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2012 DIGILAW 867 (GAU)

Mahabir Tea Estate (P) Ltd. v. Union of India

2012-07-23

I.A.ANSARI

body2012
JUDGMENT I.A. Ansari, J. 1. Considering the fact that all these writ petitions, made under Article 226 of the Constitution of India, have raised common questions of law, based on identical facts, all the writ petitions, on the request made by the learned counsel for the parties concerned, have been heard together and are being disposed of by this common judgment and order. The moot question, which these writ petitions have thrown up for determination, is: whether the remuneration, which an employee may receive, pursuant to an understanding agreement with the management of a Tea Estate, for plucking tea leafs in the morning, before the working hours commence, would fall within, or would form part of, the employee's basic wage as defined by Section 2(b) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952? 2. I have heard Mr. D.K. Biswas, learned counsel, for the petitioners, and Mr. A.S. Lodh, learned counsel, for the respondent No. 2. I have also heard Mr. N.C. Pal, learned Govt. Counsel, Tripura, for the respondent No. 3. 3. The material facts, which have led to these set of writ petitions, may, in brief, be set out as under: By a notice, dated 15.06.2010, issued by the respondent No. 2, namely, Regional Provident Fund Commissioner, Agartala, the Regional Provident Fund Commissioner contended, inter alia, that information had been laid before him that the Tea Estate concerned had not been contributing provident fund in respect of, inter alia, plucking of tea leafs despite the fact that even cash plucking of tea leafs falls within the term basic wage as defined in Section 2(b) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (in short, 'the EPF Act'). By its reply, the petitioners herein, which are companies registered under the Companies Act, 1956, and carryon the business of tea plantation and production, denied their liabilities to pay any provident fund by contending, inter alia, that the 'cash plucking of tea leafs', which was the subject-matter of controversy, did not fall within the definition of basic wage. However, notwithstanding the reply, so given by the petitioners, respondent No. 2 continued with his process of determination of liability of the petitioner. 4. However, notwithstanding the reply, so given by the petitioners, respondent No. 2 continued with his process of determination of liability of the petitioner. 4. In the situation, as indicated above, the petitioners have filed the present writ petitions, seeking issuance of appropriate writ(s) for a declaration that respondent No. 2 has no power, under the EPF Act, to initiate proceeding for determination as to whether a new head of earning of an employee comes within the purview of Section 6 of the EPF Act, particularly, when no notification has been issued by the Central Government in this regard. By these writ petitions, the petitioners have also sought for declaration that the demand, raised by the respondent No. 2, on account of remuneration, which the petitioners pay to a workman for cash plucking of green tea leafs, in the morning, before the working hours commence, is illegal and untenable in law. 5. Whether cash payment, made to a workman by the management of a Tea Estate, for extra work done by the workman beyond the working hours, in the circumstances and the manner as indicated above, can be treated to be part of the basic wage, as defined in Section 2(b) of tile EPF Act, is the question, which this set of writ petitions have, as already pointed out above, raised. 6. Before proceeding to determine as what the meaning of the term basic wages is, it needs to be pointed out that the term basic wages has been defined in Section 2(b) of the EPF Act. Section 5 of the EPF Act introduces the concept of employees provident fund scheme for those industries, which are included in Schedule 1 to the EPF Act. 7. Section 5 of the EPF Act introduces the concept of employees provident fund scheme for those industries, which are included in Schedule 1 to the EPF Act. 7. Section 2(b) of the EPF Act, which defines basic wages, reads as follows: Section 2(b) "basic wages" means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include (i) the cash value of any food concession: (ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment: (iii) any presents tuade by the employer. 8. From a bare reading of the definition of basic wages, as embodied in Section 2(b) of the EPF Act, it clearly follows that basic wages mean all emoluments, which are earned by an employee, while on duty or on leave, or on holidays with wages, in either case, in accordance with the terms of the contract of employment and which are paid or payable in cash to him. Basic wages would not, however, include (i) the cash value of any food concession; (ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment; and (iii) any presents made by the employer. 