M/S. THIRUVANANTHAPURAM DIARY, Ambalathara, Poonthura P.O., Thiruvananthapuram v. Regional Director, Employees State Insurance Corporation, Regional Office, Panchdeep Bhavan, North SwaraJ Round, Thrissur-20; Industrial Tribunal cum Employees Insurance Court, Kollam

## IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE S.SIRI JAGAN & THE HONOURABLE MR. JUSTICE BABU MATHEW P.JOSEPH THURSDAY, THE 7TH DAY OF MARCH 2013/16TH PHALGUNA 1934 Ins.APP.No. 58 of 2010 ( ) --------------------------- AGAINST THE JUDGMENT IN IC.3/2004 of E.I.COURT, KOLLAM DATED 27-04-2010 APPELLANT(S)/APPELLANT: ------------------------------- M/S. THIRUVANANTHAPURAM DIARY, AMBALATHARA, POONTHURA P.O., THIRUVANANTHAPURAM REPRESENTED BY ITS MANAGING DIRECTOR. BY ADVS.SRI.B.S.KRISHNAN (SR.) SRI.K.ANAND SMT.LATHA KRISHNAN RESPONDENT(S)/RESPONDENT: ------------------------------------ 1. THE REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION REGIONAL OFFICE PANCHDEEP BHAVAN, NORTH SWARAJ ROUND, TRICHUR-20. - 2. INDUSTRIAL TRIBUNAL CUM EMPLOYEES INSURANCE COURT, KOLLAM. - SECOND RESPONDENT IS DELETED FROM THE PARTY ARRAY AS PER ORDER DATED 4/1/2011 R1 BY ADV. SRI.T.V.AJAYAKUMAR THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 07-03-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## APPENDIX: APPELLANT'S EXHIBITS : ANNEXURE A1: CERTIFIED COPY OF THE JUDGMENT DATED 27/4/2010 IN IC. 3/04 OF THE EI COURT ANNEXURE A2: TRUE COPY OF THE CHALLAN DATED 16/12/1999 EVIDENCING THE REMITTANCE OF CONTRIBUTION BY THE RELIANCE SECURITY AGENCY, KARUNAAPPALLY //True copy// PA TO JUDGE. uj. . ## **S. SIRI JAGAN & BABU MATHEW P. JOSEPH, JJ.** ===================== **Ins. Appeal No. 58 of 2010** ===================== Dated this the 7[th] day of March, 2013 **JUDGMENT** ## **SIRI JAGAN, J.** The applicant in Insurance Case No. 3 of 2004, before the Employees Insurance Court, Kollam is the appellant herein. The respondent Regional Director of E.S.I. Corporation demanded contributions in respect of four items of payments made by the appellant to its employees, namely (1) performance incentive paid to the employees under an industrial settlement between the appellant and its employees, (2) wages paid to security personnel employed by the appellant through a security agency, (3) the payments made to Kerala Head Load Workers Welfare Bord for availing of services of head load workers and (4) payments made for repair and maintenance of buildings. The appellant contended that in view of the decision of the Supreme Court in **Whirlpool India Limited** v. **ESI Corporation (2000) I LLJ 1-1-2001)** , the performance incentive paid yearly will not come within the definition of wages under Section 22 (2) of the Employees State Insurance Act. But the E.I. Court held that the issue is covered by the decision of the Supreme Court in **Wellman (India)** ## **Private Limited** v. **Employees State Insurance Corporation (AIR** **1994 SC 1037),** since the production incentive in this case is as per **Ins. Appeal No. 58 of 2010** -2- an industrial settlement whereas the payment in **Whirlpool's** case was not pursuant to a settlement, but as per a scheme evolved by the employer which was paid quarterly. Therefore, following the decision of the Supreme Court in **Wellman's** case supra, the E.I. Court held that performance incentive paid by the appellant would come within the definition of wages under Section 22 (2) of the Employees State Insurance Act in respect of which the appellant is liable to pay contribution. In respect of wages paid to security personnel the contention of the appellant is that the security personnel are covered under the ESI Act at the instance of security agencies who deputes them and therefore, no contribution is payable by the appellant in respect of wages paid to them. But the E.I. Court held that since the appellant did not produce any evidence to prove coverage of those employees, the appellant is liable to pay contribution in respect of those wages. In respect of amounts paid to the Kerala Head Load Workers' Welfare Board for availing of service of the head load workers from the Board, the appellant took the stand that in view of a notification issued by the Government of Kerala exempting Kerala Head Load Workers' Board from paying contributions under the ESI Act, the appellant is not liable to pay contributions in respect of the payment made to the Kerala Head load Workers Board. According to the appellant, appellant had relied on a decision of the very same E.I. ## **Ins. Appeal No. 58 of 2010** -3- Court in Insurance Case No. 17 of 2008, in which, the Kollam diary of the appellant was exempted from payment of contributions in respect of amounts paid to the Kerala Head Load Workers Welfare Board in view of the exemption notification issued by the Government of Kerala. But, without considering the same the E.I. Court held that the appellant is liable to pay contribution in respect of the same. In respect of repair and maintenance the E.I. Court did not decide the question since the corporation had not taken a final decision on the question as to whether contribution should be demanded from the appellant in respect of the same. The appellant challenges the said findings of the E.I. Court raising the following questions of law: - “1. Whether the Hon'ble E.I. Court is right in holding that the performance incentive paid to the employees as per the settlement would constitute wages. 2. Whether the Hon'ble E.I. Court could hold the action of the respondent in demanding contribution on omitted wages under the head, Loading and Unloading Charges is proper even if the employer of the head load workers is Kerala Head Load Workers Board which is exempted from the purview of ESI Act by the Government of Kerala vide G.O. No. 241/B3/2007/LBR dated 4-6-2009. 3. Whether the Appellant Establishment is liable to pay contribution on the amount of wages paid to Security Personnel of Security Agencies which has already been covered under the ESI Act independently.” 