THE EMPLOYEES STATE INSURANCE CORPORATIONversusM/S TEXMO INDUSTRIES

1010                      [2021]REPORTS
                SUPREME COURT   2 S.C.R. 1010                [2021] 2 S.C.R.


 A        THE EMPLOYEES STATE INSURANCE CORPORATION
                                         v.
                           M/S TEXMO INDUSTRIES
                   (Special Leave Petition (C) No. 811 of 2021)
 B                               MARCH 08, 2021
            [INDIRA BANERJEE AND HRISHIKESH ROY, JJ.]
              Employee State Insurance Act, 1948 – s.2(22) and s.2(24) –
       Whether ‘wages’, as defined in s.2(22) of the ESI Act would include
       Conveyance Allowance paid by a Company to its employees – Held:
 C
       From the definition of wages in s.2(22), it is amply clear that wages
       includes remunerative payments, but does not include compensatory
       payments – Travelling allowance including the value of travelling
       concession has expressly been excluded from the definition of wages,
       as also any payment made to an employee to reimburse or
 D     compensate for special expenses that an employee might incur by
       reason of the nature of his employment – Conveyance Allowance is
       in the nature of travelling allowance, the object of which is to enable
       the employee to reach his place of work and to defray costs incurred
       on travel from his place of residence to his place of work – If instead
       of paying the Conveyance Allowance, the employer provided free
 E
       transport to the employee, the monetary value of that benefit of
       travel from his residence, to his place of work would also not be
       regarded as forming part of his wages – The definition of wages in
       s.2(22) of the ESI Act clearly excludes Travelling Allowance –
       Expression “Travelling Allowance” has not been defined in the ESI
 F     Act – Under s.2(24) of the ESI Act all words and expressions used,
       but not defined in the ESI Act shall have the meaning assigned to
       them under the Industrial Disputes Act – Travelling Allowance is
       also not defined in the Industrial Disputes Act – No provision in the
       ESI Act or in the Industrial Disputes Act, which restricts the scope
       and ambit of Travelling Allowance – In absence of any definition
 G
       or explanation of the expression “Travelling Allowance” in either
       of those Acts, the expression has to be construed as per its ordinary
       meaning in common parlance – No such difference between
       Conveyance Allowance and Travelling Allowance to justify the stand
       of the Petitioner Corporation that Conveyance Allowance would
 H     not fall within the ambit of Travelling Allowance – Travelling
                                        1010
      THE EMPLOYEES STATE INSURANCE CORPORATION v.                       1011
                 M/S TEXMO INDUSTRIES

Allowance includes Conveyance Allowance – Use of the expression          A
“any travelling allowance” in s.2(22)(b) makes it clear that all kinds
of travelling allowance are excluded from the definition of wages –
No reason why Conveyance Allowance should not be excluded from
the definition of wages – Industrial Disputes Act, 1947.
      Words and Phrases – “conveyance” and “travel” – Meaning            B
of.
      Interpretation of Statutes – Rule of construction – In the face
of ambiguity – Held: When there is any ambiguity in any provision,
the Court would ordinarily favour a construction that would be
beneficial to those for whom the legislation is enacted.                 C
      Regional Director, Employees State Insurance
      Corporation v. M/s IT Solutions (India) Private Limited
      ILR 2002 KAR 4019 – overruled.
      Wellman (India) (P) Ltd. v. ESI Corporation (1999) 1
      SCC 219: [1993] 3 Suppl. SCR 568; Modella                          D
      Woollens Ltd. v. ESI Corporation 1994 Supp (3) SCC
      580; and Harihar Polyfibres v. Regional Director, ESI
      Corporation (1994) 4 SCC 7 – distinguished.
      Management of Oriental Hotels Ltd., Chennai v.
      Employees’ State Insurance Corporation, Chennai 2002               E
      (1) LLJ 14; Regional Director, ESI Corporation v.
      Sundaram Clayton Ltd. 2004 (II) LLJ 30 and Regional
      Director, ESI Corporation, Thrissur v. Royal Plastics
      Industries, Aluva 2015 (2) KLT 64 – affirmed.
      Whirlpool of India Limited v. ESI Corporation (2000) 3             F
      SCC 185:[ 2000] 2 SCR 165 – referred to.
      Oxford Learner’s Dictionary, 8th Edition – referred
      to.
                       Case Law Reference
                                                                         G
      [2000] 2 SCR 165               referred to         Para 28
      [1993] 3 Suppl. SCR 568        distinguished       Para 29


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1012            SUPREME COURT REPORTS                          [2021] 2 S.C.R.


