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Judgment
Sathiadev, J.—The Petitioner carries on business as a Hotelier and in respect of the Petitioner''s hotel, the provision of the Employees''
Proviaent Fund and Family Pension Fund Act, 1952 (Act XIX of 1952) hereinafter referred to as the Act, applies. In the year 1962, when the
question arose as to whether the cash value of food given free to the employees of Hotels and Restaurants should be taken into consideration for
the purposes of contributions payable under the Act, on 12th January, 1962, Central Government took a decision, and informed that the cash
value of the meals given free to the employees of hotels and restaurants in accordance with me terms of contract of employment expressed or
implied, need notice taken into account for the purposes of contributions u/s 6(1) of the Act. This was followed by a communication sent by the
second Respondent therein on 5th March, 1962, addressed to all Hotels and Restaurants stating that no contribution need be deducted on cash
value of food given free to hotel employees. Till 1975, for thirteen years, no demand was made for contribution in respect of free food supplied.
As circular was issued on 21st August, 1975 by the second Respondent stating that all the hotels and restaurants covered u/s 1(3) of the Act
should pay contributions not only on the salary/wages and dearness allowance, but also on the amount of cash equivalent of the free food allowed
to the Employees as per rates evolved under Rule 21 (Rule 35) of the Tamil Nadu Catering Establishment Rules, from September, 1975.
Representation were made, but as the second Respondent In the decision made, this was reflected in a communication, dated 21st August, 1975
addressed to all hotels and restaurants stating that free food supplied will also be included, as proposed. On behalf of Madias Hotels Association,
a representation was sent on 26th September, 1975 and again by another reply. On 22nd October, 1975, the second Respondent rejected the
representations, by stating that the decision earlier arrived at in 1962 would not operation as an estoppel, and that the Petitioner is requested to
advise member Hotels and Restaurants to comply with the instructions contained in the letter of 21st August, 1975. At this juncture, Writ Petition
Nos. 1636 of 1976, etc, were filed by eight hotels challenging the decision arrived at in the communications dated 21dt August 1975 and 6th May,
1976; but this Court held that Petitioners may file application u/s 19-A of the Act for the opinion of the Central Government, and till such decision
is arrived at, the liability to pay contribution on the basis of these communications cannot be enforced. With those observations, the writ petitions
were dismissed.
An application was filed on 19th November, 1976 u/s 19-A of the Act and the decision was rendered on 9th May, 1978 which is impugned in
Writ Petition No. 2773 of 1978, holding that Explanation I to Section 6 cannot be given the restricted meaning and (SIC) it would be available
only, if there is a patial concession and not when it is a full concession as in the present case, and that the spirit underlying it has to be locked into
and not the letter of the law. Challenging the correctness of this opinion arrived at u/s 19-A this writ petition in Writ Petition No. 2773 of 1978 is
filed.
Petitioner contends that any decision arrived at u/s 19-A of the Act cannot be beyond or outside the scope of the provisions of the Act, and
what is now decided is contrary to the decision arrived at earlier in 1962, and which held the filed for not less than thirteen years. The Madras
Catering Establishments Act, 1958, hereinafter referred to as Tamil Nadu Act and the rules franed thereunder, hereinafter referred to as Tamil
Nadu Rules, were in existence since 1959, and, therefore, the decision taken in 1962 was at a time when Tamil Nadu Act and the Rules were
already in force, and it being so, now to start thinking differently by the second Respondent is only the out-come of misunderstanding the scope of
the provisions of the Act. The two Respondents have been properly implementing the Act all along; having taken a decision that cash value of
freefood would. not be included as an ingredient for calculating contribution. It is therefore contended that food concession mentioned in Section
2(b)(i) of the Act would never include free supply of food and Explanation I to Section 6 of the Act refers only to food concession,which is in the
nature of providing foodgrains by way of subsidy, whereas in respect of free food, there being no contribution by the employee of the cost of the
materials, under the provisions of the Act, free food supplied, had never been treated as a food concession.
