M/S IBM INDIA PRIVATE LIMITED V. UNION OF INDIA

WP/41066/2014

AI Insights

The case involves IBM India Private Limited, which sought to quash an order from the Regional Provident Fund Commissioner-II mandating them to pay provident fund contributions on wages paid to a former employee, L. Thomas Selvan, under Section 17-B of the Industrial Disputes Act, 1947. The employee had been reinstated by a Labour Court's award, which was stayed by the High Court pending appeal, subject to the employer paying wages under Section 17-B. The core legal issue was whether these payments, made under the court's interim order, constituted 'wages' for the purpose of provident fund contributions. The court examined various precedents and statutory definitions to conclude that such payments are not 'wages' as defined under the provident fund laws, leading to the quashing of the Commissioner's order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 721777 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 01-02-2023
• Assessment Year: misc
• Other Referred Cases: Dena Bank vs. Kiritikumar T. Patel, Swastik Textile Engineers Pvt. Vs. Virjibhai Mavjibhai Rathod and Another, M/s. Orissa Air Products Pvt. Ltd., vs. Regional Provident Fund Commissioner, R.V.Shanbhag vs. The Federation of Karnataka Chamber of Commerce and Industries and Ors
• Laws Referred To: Constitution of India, Industrial Disputes Act, 1947, Employees' Provident Funds and Miscellaneous Provisions Act, 1952
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: B V VIDYULATHA; A J SRINIVASAN
• Assessee Lawyers: K KASTURI
• Keywords: Backwages; Provident fund; Reinstatement; Wages; Section 17-B
• Section: 226; 2(b); 17-B; 10(4)(a); 2(rr)

Judgement Text

"IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF FEBRUARY, 2023 BEFORE THE HON’BLE MR. JUSTICE C.M. POONACHA WRIT PETITION NO.41066 OF 2014 (L-PF) BETWEEN M/S. IBM INDIA PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT SUBRAMANYA ARCADE, # 12, BANNERGHATTA MAIN ROAD, BANGALORE 560029 REPRESENTED BY ITS LEGAL COUNSEL SRI. LAHAR APPAIAH ...PETITIONER (BY SRI K.KASTURI, SR. COUNSEL FOR SRI THOMAS VELLAPALLY, ADVOCATE) AND 1 . UNION OF INDIA REPRESENTED BY ITS PRINCIPAL SECRETARY, MINISTRY OF LABOUR & EMPLOYMENT, NEW DELHI 110001 2 . REGIONAL PROVIDENT FUND COMMISSIONER-II NO.2, MARUTHI COMPLEX, 1ST \"A\" MAIN, HIG SECTOR, NEAR SBI, YELAHANKA NEW TOWN, BANGALORE 560064 3 . L. THOMAS SELVAN S/O S.N.LAZAR, MAJOR, NO.14/2, II FLOOR, R 2 M.E.G OFFICERS COLONY, BANGALORE 560033 AND NOW AT C/O LAWRENCE, NO.407, TRINITY ENCLAVE, OLD MADRAS ROAD, CV RAMAN NAGAR POST, BANGALORE 560093 …RESPONDENTS (BY SMT B V VIDYULATHA, ADVOCATE FOR R2; SRI A J SRINIVASAN, ADVOCATE FOR R3; V/O DATED 21.1.2015 R1 IS DELTED) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ANN-L ORDER DT.15.7.14, PASSED BY THE REGIONAL PROVIDENT FUND COMMISSIONER-II SRO, YELAHANKA, BANGALORE R2, HEREIN AND ETC. THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 08.11.2022, COMING ON FOR 'PRONOUNCEMENT OF ORDER' THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER The present petition is filed seeking for the following reliefs: \"a) Issue a Writ of Certiorari or other appropriate writ, direction or order quashing the impugned Annexure L order dated 15.07.2014 passed by the Regional Provident Fund Commissioner-II, SRO, Yelahanka, Bangalore, Respondent No.2 herein; 3 b) Issue a writ of mandamus or other appropriate writ, direction or order to Respondent No.2 restraining him from collecting any provident fund contributions on the 17 B wages paid to the Respondent No.3, in terms of ANNEXURE 'L' order during the pendency of this petition; c) Grant such other or further relief to the Petitioner as may be deemed fit in the facts and circumstances of the case and in the interests of justice.\" 2. The facts leading to the present petition are that the respondent No.3 (herein after referred to as 'workman') was employed with the petitioner – Company and his services were terminated pursuant to the termination order dated 05.11.2001. Being aggrieved, the workman filed a petition under Section 10(4-A) of the Industrial Disputes Act, 1947 (for short 'I.D. Act') before the Labour Court, Bengaluru. The petitioner entered appearance in the said proceedings and contested the same. The Labour Court by its award dated 17.12.2012, directed the petitioner to 4 reinstate the workman into service with backwages, continuity of service and consequential benefits. The said award of the Labour Court was challenged by the petitioner before this Court in W.P.No.10715/2013. This Court, vide interim order dated 04.03.2013, stayed the award of the Labour Court, subject to payment of wages under Section 17-B of the I.D. Act. In compliance of the said order dated 04.03.2013, the amount equivalent to the last drawn salary of the workman was paid by the petitioner from February, 2013. 3. The workman filed a complaint dated 02.09.2013, to the second respondent - Regional Provident Fund Commissioner, K.R. Puram, Bengaluru, alleging that no Provident Found (for short 'PF') contribution was being deducted from the amount paid by the petitioner. Pursuant to the said complaint, the second respondent issued notice to the petitioner, 5 in response to which, the petitioner filed a detailed reply. Thereafter, upon being notified, enquiry was conducted under paragraph 26-B of the Employees Provident Funds Scheme, 1952 (for short 'EPF Scheme') by the second respondent and written submissions were also submitted. The second respondent vide order dated 15.07.2014, held that the petitioner is liable to pay the PF contribution. Being aggrieved, the present writ petition is filed. 