IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 22ND JANUARY 2009 / 2ND MAGHA 1930 Ins.APP.No. 40 of 2007() ------------------------ IC.74/2004 of EMPLOYEES INSURANCE COURT, PALAKKAD .................... APPELLANT(S):OPPOSITE PARTY ---------------------------- THE REGIONAL DIRECTOR,ESI CORPORATION PANCHDEEP BHAVAN,NORTH SWARAJ ROUND TRISSUR-20. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT(S): APPLICANT ------------------------ M/S.TONY HARRIS SEA FOODS LTD, ERAMALLOOR,ALAPPUZHA, REP.BY ITS MANAGING DIRECTOR,S.LALJI. ADV. SRI.ISSAC NINAN FOR R1 SRI.T.KURIAKOSE PETER FOR R1 THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 22/01/2009 , THE COURT ON THE SAME DAY DELIVERED T E FOLLOWING: M.N.KRISHNAN, J ===================== INAP No.40 OF 2007 ===================== Dated this the 22nd day of January 2009 JUDGMENT This appeal is preferred against the order of the Employees Insurance Court, Palakkad in I.C.No.74 of 2004. The short point that arises for determination is whether the conveyance allowance given to the employees under the terms of the contract of employment becomes part of the wages so as to attract contribution under the provisions of the Employees State Insurance Act. The E.I.Court relying upon the decision of the Division Bench of the Madras High Court in Regional Director, ESIC v. Sundaram Claton Ltd.(2004 II LLJ 30) held that conveyance allowance also means only travelling allowance and as travelling allowance is excluded from the purview of wages as defined under Section 2(22)(b) of the ESI Act, it cannot be taken into consideration for fixing the contribution. It is against that decision the ESI Corporation has come up in appeal. 2. Let me first refer to the decision of the Madras High Court in Oriental Hotels Ltd. v. Employees State Insurance Corporation(2002(1) LLJ 14). The Madras High Court held that “however in view of the specific INAP 40/2007 -:2:- exclusion of travelling allowance in the definition itself and since conveyance allowance was of the same character as travelling allowance, conveyance allowance was held not to fall part of 'wages'”. In the decision reported in 2004-II LLJ 30(supra), the Madras High Court considered the very same question and held that it will not come under the definition of 'wages'. In the said decision, in paragraph 13, the earlier decision was extracted which reads as follows: “In so far as the conveyance allowance is concerned, even though it forms part of the wages being the amount payable in terms of the contract of employment, having regard to the settlement and even de hors the settlement, the payment of the amount would fall within the ambit of 'additional remuneration'. Nevertheless, that amount will have to be excluded having regard to the specific exclusion provided in the definition itself for travelling allowance or the value of any travelling concession. The conveyance allowance paid is in the nature of travelling allowance as the object of that payment is to enable the employee to reach his place of work and to defray a part of the cost incurred on the travel from his place of residence to the place of work. If instead of paying the conveyance allowance, the employer had INAP 40/2007 -:3:- provided free transport to the employees, the monetary value of that benefit of free travel from his residence to the place of work would not have been capable of being regarded as forming part of the wages. The conveyance allowance paid in cash for the purpose of being utilised on the travel from place of residence to the place of work, is of the same character and there is no reason why it should not be regarded as travelling allowance for the purpose of Section 2(22)(b) of the Employees' State Insurance Act”. 3. So the view of the Madras High Court is that travelling and conveyance are one and the same and when travelling allowance is excluded from the purview of wages any amount paid as conveyance allowance also has to be excluded. 4. But a different note had been taken by a Division Bench of the Karnataka High Court in the decision reported in M/s.Rajashree Cement v. Dy.Director(I), ESI Corpn(2004 LAB IC 2244), which reads as follows: “Conveyance allowance is different from travelling allowance or travelling concession referred to in Cl.(b) of S.2(22) of the Act. Travelling allowance referred to in Cl.(b) is a payment meant to defray specific expenses incurred by the employees by reason INAP 40/2007 -:4:- of the nature of his employment and may include any allowance paid or reimbursed to any employee for specific duty related journey. It may also include reimbursement of actual cost of journey subject to proof of actual expenditure. Payment of conveyance allowance on a uniform basis regardless whether the employee concerned has or has not incurred any expenditure on his journey to a place of his work is not however synonymous to travelling allowance as is envisaged under Cl.(b) of S.2(22)”. In the said decision, the Karnataka High Court has taken the view that when a consolidated amount is granted as conveyance allowance under the terms of the contract, it will fall within the term 'remuneration' under Section 2(22) of the ESI Act and therefore it has to be taken into consideration for the purpose of finding out whether contribution has to be paid or not. 5. The Karnataka High Court had also in the decision reported in Regional Director, Employees State Insurance Corp. v. IT Solutions(2002 III LLJ 757) held that the Apex Court in the decision reported in Harihar Polyfibres v. ESI(AIR 1984 SC 1680) held that house rent allowance, night shift allowance, incentive allowance and heat and dust allowance fall within the definition of wages in Section 2(22) of the Act. Therefore, since INAP 40/2007 -:5:- the applicant-employer is paying a certain fixed amount as conveyance allowance to every employee working in its concern, in terms of contract of employment, there is no impediment to hold that the conveyance allowance forms part and parcel of wages within the definition of Section 2(22) of the Act. 6. There cannot be any dispute that if conveyance allowance is roped into the inclusive word of 'remuneration' then necessarily it can form a part of wages. At the same time, if the conveyance allowance so granted is taken as travelling allowance then the exclusion clause under Section 2(22)(b)of the Act may come into play and therefore it cannot be taken into consideration. Conveyance allowance of course is a consolidated amount paid by the employer to the employee for the purpose of conveyance. It is argued that instead of paying the conveyance allowance a transport is arranged for the to and fro journey of the employees then the question of conveyance allowance might not have arisen at all and therefore taking into consideration that aspect, the conveyance allowance should be treated as travelling allowance which forms an exclusion from the purview of wages. It has to be stated that normally conveyance allowance is granted as a consolidated sum. It does not depend upon the question how you travel, from where you travel. But INAP 40/2007 -:6:- travelling allowance is something which one undertakes in connection with his employment. For example, when an official undertakes a journey to a place outside his working headquarters, then necessarily he has to be provided expenses for the travelling which he undertakes. So, travelling allowance is something which depends upon the journey you have to make outside place of your work in your official capacity for your official purposes. But conveyance allowance does not belong to that category, but it is a consolidated amount paid irrespective of the question whether you come by a conveyance or not. For example, even if you are a next door neighbour to a place of work in order to avoid inequality among employees the employer fixes a fixed sum and gives you and therefore irrespective of the travelling you get that amount by virtue of the terms of the contract entered into between the employer and the employees. Therefore the word conveyance allowance and travelling allowance has to be understood in different meaning and the different situation in which it applies and when the amount is paid as a consolidated sum just like any other allowance which can be taken into consideration as part and parcel of remuneration it does not come under the excluded clause. Therefore I am inclined to agree with the decision rendered by the Karnataka High Court in preference to the decision of the Madras High Court for the INAP 40/2007 -:7:- reasons stated in the previous paragraphs of the judgment. Therefore the appeal is allowed and the order passed by the E.I. Court is set aside and it is held that conveyance allowance forms part and parcel of wages and it shall be taken into consideration for the purpose of fixing the ESI contribution. INAP is disposed of accordingly. M.N.KRISHNAN, JUDGE Cdp/-