Full Judgment Text
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Special Leave Petition (C.) No.811/2021
The Employees State Insurance
Corporation ...Petitioner (s)
Versus
M/s Texmo Industries …Respondent (s)
O R D E R
1. This Special Leave Petition is against a judgment and order dated
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8 October 2020 passed by the High Court of Judicature at Madras,
dismissing the appeal being C.M.A. No.1527 filed by the Employees
State Insurance Corporation, hereinafter referred to as the ‘Petitioner
Corporation’, under Section 82(2) of the Employees State Insurance Act,
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and affirming the order dated 31 July 2020 passed by the Employees
State Insurance Court, Coimbatore allowing E.S.I.O.P No. 1/2016 filed by
the Respondent Company under Section 5 of the Employee State
Insurance Act, 1948 (for short, ‘ESI Act’).
2. The Respondent Company manufactures different kinds of
Signature Not Verified
Digitally signed by
JAGDISH KUMAR
Date: 2021.06.25
16:37:34 IST
Reason:
agricultural pumps and other products and has ten branches in
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Coimbatore, Tamil Nadu. The ESI Act is applicable to the factories and
establishments of the Respondent Company, and the employees of the
Respondent Company are required to be insured in the manner provided
by the ESI Act.
3. The Respondent Company is liable to pay Employees’ State
Insurance Contribution in respect of its employees, as provided in
Section 39 of the ESI Act. Section 44 of the ESI Act requires the
Respondent Company to maintain a register, containing particulars of
its employees, and to submit Returns to the Petitioner Corporation, in
the manner prescribed by the Regulations framed under the ESI Act.
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4. On or about 23 January 2015, officials of the Petitioner
Corporation inspected the records of the Respondent Company for the
period from December 2010 to December 2014 and detected
discrepancies in the wages, and consequential short payment by the
Respondent Company, towards Employees State Insurance
contributions, totalling Rs.21,52,829/-, out of which Rs.9,48,517/- was
towards Conveyance Allowance, paid by the Respondent Company to its
employees.
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5. By an order dated 19 March, 2015, the Corporation called upon
the Respondent Company to pay its outstanding contributions totalling
Rs.21,52,829/-, with interest, within 15 days from the date of the order,
failing which the same would be recovered as arrears of land revenue.
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The Respondent Company was, however, given the opportunity of
personal hearing, if it disputed the claim of the Corporation.
6. The Respondent Company made a representation against the
claim, pointing out that the Corporation had erroneously computed the
salary, by including Conveyance Allowance, leave salary, etc. which did
not constitute wages as defined in Section 2(22) of the ESI Act.
7. Thereafter the Petitioner Corporation passed an amended order
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dated 6 July, 2016 under Section 45A of the ESI Act, determining the
differential contribution payable by the Respondent Company at
Rs.19,38,300/- as per the break up given in the said amended order,
that is, Rs.9.89,783 towards difference in wages and Rs.9,48,517/-
towards Conveyance Allowance. The Respondent Company duly
remitted Rs.9,89,783/- towards difference in wages.
8. The Respondent Company instituted proceedings in the
Employees State Insurance Court being E.S.I.O.P No.1 of 2016 in respect
of the claim of the Corporation of Rs.9,48,517/- in respect of the
Conveyance Allowance paid by the Respondent Company to its
employees.
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9. By a judgment and order dated 31 July, 2020, the Employees’
State Insurance Court allowed the E.S.I.O.P No.1 of 2016, and set aside
the claim of Rs.9,48,517/- in respect of Conveyance Allowance, paid by
the Respondent Company to its employees.
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10. Being aggrieved by the judgment and order dated 31 July, 2016
of the Employees State Insurance Court, the Corporation filed an appeal
therefrom in the High Court under Section 82(2) of the ESI Act. The said
appeal has been dismissed by the judgment and order impugned in this
Special Leave Petition.
11. The short question involved in this Special Leave Petition is
whether ‘wages’, as defined in Section 2(22) of the ESI Act, would
include Conveyance Allowance paid by the Respondent Company to its
employees.
12. Section 22(2) of the ESI Act is set out hereinbelow for
convenience:
"2.Definitions . —In this Act, unless there is anything
repugnant in the subject or context,—
…...
