M/S HIMALAYA DRUG COMPANY V. THE REGIONAL PROVIDENT FUND COMMISSIONER-1

WP/18320/2019

AI Insights

The case involves M/s Himalaya Drug Company, which sought to challenge the orders demanding Provident Fund contributions on ex-gratia payments and 17B wages paid to its employees, who were transferred and later settled with the company. The High Court of Karnataka examined whether the contributions were rightly demanded under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, considering the nature of the payments made to the employees under the settlement agreement. The court found that the ex-gratia payments were part of the basic wages and thus liable for Provident Fund contributions, while the 17B wages were not.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 726517 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 13-02-2023
• Assessment Year: misc
• Other Referred Cases: Dena Bank v. Kiriti kumar T Patel, M/s Orissa Air Products Pvt. Ltd. v. Regional Provident Fund Commissioner (C&R), Khurda and Another, Burmah Sheel Oil Storage and Distributing Company of India Ltd. v. The Regional Provident Fund Commissioner Delhi and Ors., Bridge & Roof Co.(India) Ltd. v. Union of India (UOI), Manipal Academy of Higher Education v. Provident Fund Commissioner, The Regional Provident Fund Commissioner (II), West Bengal and Ors. v. Vivekananda Vidya Mandir and Ors., Dinesh Khare v. Industrial Tribunal, Shree Changdeo Sugar Mills and Another v. Union of India and Another, Prantiya Vidhyut Mandal Mazdoor Federation and Ors. v. Rajasthan State Electricity Board and Ors., Harjinder Singh v. Punjab State Warehousing Corporation, Union of India and another v. Ogale Glass Works Ltd, Management of Reynolds Pens India Pvt. Ltd. Sriperumbudur Taluk, Kancheepuram and Others v. Regional Provident Fund Commissioner-II, Employees Provident Fund Organisation, Mugappair, Chennai and Others, Regional Director Employees' State Insurance Corpn. v. Popular Automobiles etc., Sant Raj and Others v. O P singla and Others, K C Joshi v. Union of India and others, District Exhibitors Association Muzaffarnagar and Others v. Union of India and Others, Union of India (UOI) and Others v. Murugan Talkies, R V Shanbagh v. The Federation of Karnataka Chamber of Commerce and Industry and Others (FKCCI), Steel Authority of India Limited v. Union of India and others, Marathwada Gramin Bank Karmachari Sanghatana v. Management of Marathwada Gramin Bank, Dinesh Khare v. Industrial Tribunal
• Laws Referred To: Constitution of India, Industrial Disputes Act, 1947, Employees' Provident Funds and Miscellaneous Provisions Act, 1952
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K S VENKATARAMANA; BASAVARAJ SABARAD; H L PRADEEP KUMAR
• Assessee Lawyers: S N MURTHY; SOMASHEKAR
• Keywords: Basic Wages; Ex-gratia payment; Provident Fund Contribution; Settlement Terms; 17B wages
• Section: 226; 2(b); 17B; 227

Judgement Text

"IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13th DAY OF FEBRUARY, 2023 BEFORE THE HON’BLE MR. JUSTICE C.M. POONACHA WRIT PETITION NO.18320 OF 2019 (L-RES) BETWEEN M/S HIMALAYA DRUG COMPANY MAKALI, BENGALURU-562123 REPRESENTED BY ITS DIRECTOR-HR SRI K G UMESH ...PETITIONER (BY SRI S N MURTHY, SENIOR ADVOCATE FOR SRI SOMASHEKAR, ADVOCATE) AND 1 . THE REGIONAL PROVIDENT FUND COMMISSIONER-1 REGIONAL OFFICE NO.S(1)(F) IST CROSS, IST STAGE, PEENYA, BANGALORE-560058 2 . THE RECOVERY OFFICER EPF ORGANISATION, REGIONAL OFFICE NO.S(1)(F) 1ST CROSS, IST STAGE, PEENYA, BANGALORE-560058 3 . SRI M NAGARAJU S/O LATE SRI MUNIYAPPA, AGED ABOUT 60 YEARS, NO.38, NEAR NARASIMHASWAMY TEMPLE, HESARAGHATTA VILLAGE, BANGALORE-560088 2 4 . SRI S M PASHAKHADRI S/O LATE SRI SYED HAZRATH BASHA, AGED ABOUT 60 YEARS, DARGAHAZ SYED SHA SADRUDDIN HUSSAIN, BEHIND VETERINARY HOSPITAL, NELAMANGALA, BANGALORE-562123 5 . SRI MUNIYAPPA V S/O SRI VEERABHAIRAPPA, AGED ABOUT 60 YEARS, HANUMANTHEGOWDAPALYA, MADAVARA POST, BANGALORE NORTH. 6 . SRI V GANGAIAH S/O SRI VENKATAGIRIYAPPA, AGED ABOUT 60 YEARS, SIDDARAHOSAHALLI, MADAVARA POST, BANGALORE NORTH. 7 . SRI G RUDRAIAH S/O LATE SRI GANGADHARAPPA, AGED ABOUT 60 YEARS, NAGARURU VILLAGE, DASANAPURA HOBLI POST, BANGALORE NORTH. 8 . SRI ANUMARASAIAH S/O SRI MARANNA, AGED ABOUT 60 YEARS, NAGARURU VILLAGE, DASANAPURA HOBLI POST, BANGALORE NORTH. 9 (a) SMT RAJAMMA W/O LATE SRI CHIKKAHANUMANTHAIAH, AGED ABOUT 55 YEARS, NAGARURU VILLAGE, 3 DASANAPURA POST, BANGALORE SOUTH. 9(b) SRI N C NATARAJ S/O LATE SRI CHIKKAHANUMATHAIAH, AGED ABOUT 35 YEARS, NAGARURU VILLAGE, DASANAPURA POST, BANGALORE SOUTH. 9(c) SMT JAYALAKSHMAMMA D/O LATE SRI CHIKKAHANUMANATHAIAH, AGED ABOUT 32 YEARS, NAGARURU VILLAGE, DASANAPURA POST, BANGALORE SOUTH. 10 . SRI N CHOWDAPPA S/O LATE SRI NARASIMHAIAH, AGED ABOUT 60 YEARS, DOOR NO 186, HEGGADADEVANAPURA, ALUR POST, BANGALORE NORTH. 11 . SRI FIYAZ AHMED S/O LATE SAYAB SAB, AGED ABOUT 60 YEARS, NO.4431, DARGA MOHALLA, BEHIND SHANTHALA THEATRE, NELAMANGALA-562123 11A) SMT.ZULAYKHA JABEEN, W/O LATE FIYAZ AHMED (FAYAZ AHMED), AGED ABOUT 62 YEARS 11b) SRI TOUSEEF AHAMED S/O LATE FIYAZ AHMED (FAYAZ AHMED), AGED ABOUT 34 YEARS 11C) SRI ARIF AHMED S/O LATE FIYAZ AHMED (FAYAZ AHMED), 4 AGED ABOUT 32 YEARS ALL THE THREE VIZ., 11A, 11B AND 11C ARE RESIDING AT NO.108, 5TH CROSS, 9TH MAIN NEAR MAGNIFIQ SCHOOL J.H.B.C.S. LAYOUT, BENGALURU 560 078. 11D) SMT.NOOR ASMA D/O LATE FIYAZ AHMED (FAYAZ AHMED), W/O M.THOFIK AGED ABOUT 34 YEARS MAHESHWARI NAGAR, T.DASARAHALLI BENGALURU 560 057 12. SRI V RAJANNA S/O SRI VEERAPPA, AGED ABOUT 60 YEARS, ALUR POST, DASANAPURA HOBLI, BANGALORE NORTH. 