N G E F LTD Vs. DEPUTY REGIONAL DIRECTOR, E S I C BANGALORE

JUDGEMENT

(1.) A Division Bench of this Court having found that there is a conflict of decisions on the scope of 'wages' as defined under Section 2 (22) of the Employees' State Insurance Act, 1948, has referred the following question for opinion to a Full Bench:

(2.) Before we refer to these decisions and the provision of the Employees' State Insurance Act, 1948, (hereinafter referred to as "the Act"), it will be necessary to set out the relevant facts of the case. The appellant is a public limited company incorporated under the Companies Act, 1956. It carries on the business of manufacture and sale of electrical equipments of various kinds. It has about 4,000 employees on its rolls. The Management of the Company has been making its contributions in terms of the provisions of the said Act since September, 1964. On 6th July, 1968, the Management introduced an incentive scheme for ihe benefit of its employees and as per the terms of the scheme it has been making incentive payments to its employees. Treating the payment as purely incentives, the Management did not take into consideration the said payment for calculating the contributions payable by it under the Act. On 25th October, 1971, the Deputy Regional Director of the Employees' State Insurance Corporation "the Corporation") called upon the Management to include also the incentive payment made to the employees as part of wages for the purpose of determining the contribution payable under the Act. The Management resisted the demand. When the Corporation persisted, the Management took up the dispute before the Employees' Insurance Court Bangalore under Section 75 of the Act.

(3.) A perusal of the incentive scheme introduced by the Management shows that the learned Judge was right in his conclusion that it was not a one sided offer by the Management. It was proposed by the Union and accepted by the Management which is evident from Paragraph VI of the Memorandum of Settlement entered into between the Management and the Employees' Union on 6th July, 1968. The scheme provides for fixation of time standards on a scientific basis and the employee was guaranteed of his time wages irrespective of his rate of production. Under the Scheme, the employee starts earning incentive when he exceeds "standard efficiency". He would get a benefit of the saving in direct labour cost resulting from the higher rate of production at the rates prescribed in Table I of the scheme. That means, if an employee produces 25 per cent more than he is expected to produce at standard efficiency, he will be paid 25 per cent more by way of incentive wages. It is not in dispute that this kind of arrangement is still being continued although a right has been reserved for the Management to terminate the scheme by serving three months' notice after the standard time is fixed.