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Thursday, January 9, 2014

2014 judis.nic.in/s.c/filename=41130 = KICHHA SUGAR COMPANY LIMITED TH. GEN. MANG. … APPELLANT VERSUS TARAI CHINI MILL MAJDOOR UNION, UTTARKHAND …RESPONDENT=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 =

                                           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.





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