In the counter-affidavit, it is claimed that no doubt in 1962, the decision, as claimed by the Petitioner was taken, but on a correct understanding
of what is obtaining in Tamil Nadu, the circular was sent on 21st August, 1975 to all the Hotels/Restaurants and there being a computation of the
cash equivalent of the free food under Rule 21 (Rule 21 is renumbered as Rule 35), of Tamil Nadu Rules,Sections 8 and 15 of the Tamil Nadu
Catering Establishments Act, 1958 relate to extra wages for overtime work and wages during leave period respectively. Rule 21 (Rule 35) is to the
following effect:
Calculation of the cash equivalent supply of meals and, tiffin:
The cash equivalent of the meals and tiflin required to be supplied to an employee free of charge shall be calculated at the rate of Rs. 2.75, per day
in respect of the district of Madras, district head-quarters, taluk head-quarters, municipalities and townships and at Rs. 2.50 per day in respect of
town panchayats not falling under the former category.
Employees in Hotels are provided free food, because of the nature of work involved which does not enable them to have the required time to leave
the premises and when the national value of the food is fixed at Rs. 2.75 in Madras and other Municipalities, Townships, etc, and Rs. 2.50 per day
in respect of Town panchayats, etc., and when the rate is so fixed at a lower level, it evidently means that they are given food at a concessional
rate. Because of free food being given, their wages are fixed at low level. It is only the Respondents, who is the competent authority to interpret the
provisions of the Act and the decision arrived at is in accord with the provisions of the Act. The earlier instructions issued in 1962 are in the nature
of executive instructions, and when the Tamil Nadu Act has been enacted to regulate the conditions of workers in catering establishments and
improve their working conditions, to take into account the rate fixed therein is not impioper, and that the Respondents had the jurisdiction to take a
decision correctly irrespective of what has happened during the past thirteen years and to make a demand for contribution strictly in accordance
with the provisions of the Act.
Mr. A.S. Raman, learned Counsel for the Petitioner would first contend that free food given to employees would not mean food concession as
intended under the provisions of the Act. He refers to Section 2(b) of the Act, which is to the following effect:
2(b) ''basic wages'' means all emoluments which are earned by an employee whill 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 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, commissioner any other similar allowance payable to the employee in respect of his employment
or work done in such employment; and
(iii) any presents made by the employer
While calculating contribution to be paid by the employer u/s 6, it shall be six and a quarter percent, of the basic wages, dearness allowance and
retaining allowance for the time being payable to each of the employee''s and the employee''s, contribution shall be equalto the contribution payable
by the employer in respect of him. Explanation I is to the following effect:
Explanation I: For the purposes of this Section, dear ness allowance shall be deemed to include also the cash value of any food concession allowed
to the employee.
Therefore for computation of basic wages, the cash value of any food concession or any presents made by the employer, should not be included
therein. When dearness allowance is computed, it will include the cash value of any food concession allowed to the employee. It is the contention
of the Petitioner that food concession, as conceived of and as practised all these years, is to make it refereable only in respect of subsidised supply
of food grains wherin the employee purchased the food grains and other articles at a concessional rate. When free food is supplied, there is no
payment by the employees towards the cost of the food consumed by them. To a certain extent, the decision arrived at u/s 19-A clearly brings out
that the Central Government was well-aware of what is meant as food concession. In paragraph 14 of the impugned Order, it states that those
words used in Explanation I should not be given the restricted meaning, and that when the Act was enacted, in factories and mills, a practice was
prevailing like that of selling controlled food grains at concessional rates and therefore the spirit underlying it should be made out and not the letter
of the law. This stand shows that Central Government was fully aware of the amplitude of the provisions of the Act, but had suddenly thought of
catching bold of the spirit behind it, rather than what the provisions stand for. If free food is to be treated as a concessional one, and if for any
reason, the Respondents came to understand it only after looking into Rule 21 (Rule 35) of Tamil Nadu Rules, which was available for them during
the past thirteen years, it is necessary to refer to Section 2 (13-A) of Tamil Nadu Act, which is to the following effect:
''Wages'' means the basic wages, dearness allowances, the cash equivalent of the meals and tiffin supplied to the employees free of charge and the
value of any other amenity or of service or of any concessional supply of food grains or other article which can be computed in terms of money,
but does not include a bonus.
