, set aside the award and the
judgment of the High Court and hold that overtime allowance and leave
encashment are not fit to be taken into account for calculating the Hill
Development Allowance. No costs.
..………..……………………………….J.
(CHANDRAMAULI KR. PRASAD)
………………….………………………………….J.
(JAGDISH SINGH KHEHAR)
NEW DELHI,
JANUARY 06, 2014.
-----------------------
13
Industrial Dispute - Govt. order to pay Hill Development allowance to its employees working at specified hill areas at the rate of 15% of the basic wage - Worker demanded to pay not only on basic wage but also on other allowances - Tribunal decided in favour of workers, High court confirmed - Apex court set aside the Orders - Holding that Basic wage does not include other allowances =
The Government of Uttar Pradesh, by its order dated 5th of January,
1981, had directed for payment of Hill Development Allowance to its
employees working at specified hill areas at the rate of 15% of the basic wage.
The workmen
demanded calculation of 15% of the said allowance by taking into account the amount paid as overtime, leave encashment and all other allowances.
Whether the exclusion of payment of overtime, leave encashment,
bonus and retaining allowance while calculating the Hill
Development Allowance by the Employer is legal and justified?
If not, to what relief, the workmen concerned are entitled
to get?
=
The
expression ‘basic wage’ has not been explained by the Government in the
order granting Hill Development Allowance. It has been defined only under
Section 2(b) of the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952. Therefore, we have to see what meaning is to be given to this
expression in the present context. Section 2(b) of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 defines ‘basic
wages’ as follows:
“2. Definitions. - In this Act, unless the context otherwise
requires, -
(a) xxx xxx xxx
(b) “basic wages” means all emoluments which are earned by an
employee while on duty or on leave or on holidays with wages in
either case in accordance with the terms of the contract of
employment and which are paid or payable in cash to him, but
does not include-
i) the cash value of any food concession;
ii) any dearness allowance that is to say, all cash
payments by whatever name called paid to an employee
on account of a rise in the cost of living, house-rent
allowance, overtime allowance, bonus commission or any
other similar allowance payable to the employee in
respect of his employment or of work done in such
employment;
iii) any presents made by the employer;”
According to http://www.merriam-webster.com (Merriam Webster
Dictionary) the word ‘basic wage’ means as follows:
“1. A wage or salary based on the cost of living and used as a
standard for calculating rates of pay
2. A rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime.”
It also finds support from a judgment of this Court in the case of
Manipal Academy of Higher Education v. Provident Fund Commr.,(2008) 5 SCC
428 in which it has been held as follows:
“10. The basic principles as laid down in Bridge & Roofs case,
AIR 1963 SC 1474, on a combined reading of Sections 2(b) and 6
are as follows:
(a) Where the wage is universally, necessarily and ordinarily
paid to all across the board such emoluments are basic wages.
(b) Where the payment is available to be specially paid to
those who avail of the opportunity is not basic wages. By way
of example it was held that overtime allowance, though it is
generally in force in all concerns is not earned by all
employees of a concern. It is also earned in accordance with
the terms of the contract of employment but because it may not
be earned by all employees of a concern, it is excluded from
basic wages.
(c) Conversely, any payment by way of a special incentive or
work is not basic wages.”
In view of what we have observed above, the impugned award and the
judgment of the High Court are illegal and cannot be allowed to stand.
In the result, we allow this appeal, set aside the award and the
judgment of the High Court and hold that overtime allowance and leave
encashment are not fit to be taken into account for calculating the Hill
Development Allowance. No costs.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.77 OF 2014
(@SPECIAL LEAVE PETITION (CIVIL.) NO. 16382 OF 2009)
KICHHA SUGAR COMPANY LIMITED
TH. GEN. MANG. … APPELLANT
VERSUS
TARAI CHINI MILL MAJDOOR
UNION, UTTARKHAND …RESPONDENT
J U D G M E N T
CHANDRAMAULI KR. PRASAD, J.
