Vayitri Plantations Ltd. vs Babu Mathew

Jagannadha Rao, C.J.—The meaning of the word "wages" in Section 2(rr) of the Industrial Disputes Act, 1947, falls for consideration in this appeal.

The appellant, Vayitri Plantations Ltd., is the employer. The 3rd respondent was working as Asst Tea-maker of the Thalamala Estate of the appellant. A show cause notice was issued to him by the appellant on June 14, 1988 as to why disciplinary action should not be taken for being absent without prior sanction and leave and for connecting excess charge to the Generator, causing loss of production and monetary loss. The third respondent submitted his explanation. A domestic enquiry was conducted by an Advocate and an order of dismissal was issued on September 20, 1989. Thereafter, a dispute was raised under the Act and the matter was referred to the Labour Court, Kannur in I.D. No. 34 of 1990. In the Labour Court, the appellant filed a written statement contending that the reference was invalid as the 3rd respondent was not a ''workman'' as defined u/s 2(s) as he was working in a managerial position or administrative position. This question was to be decided as a preliminary issue. It was also contended that there was nothing wrong with the domestic enquiry. On these contentions, the Labour Court framed the following preliminary points:

"1. Whether M.J. Chacko is a worker as defined under the Industrial Disputes Act, if not, how the petition is maintainable?

Whether the domestic inquiry conducted is in accordance with law? If not, whether it is violative of the principles of natural justice?

What is the proper order to be passed?"

Oral and documentary evidence was adduced. It was held by the Labour Court in its order dated August 28, 1992, that the third respondent was a ''workman'' and that, as there was violation of the principles of natural justice in the domestic inquiry, the matter must be disposed of on evidence to be adduced by the management to sustain their action of dismissal.

Questioning the said order, the present Writ Petition O.P. No. 1044 of 1993 was filed by the employer and the learned Single Judge, by judgment dated April 6, 1993, dismissed the writ petition. Against the said judgment this writ appeal is filed.

It was argued by the learned counsel for the appellant that the third respondent was not a ''workman'' within Section 2(s) inasmuch as the ''ex-gratia'' payment of Rs. 100/- per month was also "wages" within Section 2(rr) of the I.D. Act, and if that be so, the monthly wages will exceed Rs. 1600/-and the third respondent would not be a workman. It was also argued that the third respondent was working in a ''managerial or administrative capacity''. It was submitted that absence of a charge-sheet does not vitiate the inquiry and that if the value of the ''accommodation'' given to him is taken into in account, his ''wages'' will exceed Rs. 1600/- per month. These latter aspects need not detain us. The rulings cited for the position that charge-memo is not necessary do not, in fact, say so. They merely deal with the irregularities in the charge-memo and so we are not referring to them.

The question is whether the third respondent is a ''workman'' as defined in Section 2(s). It will be noticed that ''workman'' means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute or where dismissal, discharge or retrenchment has led to that dispute, but does not include ''any such person (i) .....or (ii) .....or (iii) who is employed mainly in a managerial or administrative capacity or (iv) who being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem.....''. In the present case, the employer had raised a plea before the Labour Court that the third respondent is not a workman within Section 2(s) as he is working in a ''managerial or administrative capacity''. This contention was negatived by the Labour Court on a reference to and consideration of the oral and documentary evidence. The learned Single Judge was not inclined to go into this aspect of the matter in view of the decision of the Supreme Court in D.P. Maheshwari Vs. Delhi Administration and Others, . On a reading of the judgment of the Labour Court, we are satisfied that the finding of the Labour Court that the third respondent is not functioning in a ''managerial or administrative capacity'' is supported by evidence and that there is neither any error of law or fact committed by the Labour Court in arriving at that finding.

It is next argued for the employer that the third respondent is a person who, though employed in a supervisory capacity, is not a workman because he was drawing ''wages'' more than Rs. 1600/-. p.m. and his case falls u/s 2(s) and is therefore not a workman. The contention is that the monthly remuneration, as per Ext. M21, is Rs. 1690.08 and therefore the third respondent is not a workman within Section 2(s).

On the other hand, it is argued for the workman that the ex-gratia payment of Rs. 100/- p.m. is to be excluded as it is not ''wages'' within Section 2(rr) and if that is done the monthly pay will be only Rs. 1590.08 which is less than Rs. 1600/-.