Even in the said Act, there is a clear distinction between free food and simply of food grains at concessional or subsidised rate. Hence when there
is such a clear distinction made in the Tamil Nadu Act and even in the Central Act, in Section 2(b) only the cash value of the food concession is
contemplated,and not free supply of food, it woud not be correct to hold that free supply of food would also come within the folds of food
concession. No doubt Counsel for Respondents contended that, whether it is partial or whole, it is a concession, but this arguments would not be
available because there is an indication in Section 2(b)(ii) that present made by the employer would not be included in basic wages. No doubt Mr.
A.S. Raman, learned Counsel for the Petitioner is not for claiming that free food is a present, but be refers to it to show that Parliament was
consicious of an employee getting benefits which may partake in the nature of wages, but secured by him, free from the employer. When
Respondents themselves state that when the Act was ushered, in, there was the practise of supply of food grains at concessional rates, it is also
indicative of what was the real intention in using the word food concession in the Act.
Even in paragraph 14 of the impugned Order, it is stated that it is not the letter of the law that should be looked at, but the spirit behind it. Hence
it is obvious that the correct interpretation to be put on the word food concession would exclude free food supplied, and such being the case, it is
not for the first Respondent while rendering the opinion u/s 19-A of the Act to state that the word that free food supplies in hotels, it only a food
concession.
The next contention of Mr. A.S. Raman, the learned Counsel for the Petitioner is that, even when the decision was rendered on 22nd January,
1962, Tamil Nadu Act and Rules were in force since 1959 and to rely upon Rule 21 (Rule 35), after nearly 14 years of the coming into force of
the Act, exposes the wrong understanding of the provisions of the Act by the second Respondent which has been followed by the first Respondent
erroneously, and unfortunately in spite of detailed representations made.
Under Tamil Nadu Act and the Rules, the notional value of free food supply is taken into account, as admitted by the Respondents in the
counter-affidavit that:
Sections 8 and 15 (it should be Section 13) of the Tamil Nadu catering Establishments Act, 1958 relate to extra wages for over-time work and
wages during leave period respectively.
When this computation is available only for such limited purposes, to claim, that in Tamil Nadu area alone, the Central Act would be differently
understood, is again a strange manner of implementing the provisions of the Central Act.
The earlier correspondence, beginning from 1962 onwards, refer to the existence of practice of free food being supplied in hotels all over India
including Tourist Department and when no such demand, as made in Tamil Nadu, is obtaining in other areas, it is strange that first Respondent
should have rendered the impugned opinion resting on the provisions in Tamil Nadu Act and Rules. In the counter-affidavit it is stated that in most
of the States, subsequent to 1964, notifications were issued under Minimum Wages Act 1948 fixing the minimum rates of wages for the employees
in Residential Hotels and Eating Houses and permitting deduction on certain sums for free food, lodging etc., As contended by the Petitioner, the
so called instructions were not followed throughout India from the year 1962. Therefore it is not even the case of the Respondents that Explanation
I to Section 6 of the Act and Section 2(b)(i) of the Act bad been understood in the manner that would be applicable all over the Country, as
decided in the impugned Order. Here again the contention of Mr. A.S. Raman that there cannot be a different application only in respect of Tamil
Nadu, deserves to be accepted.
