Case: The Daily Partap Vs. Regional Provident Fund Commissioner, Punjab

3. The appellants were carrying on the business of printing of the newspapers in the city of Jalandhar in the State of Punjab and circulating the same to their customers. They were alleged to have not remitted their contributions along with the share of their concerned employees to the extent of the amounts paid by them for the period from August, 1975 to March, 1976 by way of Production Bonus. The contention of the appellants was that as the disputed amounts were paid to the concerned employees under the relevant `Production Bonus Schemes they were not liable to remit contributions for the same as per Section 6 of the Act. On the basis of the said contention, they filed writ petitions earlier against the aforesaid demand of the authorities before the High Court. In the said writ petitions filed in the year 1976, the then learned Advocate General for the State of Haryana appearing for the authorities, conceded before the High Court that the appellants were not required to deposit the provident fund on the Production Bonus and the appellants may deposit provident fund only on "wages" as defined in the Act from August, 1975 and with regard to the refund of the amount deposited in respect of Production Bonus, the appellants may apply to the respondent authorities, who, after giving them hearing, would decide the matter within three months. The said decision of the High Court in both these writ petitions moved by the appellants were rendered on 19th July, 1976. Thereafter the respondent authorities gave hearing to the appellants and ultimately took the view that the disputed amounts for which contributions were asked for under Section 6 of the Act from the appellants were part of the "basic wages" and no such Production Bonus Scheme was existing in the appellants concerns. Consequently, the claim of the appellants for non-application of Section 6 of the Act of these disputed amounts was rejected. Under these circumstances, the appellants once again carried the matters in writ petitions before the High Court. Those writ petitions were dismissed by the learned Single Judge by the impugned order which came in their turn to be confirmed by the Division Bench in the Letters Patent Appeals as noted earlier.

Reasoning:
7. As noted earlier, it is true that when the appellants in the first instance filed writ petitions in the High Court, it was contended by them that the Production Bonus amounts paid by them to their workmen were not part of the "basic wages" as defined under Section 2(b) of the Act. It is also true that they contended before the High Court in those proceedings that under some mistake of law they had already deposited provident fund of the employees with respect to Production Bonus also. That they were entitled to appropriate refund of the said amount. It is equally true that when such a contention was raised by them, the learned Advocate General, Haryana, who appeared at that stage on behalf of the respondent authorities, conceded that the appellants were not required to deposit provident fund on the Production Bonus and they may deposit provident fund only on the "wages" as defined in the Act from August, 1975 and that for appropriate refund they may apply to the respondent who will give them hearing and decide the matter. Learned Advocate General also assured that the appellants will have to pay refund of the provident fund to the employees to the extent that such amounts were deducted from the salaries of the employees covered by the Production Bonus scheme. The said assurance of the learned Advocate General was accepted by the learned counsel for the appellants and that is how the appellants moved an application for refund before the authorities.8. However, it has to be kept in view that the Advocate Generals concession was on a question of law as to whether the Scheme which was put forward by the appellants as Production Bonus Scheme was covered by Section 6 read with Section 2(b) or not. Such a concession on the question of law cannot bind the authorities for all time to come but even apart from this aspect of the matter the said concession has to be considered as a whole. In the same breath while conceding that the appellants were not required to contribute on Production Bonus amounts, the learned Advocate General made it clear that they have to deposit provident fund on the "wages" as defined under the Act meaning thereby the question whether the disputed amounts for which refund was to be claimed by the appellants from the authorities fell within the definition of "wages" under the Act or not. It was a live issue which had to be decided by the authorities in proposed refund applications. Learned Advocate General had not given an absolute concession that the appellants were not liable to contribute any part of the disputed amount towards provident fund and that it never fell within the definition of the word "wages". Under these circumstances, when the applications for refund were moved by the appellants they were required to be decided on their own merits. The statement of the learned Advocate General before the High Court had no adverse effect on such a statutory jurisdiction of the authorities. The merits of refund applications had to be decided by the authorities after hearing the appellants. The entire question whether the claim for refund was justified in law or not and the further connected question whether the amounts deposited were towards "basic wages" or otherwise were open for consideration of the authorities. It cannot be said that such an inquiry was not open to the authorities and was clearly shut out by the order of the High Court dated 19th July, 1976 recording the concession of the learned Advocate General. The first point, therefore, is answered against the appellants and in favour of the respondentis not in dispute between the parties that the appellants establishments are governed by the Act. In fact learned counsel for the appellants stated that they are remitting requisite contributions under Section 6 so far as the amounts of "basic wages" paid by them to their employees are concerned and equally matching contributions from the