4. Learned Senior Counsel appearing for the petitioner – Company referring to the definitions contained in the enactments, contends that the payment made to the workman was pursuant to the interim order dated 04.03.2013, passed in W.P.No.10715/2013 and the same cannot be tantamount to wages for the PF contribution to be made in respect of the said amount. In support of his contentions, he relies on the following judgments: 6 1. Dena Bank vs. Kiritikumar T. Patel1. 2. Swastik Textile Engineers Pvt. Vs. Virjibhai Mavjibhai Rathod and Another2; 3. M/s. Orissa Air Products Pvt. Ltd., vs. Regional Provident Fund Commissioner3. Hence, he seeks for allowing of the writ petition and granting of the reliefs sought for therein. 5. Per contra, learned counsel for the respondent - workman justifies the order passed by the second respondent and submits that the wages under Section 17-B of the I.D. Act is liable for the contribution to the PF amount. In support of his submission, he relies on the judgment of this Court in the case of R.V.Shanbhag vs. The Federation of 1 (1999) 2 SCC 106 2(2008) 1 GLR 670 3 (2012) IIILLJ 697 ORI 7 Karnataka Chamber of Commerce and Industries and Ors4. 6. Learned counsel for the respondent PF authorities also justifies the order passed by the PF authorities. 7. I have considered the contentions putforth by both the parties and perused the material available on record. The question that arises for consideration is: \"Whether the employer is liable to deposit the provident fund contribution as provided under the Employees Provident Fund Scheme, 1952 in respect of payments made in compliance of Section 17-B of the I.D. Act?\" 4 2002 (1) KCCR 32 8 8. The essential facts are undisputed, inasmuch as, the workman was in the employment of the petitioner and he was terminated on 05.11.2001. That the said order of termination was set aside by the Labour Court by award dated 17.12.2012, which was challenged by the petitioner before this Court in W.P.No.10715/2013. It is further undisputed that this Court, vide interim order dated 04.03.2013, stayed the award passed by the Labour Court subject to the petitioner complying Section 17-B of the I.D. Act and in furtherance thereof, the petitioner has been paying the wages to the workman. 9. The workman was paid a salary of `48,955/- and a sum of `14,281/- was deducted (including PF contribution of `1,955/-) and the net salary paid was `34,674/-. Pursuant to the interim order of this Court dated 04.03.2013, the payment to the workman was shown in the pay-slip as 'Special 9 Payment' in a sum of `48,955/- and after deduction of income tax of `9,791/-, the amount paid was `39,164/- for the month of April, 2013. A note was mentioned at the bottom of the pay-slip that the said payment is made under Section 17-B of the I.D. Act pursuant to the interim order of this Court, without prejudice of IBM's position and that the matter is sub- judice and subject to final judicial order. 10. The second respondent upon considering the contentions putforth by both the parties, vide its order dated 15.07.2014, while holding that the petitioner was liable to pay the contribution to the PF, has held as follows: \"There is no specific provision under the Act to deal with the issues in the case. Where no specific direction is available in letter, the spirit of the law will have to take charge. No doubt, the quintessence of the objective sought to be achieved through the Employee's Provident Fund and 10 Miscellaneous Provisions Act, 1952 is \"Social Security\" to the working class. Hence, I am inclined to resolve the dispute keeping the spirit of the law in mind. .... .... If the employee is getting wages, whether on employment or not, it is paid because their existed a relationship of master-servant between the complainant and the establishment. It is sequel to the employment till termination. Now, that the employer is required to pay wages as per the orders of the Hon'ble High Court of Karnataka, there is no dispute that the wages of an employee/member is subject to PF contribution. The only dispute is that complainant claims that he remains an employee and wages (as defined u/s 17B of ID Ac) is subject to Provident Fund contribution and the establishment refutes his claim. …. …. 11 While I find that the contention of the establishment is not totally bereft of merit, the scale is more tilted towards the contentions of the complainant.\" (emphasis supplied) 11. To appreciate the contentions putforth by both the parties, it is necessary to consider the relevant statutory provisions. Section 2(rr) of the I.D. Act reads as follows: \"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- (i) such allowances (including dearness allowance) as the workman is for the time being entitled to; …. …. \" 12 12. Section 17-B of the I.D. Act reads as follows: \"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 13 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 shall be payable under this section for such period or part, as the case may be.] 13. Section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 states as follows: \"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) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, 14 overtime allowance, bonus commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment; (iii) any presents made by the employer.