(22) “wages” means all remuneration paid or payable, in
cash to an employee, if the terms of the contract of
employment, express or implied, were fulfilled and
includes any payment to an employee in respect of any p
eriod of authorised leave, lock-out, strike which is not
illegal or lay-off and other additional remuneration, if any
paid at intervals not exceeding two months], but does
not include—
(a) any contribution paid by the employer to any
pension fund or provident fund, or under this Act;
(b) any travelling allowance or the value of any
travelling concession;
(c) any sum paid to the person employed to defray
special expenses entailed on him by the nature of
his employment; or
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(d) any gratuity payable on discharge”
13. A reading 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, under a contract of employment, express or implied, as
consideration for discharging his duties and obligations under such
contract of employment, including any payment to an employee in
respect of any period of authorised leave, lock-out, strike which is not
illegal or lay-off and other additional remuneration, if any, paid at
intervals not exceeding two months. The definition of ‘wages’, however,
expressly excludes any contribution paid by the employer to any
pension fund or provident fund or under the ESI Act, any travelling
allowance or the value of any travelling concession, any sum paid to the
person employed to defray special expenses entailed on him by the
nature of his employment or any gratuity payable on discharge.
14. From the definition of wages in Section 2(22) of the ESI Act, it is
amply clear that wages includes remunerative payments, but does not
include compensatory payments. Travelling allowance including the
value of travelling concession has expressly been excluded from the
definition of wages, as also any payment made to an employee to
reimburse or compensate for special expenses that an employee might
incur by reason of the nature of his employment.
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15. The Employees’ State Insurance Court held, and in our view,
rightly, that Conveyance Allowance is in the nature of travelling
allowance, the object of which is to enable the employee to reach his
place of work and to defray costs incurred on travel from his place of
residence to his place of work. If instead of paying the Conveyance
Allowance, the employer provided free transport to the employee, the
monetary value of that benefit of travel from his residence, to his place
of work would also not be regarded as forming part of his wages.
16. In Management of Oriental Hotels Ltd., Chennai v.
Employees’ State Insurance Corporation, Chennai reported in
2002 (1) LLJ 14, a Division Bench of Madras High Court held:-
“8. 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 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
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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.”
17. In Regional Director, ESI Corporation v. Sundaram Clayton
Ltd . Reported in 2004 (II) LLJ 30 another Division Bench of the Madras High
Court reiterated that, payment towards Conveyance Allowance for the
travel of employees from their place of residence to their place of work
would have to be construed as Travelling Allowance and excluded from
‘wages’ in view of clause (b), sub-section (22) of Section 2 of the ESI Act.
18. We affirm the view taken by Madras High Court in Oriental
Hotels Limited, Chennai (supra) and Sundaram Clayton (supra). In
Regional Director, ESI Corporation, Thrissur v. Royal Plastics
Industries, Aluva reported in 2015 (2) KLT 64, a Single Bench of Kerala
High Court referred to the judgment of the Madras High Court in Oriental
Hotels' case (supra) and held that, clauses (a) to (d) of sub-section (22) of
Section 2 of the ESI Act are in the nature of exception to the main part of
the sub-section. Any Travelling Allowance or the value of any travelling
concession would be outside the purview of the term ‘wages’, and that it
would make no difference whether the Travelling Allowance was paid as
part of the contract of employment, or whether it was paid in lump sum or
whether it was paid at regular intervals. It would not cease to be Travelling
Allowance only because it was a fixed sum paid along with the wages, as
per the terms of the contract of employment. We agree with the view taken
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by the Single Bench of Kerala High Court in Royal Plastics Industries
(supra).
19. We are unable to agree with the view taken by the Single Bench
of Karnataka High Court in Regional Director, Employees State
Insurance Corporation v. M/s IT Solutions (India) Private Limited
reported in ILR 2002 KAR 4019, that the value of Conveyance Allowance
cannot be excluded from the definition of ‘wages’. The reasoning of the
Karnataka High Court that Conveyance Allowance cannot be excluded
from the definition of ‘wages’ because Conveyance Allowance is paid
every month to every employee like House Rent Allowance, in terms of
the contract of employment, so as to meet to and fro conveyance
expenses, whereas travelling allowance is paid to the concerned
employee when he or she is sent out of station on duty to meet
travelling expenses, is in our view, unsustainable in law.