 A           1994 Supp (3) SCC 580            distinguished         Para 29
             (1994) 4 SCC 7                   distinguished         Para 29
             CIVIL APPELLATE JURISDICTION: Special Leave Petition
       (C.) No.811 of 2021
 B            From the Judgment and Order dated 08.10.2020 of the High Court
       of judicature at Madras in C.M.A. No.1527 of 2020.
             Dr. Sumant Bharadwaj, Ms. Mridula Ray Bharadwaj, Advs. for
       the Appellant.
             The Order of the Court was passed :
 C
                                       ORDER
              1. This Special Leave Petition is against a judgment and order
       dated 8th October 2020 passed by the High Court of Judicature at Madras,
       dismissing the appeal being C.M.A. No.1527 filed by the Employees
       State Insurance Corporation, hereinafter referred to as the ‘Petitioner
 D
       Corporation’, under Section 82(2) of the Employees State Insurance
       Act, and affirming the order dated 31st July 2020 passed by the Employees
       State Insurance Court, Coimbatore allowing E.S.I.O.P No. 1/2016 filed
       by the Respondent Company under Section 5 of the Employee State
       Insurance Act, 1948 (for short, ‘ESI Act’).
 E            2. The Respondent Company manufactures different kinds of
       agricultural pumps and other products and has ten branches in Coimbatore,
       Tamil Nadu. The ESI Act is applicable to the factories and establishments
       of the Respondent Company, and the employees of the Respondent
       Company are required to be insured in the manner provided by the ESI
 F     Act.
             3. The Respondent Company is liable to pay Employees’ State
       Insurance Contribution in respect of its employees, as provided in Section
       39 of the ESI Act. Section 44 of the ESI Act requires the Respondent
       Company to maintain a register, containing particulars of its employees,
 G     and to submit Returns to the Petitioner Corporation, in the manner
       prescribed by the Regulations framed under the ESI Act.
             4. On or about 23rd January 2015, officials of the Petitioner
       Corporation inspected the records of the Respondent Company for the
       period from December 2010 to December 2014 and detected
 H     discrepancies in the wages, and consequential short payment by the
     THE EMPLOYEES STATE INSURANCE CORPORATION v.                            1013
                M/S TEXMO INDUSTRIES

Respondent Company, towards Employees State Insurance contributions,         A
totalling Rs.21,52,829/-, out of which Rs.9,48,517/- was towards
Conveyance Allowance, paid by the Respondent Company to its
employees.
       5. By an order dated 19th March, 2015, the Corporation called
upon the Respondent Company to pay its outstanding contributions totalling   B
Rs.21,52,829/-, with interest, within 15 days from the date of the order,
failing which the same would be recovered as arrears of land revenue.
The Respondent Company was, however, given the opportunity of
personal hearing, if it disputed the claim of the Corporation.
       6. The Respondent Company made a representation against the           C
claim, pointing out that the Corporation had erroneously computed the
salary, by including Conveyance Allowance, leave salary, etc. which did
not constitute wages as defined in Section 2(22) of the ESI Act.
       7. Thereafter the Petitioner Corporation passed an amended order
dated 6th July, 2016 under Section 45A of the ESI Act, determining the
                                                                             D
differential contribution payable by the Respondent Company at
Rs.19,38,300/- as per the break up given in the said amended order, that
is, Rs.9.89,783 towards difference in wages and Rs.9,48,517/- towards
Conveyance Allowance. The Respondent Company duly remitted
Rs.9,89,783/- towards difference in wages.
      8. The Respondent Company instituted proceedings in the                E
Employees State Insurance Court being E.S.I.O.P No.1 of 2016 in
respect of the claim of the Corporation of Rs.9,48,517/- in respect of the
Conveyance Allowance paid by the Respondent Company to its
employees.
       9. By a judgment and order dated 31st July, 2020, the Employees’      F
State Insurance Court allowed the E.S.I.O.P No.1 of 2016, and set aside
the claim of Rs.9,48,517/- in respect of Conveyance Allowance, paid by
the Respondent Company to its employees.
        10. Being aggrieved by the judgment and order dated 31 st July,
2016 of the Employees State Insurance Court, the Corporation filed an        G
appeal therefrom in the High Court under Section 82(2) of the ESI Act.
The said appeal has been dismissed by the judgment and order impugned
in this Special Leave Petition.
     11. The short question involved in this Special Leave Petition is
whether ‘wages’, as defined in Section 2(22) of the ESI Act, would           H
1014               SUPREME COURT REPORTS                        [2021] 2 S.C.R.


