Case: Harihar Polyfibres Vs. The Regional Director, Esi Corporation

The Employees State Insurance Act is a welfare legislation and the definition of wages is designedly wide. Any ambiguous expression is, or course, bound to receive a beneficent construction at our hands too. Now, under the definition first, whatever remuneration is paid or payable to an employee under the terms of the contract of the employment, express or implied is wages; thus if remuneration is paid in terms of the original contract of employment or in terms of a settlement arrived at between the employer and the employees which by necessary implication becomes part of the contract of employment it is wages: second, whatever payment is made to an employee in respect of any period of authorised leave, lock out: strike which is not illegal or lay-off is wages; and third, other additional remuneration, if any paid at intervals not exceeding two months is also wages; this is unqualified by any requirement that it should be pursuant to any term of the contract of employment, express or implied. However, wages does not include any contribution paid by the employer to any pension fund or provident fund, or under the Act, any travelling allowance or the value of any travelling concession, any sum paid to t he person employed to defray special expenses entailed on him by the nature of his employment and any gratuity payable on discharge. Therefore wages as defined includes remuneration paid or payable under the terms of the contract of employment, express or implied but further extends to other additional remuneration, if any, paid at intervals not exceeding two months, though outside the terms of employment. Thus remuneration paid under the terms of the contract of the employment lex press or implied) or otherwise if paid at intervals not exceeding two months is wages. The interposition of the clause and includes any payment to an employee in respect of any period of authorised leave, lock out, strike which is not illegal or lay off between the first clause, all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express of implied, was fulfilled and the third clause, other additional remuneration, if any, paid at intervals not exceeding two months, makes it abundantly clear that while remuneration under the first clause has, to be under a contract of employment, express or implied, remuneration under the third clause need not be under the contract of employment but may be any additional remuneration outside the contract of employment. So, there appears to our mind no reason to exclude House Rent Allowance, Night Shift Allowance, Incentive Allowance and Heat, Gas and Dust Allowance fro m the definition of wages. A Full Bench of the Karnataka High Court in N.G.E.F. Ltd. v. Deputy Regional Director, E.S.I.C., Bangalore considering the question at some length held that the amount paid by way of incentive under the scheme of settlement entered into between the Management and its workman was wages within the meaning of s. 2(22) of Employees State Insurance Act. It was observed by the Full Bench of the Karnataka High Court ast is true that the word remuneration is found both in the first and second parts of the definition. But the condition attached to such payment in the first part cannot legitimately be extended to the second part. The other additional remuneration ref erred to in the second part of the definition is only qualified by the condition attached thereto (that is, paid at intervals not exceeding two months). That was also the view taken by a Full Bench of the Andhra Pradesh High Court in Employees State Insurance Corpn. Hyderabad v. Andhra Pradesh Paper Mills Ltd. and also the Bombay High Court in M/s Mahalaxmi Glass Works Pvt. Ltd. v. Employees State Insurance Corpn. But this aspect of the matter has been completely overlooked by this Court in Kirloskars case."In Employees State Insurance Corporation, Hyderabad v. Andhra Pradesh Paper Mills Ltd., Rajahumundry, a Full Bench (Divan, C.J., Raghuvir and Gangadhara Rao, J.) of the Andhra Pradesh High court held that incentive bonus paid to an employee (which the Court, on the facts of the case, found was not remuneration in terms of the contract of employment, express or implied) fell within the third part of the definition of wages that is additional remuneration if any, paid at intervals not exceeding two months. The Full Bench said:-"The word other appearing at commencement of the third part of the 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 ofe learned judges of the Full Bench referred to the judgment of a learned Single judge of the Calcutta High Court in Bengal Potteries Ltd. v. Regional Director, W. Bengal Region, Employees, State Insurance Corporation and others, where the learned Judges had held that "the additional remuneration sought to be included by the expression and includes other additional remuneration must be remuneration which though no part of the wages could be paid as part of the terms of contract of employment." The Full Bench did not agree with the view expressed by the learned Single Judge and said:-"We are unable to agree with this part of his reasoning and for the reason which we have set out hereinabove we disagree with this part of his judgment in par a (3)".

Court's reasoning:
We express our respectful agreement with what has been said by the Full Bench of the Andhra Pradesh High Court in the above extracted passage and their dissent from the view expressed by the learned Single Judge of the Calcutta High Court. The Full Bench further held that House Rent Allowance paid by an employer to his workmen would constitute wages within the meaning of the s. 2(22) of the ActOur attention was also invited to the case of Braithwaite &Co. (India) Ltd. v. The Employees State Insurance Corporation (V. Bhargava and C.A. Vaidialingam, JJ). The case arose prior to the amendment of the Employees State Insurance Act in 1966 when the explanation to s. 41 was bodily lifted from s. 41 into the definition of wages in s.2(22). The case related to the payment of an ex-gratia reward styled as an Inam (a bounty) which was admittedly not claimed to be additional remuneration, if any, paid at intervals not exceeding two months but claimed to be remuneration paid or payable to in cash to an employee if the terms of the contract of employment, express or implied was fulfilled which the Court found it was not. The case has been sufficiently explained by the Full Bench of the Andhra Pradesh High Court in E.S.I. Corpn., Hyderabad v. A.P. Paper Mills Ltd. (supra) and by the Full Bench of the Karnataka High Court in N.G.E.F. Bangalore v. Deputy Regional Director, E.S.I.C., Bangalore.We do not think that it is necessary to say anything further in this matter.