The Labour Court, on a consideration of this aspect of the matter, accepted the contention of the third respondent and held that an ''ex-gratia'' payment cannot, on the facts of the case, be treated as ''wages'' within Section 2(rr) of the Industrial Disputes Act, 1947.

That brings us to the principal question as to whether the ''ex- gratia'' payment of Rs. 100/-p.m. can be treated as ''wages'' within Section 2(rr).

Section 2(rr) of the Act defines ''wages'' as follows:

"Section 2(rr): ''wages'' means all remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment, or of work done in such employment, and includes-

(i) such allowances (including dearness allowance) as the workman is for the time being entitled to;

(ii) the value of any house accommodation, or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles;

(iii) any traveling concession;

(iv) any commission payable on the promotion of sales or business or both;

but does not include

(a) any bonus;

(b) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the workman under any law for the time being in force;

(c) any gratuity payable in the termination of his service."

It will be seen that the definition consists of three parts, the first part containing the meaning of the words, the second part containing certain inclusions and the third part containing certain exclusions.

It is not argued for the appellant before us that the ''ex-gratia'' payment of Rs. 100/- p.m. comes within the ''inclusive'' part of wages in Section 2(rr). The Labour Court held in paragraph 17 that:

"From a reading of the definition (of) wages occurring in Section 2(rr) of the I.D. Act, it can be seen that ex-gratia payment is not included. As the term denotes, it is gratuitous payment, not coming under the term ''remuneration''. Moreover, gratuity payable on the termination of the service of a worker has been excluded specifically from the purview of wages occurring in Section 2(rr) of the I.D. Act. The ex-gratia payment stands more or less in the same footing and is well distinguishable from any allowances including D.A. If that be the position, ex-gratia payment mentioned in Ex. M21 will have to be excluded from calculation."

In other words, the Labour Court held that the first or main part of Section 2(rr) is not attracted because ''ex-gratia'' payment is not remuneration. It held that the ''inclusive'' part or second part is not attracted as the payment is not an allowance. Assuming that it comes under the first or main part and is ''remuneration'', it stands excluded by the exclusionary part or third part as it is similar to ''gratuity''. This is what the Labour Court held.

We shall assume that, as contended for the appellant-employer, the ''ex-gratia'' monthly payment is not in the nature of ''gratuity'' coming within the exclusionary part or third part. So far as the inclusive part or second part is concerned, there is no dispute that it is not an allowance. The question then is whether it falls within the main part or first part of Section 2(rr).

Now, if we compare the main part or first part of the definition of ''wages'' in Section 2(rr) of the I-D. Act, 1947, it is almost identical with the main part or first part of the definition of ''wages'' in several other statutes containing labour legislation. No doubt in the inclusive and exclusionary parts, there are substantial differences. As we are here concerned with the main part or first part of Section 2(rr), we are of the view that it is permissible to look to the binding precedents, if any, in analogous labour statutes so far as the main or first part is concerned.

A question analogous to an ''ex-gratia'' payment with which we are concerned in the present case, arose in Braithwaite & Co. v. E.S.I. Corporation (1968-I-LLJ-550). That was, no doubt, a case under the Employees'' State Insurance Act, 1948, and the main part or first part of the definition of ''wages'' in Section 2(22) of that Act reads as follows:

"Section 2(22): ''wages'' means all remuneration paid or payable in cash to an employee, if the terms of contract of employment, express or implied, were fulfilled''.

It is seen that the main part or first part of Section 2(22) is substantially similar to the main part or first part of Section 2(rr) of the I.D. Act, 1947, at any rate, so far as the words ''all remuneration'', ''if the terms of employment, express or implied, were fulfilled,'' are concerned.

In Braithwaite''s case, the question was whether the payment of an ''inam'' which was not one of the original terms of the contract of employment, but which was proposed by the employer, long thereafter on December 28, 1955, was ''wages'', within the main part or first part in Section 2(22) of the E.S.I. Act It was held that it was not ''wages''. The E.S.I. Corporation contended that the Inam was ''wages'' within the main or first part of Section 2(22) of that Act being ''all remunerations paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled''. The E.S.I. Corporation did not rely upon any part of the inclusive part of the definition nor did the company rely on the exclusionary part of the definition. The High Court accepted the plea of the E.S.I. Corporation. The Supreme Court reversed the judgment of the High Court and held that the ''Inam'' did not come within the main or first part of the definition in Section 2(22) of that Act which substantially conforms to the main or first part of Section 2(rr) in the I.D. Act, 1947. The High Court there held that the ''inam'' had become an implied term of the contract of employment.

