CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1790 of 1992.
From the Judgement and Order dated 30.6.1987 of the Rajasthan High Court in D.B. Special Appeal (Writ) No.305 of 1986.
A.K. Goel for the Appellant.
Vijay Bahuguna, V.C. Mahajan, S.K. Jain, Ms.Sushma Suri and Ms.C.K. Sucharita for the Respondents.
The Judgement of the Court was delivered by KULDIP SINGH, J. Special leave granted. The question for our consideration in these appeals is whether arrears of wages, as result of wage-increase-award under the Industrial Disputes Act, 1947(The Act), would come within the definition of ‘‘basic wages’’ under Section 2(b) of the Provident Fund and Miscellaneous Provisions Act, 1952(The Fund Act).
A dispute regarding wages and other conditions of service arose between the Rajasthan State Electricity Board (The board) and its workmen. The parties arrived at a settlement as result of which the dispute was referred to the arbitrators under the Act. The arbitrators entered upon the reference and gave an award dated May 20, 1985. The relevant part of the award is reproduced as under:-
‘‘The matters in dispute (terms of reference)
are as under:-
(1) Wages increase :
(a) What should be the Minimum wages for
regular unskilled workmen of Rajasthan State
Electricity board in pay Scales No.1 with
effect from April 1, 1980 ?
(b) What should be the wages structure of
different categories of workmen of Rajasthan
State Electricity Board covered under pay
scale Nos.1 to 6 with effect from April 1,
1980 ?
Decisions on matters in dispute (terms of
reference)
After hearing the arguments on behalf of the
parties and considering the documents supplied
by them, and taking into account other rele-
vant matters, our decisions on the matters in
dispute are given below:-
The minimum wages for regular unskilled work-
men of RSEB in pay scale No.1 with effect
from 1st April, 1980 shall be Rs.400 (Four
hundred only) with NIL Dearness Allowance or
any other addition to wages in the nature of
Dearness Allowance, henceforth referred to as
D.A.
Revised pay scales: on the basis of minimum
basic pay of Rs.400 with NIL DA, Revised pay
scales Nos.1 to 6 shall be as per Annexure-I
to this Award with NIL DA with effect from 1st
April, 1980.’’
According to the award various categories of workmen were to be paid higher wages with effect from April 1, 1980. The arrears of pay and other benefits accrued to the workmen were to be paid in four equal instalments. The first instalment was payable on December 1, 1985 and the remaining three at an interval of six months each. The Provident Fund authorities issued directions that provident fund contributions be deducted from the arrears paid to workmen. Accordingly when the first instalment was disbursed the Board deducted the employees contribution and also made its own contributions as required under the Fund Act. However, at the time of the second instalment, the Board filed a writ petition under Article 226 of the Constitution of India before the Rajasthan High Court challenging the directions of the Provident Fund authorities on the ground that arrears payable to the employees as a result of the award of the arbitrators were not the ‘‘basic wages’’ under Section 2(b) of the Fund Act. A learned Single Judge of the High Court dismissed the writ petition. On appeal, a Division Bench of the High Court set aside the judgement of the learned Single Judge and allowed the writ petition on the following reasoning:-
"If a contract of employment provides for payment
of wages at a future date then it may fall within
the definition of wages as the same becomes payable
under the contract of employment, wages payable
under some statute or payable under orders of a
Court cannot be said to be wages payable under a
contract of employment. The Scheme framed under
Section 6 of the P.F. Act provides for calculation
of the contribution on basis of the emoluments
actually drawn during a whole month. The employer
has to submit a consolidated statement of the
employees who are members of the fund alongwith
their basic wages and this return is to be submit-
ted within a prescribed time. If subsequently there
is a change in the basic wages then there is no
provision in the scheme for preparing an amended
statement. The contribution recovered from the
employees has to be entered every month by the
employer in the contribution card. A monthly entry
once made will have to remain there unchanged.
Unless there is a specific provision in the scheme
for payment of contribution to the fund, the same
cannot be said to be payable by implication.