Kichha Sugar Company Limited aggrieved by the order dated 24th of
June, 2008 passed by the Uttarakhand High Court in WPMS No. 3717 of 2001,
affirming the award dated 12th of November, 1992
directing payment of Hill Development Allowance after taking into account the amount received as
“leave encashment and overtime wages”, has preferred this special leave
petition.
Leave granted.
Facts lie in a narrow compass;
The Government of Uttar Pradesh, by its order dated 5th of January,
1981, had directed for payment of Hill Development Allowance to its
employees working at specified hill areas at the rate of 15% of the basic wage.
Kichha Sugar Company Limited, the appellant herein (hereinafter
referred to as ‘the employer’), being a unit of a subsidiary of U.P.
Government Corporation, adopted the same and started paying Hill
Development Allowance at the rate of 15% of the basic wage.
The workmen
demanded calculation of 15% of the said allowance by taking into account the amount paid as overtime, leave encashment and all other allowances.
When the employer did not agree to the calculation of the Hill Development
Allowance as suggested by the workmen, a dispute was raised.
It was
referred to conciliation and on its failure, the competent Government made
the following reference.
Whether the exclusion of payment of overtime, leave encashment,
bonus and retaining allowance while calculating the Hill
Development Allowance by the Employer is legal and justified?
If not, to what relief, the workmen concerned are entitled
to get?
It is common ground that while calculating Hill Development Allowance,
the employer has not taken into account any other amount including amount
received as bonus, leave encashment, retaining allowance or overtime wages.
It is the claim of the workmen that 15% of the Hill Development Allowance
is to be calculated and paid after taking into account the payments made
under the aforesaid headings. The employer repudiated their claim and
according to it, the workmen shall be entitled to 15% of the basic wages as
Hill Development Allowance.
The Industrial Tribunal gave opportunity to
both the employer and the workmen to file their claim and produce material and on consideration of the same, gave award dated 12th of November, 1992 directing the employer to “give Hill Development Allowance to their permanent and regular workers on the amount received regarding leave
encashment and overtime wages.” However, the Tribunal observed that “Hill Development Allowance shall not be payable on bonus and retaining allowance
or on any other allowances”.
The employer, aggrieved by the award
preferred writ petition before the High Court, which affirmed the same
without any discussion or assigning any reason in the following words:
“9. After going through the aforesaid finding recorded by the
tribunal concerned, I find no infirmity or illegality in the
impugned award passed by the tribunal concerned and the same is
hereby confirmed.”
Before we enter into the merit of the case, it is apt to understand
what Hill Development Allowance is.
In our opinion, Hill Development
Allowances is nothing but a compensatory allowance.
A compensatory
allowance broadly falls into three categories;
(i) allowance to meet the
high cost of living in certain, specially costly cities and other local
areas;
(ii) allowance to compensate for the hardship of service in certain
areas, e.g. areas which have a bad climate and/or difficult to access; and
(iii) allowances granted in areas, e.g. field service areas, where, because
of special conditions of living or service, an employee cannot, besides
other disadvantages, have his family with him.
There may be cases in which
more than one of these conditions for grant of compensatory allowance is
fulfilled. It seems that taking into account bad climate and remote and
difficult access, the decision was taken to grant the Hill Development
Allowance at the rate of 15% of the basic wage.
We have heard Mr. Tanmaya Agarwal for the appellant and Mr. Jatin
Zaveri for the respondent. Mr. Agarwal submits that basic wage will not
include the amount received as leave encashment and overtime wages.
According to him, basic wage would mean the wage which is paid to all the
employees. He submits that leave encashment and overtime wages would vary
from workman to workman and, therefore, those cannot be
included in the basic wage. In support of the submission he placed
reliance on a judgment of this Court in the case of Muir Mills Co. Ltd. v.
Workmen, AIR 1960 SC 985 and our attention has been drawn to the following
passage from Paragraph 11 of the judgment, which reads as follows:
“11. Thus understood “basic wage” never includes the additional
emoluments which some workmen may earn, on the basis of a
system of bonuses related to the production. The quantum of
earnings in such bonuses varies from individual to individual
according to their efficiency and diligence; it will vary
sometimes from season to season with the variations of working
conditions in the factory or other place where the work is
done; it will vary also with variations in the rate of supplies
of raw material or in the assistance obtainable from machinery.