The Supreme Court analysed the features of the ''Inam'' scheme. Firstly, the Inam was not part of the original contract of employment in the original contract, there was no offer to give any reward of prize. Secondly, when later, the incentive or inam scheme was introduced and certain special conditions were introduced, the scheme itself reserved the right to withdraw it altogether without assigning any reason or to revise its conditions at its sole discretion. Thirdly, the inam is not payable if the targets were not achieved due to lack of orders, lack of materials, breakdown of machinery, lack of labour, strikes, lock-outs, go-slow or any other reason whatsoever. Fourthly, if there was any deterioration in the workmanship on the part bf the employees, the scheme could be abandoned forthwith. Fifthly, it was made clear that this payment of reward was in no way connected with nor was part of wages. Therefore, the Supreme Court held that the ''inam'' was neither an express nor an implied term of the contract. The Supreme Court also observed, referring to Bala Subrahmanya Rajaram Vs. B.C. Patil and Others, a case arising under the Payment of Wages Act, wherein the main pan of the definition of ''wages'' was similar.

In the present case, the ''gratuitous payment'' was not part of the original contract of employment. The third respondent had been appointed as a ''badli workman'' in October, 1968 on daily wages, and as a Kankani in 1970, and in June, 1970, he was upgraded as an Asst Tea-Maker. He was dismissed on September 20, 1989 which dismissal has led to this industrial dispute. The ''gratuitous payment'' was introduced by Ext. R5 letter w.e.f. December 1, 1987, which is produced by the workman along with his counter. It reads:

"We are pleased to inform you that in appreciation of the good services being rendered by you, the Management has decided to grant you an ex-gratia payment of Rs. 100/- p.m. with effect from December 1, 1987.

The Management sincerely believes that this payment will motivate you to greater enthusiasm, devotion and commitment in your work.

The ex-gratia payment will be in addition to your normal salary and allowances and will be shown separately in the books and records.

The ex-gratia payment is liable to be increased, decreased or totally withdrawn at the discretion of the company depending on your future performance.

The ex-gratia will not qualify for bonus, gratuity or other benefits.

Kindly sign the duplicate of this memo and return it to us in token of your acceptance of the payment and the conditions specified therein."

Looking at these terms of the ''ex-gratia'' offered to the third respondent, long after he became an Asst. Tea-Maker, and the ''inam Scheme'' in Braithwaite''s case, we are clearly of the view that they are similar and if the ''inam'' did not come under the main or first part of the definition of wages in Section 2(22) of the E.S.I. Act, the ''ex-gratia'' payment in the present case cannot also come within the main or first pan of Section 2(rr) of the I.D. Act, 1947. Here too the ''ex-gratia'' is not pan of the contract of employment and it is not to be mixed up with ''wages'' but is to be shown in separate books and records and is liable to be withdrawn at the discretion of the employer. The fact that it is dependent on the future performance of the employee is, in our opinion, not material because the ex-gratia itself is not as a matter of right.

For the aforesaid reasons, we hold that the ex-gratia payment of Rs. 100/- p.m. is to be excluded for purposes of computing the ''wages'' u/s 2(rr) of the I.D. Act, 1947 and if so, the workman''s wages fall below Rs. 1600/- p.m. and the industrial dispute was clearly maintainable.

Learned counsel cited certain rulings but as none related to any ''ex-gratia'' payment, we are not referring to them. The rulings u/s 2(rr) of the I.D.Act, decided by the Supreme Court, namely, Bennett Coleman and Co. (P) Ltd. Vs. Punya Priya Das Gupta, Dil-bagh Rai Jarry v. Union of India (1974-I-LLJ-164) and in Bharat Electronics Ltd., Bangalore Vs. Industrial Tribunal, Karnatak, Bangalore and another, all related to the ''allowances'' - namely, the inclusive part of the definition and do not help us in this case as the appellant before us has no case that the ''ex-gratia'' is an allowance.

For the aforesaid reasons, we hold that the reference was maintainable and we accordingly dismiss this Appeal. No costs.