Case: Employees State Insurance Corporation Vs. Mangalam Publications (India) Pvt. Ltd

2. Brief facts leading to this appeal are as follows:The respondent is an establishment covered by the provisions of Employees State Insurance Act, 1948 (hereinafter referred to as the `ESI Act). It is a private limited company engaged in the business of printing and publishing of a daily Malayalam newspaper called "Mangalam"; the respondent has more than 250 employees including working andjournalists. In order to have a uniform formula regarding the wages payable to the employees of newspaper companies like the respondent, the Central Government appointed Wage Boards from time to time to study and submit reports from time to time. Earlier, the Wage Board headed by Justice Bachawat, known as `Bachawat Wage Board was constituted and the Board submitted its recommendations. Thereafter, the Government of India appointed a new Wage Board, headed by Justice Manisana which was called as `Manisana Wage Board. As per the recommendations of `Manisana Wage Board, the Government of India issued a notification dated 24.09.1996 fixing interim rates of wages in respect of working journalists,journalists and newspaper agency employees at the rate of twenty per cent of the basic wages and an additional amount of Rs. 100/per month, with effect from 20.04.1996. As per the said notification, the respondent started paying interim relief to its employees, and paid such interim relief from 01.04.1996 to 31.03.2000. However, the respondent did not pay the statutory contribution under the ESI Act for the period during which it paid interim wages to its employees. The ESI contribution due on interim wages paid by the respondent from 01.04.1996 to 31.03.2000 worked out to Rs. 2,53,272/(however, as per demand notice dated 02.11.2000, the figure is Rs. 2,58,061.50).Subsequently, another office memorandum was issued by the Government of India, Department of Public Enterprises, Ministry of Industry, providing for the grant of interim relief to the employees of Central Public Sector Enterprises (PSES). The said office memorandum was subject to the following conditions:a) These instructions are applicable to the employees of Central PSES following IDA pattern.b) The amount paid as interim relief would be fully adjusted and .... in the final pay revision package.c) xxx xxx xxxd) xxx xxx xxxe) xxx xxx xxxf) xxx xxx xxxg) The amount of interim relief will be....viz. it will neither be termed as `pay nor `allowances nor `wages. Accordingly, this amount would not count for any service benefit i.e. computation of house rent allowance, compensatory allowance, overtime allowance, cash compensation, encashment of leave, pay fixation, pension or gratuity etc.Theoffice memorandum dated 19.08.1998 of the Ministry of Industry had nothing to do with the notification dated 20.04.1996 providing for interim relief to the employees of newspaper agencies. The office memorandum dated 19.08.1998 makes itself clear that the same was applicable to employees of the Central PSES, and consequently it had no application to employees of private sector undertakings like that of the respondent company.3. The premises of thewas inspected by the Insurance Inspector of theon 13.06.2000, wherein it was found that the respondent had not paid any contribution on the interim wages paid by it to its employees during the period from 01.04.1996 to 31.03.2000. The contention of the respondent was that it was not required to pay any contribution on the interim relief paid by it to its employees in view of office memorandum dated 19.08.1998. Since the contribution was not paid by the respondent, as mentioned supra, a notice dated 18.07.2000 was issued by the appellant to the respondent to pay contribution of theamount for theperiod. The notice of demand dated 02.11.2000 was also served on the respondent demanding an amount of Rs. 2,58,061.50 with interest thereon.4. Feeling aggrieved by thenotices, the respondent moved the Employees Insurance Court, Idukki, Kerala, by filing a petition under Section 75 of the ESI Act, which came to be numbered as Insurance Case No. 19/2000. In the said petition also, the respondent relied upon the office memorandum dated 19.08.1998 and a clarificatory letter dated 20.12.1996 of the Indian Newspaper Society. The said petition was opposed by the appellant contending that the office memorandum dated 19.08.1998 was not applicable to the respondent, and that the clarification given by the Indian Newspaper Society has no legal validity; the effect of the Act of Parliament i.e., ESI Act cannot be superseded by the office memorandum issued by the department; that under Section 2(22) of the ESI Act, all remuneration is wages except the categories mentioned in clauses (a) to (d) of Section 2(22) of the ESI Act, and that interim relief does not come within the excluded parts of clauses (a) to (d). After consideration of the material on record, the ESI Court dismissed the application filed by the respondent holding that the interim relief paid by the respondent to the employees was "wages" as defined under Section 2(22) of the ESI Act, and hence the respondent was liable to pay contribution for the interim relief paid. It was observed by the ESI Court that the respondent paid interim relief to its employees as per the direction contained in the notification dated 20.04.1996 and the provisions of the notification became a part of the contract of employment of the employees of the respondent company. It was also observed that the office memorandum dated 19.08.1998 was only applicable to the employees of the Central PSES, and it does not anywhere say that the interim relief is not "wages" as defined under Section 2(22) of the ESI Act or that contribution need not be paid on the payment of interim relief.The respondent filed Insurance Appeal No. 2/2000 before the High Court of Kerala under Section 82 of the ESI Act, challenging the order passed by the ESI Court on 13.10.2003. The appeal came to be allowed by the impugned judgment, holding that the appellant herein is not entitled to collect any contribution in respect of interim relief paid by the respondent to its employees. While concluding so, the High Court has held that the amount paid as interim relief cannot be treated as "wages" or "part of wages" and can only be treated aspayment". Hence, this appeal.