 A     include Conveyance Allowance paid by the Respondent Company to its
       employees.
            12. Section 22(2) of the ESI Act is set out hereinbelow for
       convenience:
             “2.Definitions.—In this Act, unless there is anything repugnant
 B           in the subject or context,—
             …...
             (22) “wages” means all remuneration paid or payable, in cash
             to an employee, if the terms of the contract of employment,
 C           express or implied, were fulfilled and includes any payment
             to an employee in respect of any period 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—

 D           (a)     any contribution paid by the employer to any pension
                     fund or provident fund, or under this Act;
             (b)     any travelling allowance or the value of any travelling
                     concession;
             (c)     any sum paid to the person employed to defray special
 E                   expenses entailed on him by the nature of his
                     employment; or
             (d)     any gratuity payable on discharge”
              13. A reading of Section 2(22) of the ESI Act, makes it amply
       clear that ‘wages’ means all remuneration paid or payable in cash to an
 F     employee, under a contract of employment, express or implied, as
       consideration for discharging his duties and obligations under such
       contract of employment, including any payment to an employee in respect
       of any period of authorised leave, lock-out, strike which is not illegal or
       lay-off and other additional remuneration, if any, paid at intervals not
 G     exceeding two months. The definition of ‘wages’, however, expressly
       excludes any contribution paid by the employer to any pension fund or
       provident fund or under the ESI Act, any travelling allowance or the
       value of any travelling concession, any sum paid to the person employed
       to defray special expenses entailed on him by the nature of his
       employment or any gratuity payable on discharge.
 H
      THE EMPLOYEES STATE INSURANCE CORPORATION v.                             1015
                 M/S TEXMO INDUSTRIES

       14. From the definition of wages in Section 2(22) of the ESI Act,       A
it is amply clear that wages includes remunerative payments, but does
not include compensatory payments. Travelling allowance including the
value of travelling concession has expressly been excluded from the
definition of wages, as also any payment made to an employee to reimburse
or compensate for special expenses that an employee might incur by
                                                                               B
reason of the nature of his employment.
       15. The Employees’ State Insurance Court held, and in our view,
rightly, that Conveyance Allowance is in the nature of travelling allowance,
the object of which is to enable the employee to reach his place of work
and to defray costs incurred on travel from his place of residence to his
place of work. If instead of paying the Conveyance Allowance, the              C
employer provided free transport to the employee, the monetary value
of that benefit of travel from his residence, to his place of work would
also not be regarded as forming part of his wages.
      16. In Management of Oriental Hotels Ltd., Chennai v.
Employees’ State Insurance Corporation, Chennai reported in 2002               D
(1) LLJ 14, a Division Bench of Madras High Court held:-
      “8. In so far as the conveyance allowance is concerned, even
      though it forms part of the wages being the amount payable
      in terms of the contract of employment, having regard to the
      settlement and even de hors the settlement, the payment of the           E
      amount would fall within the ambit of “additional
      remuneration.” Nevertheless, that amount will have to be
      excluded having regard to the specific exclusion provided in
      the definition itself for travelling allowance or the value of
      any travelling concession. The conveyance allowance paid                 F
      is in the nature of travelling allowance as the object of that
      payment is to enable the employee to reach his place of work
      and to defray a part of the cost incurred on the travel from
      his place of residence to the place of work. If instead of paying
      the conveyance allowance, the employer had provided free
      transport to the employees, the monetary value of that benefit           G
      of free travel from his residence to the place of work would
      not have been capable of being regarded as forming part of
      the wages. The conveyance allowance paid in cash for the
      purpose of being utilised on the travel from place of residence
      to the place of work, is of the same character and there is no           H
1016            SUPREME COURT REPORTS                          [2021] 2 S.C.R.