\" 14. It is clear from the aforementioned that the wages stipulated under Section 2(rr) of the I.D. Act is the remuneration payable to a workman in respect of his employment. Section 17-B of the I.D. Act has been inserted by Act 46 of 1982. The purpose of inserting Section 17-B of the I.D. Act is to enable the employee to fight the litigation pursuant to the award for reinstatement made by the Labour Court or Industrial Tribunal. This aspect is clear from the proviso to Section 17-B the I.D. Act which stipulates that if such workman has been employed and had been receiving adequate remuneration during the said 15 period, no wages under Section 17-B of the I.D. Act is payable for the said period. 15. The payment made under Section 17-B of the I.D. Act is under certain situations only to enable the employee to fight the litigation that the company would agitate before the High Court or the Hon'ble Supreme Court and it is in such circumstances, the High Court or the Hon'ble Supreme Court are entitle to order for payment of wages under Section 17-B of the I.D. Act. 16. It is clear from the definition of basic wages as defined in Section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act that the same are amounts to earned by an employee while on duty in accordance with the terms of the contract employment. 16 17. In the case of Dena Bank (supra), the Hon'ble Supreme Court with regard to the intention of enacting Section 17-B of the I.D. Act has held as follows: \"21. As indicated earlier Section 17-B has been enacted by Parliament with a view to give relief to a workman who has been ordered to be reinstated under the award of a Labour Court or the Industrial Tribunal during the pendency of proceedings in which the said award is under challenge before the High Court or the Supreme Court. The object underlying the provision is to relieve a certain extent the hardship that is caused to the workman due to delay in the implementation to the workman is in the nature of subsistence allowance which would not be refundable or recoverable from the workman even if the award is set aside by the High Court or this Court. Since the payment is of such a character Parliament thought it proper to 17 limit it to the extent of the wages which were drawn by the workman when he was in service and when his services were terminated and therefore used the words \"full wages last drawn\". To read these words to mean wages which would have been drawn by the workman if he had continued in service if the order terminating his services had not passed since it has been by the award of the Labour of Industrial Tribunal, would result in so enlarging the benefit as to comprehend the relief that has been granted under the award that is under challenge. Since the amount is not refundable or recoverable in the even of the award being set aside it would result in the employer being required to give effect to the award during the pendency of the proceeding challenging the award before the High Court or the Supreme Court without his being able to recover the said amount in the event of the award being set aside. We are unable to constitute the 18 provisions contained in Section 17-B, to cast such a burden on the employer. In our opinion, therefore, the words \"full wages last drawn\" must be given their plain and material meaning and they cannot be given the extended meaning.\" (Emphasis supplied) 18. A Coordinate Bench of the Gujarat High Court in the case of Swastik Textile Engineers Pvt. Ltd., (supra), was considering a situation, where the employer paid backwages to an employee pursuant to the award made by the Labour Court and the question for consideration was whether the employer was liable to pay PF contribution in respect of the backwages paid. It was held as follows: \"13. For the aforesaid reasons, I am of the opinion that the amount of backwages 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 19 contribution to the provident fund under the Act.\" 19. In the case of M/s. Orissa Air Products Pvt. Ltd., (supra), the High Court of Orissa was considering a case where the payments which were made by the employer in compliance of Section 17-B of the I.D. Act are subject to the EPF Scheme and where the employer required to deposit the contributions as per paragraph No.29 of the EPF Scheme. In the said case, it was held in the said case as follows: \"4. Thus, it is clear that basic wages on which contribution is to be calculated, is all emoluments, which is earned by an Employee while on duty, leave or on holidays. The emphasis is on the expression that all employments which are earned by an Employee. Any payment made under Section 17-B of the Act is not actually wages earned. Payment made 20 under Section 17-B of the I.D. Act is in nature of subsistence allowance given to the Workman, who has been ordered to be reinstated in service by the Labour Court and the award passed by the Labour Court is assailed in any higher Court. Furthermore, it appears that this provision has been inserted to ensure that the Workman is not unnecessarily harassed by a protracted litigation and that his basic needs are taken care of. The quantity specified to be the last wages drawn is only to avoid confusion regarding the exact amount to be paid to such an Employee. 