9. The concept of the term basic wages, as embodied in Section 2(b) of the EPF Act, has been elaborately dealt with in Bridge and Roofs Co. Ltd. Vs. Union of India & Ors. ( AIR 1963 SC 1474 ), which has been followed, without exception, by the Supreme Court in its subsequent decisions in Jay Engg. Works Ltd. Vs. Union of India ( AIR 1963 SC 1480 ), TI Cycles of India Vs. M.K. Gurumani reported in (2001) 7 SCC 204 , Daily Partap Vs. Ltd. Vs. Union of India & Ors. ( AIR 1963 SC 1474 ), which has been followed, without exception, by the Supreme Court in its subsequent decisions in Jay Engg. Works Ltd. Vs. Union of India ( AIR 1963 SC 1480 ), TI Cycles of India Vs. M.K. Gurumani reported in (2001) 7 SCC 204 , Daily Partap Vs. Regional Provident Fund Commissioner reported in (1998) 8 SCC 90 , Hindustan Lever Employees Union Vs. Regional Provident Fund Commissioner, reported in (1995) 2 LLJ 279 , and Manipal Academy Higher Education Vs. Provident Fund Commissioner reported in (2008) 5 SCC 428 . 10. As to what the term 'basic wages' conveys, the Supreme Court has succinctly explained at para 7 and 8 of Bridge and Roofs Co. Ltd. (supra). The relevant observations, appearing, in this regard, in Bridge and Roofs Co. Ltd. (supra), are, therefore, reproduced hereinbelow: 7. The main question therefore that falls for decision is as to which of these two rivals contentions is in consonance with Section 2(b). There is no doubt that "basic wages" as defined therein means all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable in cash. If there were no exceptions to this definition, there would have been no difficulty in holding that production bonus whatever be its nature would be included within these terms. The difficulty, however, arises because the definition also provides that certain things will not be included in the terms 'basic wages", and these are contained in three clauses. The first clause mentions the cash value of any food concession while the third clause mentions any presents made by the employer. The fact that the exceptions contain even presents made by the employer shows that though the definition mentions all emoluments which are earned in accordance with the terms of the contract of employment, care was taken to exclude presents which would ordinarily not be earned in accordance with the terms of the contract of employment. Similarly, though the definition includes "all emoluments" which are paid or payable in cash, the exception excludes the cash value of any food concession, which in any case was not payable in cash. Similarly, though the definition includes "all emoluments" which are paid or payable in cash, the exception excludes the cash value of any food concession, which in any case was not payable in cash. The exceptions therefore do not seem to follow any logical pattern which would be in consonance with the main definition. 8. Then we come to Clause (ii). It excludes dearness allowance, house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment. This exception suggests that even though the main part of the definition includes all emoluments which are earned in accordance with the terms of the contract of employment, certain payments which are in fact the price of labour and earned in accordance with the terms of the contract of employment are excluded from the main part of the definition of "basic wages". It is undeniable that the exceptions contained in Clause (ii) refer to payments which are earned by an employee in accordance with the terms of his contract of employment. It was admitted by counsel on both sides before us that it was difficult to find only one basis for the exceptions contained in the three clauses. It is clear however from clause (ii) that from the definition of the word "basic wages" certain earnings were excluded, though they must be earned by employees in accordance with the terms of the contract of employment. Having excluded "dearness allowance" from the definition of "basic wages". a.6 then provides for inclusion of dearness allowance for purposes of contribution. But that is clearly the result of the specific provision in Section 6 which lays down that contribution shall be 6¼ per centum of the basic wages, dearness allowance and retaining allowance (if any). We must therefore try to discover some basis for the exclusion in Clause (ii) as also the inclusion of dearness allowance and retaining allowance (for any), in Section 6. It seems that the basis of inclusion in Section 6 and exclusion in Clause (ii) is that whatever is payable in all concerns' and is earned by all permanent employees is included for the purpose of contribution under Section 6, but whatever is not payable by all concerns or may not be earned by all employees of a concern is excluded for the purpose