Contribution is to be paid on wages ’for the time
being payable to the employees’ and not on wages,
the payment of which, even at a future date, is
undecided and does not arise out of the contract of
employment. Wages payable under an award of the
arbitrators cannot be termed as deferred wages so
as to mean that they had accrued at a particular
time but were payable at a later date according to
the terms of the contract. It has also not been
shown that the reference of disputes to the arbi-
trators was under the terms of the employment so
as to include wages
Payable under the award into the definition of
wages under S.2(b)of the P.F.Act, wages payable
under the award are neither in the nature of incre-
ments payable to an employee nor wages which have
remained unpaid due to some reason".
These two appeals by the regional Provident Fund
Commissioner, Jaipur Rajashtan and by the workmen
of the Board are against the Judgment of the Divi-
sion bench of the High Court.
Sections 2 (b) and 6 of the act which are relevant are reproduced hereunder:-
2(b) "BASIC WAGES" 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 pay-
able in cash to him, but does not include -
(i) cash value of any food concession;
(ii) any dearness allowance (that is to say, all
cash payments by what ever name called paid to an
employee on account of a rise in the cost of liv-
ing), house rent allowance, over-time allowance,
bonus, commission or any other similar allowance
payable to the employee in respect of his employ-
ment or of work done in such employments.
(iii) any presents made by the employer".
(6) " contributions and matters which may be
provided for in scheme;- the contribution which
shall be paid by the employer to the Fund shall be
six and a quarter per cent of the basic
wages[dearness allowance and retaining allowance
(if any)] for the time being payable to each of the
employees (whether employed by him directly or by
or through a contractor) and the employees’ contri-
butions shall be equal to the contribution payable
by the employer in respect of him and may, if any
employee so desires and if the scheme makes provi-
sion therefore, be an amount not exceeding eight
and one-third per cent of his basic wages(dearness
allowance and retaining allowance (if any)....."
Reading the above quoted two sections together the expression "basic wages" means:-
(i) All emoluments which are earned by an employee while on duty or on leave;
(ii) with wages in accordance with the terms of the contract of employment;
(iii) which are paid or payable in cash; and
(iv) are payable for the time being to each of the employees.
When an award gives revised pay-scale the employees become entitled to the revised emoluments and where the said revision is with retrospective effect, the arrears paid to the employees, as a consequence, are the emoluments earned by them while on duty.
We do not agree with the Division Bench of High court that the wages which are substituted from back-date as a result of an award under the Act are not the basic wages as defined under the Fund Act. If the original emoluments earned by an employee were "basic wages" under the Fund act, there is no justification to hold that the substituted emoluments as a result of the award are not the "basic wages". The reference to the arbitration, the acceptance of the award by the parties and the resultant wage-increase with retrospective effect, are the direct consequences of the settlement between the workmen and the Board. We are of the view that revision of wage-structure, as a result of an award under the Act, has to be taken as a part of the contract of employment in the context of the Fund Act. This court in Harihar Polyfibres v. The regional Director ESI Corporation [1985] 1 SCR 712 while dealing with the definition of wages under Employees’ State Insurance Act 1948 held as under:-
"Now , under the definition first, whatever remu-
neration is paid or payable to an employee the
terms of the contract of the employment, express or
implied is wages; thus if remuneration is paid in
terms of the original contract of employment or in
terms of settlement arrived at between the employer
and the employees which by necessary implication
becomes part of the contract of employment it is
wages".
The workmen have inherent right to collective-bargaining under the act. The demands raised by the workmen through their unions are decided by conciliation, settlement or adjudication under the Act. These are time-consuming Proceedings. When ultimately the dispute is settled/decided in workers favour the accrued -benefit may be made available to them from back-date. This is what has happened in the present case. The award given in the year 1985 has been made operative from April 1,1980. Under the circumstances it would be in conformity with the objects of the Fund Act, which is a social welfare legislation, to hold that the revised pay-scales have become part of the contract of employment with effect from April 1,1980.
The expression" basic wages for the time being payable to each of the employees" under Section 6 of the Act means the ’basic wages" at the relevant time. When the existing pay-scales are revised with effect from back-date then the revised-wages posterior to that date are the "basic wages for the time being payable". The High Court in our view fell into error in giving a strained interpretation to the provisions of the Fund Act.
We, therefore, allow the appeals, set aside the judgment of the Division bench of the High court and dismiss the writ petition of the Board with costs. We quantify the costs as Rs.10000 to be paid to the workmen. N.V.K. Appeals allowed