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PETITIONER:

PRANTIYA VIDHUT MANDAL MAZDOORFEDERATION ETC. ETC.

Vs.

RESPONDENT:

RAJASTHAN STATE ELECTRICITY BOARDAND ORS. ETC.ETC.

DATE OF JUDGMENT23/04/1992

BENCH:

KULDIP SINGH (J)

BENCH:

KULDIP SINGH (J)

YOGESHWAR DAYAL (J)

CITATION:

1992 AIR 1737 1992 SCR (2) 757

1992 SCC (2) 723 JT 1992 (3) 51

1992 SCALE (1)922

ACT:

Employee's Provident Funds and Miscellaneous Provisions

Act, 1952

Sections 2(b) and 6-``Basic wages for the time being

payable''-Interpretation of-Award under Industrial Disputes

Act-Gives revised pay scales to employees with retrospective

effect-Arrears of wages paid to employees-Provident fund-

Contribution-Employees liability to pay-Deduction from wage

arrears of employees-Whether arises.

HEADNOTE:

A dispute regarding wages and other conditions of serv-

ice arose between the State Electricity Board-Respondent

No.1, and its workmen. The parties arrived at a settlement

as a result of which the dispute was referred to the arbi-

trators under the Industrial Disputes Act.

The arbitrators entered upon the reference and gave an

award dated May 20, 1980, according to which various catego-

ries of workmen were to be paid higher wages with effect

from April 1, 1980. The arrears of pay and other benefits

accrued to the workmen were to be paid in four equal instal-

ment. The first instalment was payable on December 1, 1985

and the remaining three at an interval of six months each.

The Provident Fund authorities issued directions that

the provident fund contributions be deducted from the ar-

rears paid to the workmen. Accordingly, when the first

instalment was disbursed, the Board deducted the employees

contribution and also made its own contribution as required

under the Provident Fund Act. However, at the time of the

second instalment, the Board filed a Writ Petition under

Article 226 challenging the directions of the Provident Fund

authorities, contending that arrears payable to the employ-

ees as a result of the award of the arbitrators were not the

``basic wages'' under section 2(b) of the Provident Fund

Act.

758

A single Judge of the High Court dismissed the Writ

Petition, but on appeal a Division Bench set aside the

judgement and allowed the Writ petition, holding that the

contribution is to be paid on wages `for the time being

payable to the employees' and not on wages, the payment of

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which, even at a future date, is undecided and does not

arise out of the contract of employment, and that wages

payable under an award of the arbitrators cannot be termed

as deferred wages so as to mean that they had accrued at a

particular time but were payable at a later date according

to the terms of the contract.

Two appeals were filed against the judgement of the

Division Bench to this Court, one by the Regional Provident

Fund Commissioner and the other by the workmen of the Board.

Allowing the appeals, and setting aside the judgement of

the Division Bench, this Court,

HELD: 1.(i) The expression ``basic wages for the time

being payable to each of the employees'' under section 6 of

the Industrial Disputes Act means the basic wages at the

relevant time. When the existing pay-scales are revised with

effect from the back-date, then the revised-wages posterior

to that date are the ``basic wages for the time being pay-

able''. The High Court fell into error in giving a strained

interpretation to the provisions of the Provident Fund and

Miscellaneous Provisions Act. [764 C]

1.(ii) When the original emoluments earned by an employ-

ee were ``basic wages'' under the Provident Fund Act, the

substituted emoluments as a result of the award are to be

regarded as``basic wages''.[763 E]

2. When an award gives revised pay-scales, the employees

become entitled to the revised emoluments and where the said

revision is with the retrospective effect, the arrears paid

to employees, as a consequence, are the emoluments earned by

them while on duty. [763 C]

3. The reference to the arbitration, the acceptance of

the award by the parties and the resultant wage increase

with retrospective effect are the direct consequences of the

settlement between the workmen and the Board. Revision of

wage structure as a result of an award under the Industrial

Disputes Act, has to be taken as a part of the contract of

employment in the context of the Provident Fund and Miscel-

laneous

759

Provisions Act. [763 E]

Harihar Polyfibres v. The Regional Director ESI Corpora-

tion, [1985]1 SCR, referred to.

4. The workmen have inherent right to collective bar-

gaining under the Industrial Disputes Act. The demands

raised by the workmen through their unions are decided by

conciliation, settlement or adjudication under the Act.

