THE HON’BLE SRI JUSTICE K.C.BHANU CIVIL MISCELLANEOUS APPEAL No. 762 OF 2005 JUDGMENT: 1. This Civil Miscellaneous Appeal is preferred aggrieved by the order dated 17.11.2004 in E.I. Case No.56 of 2001 on the file of the Employees Insurance Court and Chairman, Industrial Tribunal-I, Hyderabad, whereunder and whereby the court below allowed the case holding that the petitioner therein is not liable to pay contribution on statutory bonus. 2. For better appreciation of facts, the parties are hereinafter referred to, as they are arrayed before the court below. 3. The petitioner filed a petition under Section 75 (1) (g) of the Employees’ State Insurance Act, 1948 (for short, ‘the Act, 1948’), before the court below to set aside the C- 18 notice dated 28.11.2000 issued by the respondent Corporation stating that the petitioner is covered under the provisions of the Act, 1948 and has been ESI contributions regularly. The company is paying statutory bonus to all the employees as per Payment of Bonus Act, and at the instance of Beedi Workers’ Union, the management is paying the statutory bonus along with monthly wages for the benefits of the employees and an agreement was entered into with the Union in this regard. Inspector of respondent Corporation visited the petitioner establishment and conducted inspection and came to conclusion that the bonus paid to the employees is also covered under the Act, 1948 and thereby contribution is to be paid. The bonus is not included in the definition of wages and so the petitioner need not pay contribution on the said bonus. The respondent Corporation issued notice dated 28.11.2000 claiming contribution on the bonus amounts paid to the employees and C-18 notice issued by the respondent Corporation was received by the petitioner claiming Rs.66,831/- towards contribution for the period from April, 1998 to June, 2000. Challenging the same, the E.I. case is filed. 4. The respondent filed written statement contending that monthly bonus is paid from April, 1998 to June, 2000 and since it is paid every month it is to be treated as a part of the wage and hence the petitioner is liable to pay contribution. It is further contended that if the bonus is paid once in a year, it cannot be treated as wage, but since the bonus is paid every month, it has to be treated either as a remuneration or allowance and the same is included as wage. 5. Basing on the above pleadings, the court below framed the following issues. 1)whether the statutory bonus paid by the petitioner to its employees is not a wage as defined under Section 2(22) of the ESI Act ? 2) whether petitioner is not liable to pay any amount as demanded in the notice dated 5.7.2001 ? 3) to what relief ? 6. During enquiry, P.W.1 was examined and Exs.P1 to P6 were marked, on behalf of the petitioner, and R.Ws. 1 and 2 were examined and Exs.R1 to R18 were marked on behalf of the respondent. 7. The court below, upon considering the material on record, allowed the E.I. Case holding that the petitioner therein is not liable to pay contribution on bonus. Challenging the same, the present appeal is preferred by the respondent-corporation. 8. Now, the short point for falls for consideration is whether the bonus paid to the employee comes within the meaning of ‘wages’ as defined under Section 2(22) of the Act, 1948 ? 9. Heard both sides. 10. Section 2(22) of the Act, 1948 defines ‘wages’, which reads thus: “… all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lock out, strike which is not illegal or lay-off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include – (a) any contribution paid by the employer to any pension fund or provident fund, or under this Act; (b) any travelling allowance or the value of any travelling concession; (c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or (d) any gratuity payable on the discharge;.” 11. The learned counsel for the appellant herein placed reliance on a decision in Employees’ State Insurance Corpn., Hyderabad v. A.P. Paper Mills Ltd., Rajahmundry[1], wherein it is held thus: “.. The word ‘other’ appearing at the commencement of the third part of definition of wages under S. 2 (22) indicates that it must be remuneration or additional remuneration other than the remuneration which is referred to in the earlier part of the definition viz. , all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and incentive bonus in the present scheme is certainly additional remuneration. It must be emphasized at this stage that under the third part of the definition of ‘wages’ it is actual factum of payment which counts because the word used is ‘paid’ as distinguished from ‘paid’ or payable. The moment you get any additional remuneration other than the remuneration payable under the contract of employment and if this additional remuneration is paid at intervals not exceeding two months, it becomes wages by virtue of the third part of the definition of ‘wages’.” No doubt, this court held that incentive bonus within the definition of Section 2(22) of the Act must be ‘remuneration’ or ‘additional remuneration’. 