Dismissed

The Regional Provident Fund Commissioner, Hyd v. M/S. Vst Industries Ltd. Hyderabad and Ano

Telangana HC19 Sept 2022WA/817/2012

Case brief

AI extract

What is this about?

The Telangana High Court dismissed the RPF Commissioner's writ appeal against the EPF Appellate Tribunal's order. The Court held that ad hoc allowance and production incentives, being attendance-dependent and part of group incentives, do not constitute basic wage under Section 2-B of the EPF Act.

What did the court decide?

Writ appeal dismissed; costs not awarded; pending miscellaneous petitions dismissed.

The Regional Provident Fund Commissioner… — Pension and Retirement Benefits | Telangana HC (2022)

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HIGH COURT FOR THE STATE OF TELANGANA. AT HYDERABAD

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MONDAY, THE NINETEENTH DAY OF SEPTEIVIBER TWO THOUSAND AND TWENTY TWO

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PRESENT

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THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND

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THE HON'BLE SRI JUSTICE C. V. BHASKAR REDDY

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WRIT APPEAL NO: 817 OF 2012

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writ Appeal under clause 15 of the Letters Patent preferred against the order dated 18-09-2009 in WP No. 6732 of 2000 on the file of the High Court.

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Between:

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The Regional Provident Fund Commissioner, Hyderabad.

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...APPELLANT/PETITIONER

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AND

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1 Employees Provident Fund Appellate Tribunal, Bhavisyanidhi Bhavan,^.14, Bholaji Cama Place, New Delhi - 19 2. M/s. V.S.T. lndustries Limited,, Hyderabad.

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... R ES PON D ENTS/RE S P ON DE NTS Counsel for the Appellant: SRI VENKAT REDDY THIPPARTHI (NOT PRESENT) (sc FoR EPFO)

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Counsel for Respondent No. 1: GP FOR LABOUR

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Counsel for Respondent No. 2: NONE APPEARED

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The Court made the following: JUDGMENT

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THE TION'B THE CHIEF IUSTICE BHI'YAN AND

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TH EHoN'BLE SRI IUSTICE C.V.BHA KAR REDDY W.A.No. 9fi of 2072

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IUDGI\IENT (Per rhe Hon'bb rhe C)bieJ Jutrh Lrilal Bhayn)

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None appears flor the partics on call.

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2.^-lhis writ appeal

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1S clirected against thc order

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clatcd 08.09.2()09 passed by the lcarned Single Judge dismissing V.P.No.6732 o12000 filed by the appellant as the wrir pcriuoner. 3. 'l'he relatcd wrir pedrion was filcd by the appcllanr as the wrir pctitioncr assailing the legaliry and validiry of the order datcd 22.07.1999 passed by thc F)mployees Providenr Fund Appeilatc l'ribunal (rcspc,ndent No.i) in r\ppeal No.ATAl1(14) f99 tndcr provisions of thc En-rployees' Provident Funds and Miscellaneous Provisions Act, 1952 (briefly 'the Act' hereinafter)

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Ll 'fhe facts havc been narrared by the learned Single Judge in the follorving manner.

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'Ihc second respondent, M/s. Y az,ir Sultan Tobacco Cornpany Ltd., rvhich is involved in the business of manufacruring cigarettes, is a covered establishment under

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the provisions of the Act^{dde code No.AP/146. While making} inspection, the Inspector of^{ProvidentFund had noricedthat} the said estab[shment^{was not paying contributionson adhoc} allowances and monthly^{productiviryincentive payable to its} workers. When the^{managementof the second tespondent} company disputed its^{liability for contributiontowatdsprovident} fund, an enquiry was conducted^{under Section 7-A of the Act'} In the enquiry proceedings,^{it was the plea of the second} respondent management^{that ad hoc allowanceof Rs.20/-is} paid as per the setdement^{reached between the management} and the employees^{and the setdement itselfstates thatthe} said allowance shail^{not be taken into accountfor the purpose} of provident fund deductions;^{as such, it does not formpart of} basic wage and dearness^{allowance so as to contributeon such} allowance. So far^as production^{incentjve is concerned,it was the} case of the management^{that it is a group incentive scheme} where the workmen are^{paidon pro-ratabasis depending upon} the production and,^{as such, in the absence of anyfixed benefit} conferred on the^{workmen, the samecannotalso be clubbed in} the basic wage for^{the purpose of contribution. The Regional} Provident Fund Commissioner,^{who conducted enquiry,passed} order dated^{23-10-1,984directing the secondrespondent} management to pay provident^{fund on ad hoc allowanceand} monthly productive incentive^{bonus to the workers duringthe} period ftom 01-04-1918^{to 31-05-1982. The primary authority,in} the said order, issued directions^{for paymento[ provident fund} mainly on the ground that^{ad hoc allowancewas paidonly}

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aftet taking inro accounr rhe cost of living and further the ptoduction inccntive is paid under the monthly productivity index plan which is madc for wi*rin the fixed hours o[ wotk. \X/hile recording so, it is stated that ad hoc allowance and production rnccntive are nothing but basic wage and in order to avoid liabiliry under the Act, the employer and the employees have entered into agreement for payment of such amount wrthout subiect to contributions payable under the Act.

