Ralson (India) Limited and Another vs The Employees State Insurance Corporation

S.S. Grewal, J.—This appeal is directed against the order of Employees Insurance Court, Ludhiana, dated 30th of April, 1991, whereby the application moved by the present appellants u/s 75 of the Employees Insurance Act, 1948 (as amended by Act No. 29 of 1989) (hereinafter referred to the Act) against the present respondent, namely the Employees State Insurance Corporation, was dismissed

In brief facts relevant for the disposal of this appeal, are that according to the appellant-Company, it has been complying with the provisions of the Act and the schemes framed thereunder ; that the appellant-Company did not know whether the contribution under the Act was payable on building repairs and production incentive. Rather it was pleaded that such contribution is determined after the inspection of the record by the Inspector. It was further pleaded that the respondent issued letters about the contribution payable on incentive bonus to the employees by the appellants. Payment of such contribution was contested by the appellants. It was pleaded by the appellant that damages had been assessed on wrong dates mentioned in the show cause notice issued by the respondent on 24th of April, 1987 ; that the appellants clarified the position about variation of the dates but the same has not been considered and the lower Court has erred in awarding damages amounting to Rs. 44,801/- u/s 85B of the Act on 11.9.1987 for delayed payment of the contribution. It was next pleaded that the damages so assessed were illegal, arbitrary, without jurisdiction and have been awarded without application of mind.

The respondent in its written reply raised preliminary objection about the misjoinder of parties It was further pleaded that the present appellants had not been sending the amount of contribution regularly ; that ignorance of law is no excuse and production incentive being wages, it is mandatory for the employer to make payment within the stipulated period. It was next pleaded that the respondent was not bound to remind the appellants to deposit the amount and that damages have been correctly levied in accordance with the Act. It was also pleaded that show cause notice was issued in accordance with law, that the representation of the appellants was duly considered and damages levied are legal and valid and cannot be said to be arbitrary. It was further pleaded that the impugned order passed u/s 85B of the Act was perfectly legal and valid and in accordance with the principles of natural justice.

From the pleadings of the parties, the following issues were framed:-

Whether the order dated 11.9.1987 regarding claim of damages of Rs. 44,801/- is illegal, arbitrary, without jurisdiction and is liable to be set aside on the grounds mentioned in the application ?

Whether the petition is bad for misjoinder of parties ?

Relief.

Issue No. 1 was decided against the employer whereas issue No. 2 was not pressed. A a result of the said finding application moved by the employer u/s 75 of the Act was dismissed. Aggrieved against the impugned order passed by the lower Court, the employer-Company has filed the present appeal.

The learned counsel for the parties were heard.

On behalf of the appellants, it was mainly contended that earlier on, the Apex Court in Braithwaite and Co. (India) Ltd. Vs. The Employees'' State Insurance Corporation, held that the payment of Inam, through remuneration, could not be said to have become a term of the contract of employment within the meaning of the definition of ''wages'' as given in Section 2(22).

Relying on its earlier authority in Bala Subrahmanya Rajaram Vs. B.C. Patil and Others, it was further observed in M/s Braithwaite''s case (supra) as follows :-

"The mere fact that the reward for good work offered by the employer is accepted by the employee after he has successfully satisfied the requirement laid down by the employer for earning reward cannot mean that this payment becomes a part of contract of employment In fact, in this case, there was no question of offer by the appellant and acceptance by the employees as a condition of their service. The employees were already working in accordance with the terms of their contract of employment when the employer decided to make this extra payment if the employees did successfuly what they were already expected to do under that contract. It cannot, therefore, be held that this payment of Inam ever became even an implied term of the contract of employment of the employees of the appellant."

After the amendment of the Act in 1956, the Apex Court Changed its view in Harihar Polyfibres Vs. Regional Director, ESI Corporation, wherein it was held that "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 renumeration, 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 (express or implied) or otherwise if paid at intervals not exceeding two month''s 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 or implied, was fulfilled'' and the third clause, ''''other additional remuneration, if any, paid at intervals not exceeding two months'' mikes 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'' from the definition of ''wages''. ''

The main question which arises for determination in the instant case is as to whether because of change in Legal position referred to above, the appellant-Company would be absolved from levy of damages on account of delayed remittance of its contribution. The main argument advanced on behalf of the appellant-Company is that such delay was not on account of any deliberate intention on the part of the appellant Company but because of earlier judicial pro nouncements of the Apex Court, wherein, it had been specifically held that such payments were not liable for contribution under the Act.

Reliance in this respect was placed on Single Bench authority of this Court in M/s Amin Chand and Sons v. State of Punjab A. I. R. 1965 P&H. 441 wherein it was held that "technically the damages should have been levied immediately after the default and it was legitimate for the employer to have thought that the Government had decided not to exercise its discretion to levy damages. To choose a date to levy damages after six years was arbitrary and had resulted in operation of law very harshly and the Court is entitled to interfere in its writ jurisdiction.

According to the facts of the case in the aforecited authority;------ the petitioner received a notice from the Regional Provident Fund Commissioner, Ambala, respondent No. 2 on 2nd of March, 1960, that defaults had been made in respect'' of the afore-said payments mentioning the last payment to have been made on 15/20th of May, 1957. No reference in this notice is made to the last two payments made on 17th of February, 1958 and 15th of September 1959. The petitioner was asked to show cause why damages should not be levied in pursuance of Section 14B of the Art which is to this effect :-

"Where an employer makes default in the payment of any contribution to the Fund--------------the appropriate Government may recover from the employer such damages, not exceeding twenty-five per cent of the amount of arrears, as it may think fit to impose."

The facts of the aforecited anthority are not applicable to the facts of the case in hand, in as much as the default in contribution relates to a period much prior to the show cause notice dated 24.4.1987 where as, even additional renumeration outside the contract of employment was included in the terms of wages in view of the amendment of the Act in 966 . The Appex Court in M/s. Harihar Polyfibres''s case (supra) held that the incentive allowance and other allowances like House rent allowance would also be covered in the definition of wages in Section 2(22) of the Act. It was thus obligatory for the appellant-Company to mike the necessary contribution under the Act for the employees and it was not even necessary for the Employees State insurance Corporation to send specific notice to the appellant. Company for this purpose Thus there was no cogent reason for the appellant-Company for delayed remittance of its contributions and the respondent was well within its right to levy damages for such negligence on the part of the appellant-Company.

I find support in ray view by a Division Bench authority of this Court in Employees State Insurance Corporation and Ors. v. M/s Dhanda Engineers Private Limited Faridabad-II(1981) 83 P. L. R. 354 wherein it was held that "the mere payment of interest does not in any way condone or wash away the delay or default in the payment of contributions, which having been once made would continue to attract the penal provisions of Section 85B, of the Act and that the obligation to pay interest under Regulation 31-A, the liability to pay damages u/s 85B of the Act and punishment for offences u/s 85B of the Act, can all co-exist".

The argument advanced on; behalf of the appellant-Company is hardly tenable in the circumstances of the present case. Thus the order dated 11.9.1987 levying damages to the tune of Rs. 44801/-is legal and valid and there is no cogent ground to set aside the same.

For the foregoing reasons, I do not find any merit in this appeal and the same is hereby dismissed. However, in the circumstances of the present case, both the parties are left to bear their own costs.