Case: Employees State Insurance Corpn Vs. Gnanambigai Mills Ltd

1. This Appeal is against the Judgment of the Madras High Court dated 7th August, 2002. Briefly stated the facts are as follows:-The Employees of Respondent Company raised a demand for increase of wages. The dispute was referred to the Special Tribunal, Madras for adjudication. By virtue of Section 10-B, Industrial Disputes Act, 1947 which had been introduced in the State of Tamil Nadu, the Government passed orders dated 15th July, 1985 and 29th July, 1985 directing certain payments to be made to the workmen pending the disputes. Both orders contained a clause that any money paid in pursuance of the order could be deducted by the employer from out of the monetary benefits to which the employee would become entitled under the Award which may be passed by the Tribunal.Thus, the Special Tribunal never went into the question and did not decide whether or not the amounts paid (under the Government order) were wages or not. It merely gave its imprimatur to a compromise arrived at between the parties. Clause 3(c) of the Memorandum of Compromise, which has been strongly relied upon, reads asis agreed that the lump sum payment of Rs.500/-Rs.260/- and Rs.75/-, Rs.65/- per month, as the case may be paid or payable to the workmen upto April 30, 1986 as per the Government orders No.1399, dated 15th July, 1985 and No.1546, dated 29th July, 1985 under Section 10-B of the Industrial Disputes Act and consent letter, dated 14th February, 1986 by the Special Industrial Tribunal, be treated as an ex-gratia payment and shall not be adjusted against the future benefits covered under this

Court's reasoning:
9. Thus, any remuneration paid or payable in cash to an employee if the terms of the contract of employment, express or implied, are fulfilled would be a wage. The Government order clearly indicates that the payment was to be adjusted towards the wages after the Award is passed. By virtue of the Government order it is a payment in terms of the contract of employment and therefore it would be a wage.10. In our view the High Court has gone completely wrong in concluding that by virtue of the Award it ceases to be wages. As stated above, the Tribunal has not applied its mind as to whether or not the payments were wages. All that the Tribunal did was to give its imprimatur to a compromise between the parties. Merely because the parties in their compromise chose to term the payments as ex-gratia payments does not mean that those payments cease to be wages if they were otherwise wages. As stated above, they were wages at the time that they were paid. They did not cease to be wages after the Award merely because the terms of Compromise termed them as ex-gratia payment. We are therefore unable to accept the reasoning of the Judgments of the High Court. The Judgment of the Division Bench as well as that of the Single Judge accordingly stand set aside. It is held that the amounts paid are wages and contribution will have to be made on those amounts also. We, however, make it clear that payments of the interest will be as per the statutory provisions.