20. We are of the view that, the reasoning that Conveyance
Allowance cannot be excluded from the definition of ‘wages’ as it is paid
every month to every employee, like House Rent Allowance, in terms of
the contract of employment, so as to meet to and fro conveyance
expenses, is is based on an erroneous construction of Section 2(22) of
the said Act.
21. The definition of wages in Section 2(22) of the ESI Act clearly
excludes Travelling Allowance. The distinction sought to be made by
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the Petitioner Corporation between Travelling Allownace and
Conveyance Allowance, based on the Single Bench judgment of the
Karnataka High Court in M/s IT Solutions (India) Private Limited
(supra), is in our view misconceived. There is no cogent reason why
Conveyance Allowance which is in effect and substance the same as
Travelling Allowance, should be treated differently from Travelling
Allowance.
22. The expression “Travelling Allowance” has not been defined in
the ESI Act. Under Section 2(24) of the ESI Act all words and
expressions used, but not defined in the ESI Act shall have the meaning
assigned to them under the Industrial Disputes Act, 1947, hereinafter
referred to as the ‘ID Act”. Travelling Allowance is also not defined in
the ID Act. There is no provision in the ESI Act or in the ID Act, which
restricts the scope and ambit of Travelling Allowance. In the absence of
any definition or explanation of the expression “Travelling Allowance” in
either of those Acts, the expression has to be construed as per its
ordinary meaning in common parlance.
23. Conveyance Allowance may or may not be payable to every
employee. For that matter, House Rent Allowance may also not be paid
to all employees. It is immaterial whether an allowance is paid regularly
or intermittently depending on exigencies. It is the nature and purpose
of the allowance which is relevant.
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24. House Rent Allowance cannot possibly be equated to Conveyance
Allowance, since House Rent Allowance is not necessarily connected
with the employment of an employee. Irrespective of whether a person
is employed or not and irrespective of the nature of his employment, he
needs shelter.
25. Conveyance Allowance, on the other hand, compensates
expenses that might be incurred by an employee for reporting to his
usual place of work or to any other place of work, where he may have to
report. If an employer were to provide the employee with
accommodation within walking distance from his place of work and that
employee were not required to go to any other place in connection with
his duties under his contract of employment, the employee may not
have to incur any expenditure in connection with his employment. In
such a case, Conveyance Allowance would be redundant and might be
construed as part of allowance consisting wages. In this case, it is not
the case of the Corporation that the employees concerned did not need
to avail any conveyance expenditure to report for duty to their place of
work, or otherwise in connection with their duties under their contracts
of employment. Nor is there any such finding. We see no reason why
Conveyance Allowance should not be excluded from the definition of
wages.
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26. As per the Oxford Learner’s Dictionary, 8 Edition, conveyance
means the process of taking somebody from one place to another. A
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vehicle or other mode of transport is also formally referred to as
conveyance. As per the same dictionary, the word “travel” means “to
go from one place to another especially a long distance”. That
distance could also be a few kilometers. One might travel 10 kms to
one’s place of work. In many cities people may have to travel for hours
to reach their place of work. Travel is an expression with a wide
meaning to include long distance. It also covers short distances.
27. Had it been the intention of Section 2(22) to exclude only
occasional long distance travel from one city to another, from the
definition of wages, the Act would have specifically provided so. The
expression ‘travel’ is also often used interchangeably with the
expression ‘commute’ which means “to travel regularly by bus, train,
car etc. between one’s place of work and home, as per the said
dictionary. An example given in the said dictionary is “she commutes
from Oxford to London everyday”. Another example given is “people
are prepared to commute long distances if they are desperate for work.
The employees State Insurance Corporation Court was right in holding
that there was no difference between Conveyance Allowance and
Travelling Allowance.
28. There can be no doubt, as held by this Court in Whirlpool of
India Limited v. ESI Corporation reported in (2000) 3 SCC 185 that
the ESI Act is a social legislation enacted to provide benefits to
employees in case of sickness, maternity and employment injury and to
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make a provision for certain other matters in relation thereto. When
there is any ambiguity in any provision, the Court would ordinarily
favour a construction that would be beneficial to those for whom the
legislation is enacted. In Whirlpool of India Limited (supra), this
Court held that production incentive falls within the definition of wages.