12. On the other hand, the learned counsel for the respondent herein relied on a decision in M/s. Whirlpool of India Ltd., v. Employees’ State Insurance Corporation,[2] wherein it is held thus: (para 14) “It is evident that the additional remuneration to become wages has to be 'paid" at intervals not exceeding two months as distinguished from 'being payable'. Thus, under the last part there has to be actual payment. The High Court has found that the payment was made quarterly. It is not for us to rewrite the definition of wages even if we assume that there is a possibility of misuse by employers by making the payment at a period exceeding two months and thus circumventing the provisions of the Act. When in the last part of Section 2 (22), the word used is 'paid', we cannot add the word 'payable' or other similar expression thereto.” 13. The factual matrix is not in dispute. According to the learned counsel for the appellant, ‘bonus’ falls under the purview of ‘any other additional remuneration’ within the meaning of ‘wages’. This is not a remuneration given to the employee by virtue of any contract or otherwise. On this aspect, it is pertinent to refer to a decision in M/s. Lipton Ltd. & another v. Their Employees[3], wherein it is held thus: (para 22) “It is necessary first to state that there is a distinction between bonus and wage-a distinction to which we had earlier adverted in this judgment. Bonus comes out of profits and can claim no priority over dividend or other prior charges; bonus is paid if after meeting prior charges, there is an available surplus. Wages stand on a somewhat different footing; wages primarily rest on contract and are determined on a long term basis and are not necessarily dependent on profits made in a particular year. The distinction between the two has been adverted to in two recent decisions of this court: Messrs. Crown Aluminium Works v. Their Workmen (1) and Express Newspapers (Private) Ltd. v. The Union of India (2 ). In the Crown Aluminium Works (1) this court has observed: ` The old principle of the absolute freedom of contract and the doctrine of laissez faire have yielded place to new principles of social welfare and common good. Labour naturally looks upon the constitution of wage structures as affording ' a bulwark against the dangers of a depression, safeguard against unfair methods of competition between employers and a guarantee of wages necessary for the minimum requirements of employees'. There can be no doubt that in fixing wage structures in different industries, industrial adjudication attempts,. gradually and by stages though it may be, to attain the principal objective of a welfare state to secure 'to all citizens justice, social and economic To the attainment of this ideal the Indian Constitution has given a place of pride and that is the basis of the new guiding principles of social welfare and common good to which we have just referred. ` In so far as bare minimum wage is concerned, it has been held that no industry has the right to exist unless it is able to pay its workmen at least a bare minimum wage; in other words, minimum wage is the first charge on an industry. In the later decision of the Express Newspapers (Private) Ltd. (2) the three concepts of the minimum wage, fair wage and living wage have been examined, and it has been pointed out that the content of the expressions ` minimum wage `, ` fair wage ` and ` living wage ` is not fixed and static; it varies and is bound to vary from time to time.” So, under no stretch of imagination, it can be said that bonus would come within the meaning of ‘any other additional remuneration’. Further more, ‘any other additional remuneration’ is the remuneration paid to an employee basing on the performance of the employee. For instance, if an employee’s performance is extraordinary, then there is a possibility of giving incentive bonus for the employee so that the employee can work hard and would show good results to the company or industry or establishment. Therefore, the interpretation given by the court below that ‘bonus’ does not come within the purview of ‘any other additional remuneration’ is correct, because there is an obligation on the part of the employer under the statute to pay bonus every year. Admittedly, that ‘bonus’, according to the will and pleasure of both employer and employee, can be paid during a particular year. This option will be exercised by both the employer and employee to take minimum bonus instead of taking at the end of the year, the employee agrees to receive the bonus by dividing the same so as to pay the same every month. Therefore, the impugned order does not suffer from any infirmities so as to call for interference by this Court. 14. The Civil Miscellaneous Appeal is devoid of merit and is, accordingly, dismissed. No costs. ---------------- 08.09.2010 DRK THE HON’BLE SRI JUSTICE K.C.BHANU CIVIL MISCELLANEOUS APPEAL No. 762 OF 2005 Date: 08.09.2010 Between: Employees’ State Insurance Corporation rep. by its Regional Director. …appellant And M/s. Madarasi Chakkar Beedi Factory Ltd. Warangal, Rep. by its Managing Director …Respondent THE HON’BLE SRI JUSTICE K.C.BHANU CIVIL MISCELLANEOUS APPEAL No. 762 OF 2005 08.09.2010 [1] AIR 1978 Andhra Pradesh 18 [2] AIR 2000 Supreme Court 1190 [3] AIR 1959 Supreme Court 676