Whether the allowances paid to the employees are subject to ESI contribution deduction?

A A Kidwai, Lucknow

The allowances have been excluded by sub-clauses (b) and (c) of Section 2(22) of the ESI Act. In one case it has been held that the cycle allowance given to the employees is nothing but travelling concession and the value of cycle allowance falls in exception (b) of Section 2(22) of the Act.

Similarly, the uniform allowance paid by the employer cannot be added to wages for calculating contribution under the Act (1). All the same, the payment of milk tea and egg allowance has also been excluded from the purview of the wages (2). Payment of `Inam' paid by the employer in pursuance of an agreement will be `wages' notwithstanding that agreement was not a term of the original contract. Meals allowance paid to employees will not come within the purview of `wages' under the ESI Act (3). Subsistence allowance paid to a suspended employee is also `wages' within the definition to section 2(22) of the Act for payment of contributions (4). Amount paid towards incentive or production bonus will constitute wages for ESI purposes (5). A payment made to workers in lieu of milk, tea and egg allowance will not be deemed as wages for ESI's contributions (6). However, overtime wages for extra work done by the insured employees will be liable for deduction for ESI's contributions (7). The Supreme Court has held that the term `wages' includes House Rent Allowance, Heat, Gas and Dust Allowance as well as Incentive Allowance (8).

1 Hyderabad Asbestos Cement Product Ltd, Ballabgarh vs Regional Director, ESI Corp, Chandigarh, 1982 Lab IC 88 (Punjab) (NOC); Employees' State Insurance Corp, Chandigarh vs Gedore Tools (India) Pvt Ltd, Faridabad, 1982 Lab IC 87 (PUnjab NOC; Employees' State Insurance Corpn. New Delhi vs Pratap Names Labels Factory, 1982 Lab IC 41 (Delhi) NOC.

2 Employee's State Insurance Corp vs Enfield India, 1995 LLR 81 (Madras HC)3 Malabar Fruit Products Co vs Employees' State Insurance Corp and another, 1991 LLR 810 (Ker. HC)

4 ESI Corporation vs Leela Karunakaran, 1992 LLR 63 (Ker.HC).5 All India Glass Works Pvt Ltd vs Regional Director, Employees' State Insurance Corpn and another, 1995 LLR 28 (Bom.HC)

6 ESI Corporation vs Enfield Ltd, 1995 LLR 81 (Ma.HC).

7 Indian Drugs & Pharmaceuticals Ltd vs Employees' State Insurance Corp etc. 1997 LLR 1 (SC).

8 Harihar Polyfibres vs Relgional Director, ESI Corp AIR 1984 SC 1680; 1984 Lab IC 1568; 1984 (65) FJR 199.

What is meant by `actually worked' or `actually employed' in context with the provisions of the Payment of Gratuity Act?

Jainendra Jain, Delhi

In Explanation 1 to section 4, of the Payment of Gratuity Act, the legislature has used the words `actually employed'. If it was contemplated by Explanation 1 that it was sufficient that there should be a subsisting contract of employment, then it was not necessary for the legislature to have used the words `actually employed'. It is not permissible to attribute redundancy to the legislature to defeat the purpose of enacting the explanation. The expression `actually employed' in Explanation 1 to Section 2(c) must in the context in which it occurs, mean `actually worked'. The Supreme Court while upholding the decision of the HIgh Court has held that permanent employees were not entitled to payment of gratuity for the years they remained absent without leave and have actually worked for less than 240 days. The Punjab and Haryana High Court has also held in one case that the expression `actually worked' cannot mean those days only when the employee has worked with hammer, sickle or pen but must comprehend all those days during which he was in the employment and for which he has been paid wages either under express or implied contract of service by compulsion of statutes or standing orders.

1 Lalappa Lingappaa vs. Laxmi Vishnu Textile Mills, Shalapur, AIR 1981 SC 852; 1981 Lab IC 307; 1981 LLJ 301 (SC); (1981) 58FJR 152; 42 FLR 258; (2981) LLN 347; (1981)2 SCC 238; 1981 Surv. LJ 420.

2 Tarlok Singh vs. Labour Court, Jullunder and others, 1989 LLR 254 (P&H HC).Is it obligatory on the part of an employer to deposit gratuity when he chooses to file an appeal before the appellate authority against the order of the controlling authority whereby gratuity has been awarded?

Avinash Shinde, Bombay.

Section 7 of the Payment of Gratuity Act, 1972 provides that an employer, while filing the appeal before the appellate authority against the order of the controlling authority must deposit the gratuity as awarded by the controlling authority. In one case, instead of depositing the gratuity, the employer furnished bank guarantee. It has been held by the Madras High Court that deposit of the disputed amount is statutory requirement for filing an appeal and as such the employer must deposit the amount with the appellate authority (1). The Allahabad High Court has also confirmed that while filing an appeal, the appellate must deposit the amount of gratuity as ordered by the controlling authority (2).

1 Onward trading Company, Madras vs Deputy Commissioner of Labour, Madras and another, 1990 LLR 28 (Madras HC).

2 Sahaari Gamme Vikas Samiti Ltd. Baiatapur vs The Controlling Authority under the Payment of Gratuity Act-cum-Labour Commissionerr, Gorakhpur, 1993 LLR 448 (All. HC).

How the loss of earning capacity is determined for calculation of compensation under Workmen's Compensation Act?

Surjeet Singh, Chandigarh.

Loss of earning capacity has to be determined by taking into account the diminution or destruction of physical capacity as disclosed by the medical evidence and then it has to be seen as to what extent such dimunution or destruction should reasonably be taken to have disabaled the affected workman of his class. The medical evidence as to physical capacity is an important factory in the assessment of loss of earning capacity and in the absence of medical evidence by doctors examining the claimant on behalf of either side, it is difficult to measure the physical disability of the claimant and thus also the diminution or otherwise of the earning capacity (1). The Division Bench of Kerala High Court has held that simply because the loss of earning capacity of a workman has to be assessed by a qualified medical practitioner, it is, however, not correct to say the opinion of the medical practitioner cannot be subject to scrutiny of the consumer who alone has got the jurisdiction to find quantum of compensation (2).

1 Bengal Coal Co.Ltd. vs. Berhana Gope, 1983 II LLJ 86 (Calcutta HC)2 United Insurance Co. vs. Serthi Madhavan 1993 I LLJ 142 (Kerala High `ourt).

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