Mr. A.S. Raman, learned Counsel for the Petitioner, would then contend that when free food is supplied, the computation of the actual cost of
free food supplied varied from hotel to hotel and this prevented the inclusion of the correct quantum as part of the dearness allowance. If a notional
value is adopted under the provisions of Tamil Nadu Act, it is in respect of different set of circumstances, wherein the employees are only
interested in having a notional amount being adopted towards overtime work or leave wages. To plead that food supplied at the rate fixed under
Tamil Nadu Act would by itself show that the employee would be consuming food for larger amount and what was fixed was lower cannot be a
ground to hold that it would also form part of food concession. First of all, the notional value adopted under Tamil Nadu Act, cannot be taken into
account for the purposes of the Central Act. If clearness allowance is to be properly computed, inclusive of food concession, every employee has
a right to demand the correct value of the food concession to be adopted, so that the contribution of the employer will be more than what would
be when a notional value is followed. As per Section 6 of the Act, this responsibility does not stop with the employer, but is also visited upon the
employee, and he has the right to demand for the full cost of the cash value of the food consumed to be taken into account for the purposes of the
Act. When he secures food articles, at concessional rate and pays for them, he knows what exactly is the price involved in availing of food
concession, and there can be no area of dispute therein. When once free food is allowed to be taken, actual cost of it would vary even from
employee to employee, leave alone the rate that may be charged in different hotels to public. Realising the complexity which would develop-out of
it, if the construction now put upon it u/s 19-A, is to be followed, as early as 1962, the executive direction issued, had resulted in a correct
decision being taken to exclude free food and not to treat it as a food concession.
Mr. S. Govind Swaminathan, the learned Counsel for the Respondents would state that the Order passed on 22nd October 1975 or even the
earlier communication dated 21st August 1975 had not been challenged in this wit petition, and as they still continue to stand, the Petitioner cannot
secure any benefit even if for any reason the opinion rendered u/s 19-A is set aside. This contention is without any force because, the
communication dated 21st August 1975 was that, inspite of taking a decision that on and from Sept ember, 1975,the hotels will have to remit the
contribution by including cash value of free food along with other ingredients, contemplated u/s 6 of the Act. It was only a general communication
and not a demand on any particular hotel. As for the communication dated 22nd October 1975, it was also addressed to Honorary Secretary of
the Madras Hotels Association on the representations received by the second Respondent. In conclusion it was stated therein that the Association
was to advise its members to comply with the requirements or instructions contained in with another Order, that was challenged in Writ Petition
Nos. 1636 of 1976 etc., This, Court referred the parties for a decision u/s 19-A. and till the decision is made, the liability to contribute was
deffered. When the Order had been kept in abeyance till a decision is taken under the impugned Order, it would not be corrrect to contend that
the two communications sent to the Association, are to be treated as individual demands made on the concerned employers. Therefore, it cannot
be said that the Petitioner herein, cannot challenge the impugned Order, and even if he is successful, he would still be bound by the said two
communications, is unacceptable.
The next contention of Mr.S. Govinda Swaminathan learned Counsel for the Respondents is that, unless there is an inherent vice in the
impugned Order, it cannot be interferred with and there was nothing illegal in adopting the notional value in Tamil Nadu Act and the Rules. In effect
his contention is that a decision rendered u/s 19-A being final, this Court would not go into the merits of the matter. As for the jurisdiction of this
Court to interfere with an Order of Government u/s 19A Mr.A.S. Raman, righly refers to the decision in Bridge and Roof Co. (India) Ltd. Vs.
Union of India (UOI), . wherein a decision arrived at u/s 19-A was challenged and the Supreme Court ultimately held that the Order in that case
was incorrect. Hence this Court has the jurisdiction to set aside the impugned Order if it be made out that the said decision is contrary to the
provision of the Act.
As pointed out earlier, when first Respondent had taken into account an irrelevant (SIC) by referring to Tamil Nadu Act and Tamil Nadu Rules
and had failed to properly comprehend the scope of food concession, it has resulted in a conclusion being arrived at contrary to the provisions of
the Act.
When free food cannot come within the scope of food concession the intimation sent on 21st August, 1975 followed by the communication,
dated 22nd October, 1975 are illegal, and against the provisions of the Act.
Writ Petition No. 5019 and 5020 of 1978 are filed by two other hotels and the proceedings impugned therein are the notices sent in exercise
of the powers u/s 7-A of the Act. Points raised therein being identical, the impugned demands are illegal.
In the context of what has been stated above all these writ petitions are allowed with costs.