IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN MONDAY, THE 7TH SEPTEMBER 2009 / 16TH BHADRA 1931 OP.No. 21636 of 2001(A) ------------------------------------ PETITIONER(S): ---------------------- THE REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION, BHAVISHYANIDHI BHAVAN, PATTOM, TRIVANDRUM. BY ADV. MR.N.N. SUGUNAPALAN, SC, P.F. RESPONDENT(S): ---------------------------- 1. THE ADMINISTRATOR, COSMPOLITAN HOSPITALS (P) LTD., MURINJAPALAM, PATTOM , TRIVANDRUM 4. 2. THE PRESIDING OFFICER, THE HONOURABLE EMPLOYEES PROVIDENT FUNDS APPELLATE TRIBUNAL, NEW DELHI. R1 BY MR. B.S.KRISHNAN, SENIOR ADVOCATE THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 07/09/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON CMP. NO.35236/2001 IN OP. NO.21636/2001 DISMISSED 07/09/2009 SD/- S.SIRI JAGAN, JUDGE APPENDIX PETITIONER'S EXHIBITS P1:- COPY OF THE ORDER DTD. 21.12.99 PASSED BY THE PETITIONER. P2:- COPY OF THE APPEAL FILED BY THE IST RESPONDENT BEFORE THE 2ND RESPONDENT. P3:- COPY OF THE AFFIDAVIT FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. P4:- COPY OF THE ORDER DT. 20.7.2000 OF THE 2ND RESPONDENT. TRUE COPY P.S. TO JUDGE tss S. Siri Jagan, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= O.P. No. 21636 of 2001 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 7th September, 2009. J U D G M E N T The Regional Provident Fund Commissioner, Thiruvananthapuram is the petitioner in this original petition. He is challenging Ext. P4 order of the Employees Provident Fund Appellate Tribunal, wherein the Tribunal set aside Ext.P1 order of the petitioner holding that the interim relief and special allowance paid to the employees of the 1st respondent is not exigible to contribution under the Employees Provident Funds and Miscellaneous Provisions Act, based on a judgment of the Madras High Court in E.I.D. Parry (India) Ltd., v. Regional P.F. Commissioner, Tamilnadu, 1984 (1) LLJ, 300. On an inspection of the books of accounts of the 1st respondent, the 2nd respondent found that the 1st respondent had paid to their employees interim relief at the rate of Rs. 300/- per month and Rs. 50/- per month as special allowance in respect of which no contributions have been paid under the Act. By Ext. P1 order, the petitioner directed the 1st respondent to pay contributions in respect of those amounts also. The 1st respondent filed Ext. P3 appeal, which was allowed by the Employees P.F. Appellate Tribunal by Ext. P4 order holding that contributions are not payable in respect of that amounts. That order is under challenge before me. 2. According to the petitioner, the interim relief is paid as wages and special allowance is being paid as remuneration for special services rendered by the employees and therefore the same forms part of basic wages as defined under Section 2(b) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Simply because in the agreement between the 1st respondent and their employees, there is a clause that the said payment would not be counted for the purpose of payment of provident fund, bonus etc, that would not take the amounts out of the purview of 'basic wages'. O.P. No. 21636/2001 -: 2 :- Learned counsel for the petitioner submits that the decision in E.I.D. Parry's case (supra) is distinguishable on facts and even otherwise, the said judgment is against the express provisions of the Act. 3. Counsel for the 1st respondent argues in support of Ext. P4 order. According to the 1st respondent, the payments in question are identical to the allowances paid in E.I.D. Parry's case (supra) and in both cases, the agreement between the employer and employees contains a provision to the effect that payment would not be counted for the purpose of payment of P.F contributions. Therefore, the ratio of that decision is squarely applicable to the present case, is the contention raised by the learned counsel for the 1st respondent. 4. I have considered the rival contentions in detail. 5. It is admitted by the 1st respondent that Rs. 300/- p.m. was paid to the employees of the 1st respondent from 1st August, 1998 as interim relief and an amount of Rs. 50/- p.m. was being paid as special allowance from 1-4-1996. This was paid under an agreement, wherein the employer and employees agreed that such payment would not be counted for provident fund contributions, bonus, gratuity, ESI contribution etc. I am of opinion that the liability to pay contributions under the Act cannot be governed by the agreement between the employer and employees. Notwithstanding such agreement, if a payment comes within the definition of 'basic wages' as defined under Section 2(b) of the Act, contributions are payable in respect of that amount. 6. Section 2(b) reads thus: “(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-- O.P. No. 21636/2001 -: 3 :- (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 he 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.” In this case, Rs. 300/- p.m. paid to the employees is described as interim relief. Interim relief essentially means increase in wages subject to final agreement regarding the actual increase to be granted. It is admitted that in the agreement, there is a specific provision that the interim relief and special allowance being paid shall cease to be paid from the date of implementation of increase minimum wages notification in respect of private hospital issuance of which is expected soon. That being so, it is more than evident that such payment is in lieu of increase in wages. If it is increase wages, then I do not think that that can be taken out of the purview of the definition of 'basic wages' in Section 2(b), in which case the 1st respondent is liable to pay contributions on those payments also. So also, the special allowance is paid for special services rendered by the employees, which are emoluments earned by the employees in accordance with the terms of the contract between the employer and employees. Therefore, the special allowance also answers the definition of 'basic wages', in which case, contributions are payable by the employer on that payment also. 7. I am satisfied that the decision relied on by the Tribunal and the 1st respondent is clearly distinguishable insofar as in that judgment, the court was considering the case of payment of an ad hoc allowance and not any payment towards wages at all. Even O.P. No. 21636/2001 -: 4 :- otherwise, simply because the employer and employee, by agreement, decide that contribution is not payable in respect of a payment, liability under the Act cannot be avoided, if such payment answers the definition of 'basic wages' as defined under the Act. If it is held that the employer and employee can, by agreement, avoid payment of contributions in respect of certain payments, that would be against the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and in fact would lead to very disastrous results. Therefore, even if the facts of the case in the Madras decision are comparable, I am not inclined to follow that judgment, insofar as I have no doubt in my mind that the payments in question answer the definition of 'basic wages' under Section 2(b) of the Act. Therefore, Ext. P4 order is clearly perverse and accordingly the same is set aside, restoring Ext. P1. It is made clear that the 1st respondent is liable to pay contributions in respect of payment of interim relief and special allowance as directed in Ext. P1 order and the petitioner can recover the same from the 1st respondent as per the provisions of the Act. The original petition is allowed as above. Sd/- S. Siri Jagan, Judge. Tds/