of contribution. Dearness allowance (for examples is payable in all concerns either as an additional to basic wages or as a part of consolidated wages where a concern does not have separate dearness allowance and basic wage. Similarly, retaining allowance is payable to all permanent employees in all seasonal factories like sugar factories and is therefore included in a.6; but house-rent allowance Is not paid in many concerns and sometimes in the same concern it is paid to some employees but not to others, for the theory is that house-rent is included in the payment of basic wages plus dearness allowance or consolidated wages. Therefore, house-rent allowance which may not be payable to all employees of a concern and which is certainly not paid by all concern is taken out of the definition of "basic wages" even though the basis of payment of house rent allowance where it is paid is the contract of employment. Similarly, overtime allowance though it is generally in force in all concerns is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment; but because it may not be earned by all employees of a concern it is excluded from basic wages". Similarly, commission or any other similar allowance is excluded from the definition of "basic wages" for commission and other allowances are not necessarily to be found in all concerns; nor are they necessarily earned by all employees of the same concern though where they exist they are earned in accordance with the terms of the contract of employment, it seems therefore that the basis for the exclusion in clause (ii) of the exceptions in Section 2(b) is that all that is not earned in all concerns or by all employees of concern is excluded from basic wages. To this the exclusion of dearness allowance in clause (ii) is an exception. But that exception has been corrected by including dearness allowance in Section 6 for the purpose of contribution. Dearness allowance which is an exception in, the definition of "basic wages" is included for the purpose of contribution by Section 6 and the real exceptions therefore in clause (ii) are the other exceptions beside dearness allowance, which has been included through Section 6. 11. From a minute and patient reading, of the above observations, made in Bridge and Roofs Co. 11. From a minute and patient reading, of the above observations, made in Bridge and Roofs Co. Ltd. (supra), with regard to what the term basic wages, as defined by Section 2(b) of the EPF Act, implies, what transpires is that though the term basic wages has been defined to mean all emoluments, which are earned by an employee, while on duty or on leave, or on holidays with wages, in either case, in accordance with the terms of the contract of employment and which are paid or payable in cash to him, the fact remains that from the term basic wages, certain classes of payments, which may be made to an employee, stand excluded by three distinct clauses. Clause (i) excludes cash value of any food concession and clause (iii) excludes the presents, which an employer may make to his employee. As far as clause (ii) is concerned, it seeks to exclude, from the purview of the term basic wages, dearness allowance paid to an employee on account of rise in the cost of living, house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment of work done in such employment. 12. Thus, notwithstanding the fact that the term basic wage is defined to mean all emoluments, which are earned by a employee, while on duty or on leave, or on holidays in accordance with the terms of the contract of employment, which are paid and payable in cash, some payments have been excluded specifically by the said three clauses as mentioned hereinbefore. 13. What falls, therefore, within the term basic wage is the payment, which is received by all permanent employees in terms of their contract of employment. Logically extended, it would mean that what is not payable to all concerns or may not be earned by all employees of a concern would stand excluded from the purview of contribution, which is required to be made by virtue of Section 6 of the EPF Act. 14. Thus, when overtime allowance is not received by everyone except those, who work overtime, overtime allowance so paid would not fail within the term basic wages. Though deamess allowance has been excluded from the definition of the term basic wages, deamess allowance has been included, for the purpose of making contribution by virtue of Section 6. 14. Thus, when overtime allowance is not received by everyone except those, who work overtime, overtime allowance so paid would not fail within the term basic wages. Though deamess allowance has been excluded from the definition of the term basic wages, deamess allowance has been included, for the purpose of making contribution by virtue of Section 6. No wonder, therefore, that in Bridge and Roofs Co. Ltd. (supra), the Supreme Court has pointed out that overtime allowance, though is, generally, in force in all concerns, is not earned by all employees of a concern and, hence, overtime allowance stands excluded from the purview of the term basic wages. Similarly, any payment, which is made by way of special incentive of work, is not basic wages. 