 A           reason why it should not be regarded as travelling allowance
             for the purpose of Section 2(22)(b), of the Employees’ State
             Insurance Act.”
              17. In Regional Director, ESI Corporation v. Sundaram Clayton
       Ltd. Reported in 2004 (II) LLJ 30 another Division Bench of the Madras
 B     High Court reiterated that, payment towards Conveyance Allowance
       for the travel of employees from their place of residence to their place
       of work would have to be construed as Travelling Allowance and excluded
       from ‘wages’ in view of clause (b), sub-section (22) of Section 2 of the
       ESI Act.
 C            18. We affirm the view taken by Madras High Court in Oriental
       Hotels Limited, Chennai (supra) and Sundaram Clayton (supra). In
       Regional Director, ESI Corporation, Thrissur v. Royal Plastics
       Industries, Aluva reported in 2015 (2) KLT 64, a Single Bench of Kerala
       High Court referred to the judgment of the Madras High Court in Oriental
       Hotels’ case (supra) and held that, clauses (a) to (d) of sub-section (22)
 D     of Section 2 of the ESI Act are in the nature of exception to the main
       part of the sub-section. Any Travelling Allowance or the value of any
       travelling concession would be outside the purview of the term ‘wages’,
       and that it would make no difference whether the Travelling Allowance
       was paid as part of the contract of employment, or whether it was paid
 E     in lump sum or whether it was paid at regular intervals. It would not
       cease to be Travelling Allowance only because it was a fixed sum paid
       along with the wages, as per the terms of the contract of employment.
       We agree with the view taken by the Single Bench of Kerala High
       Court in Royal Plastics Industries (supra).

 F            19. We are unable to agree with the view taken by the Single
       Bench of Karnataka High Court in Regional Director, Employees State
       Insurance Corporation v. M/s IT Solutions (India) Private Limited
       reported in ILR 2002 KAR 4019, that the value of Conveyance Allowance
       cannot be excluded from the definition of ‘wages’. The reasoning of the
       Karnataka High Court that Conveyance Allowance cannot be excluded
 G     from the definition of ‘wages’ because Conveyance Allowance is paid
       every month to every employee like House Rent Allowance, in terms of
       the contract of employment, so as to meet to and fro conveyance
       expenses, whereas travelling allowance is paid to the concerned employee
       when he or she is sent out of station on duty to meet travelling expenses,
 H     is in our view, unsustainable in law.
     THE EMPLOYEES STATE INSURANCE CORPORATION v.                            1017
                M/S TEXMO INDUSTRIES

       20. We are of the view that, the reasoning that Conveyance            A
Allowance cannot be excluded from the definition of ‘wages’ as it is
paid every month to every employee, like House Rent Allowance, in
terms of the contract of employment, so as to meet to and fro conveyance
expenses, is is based on an erroneous construction of Section 2(22) of
the said Act.
                                                                             B
       21. The definition of wages in Section 2(22) of the ESI Act clearly
excludes Travelling Allowance. The distinction sought to be made by the
Petitioner Corporation between Travelling Allownace and Conveyance
Allowance, based on the Single Bench judgment of the Karnataka High
Court in M/s IT Solutions (India) Private Limited (supra), is in our
view misconceived. There is no cogent reason why Conveyance                  C
Allowance which is in effect and substance the same as Travelling
Allowance, should be treated differently from Travelling Allowance.
       22. The expression “Travelling Allowance” has not been defined
in the ESI Act. Under Section 2(24) of the ESI Act all words and
expressions used, but not defined in the ESI Act shall have the meaning      D
assigned to them under the Industrial Disputes Act, 1947, hereinafter
referred to as the “ID Act”. Travelling Allowance is also not defined in
the ID Act. There is no provision in the ESI Act or in the ID Act, which
restricts the scope and ambit of Travelling Allowance. In the absence
of any definition or explanation of the expression “Travelling Allowance”    E
in either of those Acts, the expression has to be construed as per its
ordinary meaning in common parlance.
        23. Conveyance Allowance may or may not be payable to every
employee. For that matter, House Rent Allowance may also not be paid
to all employees. It is immaterial whether an allowance is paid regularly    F
or intermittently depending on exigencies. It is the nature and purpose
of the allowance which is relevant.
      24. House Rent Allowance cannot possibly be equated to
Conveyance Allowance, since House Rent Allowance is not necessarily
connected with the employment of an employee. Irrespective of whether        G
a person is employed or not and irrespective of the nature of his
employment, he needs shelter.
      25. Conveyance Allowance, on the other hand, compensates
expenses that might be incurred by an employee for reporting to his
usual place of work or to any other place of work, where he may have
                                                                             H
1018             SUPREME COURT REPORTS                            [2021] 2 S.C.R.


