Gordon Woodroffe Ltd. Vs. Regional Commissioner EPF, Tamil Nadu and Pondicherry

Citation: MANU/TN/3157/2009

Court: High Court of Madras

Decided On: 26.10.2009

Facts

EPF Commissioner passed an order against the Appellant-employer under Section 7-A of the Employees Provident Fund and Miscellaneous Provisions Act (“Act“), determining the contribution payable by the Appellant on ‘Saturday Allowance’ and ‘Special Allowance’ paid to its employees.

Contentions

Appellant: The payment of ‘Saturday Allowance’/’Special Allowance’ will not form part of the substantive part of definition of basic wages and it would fall within the excluded category falling under Section 2(b)(ii) of the Act.

Respondent: By merely adding a clause in the settlements to the effect that payment of ‘Saturday Allowance’/’Special Allowance’ being an ad hoc payment, need not be taken into computation for any other benefits, would not entitle the appellant to exclude the payment of contribution on those allowances. Such a clause in the settlements would be contrary to the statutory provision.

Issue

Whether the payment of ‘Saturday Allowance/Special Allowance’ will form part of the basic wages and accordingly be counted for the provident fund contribution.

Held

Under Section 6 of the EPF Act, the rate of contribution payable has been provided, by which such contribution is to be recovered from the basic wages, dearness allowance and retaining allowance, if any. Although dearness allowance stands excluded from the category of basic wages [under Section 2(b)(ii) of Act], by virtue of Section 6 of the Act, for the purpose of contribution, the dearness allowance payable to an employee has got to be taken into account. The rest of the excepted categories mentioned in Sub-clause (ii) of Section 2(b) mentions that the same would not form part of basic wages, viz., house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to an employee in respect of his employment or of work done in such employment.

The court by looking into the relevant facts eventually concluded that such a category of special allowance paid by the appellant is squarely covered by the excepted category as defined under Section 2(b)(ii) of the Act. Accordingly, it was held that the order of the EPF Commissioner cannot be sustained.

Madras High Court in this case also relied on the landmark judgment of Supreme
Court in Bridge & Roof Co. (India) Ltd. v. Union of India (1962 2 LLJ 490) to reiterate that the basis for the exclusion is that all that is not earned in all concerns or by all employees of a concern is excluded from basic wages. Further, it noted that unlike the normal basic wages payable to all employees, the payment of ‘Saturday Allowance/Special Allowance’ was restricted only to those employees who were confirmed and in the permanent rolls of the Appellant. Therefore, applying the Bridge & Roof Co. judgment (supra), Madras High Court held that the payment of ‘Saturday Allowance/Special Allowance’ will not form part of the basic wages. Consequently, no contribution would be payable by the Appellant.

Author: Vivek Verma

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