2. The learned counsel for the Employees State Insurance Corporation would contend that the decision of the E.I. Court is correct and does not call for interference by this Court. He points out that in the decision in **Whirlpool's** case itself, the Supreme Court has ## **Ins. Appeal No. 58 of 2010** -4- distinguished **Wellman's** case (supra) on the ground that in **Wellman's** case, the production incentive was paid under a settlement between the employer and employee in which case it would form part of the service conditions of the employees, whereas in **Whirlpool's** case there was no settlement between the employer and employee regarding such payment and therefore, the performance incentive paid yearly would not come within the definition of wages under the ESI Act. In this case, according to the counsel, performance incentive is paid as per an industrial settlement between the employer and employees and therefore the issue is squarely covered by the decision in **Wellman's** case (supra). As far as the amount paid to the security personnel is concerned he would submit that in the absence of evidence regarding coverage of those employees under the ESI Act at the instance of the security agencies and payment of contributions in respect of them the contention of the appellant cannot be accepted. Regarding the payment to the Kerala Head Load Workers Welfare Board, he would contend that the amounts paid forms wages paid to the head load workers, who have done head load work in the premises of the appellant and therefore, the same would come within the definition of wages under Section 22 (2) of the Act, consequent to which the appellant would be liable to pay contribution in respect of the same. **Ins. Appeal No. 58 of 2010** -5- 3. We have considered the rival contentions in detail. As far as the first question of law is concerned, we are of opinion that the same is governed by the decision of the Supreme Court in **Wellman's** case (supra). In fact, in **Whirlpool's** case, the Supreme Court has distinguished the decision in **Wellman's** case on the ground that in **Wellman's** case the production incentive is paid as per a settlement between the employer and employee, whereas in **Whirlpool's** case the production incentive is paid as per a scheme unilaterally framed by the employer which is paid quarterly and therefore the same would not come within the definition of wages under the E.S.I. Act. Therefore, the answer to the first question is squarely contained in the decision relied upon by the appellant i.e. **Whirlpool's** case, supra. In this case, clearly the performance incentive is paid as per a settlement between the employer and employee and therefore, would come within the first part of the definition of wages as a payment in terms of the contract of employment. That being so, we do not find any merit in the first contention, especially since the question of law framed by the appellant is already covered by the decision in **Wellman's** case as explained in **Whirlpool's** case. 4. In respect of the wages paid to the security personnel, we understand that the security personnel are supplied by a contractor engaged by the appellant for the purpose, i.e. a security agency. Of ## **Ins. Appeal No. 58 of 2010** -6- course as a principal employer at the first instance the appellant would be liable to pay contributions in respect of wages paid to the security personnel. But if in fact, the security personnel are actually covered under the Act at the instance of the security agency employing them and if the security agency has already paid contributions in respect of the wages paid to those security personnel, the Corporation cannot demand contributions in respect of the wages paid to those employees again insofar as if the same is done that would amount to collecting double contributions for the same wages. It is not as if it is difficult for the Corporation to find out whether contributions have been paid in respect of the wages paid by the appellant to the security personnel concerned for the relevant period. The appellant submits that the appellant has already supplied to the respondent the Code Number allotted to the security agency. Based on the same, the Corporation can easily ascertain whether for the wages paid to the security personnel, the security agency has already paid contribution. In the above circumstances, although no question of law needs to be decided in respect of the question raised by the appellant, we direct the corporation as follows:- Based on the Code Number of the security agency supplied by the appellant, the corporation shall ascertain from the records of the concerned security agencies as to whether the security ## **Ins. Appeal No. 58 of 2010** -7- agency has already paid contribution in respect of the security personnel employed in the premises of the appellant for the period for which contribution is now demanded. The Corporation shall within a period of two months intimate the appellant the result of their enquiry and if contributions have already been paid in respect of those employees for the relevant period the Corporation shall not collect any contributions in respect of the same from the appellant. 6. As far as the third question is concerned, we find that the very same Employees Insurance Court had in Insurance Case No. 17 of 2008 held that the Kollam diary which is a sister unit of the appellant herein, was held to be not liable to pay contributions in respect of the amounts paid to the Kerala Head Load Workers Welfare Board in Insurance Case No. 17 of 2008, based on the order dated 4-6-2009 issued by the government exempting the Kerala Head Load Workers Welfare Fund Board from the purview of the Act with retrospective effect. We wonder how the very same Employees Insurance Court could take different views in respect of the same question of law in two different cases. In the above circumstances, the E.I. Court shall reconsider the third question regarding payment of contributions in respect of the amounts paid to Kerala Head Load workers Welfare Bord and pass fresh orders in respect of the same, expeditiously. ## **Ins. Appeal No. 58 of 2010** -8- Accordingly, this appeal is disposed of as follows:- The decision of the E.I. Court in respect of payment of contributions on production incentive is confirmed. In respect of contributions on wages paid to the security personnel, the respondent shall make enquiries as directed above and take a decision and intimate the same to the appellant as directed above. In respect of the question regarding contributions on amounts paid to the Kerala Head Load Workers Welfare Board, the matter is remanded to the E.I. Court for fresh consideration in accordance with the observations made herein above within two months, from the date of receipt of a copy of this judgment. **S. SIRI JAGAN JUDGE** **BABU MATHEW P. JOSEPH** **JUDGE** kvr/