INDIAN DRUGS AND PHARMACEUTICALS LTD. ETC.versusEMPLOYEES STATE INSURANCE CORPORATION ETC.

      INDIAN DRUGS AND PHARMACEUTICALS LTD. ETC.                              A
                                    v.
     EMPLOYEES STATE INSURANCE CORPORATION ETC.

                          NOVEMBER 6, 1996

           [K. RAMASWAMY AND G.B. PATTANAIK, JJ.]                             B

     Labour Law:

      Employee State Insurance Act, 1948 :

      Ss.2(22) read with s.2(9)-"Wages "-Whether includes "overtime
                                                                              c
wages "-Held, the overtime work done by the employee is an implied
contract to do overtime and the remuneration paid therefor does form part
of the wages u/s 2(22)----Concomitantly, the employer is enjoyed to pay the
contribution under the Act.
                                                                              D
    Harihar Polyfibres v. The Regional Director, ES! Corporation, (1985]
1 SCR 712, relied on.

     Braithwaite and Co. (India) Ltd v. ES!, (1968] 1 SCR 771, held
no longer applicable.
                                                                              E
      Shivraj Fine Art Litho Works, Nagpur v. Director, Regional Office,
Maharashtra, Bombay and Ors., (1974) Lab. IC 328, V 7 C72; E.S.I.C
New Delhi v. Bir/a Cotton, Spinning and Weaving Mills Ltd,
Delhi, (1977) II, LLJ 420 Mis The Hydrabad Allwyn Metal Works
Ltd. v. Employees State Insurance Corporation, (1981) Lab. IC 457,            F
approved.

      Mis Hindustan Motors Ltd v. ES.I. Corporation and Ors., (1979)
LAB l.C. 852 and Hind Art Press, Mangalore v. ES! Corporation and
Anr., (1990) LLJ 195, disapproved.
                                                                              G
     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2777 of
1980, Etc.

     From the Judgment and Order dated 7.8.80 of the Andhra Pradesh
High Court in A.A.O. No. 150 of 1980.                                         H
                                547
    548                       SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.


A         V.V. Vaze, Kailash Vasdav, C.K. Sasi, A.T.M. Sampath, Kailash
    Vasdev, Indra Sawhney, Deepak Dewan, C.V.S. Rao and V.J. Francis for
    the appearing parties.

          The following Order of the Court was delivered :

B          These appeals are by certificate granted by the Division Bench of
    the Andhra Pradesh High Court under Article 133 of the Constitution. The
    question of law of public importance is: whether the overtime wages paid
    to an employee by the appellants are "wages" within the meaning of Section
    2(22) of the Employees State Insurance Act, 1948 (for short, the 'Act'). It
    is not necessary to record the facts in all these cases. Suffice it to state that
C   the facts in C.A.No.2784/80 a.-e sufficient for disposal of the common
    controversy. Admittedly, the appellants have taken overtime work from
    their existing employees. The employees had done work during the stipulated
    working time and thereafter they were asked to perform overtime work
    which they did and accordingly, the overtime rate of wages was paid in
    terms of the agreement between the appellants and the workmen.
D
          Therefore, the question has arisen: whether absence of stipulation
    for payment of the overtime wages in the original contract of employment,
    would take away such remuneration paid towards the overtime work from
    the definition of the word 'wages' within the meaning of Section 2(22) of
E   the Act. The said section reads as under:

                   '"Wages' means all remuneration paid or payable in
                   cash to an employee, if the terms of the contract
                   of employment, express or implied, were fulfilled and
                   includes any payment to an employee in respect of any period
F                  of authorised leave, lock-out strike, which is not illegal or
                   lay-off and other additional remuneration, if any paid at
                   intervals not exceeding two months, but does not include-

                   (a) any contribution paid by the employer to any pension
                   fund or provident fund, or under this Act;
G
                   (b) any, travelling allowance or the value of any travelling
                   concession;

                   (c) any sum paid to the person employed to defray special
H                  expenses entailed on him by the nature of his employment;
                         l.D.P. LTD.v.E.S.I.CORPN.                         549


              or                                                                   A
              (d) any gratuity payable on discharge;