In this case, there is no ambiguity. There is no such difference between
Conveyance Allowance and Travelling Allowance to justify the stand of
the Petitioner Corporation that Conveyance Allowance would not fall
within the ambit of Travelling Allowance. Travelling Allowance includes
Conveyance Allowance. The use of the expression “ any travelling
allowance” in Section 2(22)(b) makes it clear that all kinds of travelling
allowance are excluded from the definition of wages.
29. In Whirlpool of India Limited (supra), this Court referred to
and relied inter alia on Wellman (India) (p) Ltd. v. ESI Corporation
reported in (1999) 1 SCC 219, Modella Woollens Ltd. V ESI
Corporation reported in 1994 Supp(3) SCC 580 and Harihar
Polyfibres v. Regional Director, ESI Corporation reported in
(1994) 4 SCC 7. In Wellman (supra), this Court held that attendance
bonus payable to employees under the terms of settlement, which
became part of the contract of employment was well within the
definition of wages. In Modella Woollens (supra), the payment of
production bonus to the employees at the end of each quarter was
held to be wages. In Harihar Polyfibres (supra), this Court held that
payment made at intervals not exceeding two months such as “House
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Rent Allowance”, “Night Shift Allowance”, “Incentive Allowance” and
“Heat, Gas and Dust Allowance” was covered by the definition of wages
under Section 2(22) of the ESI Act. None of the judgments dealt with
Conveyance Allowance or Travelling Allowance.
30. There is no infirmity at all in the concurrent findings of the High
Court and the Employees’ State Insurance Court, which calls for
interference under Article 136 of the Constitution of India. The Special
Leave Petition is dismissed.
……………………………………………J.
[Indira Banerjee]
…………………………………………….J.
[Hrishikesh Roy]
New Delhi;
March 08, 2021
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ITEM NO.13/1 Court 13 (Video Conferencing) SECTION XII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 811/2021
(Arising out of impugned final judgment and order dated 08-10-2020
in CMA No. 1527/2020 passed by the High Court Of Judicature At
Madras)
THE EMPLOYEES STATE INSURANCE CORPORATION Petitioner(s)
VERSUS
M/S. TEXMO INDUSTRIES Respondent(s)
( IA No.4677/2021-EXEMPTION FROM FILING C/C OF THE IMPUGNED
JUDGMENT )
Date : 08-03-2021 This petition was called on for hearing today.
CORAM :
HON'BLE MS. JUSTICE INDIRA BANERJEE
HON'BLE MR. JUSTICE HRISHIKESH ROY
For Petitioner(s) Dr. Sumant Bharadwaj, Adv.
Ms. Mridula Ray Bharadwaj, AOR
For Respondent(s)
UPON hearing the counsel the Court made the following
O R D E R
The Special Leave Petition is dismissed in terms of the
signed reportable order.
(NIRMALA NEGI) (MATHEW ABRAHAM)
COURT MASTER (SH) COURT MASTER (NSH)
(Signed reportable order is placed on the file)
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ITEM NO.13 Court 13 (Video Conferencing) SECTION XII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 811/2021
(Arising out of impugned final judgment and order dated 08-10-2020
in CMA No.1527/2020 passed by the High Court Of Judicature At
Madras)
THE EMPLOYEES STATE INSURANCE CORPORATION Petitioner(s)
VERSUS
M/S. TEXMO INDUSTRIES Respondent(s)
( IA No.4677/2021-EXEMPTION FROM FILING C/C OF THE IMPUGNED
JUDGMENT )
Date : 08-03-2021 This petition was called on for hearing today.
CORAM :
HON'BLE MS. JUSTICE INDIRA BANERJEE
HON'BLE MR. JUSTICE HRISHIKESH ROY
For Petitioner(s) Dr. Sumant Bharadwaj, Adv.
Ms. Mridula Ray Bharadwaj, AOR
For Respondent(s)
UPON hearing the counsel the Court made the following
O R D E R
The Special Leave Petition is dismissed.
Pending application(s), if any, shall stand disposed of.
Reasons to follow.
(NIRMALA NEGI) (MATHEW ABRAHAM)
COURT MASTER (SH) COURT MASTER (NSH)
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