12A) SMT.RAJAMMA W/O LATE V.RAJANNA AGED ABOUT 59 YEARS 12B) SRI NAGARAJ R S/O LATE V.RAJANNA AGED ABOUT 34 YEARS BOTH 12A AND 12 B ARE RESIDING AT NO.175, ALUR NEAR BUS STOP ALUR BENGALURU 562 123. 12C) SMT.ANITHA R. D/O LATE V.RAJANNA W/O SRI RAGHUNATH H.J. RESIDING AT NO.161/3, 5 HURULICHIKKANAHALLI HURALI CHIKKANAHALLI AGED ABOUT 31 YEARS BENGALURU 560 090. CHIKKABANAVARA 12D) SMT.R.ANJALI D/O LATE V.RAJANNA W/O SRI B.R.PRASHANTH AGED ABOUT 28 YEARS RESIDING AT NO.309, 13TH CROSS 2ND STAGE, WOC ROAD,MAHALAKSHMIPURAM LAYOUT BENGALURU - 5600086. 13 . SRI ABDUL MUNAF SYED S/O LATE SRI SUED YAKUB, NO.2/3, 4TH CROSS, ANJANEYA TEMPLE ROAD, NEAR RAILWAY STATION, YESHWANTHPURA, BANGALORE NORTH-560022 14 . SRI THIRUMALEGOWDA S/O SRI KEMPAIAH, NEAR BUS STOP,. GAJAGADAHALLI COLONY, SHIVANAPURA POST, DASANAPURA HOBLI, BANGALORE-562123 …RESPONDENTS (BY SRI K S VENKATARAMANA, ADVOCATE FOR R1 & R2 SRI BASAVARAJ V SABARAD, SENIOR ADVOCATE FOR SRI H L PRADEEP KUMAR, ADVOCATE FOR R3 TO R8, R9(A-C), R10 & R13, R14 AND ALSO FOR LRs OF R11 & R12) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 18.03.2014 AT ANENXURE-E PASSED BY THE R-1 AND ETC. THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 15.11.2022, COMING ON FOR 6 'PRONOUNCEMENT OF ORDER' THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER The present Writ Petition is filed seeking for the following reliefs: \"a)The order bearing No.PY/PNY/PF/ENF/CIR.II/ 5120/2685/2013-14 dated 18.03.2014 at Annexure 'E' passed by the first respondent; and b) Order dated 05.04.2019 in EPF Appeal No.336/2017 at Annexure 'K' passed by the Central Government Industrial Tribunal-cum- Labour Court and EPF Appellate Tribunal, Bengaluru; c) Declare that EPF contribution is not payable on ex-gratia and 17B wages; d) Pass such other appropriate order as deemed fit in the facts and circumstances of the case in the interest of justice.\" 2. It is the case of the Petitioner that Respondent Nos.3 to 14 were its employees and were transferred from Bengaluru to Dehradun on 08.07.2005 and relieved them from the Bengaluru factory complex. The said transfer was challenged and a dispute was raised before the Labour Court. The Labour Court vide its award, ordered for reinstatement of the said Workmen with back wages. 7 Being aggrieved, the Petitioner filed Writ Petitions before this Court challenging the award passed by the Labour Court. This Court granted stay of the award passed by the Labour Court subject to payment of wages as per Section 17B of the Industrial Disputes Act, 1947 (for short 'ID Act'). During pendency of the Writ Petitions, the Petitioner-company and the Workmen settled the disputes amongst themselves and filed a Joint Memo setting out the terms of settlement. This Court vide its order dated 24.08.2011 took on record the said Joint Memo and disposed off the Writ Petitions by modifying the award of the Labour Court in terms of the Joint Memo. 3. Under the terms of Joint Memo, the Workmen received an ex-gratia amount of `7,00,000/- and resigned from the services of the Petitioner-company and received the said sum of `7,00,000/- as ex-gratia in consideration of all the claims to wages and all other benefits for the period from the date of transfer till the date of resignation. 8 4. Respondent No.1 - Regional Provident Fund Commissioner - 1 (for short 'PF Commissioner') issued notice to the Petitioner demanding Provident Fund contribution on the payment of `7,00,000/- in respect of each of the Workmen. The Petitioner filed its objection to the said notice. The Respondent No.1 by order dated 18.03.2014, in proceedings conducted under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'PF Act') held that the Petitioner was liable to pay the Provident Fund contribution in respect of the settlement made to the Workmen and quantified the amount payable by the Petitioner and directed it to remit the assessed amount of `27,86,187/-, failing which, the proceedings to recover the same would be initiated under the provisions of the PF Act. 5. Being aggrieved, the Petitioner challenged the said order dated 18.03.2014 before the Appellate Authority, i.e., the Central Government Industrial Tribunal 9 - cum - Labour Court (hereinafter referred to as 'Appellate Authority'). The Respondent No.1 - Commissioner entered appearance before the Appellate Authority and contested the said proceedings by filing its objections. The Tribunal, by its order dated 05.04.2019, rejected the appeal filed by the Petitioner. Being aggrieved, the present Writ Petition is filed seeking appropriate reliefs. 6. Learned Senior Counsel appearing for the Petitioner referred to Section 17B of the ID Act and Section 2(b) of the PF Act and contends that the definition of 'basic wage' as stipulated in Section 2(b) of the PF Act, is required to be earned by the employees whereas the payment under Section 17B of the ID Act is not earned by the employee but is a payment made during the period of litigation to enable the employee to contest the litigation. He further submits that the ex-gratia paid to the employee is in the nature of a settlement and hence, both the said payments cannot be construed as being liable for PF 10 contribution. In support of this contention, he relied on the following judgments: 1) Dena Bank v. Kiriti kumar T Patel1 2) M/s Orissa Air Products Pvt. Ltd. v. Regional Provident Fund Commissioner (C&R), Khurda and Another2 3) Burmah Sheel Oil Storage and Distributing Company of India Ltd. v. The Regional Provident Fund Commissioner Delhi and Ors.3 4) Bridge & Roof Co.