Kichha Sugar Company Limited aggrieved by the
order dated 24th of June, 2008 passed by the
Uttarakhand High Court in WPMS No. 3717 of 2001,
affirming the award dated 12th of November, 1992
directing payment of Hill Development Allowance
after taking into account the amount received as
“leave encashment and overtime wages”, has
preferred this special leave petition.
Leave granted.
Facts lie in a narrow compass;
The Government of Uttar Pradesh, by its order
dated 5th of January, 1981, had directed for payment
of Hill Development Allowance to its employees
working at specified hill areas at the rate of 15%
of the basic wage. Kichha Sugar Company Limited,
the appellant herein (hereinafter referred to as
‘the employer’), being a unit of a subsidiary of JUDGMENT U.P. Government Corporation, adopted the same and
started paying Hill Development Allowance at the
rate of 15% of the basic wage. The workmen
demanded calculation of 15% of the said allowance
by taking into account the amount paid as overtime,
leave encashment and all other allowances. When
the employer did not agree to the calculation of
the Hill Development Allowance as suggested by the
workmen, a dispute was raised. It was referred to
conciliation and on its failure, the competent
Government made the following reference.
Whether the exclusion of payment
of overtime, leave encashment,
bonus and retaining allowance
while calculating the Hill
Development Allowance by the
Employer is legal and justified?
If not, to what relief, the
workmen concerned are entitled
to get?
It is common ground that while calculating Hill
Development Allowance, the employer has not taken
into account any other amount including amount
received as bonus, leave encashment, retaining JUDGMENT allowance or overtime wages. It is the claim of
the workmen that 15% of the Hill Development
Allowance is to be calculated and paid after taking
into account the payments made under the aforesaid
headings. The employer repudiated their claim and
according to it, the workmen shall be entitled to
15% of the basic wages as Hill Development
Allowance. The Industrial Tribunal gave
opportunity to both the employer and the workmen to
file their claim and produce material and on
consideration of the same, gave award dated 12th of
November, 1992 directing the employer to “give Hill
Development Allowance to their permanent and
regular workers on the amount received regarding
leave encashment and overtime wages.” However, the
Tribunal observed that “Hill Development Allowance
shall not be payable on bonus and retaining
allowance or on any other allowances”. The
employer, aggrieved by the award preferred writ
petition before the High Court, which affirmed the
same without any discussion or assigning any reason JUDGMENT in the following words:
“9. After going through the
aforesaid finding recorded by the
tribunal concerned, I find no
infirmity or illegality in the
impugned award passed by the
tribunal concerned and the same is
hereby confirmed.”
Before we enter into the merit of the case, it
is apt to understand what Hill Development
Allowance is. In our opinion, Hill Development
Allowances is nothing but a compensatory allowance.
A compensatory allowance broadly falls into three
categories; (i) allowance to meet the high cost of
living in certain, specially costly cities and
other local areas; (ii) allowance to compensate for
the hardship of service in certain areas, e.g.
areas which have a bad climate and/or difficult to
access; and (iii) allowances granted in areas, e.g.
field service areas, where, because of special
conditions of living or service, an employee
cannot, besides other disadvantages, have his
family with him. There may be cases in which more JUDGMENT than one of these conditions for grant of
compensatory allowance is fulfilled. It seems that
taking into account bad climate and remote and
difficult access, the decision was taken to grant
the Hill Development Allowance at the rate of 15%
of the basic wage.
We have heard Mr. Tanmaya Agarwal for the
appellant and Mr. Jatin Zaveri for the respondent.
Mr. Agarwal submits that basic wage will not
include the amount received as leave encashment and
overtime wages. According to him, basic wage would
mean the wage which is paid to all the employees.