15. In view of the fact that cash, which is paid to an employee for plucking green tea leafs, in the morning hours before working hours, in a Tea Estate, starts, remains confined to only that employee, who chooses to pluck tea leafs during the early hours of a working day. 16. In view of the fact that the remuneration paid, for cash plucking of tea leafs, is not earned by all across the board, the remuneration so paid, cannot be called basic wages. If, however, cash plucking of tea leafs becomes applicable to all employees and not to a chosen few, who are willing to work, for the purpose of earning extra amount, then, cash plucking of tea leafs would also tall within the term basic wages. 17. In the case of Manipal Academy of Higher Education Vs. Provident Fund Commissioner, reported in (2008) 5 SCC 428 , the Supreme Court has clearly held that since under the terms of contract of employment, overtime allowance is not earned by all employees of the concern, it has to be excluded from the definition of basic wages and can not, therefore, be computed for the purpose of determination of contribution under Section 6 of the EPF Act. 18. Situated thus, it becomes clear that the notice of the respondent No. 2 to make contribution of provident fund, in respect of remuneration paid to a workman for the purpose of cash plucking of green leafs, in the circumstances, as indicated hereinbefore, is beyond the jurisdiction of the respondent No. 2 and cannot, therefore, be sustained. 19. 18. Situated thus, it becomes clear that the notice of the respondent No. 2 to make contribution of provident fund, in respect of remuneration paid to a workman for the purpose of cash plucking of green leafs, in the circumstances, as indicated hereinbefore, is beyond the jurisdiction of the respondent No. 2 and cannot, therefore, be sustained. 19. In the result and for the reasons discussed above, it is hereby declared and clarified that the process, initiated against the present petitioners, for the purpose of compelling the petitioners to make contribution, under Section 6 of the EPF Act, for the remuneration paid, in cash, to a workman against plucking of green, tea leafs, popularly known as cash plucking, is beyond the power of the respondent No. 2 and respondent No. 2 is, therefore, not entitled to direct the petitioners to make contribution towards provident fund in respect of remuneration paid by the employer to the employee for cash plucking of tea leafs. 20. In the factual scenario, as indicated above, there is considerable force, in the submissions made, on behalf of the petitioners, that it is an age old practice, in tea industries, that in order to augment collection of green tea leafs, those employees, who are interested in putting extra hours of work for the purpose of earning additional amount, are engaged to pluck green tea leaf in the morning before working hour commences. For the plucking of green tea leafs by those workmen, who are willing to earn extra amount, extra remuneration are paid to them at a rate, which may be agreed upon by the employer and the employee concerned. Such cash plucking is rightly contended on behalf of the petitioners, casual and irregular in nature. What can also not be ignored is that, the employer has the option to engage an employee and the employee has the option to choose to work or not to work for cash plucking. In this sense, the remuneration, paid for cash plucking, cannot be treated to be basic wages inasmuch as it is not universally applicable. 21. What can also not be ignored is that, the employer has the option to engage an employee and the employee has the option to choose to work or not to work for cash plucking. In this sense, the remuneration, paid for cash plucking, cannot be treated to be basic wages inasmuch as it is not universally applicable. 21. However, as can be clearly seen, respondent No. 2 has started an enquiry, under Section 7A of the EPF Act, in order to treat the remuneration, paid on account of cash plucking of tea leafs, as a part of the basic wages and has raised thereby a demand for contribution in terms of the provisions of Section 6 of the EPF Act. The process, so initiated, is, in the firm view of this Court, wholly without jurisdiction, highly illegal and needs to be, therefore, interfered with. 22. In the result and for the reasons discussed above, the impugned notices, issued by the respondent No. 2, are hereby set aside and quashed. 23. With the above observations and directions, these writ petitions shall stand disposed of. Parties are directed to bear their own costs.