(India) Ltd. v. Union of India (UOI)4 5) Manipal Academy of Higher Education v. Provident Fund Commissioner5 6) The Regional Provident Fund Commissioner (II), West Bengal and Ors. v. Vivekananda Vidya Mandir and Ors.6 7) Dinesh Khare v. Industrial Tribunal7 1 (1999)2 SCC 106 2 W.P. No.15566/2010 DD 22.02.2012 Passed by the Orrissa High Court 3 Civil Writ Appeal No.1315/1971 DD 21.03.1980 Passed by the Delhi High Court 4 AIR 1963 SC 1474 5 AIR 2008 SC 1951 6 AIR 2019 SC 1240 7 1982 (2) LLJ 17 Rajasthan HC 11 8) Swastik Textile Engineers Pvt. Ltd. v. Virjibhai Mavjibhai Rathod8 9) Marathwada Gramin Bank Karmachari Sanghatana v. Management of Marathwada Gramin Bank9 10) Steel Authority of India Limited v. Union of India and others10 11) Sant Raj and Others v. O P singla and Others11 12) K C Joshi v. Union of India and others12 13) District Exhibitors Association Muzaffarnagar and Others v. Union of India and Others13 14) Union of India (UOI) and Others v. Murugan Talkies14 15) R V Shanbagh v. The Federation of Karnataka Chamber of Commerce and Industry and Others (FKCCI)15 8 2008 (116) FLR 1002 Gujarat High Court 9 2011 (4) LLJ 305 (SC) 10 2006 (12) SCC 233 11 AIR 1985 SC 617 12 (1985) 3 SCC 153 13 1991 (3) SCC 119 14 1996 (1) SCC 504 12 7. Per contra, learned Senior Counsel appearing for Respondents-Workmen justifies the award passed by the PF Commissioner and Appellate Authority and further contends that the ex-gratia payment forms part of basic wages as contemplated under Section 2(b) of the PF Act; that having regard to the award passed by the Tribunal and the subsequent settlement, the Workmen are construed to be in employment till the date of settlement i.e. 24.08.2011; that the employees are not dismissed employees but transferred employees and the contract of employment subsists. He further contends that the PF contribution is liable to be made on the 17B wages paid also. In support of his submission, learned Senior counsel relied on the following judgments: 1) Shree Changdeo Sugar Mills and Another v. Union of India and Another16 2) Prantiya Vidhyut Mandal Mazdoor Federation and Ors. v. Rajasthan State Electricity Board and Ors.17 15 2002 (1) KCCR 32 Kar. HC 16 (2001) 2 SCC 519 17 (1992) 2 SCC 723 13 3)Harjinder Singh v. Punjab State Warehousing Corporation18 4) Union of India and another v. Ogale Glass Works Ltd19 5) Management of Reynolds Pens India Pvt. Ltd. Sriperumbudur Taluk, Kancheepuram and Others v. Regional Provident Fund Commissioner-II, Employees Provident Fund Organisation, Mugappair, Chennai and Others20 6) Regional Director Employees State Insurance Corpn. v. Popular Automobiles etc.21 8. Learned counsel appearing for Respondent Nos.1 and 2 - PF Authorities also justifies order passed by the Provident Fund Authority as well as the Tribunal. 9. I have considered the submissions made by the learned Senior Counsels for the partes as well as the learned counsel for the authorities and perused the 18 AIR 2010 SC 6111 19 AIR 1971 SC 2577 20 2012-I-LLJ-381 (Mad) 21 AIR 1997 SC 3956 14 material available on record. The questions that arise for consideration are: i) Whether the Petitioner-Company is liable to pay P.F. contribution in respect of 17B wages paid to Respondent Nos.3 to 14? ii) Whether the Petitioner-Company is liable to pay P.F. Contribution in respect of ex-gratia payment of `7,00,000/- paid to Respondent Nos.3 to 14? iii) Whether the orders passed by the PF Commissioner and the Appellate Authority are liable to be interfered with? 10. It is necessary to note the relevant factual aspects. The Workmen were transferred from Bengaluru to Deharadun on 08.07.2005. The Respondent-Workmen challenged the said transfer before the Labour Court and vide award dated 22.09.2009, the Labour Court held that the transfer order were not justified and ordered the Workmen to be continued at Bengaluru. The Award passed by the Labour Court was challenged before this Court by 15 the Petitioner-Company in various Writ Petitions and interim stay of the award of the Labour Court was granted subject to compliance of provisions under Section 17B of the ID Act. During pendency of the Writ Petitions, the Petitioner-Company and the Respondent-Workmen have filed Joint Memo placing on record the terms of settlement. As per the terms of settlement, the Respondent-Workmen who had continued in pursuing their remedy before the Labour Court resigned from service on 16.08.2011 and their resignations have been accepted and were relieved on 23.08.2011. The relevant portions of the Joint Memo was extracted herein below for ready reference: 1. The 11 workmen concerned in the two disputes, AID 13 of 2006 and AID 14 of 2006 whose names are furnished below except Mr.V.Muniyappa at Sl.No.2 who have retired from the service on 03.07.2011 have resigned from the services of the company on 16.08.2011 and their resignations have been accepted and relieved on 23.08.2011 as desired by them. With this, the relationship of employer-employee between the petitioner and 16 the workmen comes to an end once and for all. ……. 