These are time-consuming proceedings. When ultimately the

dispute is settled/decided in workers' favour, the accrued

benefit may be made available to them from a back date. [764

A]

In the instant case, the award given in the year 1985

has been made operative from April 1, 1980. It would be in

conformity with the objects of the Provident Fund and Mis-

cellaneous Provisions Act, which is a social welfare legis-

lation, to hold that the revised pay-scales have become part

of the contract of employment with effect from April 1,

1980. [764 B]

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1790 of

1992.

From the Judgement and Order dated 30.6.1987 of the

Rajasthan High Court in D.B. Special Appeal (Writ) No.305 of

1986.

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A.K. Goel for the Appellant.

Vijay Bahuguna, V.C. Mahajan, S.K. Jain, Ms.Sushma Suri

and Ms.C.K. Sucharita for the Respondents.

The Judgement of the Court was delivered by

KULDIP SINGH, J. Special leave granted.

The question for our consideration in these appeals is

whether arrears of wages, as result of wage-increase-award

under the Industrial Disputes Act, 1947(The Act), would come

within the definition of ``basic wages'' under Section 2(b)

of the Provident Fund and Miscellaneous Provisions Act,

1952(The Fund Act).

A dispute regarding wages and other conditions of serv-

ice arose between the Rajasthan State Electricity Board (The

board) and its workmen. The parties arrived at a settlement

as result of which the

760

dispute was referred to the arbitrators under the Act. The

arbitrators entered upon the reference and gave an award

dated May 20, 1985. The relevant part of the award is re-

produced as under:-

``The matters in dispute (terms of reference)

are as under:-

(1) Wages increase :

(a) What should be the Minimum wages for

regular unskilled workmen of Rajasthan State

Electricity board in pay Scales No.1 with

effect from April 1, 1980 ?

(b) What should be the wages structure of

different categories of workmen of Rajasthan

State Electricity Board covered under pay

scale Nos.1 to 6 with effect from April 1,

1980 ?

Decisions on matters in dispute (terms of

reference)

After hearing the arguments on behalf of the

parties and considering the documents supplied

by them, and taking into account other rele-

vant matters, our decisions on the matters in

dispute are given below:-

The minimum wages for regular unskilled work-

men of RSEB in pay scale No.1 with effect

from 1st April, 1980 shall be Rs.400 (Four

hundred only) with NIL Dearness Allowance or

any other addition to wages in the nature of

Dearness Allowance, henceforth referred to as

D.A.

Revised pay scales: on the basis of minimum

basic pay of Rs.400 with NIL DA, Revised pay

scales Nos.1 to 6 shall be as per Annexure-I

to this Award with NIL DA with effect from 1st

April, 1980.''

According to the award various categories of workmen

were to be paid higher wages with effect from April 1, 1980.

The arrears of pay and other benefits accrued to the workmen

were to be paid in four equal instalments. The first in-

stalment was payable on December 1, 1985 and the remaining

three at an interval of six months each. The Provident Fund

authorities issued directions that provident fund contribu-

tions be deducted from the arrears paid to workmen. Accord-

ingly when the first instalment was disbursed

761

the Board deducted the employees contribution and also made

its own contributions as required under the Fund Act. Howev-

er, at the time of the second instalment, the Board filed a

writ petition under Article 226 of the Constitution of India

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before the Rajasthan High Court challenging the directions

of the Provident Fund authorities on the ground that arrears

payable to the employees as a result of the award of the

arbitrators were not the ``basic wages'' under Section 2(b)

of the Fund Act. A learned Single Judge of the High Court

dismissed the writ petition. On appeal, a Division Bench of

the High Court set aside the judgement of the learned Single

Judge and allowed the writ petition on the following reason-

ing:-

"If a contract of employment provides for payment

of wages at a future date then it may fall within

the definition of wages as the same becomes payable

under the contract of employment, wages payable

under some statute or payable under orders of a

Court cannot be said to be wages payable under a

contract of employment. The Scheme framed under

Section 6 of the P.F. Act provides for calculation

of the contribution on basis of the emoluments

actually drawn during a whole month. The employer

has to submit a consolidated statement of the

employees who are members of the fund alongwith

their basic wages and this return is to be submit-

ted within a prescribed time. If subsequently there

is a change in the basic wages then there is no

provision in the scheme for preparing an amended

statement. The contribution recovered from the

employees has to be entered every month by the

employer in the contribution card. A monthly entry

once made will have to remain there unchanged.

Unless there is a specific provision in the scheme

for payment of contribution to the fund, the same

cannot be said to be payable by implication.