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Aggrier.ed by the order of the Regional Provident Cominissioner dated 23-10-1,984, the second respondent ftled an appeal before the appellate Tribunal, constituted under the

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provisions of the Act, in Appeal No.ATA/1(14)99. The appellate^-lribunal, relying on the iudgment of thc Hon'ble Supreme Court in rhe case of Bridge and Roof (reponed in AIR i963 SC 1474) held that payment under the head of adhoc allowance is a management skill to give incentive for the employees to be present in their working hours and on working days on r.oluntary basis. Further, the appellate Tribunal found that the said amounts are not being paid to every worker, as the scheme disentides payment to the workmen, who are absent ftom the placc of work without leave or authoriry. Similady, conring to the production incendve, the appellate Tribunal, having found that unless and unril rhe minimum prescribed limit of production is not reached as a tvhole at the end of the month, none of the employees would be entided for allowance, has taken a vrerv that the same cannot be considered as a basic wage for the purpose of deduction o[ provident fund. Aggrieved by

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the order passed by the appellate Tribunal, the Regional Provident Fund Commissioner, Hyderabad, filed *ris writ petition.

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After hearing learned counsel For the parties and considering the materials on record, learned Single Judge took the view that 'fribunal had rightly allowed the appeal fi1ed by rhe management and thercforc, decLined to interlere with thc order passed by the Tribunal. Relevant portion of the order o[ the learned Single Judge dated 08.09.2009 rcads as undcr:

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Befote I consider the submissions made by the learned counsel, I deem it appropriate to refer to the reasons in brief for aliowing the appeal preferred by the second respondent maflagement. So far as adhoc allowance is concerned, the appellate^-fribunal found that the said amount is not payable for all employees all times and the same is extended by the maflagement to attract regular attendance of workmen. It is statcd that as the said payment will depend on attendance of the wotkmen and it is extcnded by way of incentive, it cannot be considered as basic wage, in view of the ratio decided by the Hon'ble Supreme Court in the case of Bridge and Roof. So far as production incentive is concerned, it is stated that as per the scheme itsclf, each workcr is ent-ided for the said incentive in proportion to his attendance and also category-wise; as such,

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the same cannot bc treated as basic wage for the purpose o[ contribution towards provident fund.

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As per the definition under Section 2-B of the Act, basic s/agc means all emoluments which are earned by an employee while on dury, but they do not include the cash valuc of any food concession, dearness allowance, house_rent ailowance, overtime allowance, bonus, commission or any other sirnilar ailowances payablc ro the employee in respect oF his employment or of work done in such employment. Under Secuon 6 of the Act, which deals with the contributions and matters which may be provided for in Schemes notified under the .\ct, it is obligatory on rhe part of the empioyer ro pay pror.ident fund on the basic wage at such percentage as prescribed. In the case on hand, adhoc allowance was paid from 01-04-1978 to 31-05-1982 only pusuanr to setr.lemenr entered into berween the workers union and the second respondent management. It is also not in dispute that as per the very terrns of the settlement, there is a clear understanding between the workers and the management that no deductjons be made on account of provident fund out of the amount paid to the workers on account of adhoc allowance. So far as providenr fund conribudons arc concerned, it is nor a unilateral payment by the management. Whenever there are such deductions, rhere will be a matching contribution from the side o[ the management. As per the terms o[ sett_lement cntered into by the workers union with the managcment, adhoc allowance is not payable for all employees irrespeccive of

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their attendance. From the very reading of the terms of the setdeme nL it is clcar that each employee is entitle to an amount of Rs.20/- per month and the said amount will get reduced iF any employee is absent dudng the month. By applylng the ratio in the case of Bridge and Roof, it cannor be said that every employee is entided to a 6xed sum, so as to consider the said allowance as basic wage for the purpose of deductions. Further, in the case of Regional Commissioner, EpF, Tamilnadu and Pondicherry v. Management of Southern Alloy Foundries (P) Ltd. (1982 (1) LLJ Z8), a Division Bench of the Madras High Court considered an identical question, namely whether the special al.lowance paid by the employer as a result o[ an agreement entered into bctween the employer and thc employees can be said to form part o[ dearness allowance for the purpose of calculating the contribution payable by the employer under the provisions of the Act, held that when a special allowance was paid as a result of an agreement and they had not agreed ro uear it as a part of basic wage or dearness allowance, it cannot be included for computation of contribution of the employer. Even in the present case, there is a setdement which exprcssly states that payment of adhoc allowance by the management wiII be subject to deductions for the purpose of provident fund. When it is not part of dearness allowance and further when it is agreed by the workers, union and the management that no deducdons can be made towards provident fund, it cannot be said that the said setdement/contact is outside the statute. From the very