2. In consideration of the workmen resigning from the services of the company, and in consideration of the workmen giving up all their claims to wages and all other benefits for the period from the date of transfer till the date of resignation, each of the workmen is being paid a sum of Rs.7,00,000/- Rupees Seven lakhs only) as ex-gratia. This ex- gratia amount of Rs. 7,00,000/- is being spread over as detailed below: YEAR AMOUNT 08.07.2005 TO 31.03.2006 70,000.00 01.04.2006 to 31.03.2007 1,20,000.00 01.04.2007 to 31.03.2008 1,30,000.00 01.04.2008 to 31.03.2009 1,30,000.00 01.04.2009 to 31.03.2010 1,30,000.00 01.04.2010 to 31.03.2011 50,000.00 01.04.2011 to 30.06.2011 70,000.00 TOTAL 7,00,000.00 3. It is open to the workmen to claim relief under Income-tax Act, by making appropriate application to the concerned authorities under Section- 89 read with Rule 21 (A) of the Income Tax Act, 1961, seeking spread over of Rs.7,00,000/- from the date of 17 their transfer i.e. from 08.07.2005 upto 24.08.2011 in terms of the decision of the Hon'ble Supreme Court in 1985 (3) SCC page 153 K.C. Joshi Vs Union of India, in view of the spread over of ex- gratia amount as detailed above. 4. The 11 workmen concerned are all paid the amount indicated below against their names towards ex-gratia and after adding encashment of leave wages from which outstanding advance is deducted. ….. 5. In consideration of receipt of the amounts detailed above, all the claims of the 11 workmen against the company including their claims to back wages from the date of transfer till the date of joint memo, compensation in consideration of their resigning from the services of the company, leave wages, Ex-gratia, bonus, leave travel assistance and any and all other claims, monetary or otherwise in respect of services rendered by them to the petitioner company and or in respect of their non-employment shall be deemed to have been settled once and for all. 18 6. The 11 workmen concerned are all paid gratuity in terms of the Payment of Gratuity Act, 1972. …. 11. This Court vide order dated 24.08.2011 while taking on record the Joint Memo passed the following Order: Learned Counsel for the parties file a joint memo recording the terms of settlement in respect of 11 workmen, except Lakshminarayanappa C., in AID No. 13/2006. The 11 workmen who are present before court, as identified by their learned Counsel, acknowledge receipt of the cheques and submit that p they have received the cheques in full and final settlement of all their claims in terms of the settlement. Taking on record the joint memo, the writ petitions, in so far as it relates to the 11 workmen, are disposed of by modifying the award impugned, in terms of the joint memo. 12. It is clear from the terms of settlement that the ex-gratia amount of `7,00,000/- was 'in consideration of the Workmen giving up all their claims to wages and all 19 other benefits from the date of transfer till the date of resignation'. It is further to be noticed to enable the Workmen to claim relief under the Income Tax Act by making an appropriate application the sum of `7,00,000/- was spread over from the date of transfer i.e. 08.07.2005 up to the date of resignation i.e., 24.08.2011 and the manner in which the said amount has been spread over has been details in a chart at clause (2) of the terms of settlement 13. Apart from the said sum of `7,00,000/- the Workmen were also paid encashment of leave wages after deduction of allowance as details in clause (4) of the terms of settlement. In addition, the Workmen were also paid in terms of the payment of agreed amount and the payments in that regard has been detailed in clause (6) of the terms of settlement. The Income Tax payable against the individual workmen were also borne by the Company which has been enumerated at clause (7) of the terms of 20 settlement. It is clear and forthcoming that no mention is made regarding the Provident Fund contribution to be paid. 14. Having regard to the factual aspects as noticed above, it is clear that the Workmen were transferred on 08.07.2005. The Labour Court vide its award had ordered that the Respondents have deemed to have continued in the Bengaluru Branch of the Petitioner-Company. During pendency of the Writ Petition, before this Court, the Workmen have tendered their resignation which was accepted and they have been relieved on 23.08.2011. Hence, it is clear that the Workmen are deemed to have been in the employment of the Petitioner-Company up to 23.08.2011. 15. The PF Commissioner while considering the case of the parties holding that the Company is liable to remit the assessed amount vide its order dated 18.03.2014 has recorded the following finding: On analysis of the evidence placed, it is observed that the stand of the 21 establishment that these 12 workmen were relieved of their duties on 28.7.2005 is not tenable. As the evidence produced by the workmen clearly indicates that these workmen have been treated as being on rolls till August 2011 i.e., the date of final settlement. Further the company themselves have before the other statutory authorities admitted that the compensation paid is salary. Further the company has considered the date of final settlement as date of relieving for purposes of payment of gratuity to these workmen and this compensation being paid is treated as wages for calculation of gratuity to these workmen. Therefore, it is evident that the workmen have been treated as being on rolls till August 2011 and the compensation paid is nothing but wages for the period from 2005 to 2011. As the workmen have been on rolls and have been paid wages they are entitled to payment of Provident Fund on these wages. 