Court's reasoning:
6. There cannot be any dispute that if the interim relief paid by the respondent is held by this Court as "wages" as defined under Section 2(22) of the ESI Act, then the respondent is necessarily liable to pay ESI contribution on the amount of interim relief paid to itsplain reading of thedefinition of Section 2(22) of the ESI Act makes it amply clear that "wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of the employment, expressed or implied, were fulfilled and includes other additional remuneration, if any, paid at intervals not exceeding two months. But payments made on certain contingencies under Clauses (a) to (d) of Section 2(22) of the ESI Act, do not fall within the definition of "wages". The interim relief paid to the employees of the respondent in the matter on hand, as mentioned supra, will definitely not fall within the excluded part of clauses (a) to (d) of Section 2(22) of the ESI Act, inasmuch as such payment is not travelling allowance or the value of any travelling concession, contribution paid by the employer to any pension fund or provident fund; sum paid to an employee to defray special expenses entailed on him by the nature of his employment; or any gratuity payable onthe literal meaning of statutory provisions cannot be ignored. However, in cases where there may be two or more ways to interpret a statutory provision, the spirit of this legislation warrants a construction that benefits the working class. The inclusive part and exclusive portion of the definition of "wages" clearly indicate that the expression "wages" has been given wider meaning. As mentioned supra, under the definition, firstly whatever remuneration is paid or payable to an employee under the terms of the contract of the employment, expressed or implied, is "wages". Secondly, whatever payment is made to an employee in respect of any period of authorized leave,etc. is "wages". Thirdly, other additional remuneration, if any, paid at intervals not exceeding two months is also "wages". Any ambiguous expression, according to us, should be given a beneficent construction in favour of employees by the Court. If the definition of "wages" is read in its entirety including the inclusive part as well as the exclusive portion, it appears that inclusive portion is not intended to be limited only of items mentioned therein, particularly, having regard to the objects and reasons for which the Employees State Insurance Act is enacted. The Act has to be necessarily so construed as to serve its purpose and objects.As mentioned supra, the High Court while allowing the appeal filed by the respondent has mainly relied upon the office memorandum dated 19.08.1998 issued by the Department of Public Enterprises, Ministry of Industry, New Delhi, which is not applicable to the facts of this case. The said notification makes it abundantly clear that the instructions contained in the said office memorandum are applicable to Central Public Sector Enterprises (PSES) only. Admittedly, the respondent is a private limited company and hence the instructions contained in office memorandum dated 19.08.1998 are not applicable to the respondent company. In the matter on hand, the appellant claimed ESI contribution only on the amount paid by the respondent as interim relief to its employees, treating the same as "wages" as per Section 2(22) of the ESI Act. The amount paid as interim relief by the respondent to its employees definitely falls within the definition of "wages" as per Section 2(22) of the ESI Act. On the other hand, the High Court has strangely observed that the interim relief paid for the period from 01.04.1996 to 31.03.2000 can only be treated aspayment" paid by the employer to its employees and cannot be treated as "wages" for the purpose of ESI contribution. In our considered opinion, the High Court has ignored to appreciate that the effect of ESI Act enacted by the Parliament cannot be circumvented by the department office memorandum. The High Court has also failed to appreciate that the payment of interim relief/wages emanates from the provisions contained in terms of the settlement, which forms part of the contract of employment and forms the ingredients of "wages" as defined under Section 2(22) of the ESI Act and that the respondent paid interim relief, as per a scheme voluntarily promulgated by it as per the notification dated 20.04.1996, issued by the Government of India, in view of the recommendations of "Manisana Wage Board, pending revision of rates of wages. It was not an. The interim relief paid by the respondent to its employees is not a "gift" or "inam", but is a part of wages, as defined under Section 2(22) of the ESI Act. In view of the above, we hold that the payment made by way of interim relief to the employees by the respondent for the period from 1.04.1996 to 31.03.2000 comes within the definition of "wages", as contained in Section 2(22) of the ESI Act, and hence the respondent is liable to pay ESI