He submits that leave encashment and overtime wages
would vary from workman to workman
and, therefore, those cannot be included in the
basic wage. In support of the submission he placed
reliance on a judgment of this Court in the case of
Muir Mills Co. Ltd. v. Workmen, AIR 1960 SC 985 and
our attention has been drawn to the following
passage from Paragraph 11 of the judgment, which JUDGMENT reads as follows:
“11. Thus understood “basic wage”
never includes the additional
emoluments which some workmen may
earn, on the basis of a system of
bonuses related to the production.
The quantum of earnings in such
bonuses varies from individual to
individual according to their
efficiency and diligence; it will
vary sometimes from season to
season with the variations of
working conditions in the factory
or other place where the work is
done; it will vary also with
variations in the rate of supplies
of raw material or in the
assistance obtainable from
machinery. This very element of
variation, excludes this part of
workmen's emoluments from the
connotation of “basic wages”.”
Mr. Garg, however submits that any amount
including the amount paid as leave encashment and
overtime wages do come within the expression ‘basic
wage’ and, hence, have to be accounted for the
purpose of calculating 15% of the basic pay.
In view of the rival submissions, the question
which falls for our determination is as to the
meaning of the expression ‘basic wage’. The
expression ‘basic wage’ has not been explained by
the Government in the order granting Hill
Development Allowance. It has been defined only
under Section 2(b) of the Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952.
Therefore, we have to see what meaning is to be
given to this expression in the present context.
Section 2(b) of the Employees’ Provident Funds and
Miscellaneous Provisions Act, 1952 defines ‘basic
wages’ as follows:
“2. Definitions. - In this Act,
unless the context otherwise
requires, -
(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 made by the
employer;”
According to http://www.merriam-webster.com
(Merriam Webster Dictionary) the word ‘basic wage’
means as follows:
“1. A wage or salary based on the
cost of living and used as a
standard for calculating rates of
pay
2. A rate of pay for a standard
work period exclusive of such
additional payments as bonuses and
overtime.”
When an expression is not defined, one can take JUDGMENT into account the definition given to such
expression in a statute as also the dictionary
meaning. In our opinion, those wages which are
universally, necessarily and ordinarily paid to all
the employees across the board are basic wage.
Where the payment is available to those who avail
the opportunity more than others, the amount paid
for that cannot be included in the basic wage. As
for example, the overtime allowance, though it is
generally enforced across the board but not earned
by all employees equally. Overtime wages or for
that matter, leave encashment may be available to
each workman but it may vary from one workman to
other. The extra bonus depends upon the extra hour
of work done by the workman whereas leave
encashment shall depend upon the number of days of
leave available to workman. Both are variable. In
view of what we have observed above, we are of the
opinion that the amount received as leave
encashment and overtime wages is not fit to be
included for calculating 15% of the Hill JUDGMENT Development Allowance. The view which we have
taken finds support from the judgment of this Court
in Muir Mills Co. Ltd. (supra), relied on by the
appellant, in which it has been specifically held
that the basic wage shall not include bonus.
It also finds support from a judgment of this
Court in the case of Manipal Academy of Higher
Education v. Provident Fund Commr.,(2008) 5 SCC 428
in which it has been held as follows:
“10. The basic principles as laid
down in Bridge & Roofs case, AIR
1963 SC 1474, on a combined
reading of Sections 2(b) and 6 are
as follows:
(a) Where the wage is universally,
necessarily and ordinarily paid to
all across the board such
emoluments are basic wages.
(b) Where the payment is available
to be specially paid to those who
avail of the opportunity is not
basic wages. By way of example it
was held that overtime allowance,
though it is generally in force in
all
employees concerns of aisconcern.not earnedIt isby alsoall
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.
(c) Conversely, any payment by way
of a special incentive or work is
not basic wages.”
In view of what we have observed above, the
impugned award and the judgment of the High Court
are illegal and cannot be allowed to stand.
In the result, we allow this appeal, set aside
the award and the judgment of the High Court and
hold that overtime allowance and leave encashment
are not fit to be taken into account for
calculating the Hill Development Allowance. No
costs.