Ad Hoc Payment Made As Per Interim Orders Does Not Form Part Of "Wages" Under Payment Of Wages Act: Supreme Court

The Supreme Court observed that ad hoc payment made pursuant to the interim orders passed by Court does not form part of "wages" within the meaning of the expression under Section 2(s) of the Payment of Gratuity Act, 1972  for the purpose of calculating gratuity.

A party who is in enjoyment of an interim order, is bound to lose the benefit of such interim order when the ultimate outcome of the case goes against him, the bench comprising Justices Hemant Gupta and V. Ramasubramanian observed.

The issue raised in this case was whether  an ad hoc payment made to the workers pursuant to the interim orders passed by the Supreme in a previous round of litigation could form part of "wages" within the meaning of the expression under Section 2(s) of the Payment of Gratuity Act, 1972 (hereinafter referred to as the "Act"), for the purpose of calculating gratuity?

Referring to Section 2(s) of the Act which defines wages, the bench noted:

The definition of the expression is in 3 parts, the first part indicating the meaning of the expression, the second part indicating what is included therein and the third part indicating what is not included therein. In the first part of the definition, the emphasis is on what is earned by the employee "in accordance with the terms and conditions of employment" .. Irrespective of whether what was earned has been paid or remained payable, the same is included in the definition, provided it is in accordance with the terms and conditions of his employment...

In The Straw Board Manufacturing Co. Ltd. vs. Its Workmen this Court clarified the meaning of the expression "wages" under Section 2(s) of the very same enactment, as follows: "We clarify that wages will mean and included basic wages and Dearness Allowance and nothing else".

Regarding the contention raised by placing reliance on an order of Supreme Court, the bench observed thus:

Whenever the State or instrumentalities of State come up with appeals challenging small benefits granted to individual litigants, this Court applies the test of proportionality to see whether the quantum of benefits granted to the individual concerned, justifies the examination of the question of law, at the cost of that little man from a far off place. The refusal of this Court to go into the question of law in such cases, cannot be treated as tantamounting to answering the question of law in a particular manner.

Allowing the appeal, the bench set aside the orders of the High Court, the Controlling Authority and the Appellate Authority under the Act, which held that the ad hoc payment made pursuant to the interim orders  will form part of the wages.

Case details

Chairman­ Cum ­managing Director Fertilizer Corporation Of India Ltd. Vs Rajesh Chandra Shrivastava | 2022 LiveLaw (SC) 351 | CA 2260 OF 2022 | 7 April 2022

Coram: Justices Hemant Gupta and V. Ramasubramanian

Headnotes

Payment of Gratuity Act, 1972 ; Section 2(s) - 'Wages' - Ad hoc payment made pursuant to the interim orders passed by Court does not form part of "wages" within the meaning of the expression under Section 2(s) of the Payment of Gratuity Act, 1972 for the purpose of calculating gratuity. (Para 17-22)

Precedent - Whenever the State or instrumentalities of State come up with appeals challenging small benefits granted to individual litigants, this Court applies the test of proportionality to see whether the quantum of benefits granted to the individual concerned, justifies the examination of the question of law, at the cost of that little man from a far off place. The refusal of this Court to go into the question of law in such cases, cannot be treated as tantamounting to answering the question of law in a particular manner. (Para 15)

Interim order- A party who is in enjoyment of an interim order, is bound to lose the benefit of such interim order when the ultimate outcome of the case goes against him. (Para 20)