16. The Appellate Authority after considering the respective contentions urged by both the parties, while 22 rejecting the appeal filed by the Petitioner has recorded the following findings: 12. …. The relief discussed by the Apex Court in the Judgment of Shri Sant Raj (supra) under Income Tax Act is for the benefit of the employee who receives the compensation in lump sum but not for the benefit of the employer. In the present case the appellant in its settlement order on its own has considered the date of exit as 23.08.2011 and that, the employees were relieved from the service w.e.f. 29.08.2011, now the appellant has come before the Appellate Authority that, the employees were relieved from service w.e.f. 28.07.2005. The workmen are not claiming anything more from the appellant. It is the statutory obligation that unfurled before the respondent authority to pay the contribution under the Act. Of course, the Management has not deducted contribution from the employees, now 23 there cannot be anymore deduction towards employee contribution under Section 6 of the Act. But, that does not enable the employer to refrain from performing its part of obligation under Section 6 of the Act. The order passed by the respondent authority towards contribution from 08.07.2005 to 23.08.2011 is proper and justified, not calling for interference. 17. The relevant statutory provisions are as follows: (i) Section 2(rr) of the ID Act defines wages as follows: 2. ….. [2(rr) \"wages' means all remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment or of work done in such employment, and includes - (ii) Section 17B of the ID Act states as follows: 24 17B. Payment of full wages to workman pending proceedings in higher courts.-Where in any case, a Labour Court, Tribunal or National Tribunal by its award directs reinstatement of any workman and the employer prefers any proceedings against such award in a High Court or the Supreme Court, the employer shall be liable to pay such workman, during the period of pendency of such proceedings in the High Court or the Supreme Court, full wages last drawn by him, inclusive of any maintenance allowance admissible to him under any rule if the workman had not been employed in any establishment during such period and an affidavit by such workman had been filed to that effect in such Court: Provided that where it is proved to the satisfaction of the High Court or the Supreme Court that such workman had been employed and had been receiving adequate remuneration during any such period or part thereof, the Court shall order that no wages 25 shall be payable under this section for such period or part, as the case may be. (iii) Section 2(b) of the PF Act defines wages as follows: 2. …. 2(b) \"basic wages\" means all emoluments which are earned by an employee while on duty or [on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include - (i) the cash value of any food concession; (ii) ….. (iii) ….. 18. It is necessary to notice the judgments cited by the parties, which are: (i) In the case of Bridge & Roof Co.(India) Ltd. (supra), the Hon'ble Supreme Court was considering a case 26 whether production of bonus is included as basic wages as defined Section 2(b) of the PF Act. The Hon'ble Supreme Court in the said case held that production bonus was not to be included in basic wage for purpose of calculating provident fund contribution. (ii) In the case of Manipal Academy of Higher Education (supra), the Hon'ble Supreme Court was considering a case whether amount received by encashing the earned leave is a part of basic pay and held that basic wage was never intended to include amounts received for leave encashment. iii) In the case of the Regional Provident Fund Commissioner (II), West Bengal (supra), the Honb'le Supreme Court was considering a case where special allowance paid by an establishment would fall within the expression 'basic pay' under Section 2(b) (ii) r/w Section 6 of the PF Act. The Hon'ble Supreme Court after noticing its judgments in the case of Bridge & Roof Co. and Manipal Academy of Higher Education while holding that allowances in 27 question are part of basic wage, held as follows: 9. Basic wage, under the Act, has been defined as all emoluments paid in cash to an employee in accordance with the terms of his contract of employment. But it carves out certain exceptions which would not fall within the definition of basic wage and which includes dearness allowance apart from other allowances mentioned therein. But this exclusion of dearness allowance finds inclusion in Section 6. The test adopted to determine if any payment was to be excluded from basic wage is that the payment under the scheme must have a direct access and linkage to the payment of such special allowance as not being common to all. The crucial test is one of universality. The employer, under the Act, has a statutory obligation to deduct the specified percentage of the contribution from the employee’s salary and make matching contribution. The entire amount is then required to be deposited in the fund within 15 days from the date of such collection. 