This very element of variation, excludes this part of workmen's
emoluments from the connotation of “basic wages”.”
Mr. Garg, however submits that any amount including the amount paid as
leave encashment and overtime wages do come within the expression ‘basic
wage’ and, hence, have to be accounted for the purpose of calculating 15%
of the basic pay.
In view of the rival submissions, the question which falls for our
determination is as to the meaning of the expression ‘basic wage’. The
expression ‘basic wage’ has not been explained by the Government in the
order granting Hill Development Allowance. It has been defined only under
Section 2(b) of the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952. Therefore, we have to see what meaning is to be given to this
expression in the present context. Section 2(b) of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 defines ‘basic
wages’ as follows:
“2. Definitions. - In this Act, unless the context otherwise
requires, -
(a) xxx xxx xxx
(b) “basic wages” means all emoluments which are earned by an
employee while on duty or on leave or on holidays with wages in
either case in accordance with the terms of the contract of
employment and which are paid or payable in cash to him, but
does not include-
i) the cash value of any food concession;
ii) any dearness allowance that is to say, all cash
payments by whatever name called paid to an employee
on account of a rise in the cost of living, house-rent
allowance, overtime allowance, bonus commission or any
other similar allowance payable to the employee in
respect of his employment or of work done in such
employment;
iii) any presents made by the employer;”
According to http://www.merriam-webster.com (Merriam Webster
Dictionary) the word ‘basic wage’ means as follows:
“1. A wage or salary based on the cost of living and used as a
standard for calculating rates of pay
2. A rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime.”
When an expression is not defined, one can take into account the
definition given to such expression in a statute as also the dictionary
meaning. In our opinion, those wages which are universally, necessarily
and ordinarily paid to all the employees across the board are basic wage.
Where the payment is available to those who avail the opportunity more than
others, the amount paid for that cannot be included in the basic wage. As
for example, the overtime allowance, though it is generally enforced across
the board but not earned by all employees equally. Overtime wages or for
that matter, leave encashment may be available to each workman but it may
vary from one workman to other. The extra bonus depends upon the extra
hour of work done by the workman whereas leave encashment shall depend upon
the number of days of leave available to workman. Both are variable. In
view of what we have observed above, we are of the opinion that the amount
received as leave encashment and overtime wages is not fit to be included
for calculating 15% of the Hill Development Allowance. The view which we
have taken finds support from the judgment of this Court in Muir Mills Co.
Ltd. (supra), relied on by the appellant, in which it has been specifically
held that the basic wage shall not include bonus.
It also finds support from a judgment of this Court in the case of
Manipal Academy of Higher Education v. Provident Fund Commr.,(2008) 5 SCC
428 in which it has been held as follows:
“10. The basic principles as laid down in Bridge & Roofs case,
AIR 1963 SC 1474, on a combined reading of Sections 2(b) and 6
are as follows:
(a) Where the wage is universally, necessarily and ordinarily
paid to all across the board such emoluments are basic wages.
(b) Where the payment is available to be specially paid to
those who avail of the opportunity is not basic wages. By way
of example it was held that overtime allowance, though it is
generally in force in all concerns is not earned by all
employees of a concern. It is also earned in accordance with
the terms of the contract of employment but because it may not
be earned by all employees of a concern, it is excluded from
basic wages.
(c) Conversely, any payment by way of a special incentive or
work is not basic wages.”
In view of what we have observed above, the impugned award and the
judgment of the High Court are illegal and cannot be allowed to stand.
In the result, we allow this appeal, set aside the award and the
judgment of the High Court and hold that overtime allowance and leave
encashment are not fit to be taken into account for calculating the Hill
Development Allowance. No costs.
..………..……………………………….J.
(CHANDRAMAULI KR. PRASAD)
………………….………………………………….J.
(JAGDISH SINGH KHEHAR)
NEW DELHI,
JANUARY 06, 2014.
-----------------------
13