       Shri Kai lash Vasdev, learned counsel for the appellants in two appeals
and Shri Sampath, learned counsel in another appeal representing Agarwal
Industries, raised two-fold contention. According to Shri Kailash Vasdev,          B
the Legislature having taken care to exclude the overtime wages from the
purview of the definition of "employee" within the meaning of Section
2(9) of the Act and equally having defined the "wages" under Section
2(22) of the Act, necessary intendment therefrom is that the legislature
intended to exclude overtime wages from the remuneration paid for overtime
work done by the employer. Unless it is part of contract of appointment, it        C
is outside the definition of'wages'. Admittedly, there is no contract between
the appellants and the workmen to pay the overtime wages. It is not
obligatory for the appellants to offer overtime wages nor is it obligatory
for the employees to work overtime. In the absence of such mutual
obligations under a contract, it cannot be considered to be "wages" within
the meaning of Section 2(22) of the Act. Shri Sampath further elaborated           D
spinning that in the light of statutory operation, unless there is any agreement
in writing, it cannot be construed to be an implied contract. Since it is nqt
obligatory for the employees to work, remuneration paid towards overtime
work amounts to mutual payment not as part of wages but as remuneration
for services rendered outside the contract of employment of the employees.
Therefore, it will not come within additional remuneration, if any, paid at        E
intervals not exceeding two months within the meaning of Section 2(22)
of the Act. In support thereof, both the learned counsel have placed strong
reliance on the judgments of the Calcutta High Court in Mis. Hindustan
Motors Ltd. v. E.S.I. Corporation and Ors.,(1979) LAB LC. 852 and
Karnataka High Court in Hind Art Press, Manga/ore v. ES/ Corporation
and Anr.,(1990) LLJ 195.                                                           F
      The question is: whether the view taken by the said High Courts is
correct in law and whether the High Court of Andhra Pradesh has committed
any error of law in interpreting of the word 'wages', under Section 2(22)
of the Act? It is seen that Section 2(9) defines "employee" thus:                  G

              "Employee means any person employed for wage in or in
              connection with the work of a factory or establishment to
              which this Act applies and-

              Ii) who is directly employed by the principal employer or            H
    550                    SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.



A               any work of, or incidental or preliminary to or connected
                with worl; of, the factory or establishment, whether such
                work is done by the employee in this factory or establishment
                elsewhere; or

                (ii) who is employed or through an immediate employer on
B               the premises of the factory or establishment or under
                supervision of the principal employer or his agent on work
                which is ordinarily part of the work of the factory or
                establishment or which is preliminary to the work carried on
                in or incidental to the purpose of the factory or establishment:
                or
c
                (iii) whose services are temporarily lent or let on hire to the
                principal employer by the person with whom the person
                whose services are so lent or let on hire is entered into a
                contract of service;

D               and include any person employed for wages on any work
                connected with the administration of the factory or
                establishment or any part, department or branch thereof or
                with the purchase of Raw materials for, of the distribution or
                sale of the products of, the factory or establishment, *or any
                person engaged as an apprentice, not being an apprentice
E               engaged under the Apprentices Act, I 961, or under the
                standing orders of the establishment; but does not include-

                (a} any member of the Indian naval, military or air forces;
                or
F
                 (b) any person so employed whose wages (excluding
                 remuneration for oVertime, work) exceed, (such wages as
                 may be prescribed by the Central Government.)

                 Provided that an employee whose wages (exceeding
G                remuneration for overtime work) exceed, (such wages as may
                 be prescribed by the Central Government) at any time after
                 (and not before the beginning of the contribution periods
                 shall continue to be an employee until the end of that period;

H         The Legislature while defining "employee " has taken care to see
                        l.D.P. LTD. v. E.S.l. CORPN.                     551


that a person employed for wages in or in connection with the work of a          A
factory or establishment to which the Act applies was covered as employee
in one or the other enumerated items (i) to (iii). In addition, other persons
employed for wages on any work connected with the administration of the
factory or establishment· or any part, department or branch thereof or with
the purchase of raw materials for, or the distribution or sale of the products
of, the factory or establishment or any person engaged as an apprentice,         B
not being an apprentice engaged under the Apprentice Act, 1961 or under
the Standing Orders of the establishment, are employees. The exclusionary
clauses have been enumerated in clauses (a) and (b) thereof with which we
are not concerned. Under the proviso, the employee whose wages excluding
remuneration for overtime work exceeds such wages as may be prescribed
by the Central Government at any time after and not before the beginning         C
of the contribution period, shall continue to be an employee until the end
of that period. lt would thus be seen that the Legislature has taken care to
bring the employer within the net of beneficial provisions of the Act.
Employee whose remuneration does not exceed the prescribed remuneration
by the Central Government for a month or any time after the beginning of
the contribution period will be governed by the provisions of the Act. ln        D
other words, from the exclusion of the overtime work, in computation of
the remuneration to the workmen, it does appear that the Legislature
intended not to exclude employee who receives overtime wages from the
purview of the Act though he did overtime work and had received
remuneration. On the other hand, it would appear that the Legislature
recognised the fact of the employer engaging, by contract express or             E
implied, the services of the existing employee for doing overtime work
and paying the remuneration. In this behalf, it is relevant to note that the
definition of"wages" under Section 2(22) of the Act, the main part of the
definition, without taking aid of the inclusive part, would indicate that
wages means all remuneration paid or payable in cash to an employee, if
the terms of the contract of employment, express or implied, were fulfilled.     F
It would, thus, be seen that if there is any contract of employment express
or implied and the terms of contract have been fulfilled, then the
remuneration paid for performance of the duty, the employer is obiigated
to pay remuneration as wages to the employee. Herein we have to consider
whether overtime wages would be part of the wages. it is settled legal           G
position that the word 'include' would be given wide interpretation so as
to bring within its ambit exhaustively all entries akin to or analogous to
the main part of wage, except to the extent the enumerated entities except
those expressly excluded by the legislation would be within its sweep. In
other words, by employing the inclusive definition, the Legislature
intended, to bring in,, by legal fiction, something within the accepted          H
    552                     SUPREMECOURTREPORTS [1996] SUPP. 8 S.C.R.