28 14. Applying the aforesaid tests to the facts of the present appeals, no material has been placed by the establishments to demonstrate that the allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee and that the allowances in question were not paid across the board to all employees in a particular category or were being paid especially to those who avail the opportunity. In order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in. There is no data available on record to show what were the norms of work prescribed for those workmen during the relevant period. It is therefore not possible to ascertain whether extra amounts paid to the workmen were in fact paid for the extra work which had exceeded the normal output prescribed for the workmen. The wage structure and the components of salary have been examined 29 on facts, both by the authority and the appellate authority under the Act, who have arrived at a factual conclusion that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees. There is no occasion for us to interfere with the concurrent conclusions of facts. (emphasis supplied) iv) In the case of Dinesh Khare (supra), a coordinate Bench of Rajasthan High Court relied upon a judgment of Bombay High Court in the case of India United Mills Ltd., Vs. Regional Provident Fund Commissioner22 which held as follows: The expression \"emoluments which are earned by an employee while on duty\" represents the amounts actually earned by an employee during the period of his employment earned while he is actually on duty. It is a payment earned for the duty done. It is not a 22 AIR 1960 Bombay 203 30 payment earned while on duty. It is a payment by way of consideration for terminating the contract of employment of a permanent employees without notice. The payments made cannot in any sense be regarded as representing \"emoluments earned while on duty\" and are not and do not constitute \"basic wages\" within the meaning of the definition given in the Employees' Provident Funds Act, 1952 and no percentage thereof is payable by way of provident fund contribution. v) In the case of Swasthik Textile Engineers Pvt. Ltd., (supra) a Coordinate Bench of Gujarat High Court was considering a case of liability of an employer to make Provident Fund Contribution in respect of back wages paid to Workmen in compliance of the order passed by the labour Court. While holding that the amount of back wages would not constitute basic wage, it was paid held as follows: 11. As recorded hereinabove, the service of the workman was terminated, which was held to be illegal and the workman had 31 been reinstated in service with continuity in service. Whether, the 'continuity in service' ordered by the Labour Court would amount to the period spent on duty. If it is to be treated as the period spent on duty, then necessarily, the workman would be entitled to receive the entire salary; would be liable to make contribution to the provident fund and, in that case, the employer would be liable to make statutory contribution to the provident fund. But, in my view, the 'continuity in service' does not carry the meaning 'the period spent on duty'. The purpose to allow continuity in service would be that such period would not be treated as break in service for the purpose of service benefits like; pay, increments, leave, allowances, pension, etc. In absence of a specific order that such period should be treated as period on duty, such period cannot be held to be the period spent on duty. Besides, the fact that the Labour Court had awarded only part of the back wages, would also tend to show that the period of absence from duty on account of termination from service was not intended to be treated as the period spent on duty. 32 12. In my view, when the Court awards backwages for the period the employee was kept away from duty, what the Court does is to award damages assessed in terms of whole or part of the wages the workman would have earned had he been continued in service without interruption. It is not the same as payment of wages for the duties performed or for the period deemed to have been spent on duty. The amount of damages or the compensation awarded by a Court would not constitute the 'basic wages' as envisaged by the Act. 13. For the aforesaid reasons, I am of the opinion that the amount of back-wages paid to the workman did not constitute the 'basic wages' as envisaged by the Act. The petitioner, was therefore, under no obligation to make statutory contribution to the provident fund under the Act. (emphasis supplied) vi) The judgment of the Hon'ble Supreme Court in the case of Dena Bank (Supra) and of a Coordinate Bench of Orissa High Court in the case of M/s. Orissa Air 33 Products Pvt. Ltd., (supra) has been relied upon to contend that the employer is not liable to pay Provident Fund Contribution in respect of wages paid under Section 17B of the ID Act. This Court considering the said judgments in W.P. No.41066/2014 disposed off on 01.02.2023 has already held that the employer is not liable to pay Provident Fund in respect of wages under Section 17B of the ID Act. vii) The case of Marathwada Gramin Bank Karmachari Sanghatana (supra) in support of his contention that Provident Fund contribution cannot be compelled to be paid in excess of statutory liability. viii) The judgment in the case of Steel Authority of India Ltd., (supra) has been relied upon for the proposition that common law principles of estoppel, waiver and acquiescence are applicable in an industrial adjudication. ix) The judgments of the Hon'ble Supreme Court in the cases of Sant Raj and Ors. (supra) and K.C. Joshi (supra) have been relied upon in support of the contention 34 regarding a lump sum payment being treated as spread over a period of time to claim the benefit of income tax. The said aspect has already been contemplated in the Joint Memo filed by the parties and hence, the said aspect is not a question that arises for consideration in the present Writ Petition. x) In the case of District Exhibitors Association (supra), the question before the Hon'ble Supreme Court was with regard to the respective operation of a scheme. The said judgment is not applicable to the facts of the present case as no such retrospective operations is sought to be made in the present case. xi) In the case of Shree Changdeo Sugar Mills and Another (supra) the Hon'ble