'Basic Wages' For EPF Contribution Includes 'Interim Wages' Paid As Per Wage Board Direction: Kerala High Court

The Kerala High Court on Wednesday said that 20% wages that had been paid to workers by the employer as 'interim relief' at the direction of government constituted Wage Board would come within the ambit of 'basic wages' for contributions under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. 

Justice P.V. Kunhikrishnan said that such 'interim relief' would not fall within the exceptions carved out for basic wages in Section 2(b)(ii) of the Act. The bench observed, 

"It is an admitted fact that 20% of the wages are paid as interim relief to all the employees. At no stretch of the imagination, this Court can conclude that this will come within the purview of Section 2(b)(ii) of the Act, 1952."

Section 2(b)(ii) excludes from basic wages- any dearness allowance, 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.

The Court said that only allowances which are connected to or similar to dearness allowance, house-rent allowance, overtime allowance, bonus and commission will come within the purview of Section 2(b)(ii) of the Act, 1952. 

Applying the principle of ejusdem generis, the Court found, 

"As far as Section 2(b)(ii) of the Act, 1952 is concerned, since the word similar is used after dearness allowance, house rent allowance, overtime allowance, bonus and commission, the other similar allowances have got a restricted meaning connected to dearness allowance, house-rent allowance, overtime allowance, bonus and commission. In this case, admittedly the interim relief granted to the workers are 20% of the wages of the workers. Under such circumstances, the only conclusion that can be arrived at, is that the interim relief disbursed by the petitioner will come within the purview of the definition of basic wages as mentioned in Section 2(b) of the Act, 1952".

Factual Matrix

The petitioner in the instant writ petitions is a company which is involved in the business of printing and publishing newspapers and other periodicals. The said establishment has been covered under the The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act'). It is noted that MCM Press, Kottayam was taken over by the Petitioner, but was still functioning under separate Code No.KR/5973 till March, 2003. The Code Number allotted to the petitioner in respect of its other employees was KR/5975. The petitioner averred that it was paying PF contributions to all its eligible employees including those covered under Code No.KR/5973 and under Code No.KR/5975 after March, 2003.

Pursuant to the constitution of Manisana Wage Board, two notifications dated 24.9.1996 were issued by the Central Government - one providing interim relief to the working journalists and the other to the non-journalists, newspaper employees and news agency employees. The petitioner's case is that since the interim relief does not constitute the 'basic wage' as defined under the Act, 1952, the petitioner did not pay P.F. contributions on the interim relief paid in respect of its employees including the employees covered under Code No.KR/5973.

Subsequently, newspaper establishments with the assistance of Indian Newspaper Society attempted to get clarification from the Government on consequential benefits such as provident fund, bonus etc. on the interim reliefs, and thereon, by quoting a letter of the Labour Ministry dated 17.12.1996, informed that the consequential benefits such as provident fund, bonus etc. are not payable on interim reliefs.

During this time, the Assistant PF Commissioner (2nd respondent herein) initiated action for recovery of P.F. contributions on the interim relief paid in respect of the employees of the petitioner who are covered under Code No.KR/5973 and KR/5975 by invoking Section 7-A of the Act, and passed an order holding that the interim relief would constitute basic wages under the Act, 1952, and directed the petitioner to pay P.F. contribution of Rs.6,76,086.85 on the interim relief paid to the employees of the petitioner covered under Code No.KR/5975.

Against the same, the petitioner herein had preferred an appeal before the Employees Provident Fund Appellate Tribunal (1st respondent herein) contending that the interim relief would not constitute 'basic wages' under the Act. The petitioner also filed a petition for waiver of the deposit of 75% of the amount of Rs.1,30,132.25 under the proviso to Rule 7(3) of the Employees' Provident Fund Appellate Tribunal (Procedure) Rules, 1997.

It was at this juncture that the 2nd respondent passed orders under Section 8-F of the Act, 1952 requiring the Managers of South Indian Bank, Kottayam and State Bank of Travancore, Main Branch, Kottayam to pay the sum of Rs.1,30,132.25 out of the money in the account of the petitioner in the said Banks.

Aggrieved by this, the petitioner had filed W.P.(C). No.13635 of 2004 before the High Court, wherein the Court had stayed the recovery proceedings on the condition that Rs. 25000 would be paid, which interim order was also extended. During this time, the 1st respondent considered the appeal and  dismissed the same and proceedings were issued. It is against this that the instant writ petitions have been filed.

Arguments Raised

It was submitted by Advocates E.K. Madhavan, U.K. Devidas, V. Krishna Menon, Prinsun Philip, and P. Vijayamma, that the interim relief granted to the workers by the petitioner would not come within the purview of basic wages as defined under Section 2(b) of the Act. It was pointed out that in a conciliation conference between the parties concerned, the dispute was settled and in the terms of settlement, it had been clearly stipulated that both parties had agreed that the adhoc payment already paid as interim relief would be treated as non-recoverable advance. In this light, the counsels contended that there could not be any direction to pay the PF contribution against a statutory settlement arrived at between the parties. 

On the other hand, the Standing Counsel for EPF Joy Thattil Ittoop, and Advocate Sherry J. Thomas argued that the wages defined in the Employees State Insurance Act, 1948 is pari materia to the definition of the basic wages in the Act, 1952. The counsels also relied upon the decision in Employees' State Insurance Corpn. v. Gnanambigai Mills Ltd (2005) wherein the Apex Court had held that "ex-gratia payments" does not mean that those payments cease to be wages if they were otherwise wages and declared that interim relief will come within the definition of wages as per Section 2(22) of ESI Act. 

Court Ruling

The Court in this case ascertained that the issue to be decided was whether the interim relief granted by the petitioner to the workers amounts to basic wages as defined in Section 2(b) of the Act, 1952. It was noted by the Court that the interim relief paid by the petitioner to the workers was 20% of their basic wages.

The Court examined the basis for the exclusion clause provided in Section 2(b)(ii) in terms of basic wages, and reiterated the finding in M/s Bridge and Roofs Co. Ltd. v. Union of India & Ors (1963) that, "the basis for the exclusion in cl.(ii) of the exceptions in S.2(b) is that all that is not earned in all concerns or by all employees of a concern is excluded from basic wages". 

Importantly, the Court went on to lay down the following principles as to what constitutes basic wages:

"(i) Where the wage is universally, necessarily and ordinarily paid to all across the board, such emoluments are basic wages;
(ii) Where the payment is available to be specially paid to those who avail of the opportunity is not basic wages;
(iii) Any payment by way of special incentives or work is not basic wage".

Applying this, and the principle of ejusdem generis on noting the word "similar" in Section 2(b)(ii) of the Act, 1952, the Court arrived at the finding that, 

"the only conclusion that can be arrived at, is that the interim relief disbursed by the petitioner will come within the purview of the definition of basic wages as mentioned in Section 2(b) of the Act, 1952". 

The Court also took note of the beneficial nature of the legislation by observing, 

"...it is clear that the Act, 1952 is a beneficial piece of legislation for the working class of the country. If two interpretations are possible in a beneficial legislation, it is a settled law that the court should lean in favour of the interpretation which is beneficial to the subject under such welfare legislation. Therefore, if two interpretations are possible while interpreting a provision in the Act, 1952, the Court will always lean in favour of the interpretation which is beneficial to the working class".

Accordingly, the instant writ petitions were dismissed by the Court. 

Case Title: Mangalam Publications (India) Pvt. Ltd. v. Employees Provident Fund & Ors. 

Citation: 2022 LiveLaw (Ker) 565

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