employees are also deducted from their wages and remitted to the authorities under the Act. It is obvious that these contributions form part of the fund and the provident fund accounts of the workmen maintained by the authorities under the scheme are credited with these amounts from time to time. These funded amounts would be available to the workmen for their requirements as withdrawals can be made from the workers credit balances in the fund as envisaged by the Act. However, Shri Ranjit Kumars grievance is a limited one, namely, that the appellants are not liable to contribute with reference to the amounts which are paid to the workmen which are not "basic wages". It was submitted that under Section 6 of the Act, only three types of contributions are required to be effected by the employer along with the corresponding matching contributions by the employees as requisite percentage of the amounts; i) basic wages, ii) dearness allowance, and iii) retaining allowance, if any, paid to the workmen by the employers. It was contended that undisputably the amounts in question were not paid to the workmen by way of dearness allowance and "retaining allowance" as laid down by Explanation 2 to Section 6 of the Act. It means "an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working for retaining his services". Therefore, according to him unless disputed amounts are part of "basic wages" they cannot be made subject matter of contributions.Therefore, the short question is whether the disputed amounts paid to the workmen employed by the appellants during the relevant time were paid by way of Production Bonus or not. An incidental question will also arise namely, whether in any case the said amount can be said to be covered by the latter part of the exception category (ii) of the definition Section 2(b) being similar allowance payable to the employee in respect of his employment or the work done in such employment. It was submitted that in any case this allowance was paid for the extra work by way of incentive. The aforesaid contention of learned counsel for the appellants will have to be examined in the light of the Production Bonus Scheme in question which has been the sheet-anchor of the appellants case for getting out of the sweep of Section 6 read with Section 2(b) of thethe light of the aforesaid observations, it was held that the scheme which fell for consideration of the Court was a scheme of Production Bonus wherein beyond a base or standard up to which basic wages or time wages have to be paid, payments were made for superior performance. This extra payment could be called an incentive wage and also Production Bonus. The aforesaid observations of the six-member Bench clearly clinch the issue against the appellants. In order to become a genuine Production Bonus scheme payment to be made to meritorious workmen who put in extra output, has to have a direct nexus and linkage with the amount of extra output produced by the eligible workmen so that the scheme can work as a real incentive scheme equally to them to make extra efforts. Such a scheme may have sliding scales of bonus amount based to total extra quantity of production for which all workmen can uniformly be paid bonus on the basis of their co-operative efforts. More the extra production more the available surplus of bonus to be divided amongst all eligible workmen uniformly. Other type of incentive bonus scheme may be made available to an individual meritorious workman, extra payment for extra work having direct linkage with the extra production out-turned by him. In neither case such distributable bonus can be a static figure as in the present case. On the facts of the present case, as seen earlier, unfortunately for the appellants the scheme on which they relied does not fulfil the aforesaid legal logistic for becoming a genuine Production Bonus scheme. It is not a scheme of sliding scale bonus having real nexus with the amount of extra output furnished by the concerned workmen either individually or collectively. As seen earlier, once they crossed even slightly the norm of work expected of them in a given shift, they all fall in the same category of eligible workmen entitled to get on uniform basis extra amount of 1 times the basic daily wage. Thus, this scheme of paying extra remuneration to more eligible and efficient workmen is a scheme of super wage fixation and is not a genuine scheme of incentive bonus which has to be earned by the workmen by showing their capabilities for earning such extra bonus linked up with the quantity of extra production. In the same volume at page 995 is reported the case of Jay Engineering Works Ltd. & Ors. v. Union of India & Ors. (supra), wherein also Wanchoo, J., spoke for a four-member Bench. The scheme under this very Act which came for consideration in that case was a composite Production Bonus scheme. It laid down that if a workman gave out-turn beyond the minimum quantity fixed for him by way of floor quota he became entitled to additional remuneration even though that additional remuneration was for that extra out-turn of work which was below the norm of out-turn which he was enjoined under the contract of service to fulfil. The very scheme also contemplated extra amount to be paid to the workmen who exceeded the norms of output and gave extra output beyond such norms. Analysing the said scheme Wanchoo, J., for this court held that to the extent to which any more remuneration was paid to the workman who had given out-turn more than the quantity of quota output fixed but up to limit of the normal output required of him, the extra remuneration part-took the character of extra wage and was covered by the definition of "basic wages" but to the extent to which such out-turn went beyond normal requirement of amount fixed, then to that extent extra payment for such extra output beyond the norms fixed became a Production Bonus scheme. In the case before this Court, such extra payment was on a piece rate basis. The workman concerned became entitled to be paid additional remuneration to the extent to which he produced goods beyond the norms prescribed for such work. It is easy to visualise that once a workman under any scheme of bonus is to be