Supreme Court held as follows: 11. We are unable to accept the submissions. Undoubtedly contribution towards Provident Fund can only be on a basic wage. However, it is not at all necessary that the workman must actually be on duty or that the workman should actually have worked in order 35 to attract the provisions of the Employees' Provident Funds Act. For example, there may be a lockout in a Company. During the period of lockout the workmen may not have worked yet for the purpose of the Employees' Provident Funds Act they will be deemed to have been on duty and Provident Fund would be deductible on their wages. In this case by order dated 12-12-1988, the High Court (pursuant to directions of this Court) fixed 31- 10-1988 as a date when the services of the employees stood terminated/retrenched. Thus upto 31st October, 1988 the employees were in service of the Appellant Company. They were, therefore, deemed to be on duty upto 31-10-1988. As set out above many of these employees had raised claims before the Labour Court and there were Awards of the Labour Court for payment of arrears of wages and retrenchment compensation. All that the Settlement did was that, by Agreement, the total claim of the workmen was reduced to a certain extent. Amongst the claim of the workmen was a claim for wages upto 31-10- 1988. This was a claim for wages for a period during which they were on \"deemed duty\". 36 Clause 5 of the Settlement, which has been set out herein above, shows that a sum of Rs.35 lakhs has been paid towards Wages and another sum of Rs.10 lakhs has been paid towards Retaining (Seasonal) wages. These are amounts which are paid for wages during a period when the workmen are deemed to be on duty. Therefore it is Basic Wage within the meaning of Section 2 (b) of the PF Act. All the cases relied upon by Mr. Sharma are of no assistance to him as in those cases the amounts were clearly not Basic Wages. In this case the above mentioned two sums of Rs.35 lakhs and Rs.10 lakhs are wages. (emphasis supplied) xii) It is necessary to note that in the case of Shree Changdeo Sugar Mills and Another (supra), the judgments of the Hon'ble Supreme Court in the case of Burmah Shell Oil Storage and Distributing Co.Ltd., Vs. RPF. Commr (1981) 2 LLJ 86 (Del), Bridge and Roofs Co.Ltd., (supra), Dinesh Khare (supra), India United Mills Ltd., V. R.P.F. Commr. (AIR 1960 Bom 203) have been cited, 37 consequent to which the finding has extracted hereinabove has been recorded. xiii) In the case of R.V.Shanbagh (supra) a coordinate Bench of this Court was considering a case of a Secretary of Federation of Karnataka Chamber of Commerce and Industry (for short 'Federation') who was terminated without any enquiry and whose termination was challenged before the Labour Court. During pendency of proceedings, a Joint Memorandum of Settlement was presented and the same was accepted wherein the Petitioner was paid a total sum of `5,00,000/- which was towards all claims of back wages and compensation in lieu of gratuity. A Coordinate Bench of this Court upon considering the definition of basic wage under Section 2(b) of PF Act held that the said definition includes not only wages paid but also payable and that what was paid, was a payable payment though belatedly paid and hence, comes within 'basic wage' as contemplated under the PF Act. Relying on the judgment of the Hon'ble Supreme Court in the 38 case of Shree Changdeo Sugar Mills and Another (supra) upheld the demand made by the Provident Fund Authority regarding its claim for compensation. xiv) In the case of Prantiya Vidhyut Mandal Mazdoor Federation (supra), the Hon'ble Supreme Court was considering as to whether the arrears of wages as a result of wage-increase-award would come within the definition of basic wages under Section 2(b) of the PF Act. 8. 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. 9. We do not agree with the Division Bench of nthe 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 39 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 contract of employment in the context of the Fund Act. (emphasis supplied) xv) In the case of Harjinder Singh (supra), the Hon'ble Supreme Court was considering a case where the workmen was terminated from service by way of retrenchment and the Labour Court had ordered for reinstatement with 50% back wages. However, the said award of the Labour Court ordering reinstatement was set aside by the High Court and the said order of reinstatement was substituted with direction to pay compensation. The said order of the High Court was set aside by the Hon'ble Supreme 40 Court and the award passed by the labour Court was restored. (xvi) In the case of Union of India and another v. Ogale Glass Works Ltd (supra), the Hon'ble Supreme Court was considering a case where the PF Act would be applicable to certain scheduled industries and held that the Respondent in the said case was involved in the manufacture of glass wares, the enamel wares and the lantern and stoves etc., was covered under the ambit under the PF Act.The learned Senior Counsel for the Petitioner sought to distinguish the said judgement by contending that the finding recorded in para No.9 of the said judgment (as extracted hereinabove) is by placing reliance on the judgment of the Hon'ble Supreme Court in the case of Harihar Polyfibres Vs. Regional Director ESI Corporation23 which is dealing with the definition of wages under the Employees State Insurance Act, 1948 xvii) A Coordinate Bench of Madras High Court in the case of Management of Reynolds Pens India