A connotation though not strictly included within its ambit. It is seen that
  the Legislature has expressly excluded items A to D from the purview of
  the definition "wages". In other words, the Legislature suggested that all
  other categories which are not excluded, fall within the inclusive wider
  definition of 'wages'. The Legislature by defining 'employee', having
  had the knowledge of the payment of the remuneration for overtime work
B done by the employee and having excluded it in Section 2(9), the omission
  thereof in the definition of Section 2(22) excluding items A to D, would
  be eloquent and meaningful. Whatever remuneration, paid or payable for
  overtime work, forms wages under an implied term of the contract. The
  object thereby is clear that the overtime work done by the employee is an
  implied contract to do overtime and the remuneration paid therefor does
C form part of the wages under Section 2(22). Concomitantly, the employer
  is enjoined to pay the contribution under the Act and should be required to
   be complied with. This Court in Harihar Polyfibres v. The Regional
  Director, ES! Corporation, [1985] I SCR 712 was to consider whether
  HRA, Night Shift Allowance, Heat, Gas and Dust allowance, incentive
  allowance paid by the employer to his employee are wages within the
D meaning of Section 2(22) of the Act: This Court considered elaborately
  and had held that the Act is a welfare legislation and the definition of
   wages is designedly wide. Any ambiguous expression is, of course, bound
   to receive a beneficent construction at the hands of the Court. Under the
  definition, whatever remuneration is paid or payable to an employee under
  the terms of the contract of the employment, express or implied, is wages.
E Thus, if remuneration is paid to the employee in terms of the original •·
  contract of employment or in terms of a settlement which by necessary
   implication becomes part of the contract of employment, it is wages. It
   was also further held that this inclusive part as against the exclusionary
   part in the definition clearly indicates that the expression wages has been
  given a very wide meaning. The inclusive part of the definition read along
F with the exclusionary part in the definition, clearly shows that the inclusive
   part is not intended to be limited only to the items mentioned therein.
   Taking into consideration the exclusionary part in the definition and reading
   the definition as a whole, the inclusive part is only illustrative and tends to
   express the wide meaning and import of the word 'wages' used in the Act.
G It was held therein that HRA. Night, Shift Allowance, Heat, Gas and Dust
   allowance, incentive allowance are wages within the meaning of Section
  2(22) of the Act. The facts in this case squarely fall within the above ratio
   laid by this Court. When the admitted position is that an employee has
   done the overtime work and received or is due to receive remuneration
   towards the work done for his rendering service, necessarily, it is a wage
H paid or payable by virtue of the implied contract. The contract of
                       I.D.P. LTD. v. E.S.I. CORPN.                   553


employment is entered into only at the initial entry into the service. In the A
course of the employment, as and when the employer finds the need to
have work done expeditiously, in addition to the normal work during the
course of the working hours, the employer offers to the employee to do
overtime work after the working hours. When an employee does overtime
work, it amounts to acceptance of the same. There emerges concluded
implied contract betweeh the employer and employee. There is no need to B
write on each occasion separately on the letter of appointment. It becomes
integral part of original or revised contract of employment from time to
time. The employer is obligated to pay wages when the employee does
work. This will be, in addition to payment of the wages he receives for
normal work. In other words, both the remuneration received during the
working hours and overtime constitute a composite wage and thereby it is C
a wage within the meaning of Section 2(22) of the Act. The Calcutta High
Court and the Karnataka High Court have applied technical rules of
construction, namely, the Legislature does not expressly say so and,
therefore, remuneration paid for overtime work is not a wage. We think
that the approach adopted by these High Court is clearly unsustainable and
illegal. On the other hand, the view expressed by the Bombay High Court D
in Shivraj Fine Art Litho Works, Nagpur v. Director, Regional Office
Maharashtra, Bombay and Ors., (1974) Lab. IC 328 (V 7 C72), by Delhi
High Court in E.$.LC. New Delhi v. Bir/a Cotion, Spinning and Weaving
Mills Ltd, Delhi, ( 1977) II LLJ 420 and by the Andhra Pradesh High
Court in Mis. The Hydrabad Allwyn Metal Works Lrd. v. Employees State
Insurance Corporation, (I 981) Lab, IC 457 and the earlier decisions E
referred to are correct in law. The ratio in Braithwaite and Co. (India)
Ltd., v. ES!, [ 1968] 1 SCR 771, is no longer applicable, since it was prior
to the amendment of the definition. As a result, it no longer operates as a
ratio. Thus, we hold that the view taken by the High Court of Andhra
Pradesh is in accordance with law laid down by this Court. We do not find F
any ground warranting interference.

       The appeals are dismissed. No costs.

       In WP (C) NO 1554/87
                                                                            G
       Writ Petition is dismissed as withdrawn.

R.P.                                      Appeals and Petition dismissed.