paid on piece rate basis for the extra output given by him beyond the norms prescribed for such work, the extra amount payable to him will have a direct linkage with the extra output furnished by him. More extra output more payment; less extra output less payment. Such a scheme would be a genuine Production Bonus scheme. The scheme in question does not fulfil the criteria laid down for a genuine production bonus scheme by either of the judgments of this Court in Bridge & Roof Co. (India) Ltd v. Union of India case (supra) or in Jay Engineering Works Ltd & Ors. v. The Union of India & Ors. case (supra).14. In this connection, we may now usefully refer to the Constitution Bench judgment in M/s Titaghur Paper Mills Co. Ltd. v. Its Workmen case (supra), wherein an earlier Constitution Bench speaking though Wanchoo, J., had occasion to consider the legal connotation of a Production Bonus scheme as distinct from profit bonus scheme. The scheme which fell for consideration of the Constitution Bench in the said case was one floated by the company wherein up to the production 36,000 tons, there was a uniform rate of bonus payable by the company for giving appropriate remuneration to the workmen for producing that much quantity of goods but the scheme did not provide for production bonus for production above 36,000 tons, as there was no agreement between the Management and the Union in this respect. The question before the Industrial Tribunal from whose decision appeal came to this court was whether the workmen were entitled to be given further benefit of production incentive scheme if by their joint efforts production of the company went beyond 36,000 tons and whether it was necessary to provide for Production Bonus beyond this limit. The Tribunal, in that case while giving clearance to such a scheme, gave two reasons for increase in the rates of payment of Production Bonus: (i) the intensification of the efforts of the workmen in increasing production, and (ii) the progressive going down of the labour cost of production per ton as production increased. The rates had to be increased progressively with production. Consequently, for each 460 tons increase in production the proper rates for payment of Production Bonus would be 1-1/4, 1, 1-3/4 and 2 days basic wages respectively or production between 36,000 and 42,000 tons, 42,000 and 48,000 tons, 48,000 and 54,000 tons and 54,000 and 60,000 tons. It is this additional Production Bonus scheme ordered by the Tribunal which was examined by this Court in the said decision. While upholding the said modification in the bonus scheme of the company, this court held that this was not a profit bonus scheme but was a genuine production incentive bonus scheme as the Production Bonus to be paid to the workmen was directly linked with the extra output furnished by them by their own efforts beyond the requisite norms of output. It was held that the scheme before them was nothing more or less than Production Bonus scheme on the basis of tonnage of production. The aforesaid decision of the Constitution Bench wherein Wanchoo, J., spoke for the Bench, was pressed in service by the same learned Judge speaking for the latter Constitution Bench while considering Section 2(b) of this very Act in Bridge & Roof Co. (India) Ltd v. Union of India case (supra) as seen earlier.15. It, therefore, becomes clear that in order to become a genuine Production Bonus scheme so as to get covered by exception (ii) to the definition of "basic wages" as found under Section 2(b) of the Act, it must be shown that the scheme in question seeks to offer production bonus to the workmen concerned who put in extra output wherein either collectively bonus be fixed to all of them on the basis of total extra output on a sliding scale or may be paid individually to a given number of workmen who by their own efforts earn such bonus. Thus in each case payment of bonus cannot be of a fixed or proven nature having no nexus with the quantity of extra output produced by them. As in the present case the scheme relied on by the appellants does not fulfil this legal test, it does not attract the exception (ii) to Section 2(b). It remains in the realm of basic extra wage. The decision rendered by learned Single Judge of the High Court as confirmed by the Division Bench decision, cannot, therefore be found fault with. The submission of learned counsel for the appellants that in the scheme in question there was no compulsion for the workman to put in extra work and the management could not compel him to do extra work nor can it allege any misconduct on the part of such workman who does not want to do excess work cannot be of any avail to the learned counsel for the appellants as even if this criteria may be common to the present scheme as well as the genuine Production Bonus scheme, the further requirement of the scheme to become a genuine Production Bonus scheme, namely, that the payment by way of bonus to the concerned eligible workman should vary in proportion to the extra output put up by him beyond the norm of output prescribed for him, is conspicuously absent in the present scheme, as seen earlier, and on the other hand, this requirement which is the very heart of a genuine Production Bonus scheme is missing in the present scheme and therefore, similarity on only one aspect between the genuine production incentive scheme and the present scheme, namely, that the workman could not have been compelled to carry out extra work pales into insignificance on the facts of the present case. Therefore, the second question has to be answered against the appellants and in favour of the respondent.While granting special leave to appeal in this case, by an order dated 9th May, 1988, this court had stayed the recovery of the amounts of the Employees Provident Fund contribution for the past period, subject to furnishing a bank guarantee for payment of that sum. But no stay of recovery of future contribution was granted. As the appeals fail, the bank guarantee if furnished by the appellants, will be available for being encashed by the respondents towards the liability of the appellants for the contributions for the past period which had remained stayed by order of this court.