Contribution is to be paid on wages 'for the time

being payable to the employees' and not on wages,

the payment of which, even at a future date, is

undecided and does not arise out of the contract of

employment. Wages payable under an award of the

arbitrators cannot be termed as deferred wages so

as to mean that they had accrued at a particular

time but were payable at a later date according to

the terms of the contract. It has also not been

shown that the reference of disputes to the arbi-

trators was under the terms of the employment so

as to include wages

762

Payable under the award into the definition of

wages under S.2(b)of the P.F.Act, wages payable

under the award are neither in the nature of incre-

ments payable to an employee nor wages which have

remained unpaid due to some reason".

These two appeals by the regional Provident Fund

Commissioner, Jaipur Rajashtan and by the workmen

of the Board are against the Judgment of the Divi-

sion bench of the High Court.

Sections 2 (b) and 6 of the act which are relevant are

reproduced hereunder:-

2(b) "BASIC WAGES" means all emoluments which are

earned by an employee while on duty or on leave

with wages in accordance with the terms of the

contract of employment and which are paid or pay-

able in cash to him, but does not include -

(i) cash value of any food concession;

(ii) any dearness allowance (that is to say, all

cash payments by what ever name called paid to an

employee on account of a rise in the cost of liv-

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ing), house rent allowance, over-time allowance,

bonus, commission or any other similar allowance

payable to the employee in respect of his employ-

ment or of work done in such employments.

(iii) any presents made by the employer".

(6) " contributions and matters which may be

provided for in scheme;- the contribution which

shall be paid by the employer to the Fund shall be

six and a quarter per cent of the basic

wages[dearness allowance and retaining allowance

(if any)] for the time being payable to each of the

employees (whether employed by him directly or by

or through a contractor) and the employees' contri-

butions shall be equal to the contribution payable

by the employer in respect of him and may, if any

employee so desires and if the scheme makes provi-

sion therefore, be an amount not exceeding eight

and one-third per cent of his basic wages(dearness

allowance and retaining allowance (if any)....."

763

Reading the above quoted two sections together the

expression "basic wages" means:-

(i) All emoluments which are earned by an employee

while on duty or on leave;

(ii) with wages in accordance with the terms of the

contract of employment;

(iii) which are paid or payable in cash; and

(iv) are payable for the time being to each of the

employees.

When an award gives revised pay-scale the employees

become entitled to the revised emoluments and where the said

revision is with retrospective effect, the arrears paid to

the employees, as a consequence, are the emoluments earned

by them while on duty.

We do not agree with the Division Bench of High court

that the wages which are substituted from back-date as a

result of an award under the Act are not the basic wages as

defined under the Fund Act. If the original emoluments

earned by an employee were "basic wages" under the Fund act,

there is no justification to hold that the substituted

emoluments as a result of the award are not the "basic

wages". The reference to the arbitration, the acceptance of

the award by the parties and the resultant wage-increase

with retrospective effect, are the direct consequences of

the settlement between the workmen and the Board. We are of

the view that revision of wage-structure, as a result of an

award under the Act, has to be taken as a part of the con-

tract of employment in the context of the Fund Act. This

court in Harihar Polyfibres v. The regional Director ESI

Corporation [1985] 1 SCR 712 while dealing with the defini-

tion of wages under Employees' State Insurance Act 1948 held

as under:-

"Now , under the definition first, whatever remu-

neration is paid or payable to an employee the

terms of the contract of the employment, express or

implied is wages; thus if remuneration is paid in

terms of the original contract of employment or in

terms of settlement arrived at between the employer

and the employees which by necessary implication

becomes part of the contract of employment it is

wages".

764

The workmen have inherent right to collective-bargain-

ing under the act. The demands raised by the workmen through

their unions are decided by conciliation, settlement or

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adjudication under the Act. These are time-consuming Pro-

ceedings. When ultimately the dispute is settled/decided in

workers favour the accrued -benefit may be made available

to them from back-date. This is what has happened in the

present case. The award given in the year 1985 has been made

operative from April 1,1980. Under the circumstances it

would be in conformity with the objects of the Fund Act,

which is a social welfare legislation, to hold that the

revised pay-scales have become part of the contract of

employment with effect from April 1,1980.

The expression" basic wages for the time being payable

to each of the employees" under Section 6 of the Act means

the 'basic wages" at the relevant time. When the existing

pay-scales are revised with effect from back-date then the

revised-wages posterior to that date are the "basic wages

for the time being payable". The High Court in our view fell

into error in giving a strained interpretation to the provi-

sions of the Fund Act.

We, therefore, allow the appeals, set aside the judg-

ment of the Division bench of the High court and dismiss the

writ petition of the Board with costs. We quantify the costs

as Rs.10000 to be paid to the workmen.

N.V.K. Appeals allowed

765