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recitals of the Scheme,^{it is clear that every employeeis not} automatical, entitted^{to the saidamount as a matter of course,} irrespective of his/her^{attendanceand the paymcfltof thc said} amount rvi-ll depend^{upon the attendance. As such, it cannot} be construcd as^{basic wagc for the purpose o[ deducdons} under Section 6 of the^{Act. In the judgmentof the Hon'ble} Supreme Court in the^{caseof Bridge and Root it is held that} whatevcr is payable in all^{concerns and is carnedby all} permanent employees is^{included for thc} Purposc^of contribution under Section^{6 of the Act, but for whatever is not} payable by all^{concerfls ormay not be earned by all} employees of a concern^{is excludedfor thc purposes of} contribution. Further, in thc ;udgment^{in the case of E'I'D'} Parry (India) Ltd.,^{(1984 (1) LIJ 300), a DivisionBench of the} Madtas Fligh Coutt^{has held that,if in accordanccwith the terms} of the contract oI employment^{the parties agreethat a particular} sum should be excluded^{for the purposeof provident [und, it} car-not bc said that it should^{be treated as a basicwage for the} purpose of deducrions^{under Section 6 of the Act' The ratio} decided in the said^{case supPorts the case o[ the second} respondcnt management.^{Even in the case on hand,there is} an identical clause in the^{setdement arrivedat betweenthe} managenlcnt and the^{workers' union. Itis to be seen that} production incentive,^{as per thc setdement, is not a fixed sum} to be earned by every^{workman.The saidincentive, rvhichis} in the naturc of a bonus,^{is payablein a particular month to a} particular workman,^{whichwill be arrivedat by multiplying the}

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applicable scheduled hours eligible for payment as described in the productiviry incentive scheme at the rate that applies to the particular gtoup, applicable to that month. In that view of the matter, it is clear from the very setdement that the said amount which is payable to the workmen is in the nature of a bonus on the production which vades from one workman group to the other, as applicable to the index slab notified in the productivity incentive scheme. As such, having regard to the nature o[ thc schcme and the bonus, payment of amount towards production incentive wholly depends ofl the production for a particular month, which is nothing but a bonus and which is exempted and, hence, cannot be called a basic wage, as defined. Further, as cvery workman cannot claim particular amouflt as a matter of right, evcn by applying the ratio decided by the Hon'ble Supreme Court in the case of Bridge and Root the said amount cannot be taken into consideration for the pulpose of payment of provident fund under Section 6 of the Act. Though learned counsel for the petitioner relied on a iudgment^{of a learned single} J^{udge of the RaiasthanHigh} Court in D.C.M Ltd. V. Regional Provident Fund Commissioner (1998 (1) LLJ 979) wherein it is held that liability under the Act will depend upon the phtaseology used by the employer, but, having tegard to the facts of the case on hand and the setdement entcred into, the said iudgment^is not beneficial to the learned counsel.

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For the aforesaid reasofls, this Court is of the view that

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the appellarc^'lribunal has righdy allowed the appcal filed by the second respondent management by recording val,id reasons and there are no grounds to interfere with the same in this petition filcd undcr Arttcle 226 of the Constiturion oF India.

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On due considerarion, we do nor find any error or in firmiry in the view taken by the learned Single Judge ro warrant interfcrence. Lcarned Single Judge considered the findings of the appellate Tribunal and found rhe same to be in accordance with law. Thus, thc decision of the appellate Tribunal was afhrmed by the learned Single Judge. We find no good reason to interfere with the samc.

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l Writ Appeal is devoid of merit and is accordingly dismissed. N() cos ts

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As a sequel, miscellaneous pecit-ions, pending if any, stand

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dis mis sed.

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SD/- M. MANJULA DEPUTY REGISTRAR

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//TRUE COPY//

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SECTION OFFICER

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To, 1. One CC to Sri Venkat Redd y Thipparthi(SC FOR EPFO) Advocate [OPUC] 2. Two CCs to GP For Labour, High Court for the State of Telangana. [OUT] 3. Two CD Copies 4. One Spare Copy MBC GJP

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HIGH COURT

DATED: 1910912022

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JUDGMENT

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WA.No.817 of 2012