6. It is not disputed that the Employee was dismissed. The Labour Court by its award directed his reinstatement but the operation of the award has been stayed. So, at present, the status of the workman is that of a dismissed employee, and therefore, he cannot be said to have earned the wages, which is being paid to him under section 17B of the I.D. Act. In 21 that view of the matter, the conclusion arrived at by the Regional Provident Fund Commissioner, Orissa, Bhubaneswar in the proceeding under paragraph No.26B of the Scheme, 1952 on 24.08.2010 is erroneous, and therefore, the same is quashed.\" (Emphasis supplied) 20. In the case of R.V.Shanbhag (supra), a Coordinate Bench of this Court was considering a case where the Assistant Secretary of the Federation of Karnataka Chamber of Commerce and Industry was terminated without enquiry and it was challenged before the Labour Court. During the pendency of the proceedings before the Labour Court, upon a report submitted by a Committee, a settlement was arrived at and joint memorandum of settlement was presented before the Labour Court which was accepted and an award was passed in terms of the settlement. It was agreed in the said settlement that 22 the dismissed employee would be paid a sum of `5,00,000/-. However, the said payment did not include the PF legally payable to the workman. The PF Authorities passed an order in favour of the employee directing the Federation to pay the PF. However, the Appellate Authority had decided in favour of the Federation. In the said writ petition, it was held as follows: \"10. The said settlement has been accepted by the Labour Court and has become an award by the Labour Court. A reading of the said terms would show that the Federation has paid a sum of `5/- lakhs in full settlement of the claims of the petitioner towards backwages and compensation in lieu of reinstatement etc., gratuity and further compensation under voluntary retirement scheme. The settlement further refers to an amount of salary payable for different periods. The settlement further reads in Clause 2 that 23 what is received by the Petitioner in full and final settlement of the claim pertaining to back wages, compensation in lieu of reinstatement, gratuity etc. There is absolutely no reference with regard to settlement of PF. There is not even a whisper about the settlement of PF. In these circumstances I am of the view that the present settlement cannot be said to be a settlement in full in favour of the petitioner in so for as PF. If that is the case nothing prevented the parties in saying so in the settlement. Moreover the parties could have not have settled PF which is always settled under the Act by the Commissioner. PF is a statutory payment and it cannot be settled de hors of the Act. A settlement contrary to an Act would be a settlement contracting out of a statute which is impermissible in law. In these circumstances petitioner's counsel is right in saying that the settlement did not pertain to a settlement of PF dues. …. \" 24 21. It is clear from the aforementioned rulings relied upon by the learned counsel that judgment in the case of R.V.Shanbhag (supra) is not applicable to the facts of the present case, inasmuch as, in the said case, the question for consideration was with regard to the settlement arrived at between the parties and the of PF contribution to be paid in respect of the same. 22. The case of Swastik Textile Engineers Pvt. Ltd., (supra), the question for consideration is with regard to PF contribution for backwages. 23. In the case of Dena Bank (supra), the Hon'ble Supreme Court has categorically held with regard to the objective for payment of wages under Section 17-B of the I.D. Act and the same is required to be taken into consideration in the present case 25 while deciding the question that arises for consideration. 24. The case of M/s. Orissa Air Products Pvt. Ltd., (supra), is squarely applicable to the present case. As noticed above, the payment of wages under Section 17-B of the I.D. Act is in the nature of subsistence allowance given to the workman under certain circumstances. It is also relevant to note that the subsistence allowance paid under Section 17-B of the I.D. Act is not recoverable or refundable, in the event of the award for reinstatement being set aside. 25. The payment of backwages under Section 17-B of the I.D. Act is made when the award of reinstatement made by the Labour Court or Industrial Tribunal is stayed by the High Court. Hence, it is relevant to note that the employee has been 26 dismissed and the award of directing his reinstatement is stayed. Hence, the status of the workman at that stage is that of a dismissed employee and payment made under Section 17-B of the I.D. Act cannot be said to be wages to the dismissed employee. The status of the employment of the dismissed employee will only be subject to the outcome of the litigation initiated by the employer. 26. In that view of the matter, the question framed for consideration is answered in the negative and the relief claimed in the present writ petition is liable to be granted. Hence, I pass the following: ORDER a) The writ petition is allowed; 27 b) The order dated 15.07.2014 passed by the Regional Provident Fund Commissioner-II, Sub-Regional Office, Yelahanka is quashed; c) No costs. Sd/- JUDGE Srt "