 A     to report. If an employer were to provide the employee with
       accommodation within walking distance from his place of work and that
       employee were not required to go to any other place in connection with
       his duties under his contract of employment, the employee may not have
       to incur any expenditure in connection with his employment. In such a
       case, Conveyance Allowance would be redundant and might be construed
 B
       as part of allowance consisting wages. In this case, it is not the case of
       the Corporation that the employees concerned did not need to avail any
       conveyance expenditure to report for duty to their place of work, or
       otherwise in connection with their duties under their contracts of
       employment. Nor is there any such finding. We see no reason why
 C     Conveyance Allowance should not be excluded from the definition of
       wages.
              26. As per the Oxford Learner’s Dictionary, 8 th Edition,
       conveyance means the process of taking somebody from one place to
       another. A vehicle or other mode of transport is also formally referred
 D     to as conveyance. As per the same dictionary, the word “travel” means
       “to go from one place to another especially a long distance”. That distance
       could also be a few kilometers. One might travel 10 kms to one’s place
       of work. In many cities people may have to travel for hours to reach
       their place of work. Travel is an expression with a wide meaning to
       include long distance. It also covers short distances.
 E
              27. Had it been the intention of Section 2(22) to exclude only
       occasional long distance travel from one city to another, from the definition
       of wages, the Act would have specifically provided so. The expression
       ‘travel’ is also often used interchangeably with the expression ‘commute’
       which means “to travel regularly by bus, train, car etc. between one’s
 F     place of work and home, as per the said dictionary. An example given in
       the said dictionary is “she commutes from Oxford to London everyday”.
       Another example given is “people are prepared to commute long distances
       if they are desperate for work. The employees State Insurance
       Corporation Court was right in holding that there was no difference
 G     between Conveyance Allowance and Travelling Allowance.
             28. There can be no doubt, as held by this Court in Whirlpool of
       India Limited v. ESI Corporation reported in (2000) 3 SCC 185 that
       the ESI Act is a social legislation enacted to provide benefits to employees
       in case of sickness, maternity and employment injury and to make a
 H     provision for certain other matters in relation thereto. When there is any
      THE EMPLOYEES STATE INSURANCE CORPORATION v.                                1019
                 M/S TEXMO INDUSTRIES

ambiguity in any provision, the Court would ordinarily favour a                   A
construction that would be beneficial to those for whom the legislation is
enacted. In Whirlpool of India Limited (supra), this Court held that
production incentive falls within the definition of wages. In this case,
there is no ambiguity. There is no such difference between Conveyance
Allowance and Travelling Allowance to justify the stand of the Petitioner
                                                                                  B
Corporation that Conveyance Allowance would not fall within the ambit
of Travelling Allowance. Travelling Allowance includes Conveyance
Allowance. The use of the expression “any travelling allowance” in
Section 2(22)(b) makes it clear that all kinds of travelling allowance are
excluded from the definition of wages.
       29. In Whirlpool of India Limited (supra), this Court referred to          C
and relied inter alia on Wellman (India) (p) Ltd. v. ESI Corporation
reported in (1999) 1 SCC 219, Modella Woollens Ltd. V ESI
Corporation reported in 1994 Supp(3) SCC 580 and Harihar Polyfibres
v. Regional Director, ESI Corporation reported in (1994) 4 SCC 7. In
Wellman (supra), this Court held that attendance bonus payable to                 D
employees under the terms of settlement, which became part of the
contract of employment was well within the definition of wages. In
Modella Woollens (supra), the payment of production bonus to the
employees at the end of each quarter was held to be wages. In Harihar
Polyfibres (supra), this Court held that payment made at intervals not
exceeding two months such as “House Rent Allowance”, “Night Shift                 E
Allowance”, “Incentive Allowance” and “Heat, Gas and Dust
Allowance” was covered by the definition of wages under Section 2(22)
of the ESI Act. None of the judgments dealt with Conveyance Allowance
or Travelling Allowance.
       30. There is no infirmity at all in the concurrent findings of the         F
High Court and the Employees’ State Insurance Court, which calls for
interference under Article 136 of the Constitution of India. The Special
Leave Petition is dismissed.

                                                                                  G
Bibhuti Bhushan Bose                          Special Leave Petition dismissed.




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