Pvt. Ltd. 23 (1984)IILLJ475SC 41 Sriperumbudur Taluk, Kancheepuram and Others (supra) was dealing a case where allowances paid to employees under different heads such as conveyance, educational allowances, food concessions, medical special allowance, night shift, city compensatory allowance would come within the meaning of term of 'basic wage' as per Section 2(b) of the PF Act. The Madras High Court after a detailed discussion of the various judgments of the Hon'ble Supreme Court referred to interfere with the orders passed by the PF Authorities as well as the Appellate Authorities directing payment of Provident Fund contribution. In the said judgment it was held as follows: 30. The employer and employee would have settlement agreeing to keep certain payments outside the purview of Section 2(b) defining the term \"basic wages\" and the Authorities cannot go into the term of the said settlement is concerned, it must be noted that once there is statutory definition of basic wages and if certain amounts which are otherwise liable to be included in the term 'basic wages', but nevertheless kept outside by the employer, such contracting out of statute 42 can never be permitted and there cannot be any private arrangement in respect of such transaction. In essence there cannot be an estoppel against the statute. xviii) The Hon'ble Supreme Court in the case of Regional Director, Employees' State Insurance Corporation (supra), was considering a case as to whether a suspended employee and whether his employer were liable to remit the requisite contributions under the ESI Act, 1948. The Hon'ble Supreme Court in the said case has held that the suspended employee and the employer are liable to pay requisite contribution under the ESI Act, 1948. 19. In the present case, it is the contention of the Petitioner that Respondent No.1 – Authority while determining the Provident Fund contribution on the ex- gratia amount as well as the 17B wages paid to Respondent Nos.3 to 14 has made various errors in calculation. The said errors of calculation pointed out are; i) That the excess amount of `49,96,422/- has been taken by the EPF 43 Department and same is sought to be demonstrated by statement which is produced as Annexure-G to the Writ Petition; ii) That the calculation for the Provident Fund contribution is payment made as `13,000 for 11 employees and `9,000/- for one employee, whereas as per para 2(f)(ii) of PF Act, Petitioner is not liable to pay contribution of any salary exceeding `6,500/- per month for the period 8.07.2005 to 23.08.2011 and furnished a calculation of the amount payable as Annelxure-G1. iii) It is the contention of the Petitioner that the EPF Department has wrongly determined a sum of `27,86,187/- as the contribution payable, whereas the actual contribution payable is only `14,22,720 which includes both employer and employee contribution. Thus, an excess contribution of `13,63,467/- is wrongly determined. A copy of statement showing the excess Provident Fund 44 contribution determined is produced as Annexure – G2 to the Writ Petition. 20. In view of the fact that the primary question arises for consideration in this Writ Petition as is framed in para No.10 above regarding the liability of the Petitioner to pay Provident Fund contribution of 17B wages and on the ex-gratia payment the said question is answered in this Writ Petition and question regarding recalculation of the contribution amount as noticed in para No.10 above is to be considered by the Provident Fund Authorities. 21. In view of the settled position of law as noticed from the aforementioned judgments, the workmen is deemed to have been in the employment of the Petitioner-Company upto 24.08.2011, the Compensation paid by the Petitioner-Company although termed as 'ex- gratia', by virtue of their employment with the Petitioner- Company, squarely falls under the definition of basic wage as contemplated under Section 2(b) of the PF Act. 45 22. In view of the aforementioned, the question No.1 framed for consideration at para No.10 above regarding liability of the Petitioner-Company to pay Provident Fund contribution in respect of 17B wages is answered in the Negative. Question No.2 regarding the liability of the Petitioner to pay Provident Fund contribution in respect of ex-gratia payment is answered in the Affirmative. With regard to question No.3, the orders dated 18.03.2014 passed by the PF Authority and the order dated 15.04.2019 passed by the Appellate Authority are liable to be interfered with and hence, question No.3 is answered in the Affirmative. The matter is required to be remanded to Respondent No.1-Authority for the purpose of recalculating the Provident Fund contribution of the Petitioner-Company having regard to the discussions made above and also to recalculate the Provident Fund contribution of the Petitioner by taking into consideration the errors which have been pointed out by the Petitioner as noticed at para No.19 above. 46 23. In view of the aforementioned, I proceed to pass the following ORDER i) The Writ Petition is partly allowed. ii) The order bearing No.PY/PNY/ PF/ENF/CIR.II/5120/2685/2013-14 dated 18.03.2014 passed by Respondent No.1 and order dated 05.04.2019 passed in EPF No.336/2017 passed by the Central Government Industrial Tribunal cum Labour Court and EPF Appellate Tribunal, Bengaluru are set aside. iii) The matter is remanded to Respondent No.1-Commissioner to recalculate the Provident Fund contribution of the Petitioner in view of the observations made hereinabove. No costs. Sd/- JUDGE BS "