BRAITHWAITE & CO. (INDIA) LTD. versus THE EMPLOYEES STATE INSURANCE CORPORATION

Citation: [1968] 1 S.C.R. 771 · Decided: 06-10-1967 · Supreme Court of India · Bench: VISHISHTHA BHARGAVA · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

BRAITHWAITE & CO. (INDIA) LTD. 
v. 
THE EMPLOYEES' STATE INSURANCE CORPORATION 
October 6, 1967 
[V. BHARGAVA AND C. A. VAIDIALINGAM, JJ.J 
Emvlouees' Stotp Tnsurance Act (34 of 1948), s. 2(22) and Ex· 
planation to 1. 41-Scope of, 
Legal fiction-Nature of. 
A 
B 
Contract of emptoyment-Prom~•e of reward by emp!OJ/er- C 
When a term of contract. 
Section 2(22) of the Employees' State In8urance Act, 
1948, 
defines 'wages'. Under its first part all remuneration paid or payalM 
in cash to an employee, if the terms of the contract of employmi:nt, 
express or implied, were fulfilled, would be wages. The Explanation 
to s 41 lays down that, for purposes of ss. 4-0 and 41. wages shall be D 
deemed to include payment to an employee in respect of any period 
of authorised leave, lock--0ut or legal strike. 
Under the original terms of the contract of employment between 
the appellant and its employees, the employees were expected to 
work for certain periods at agreed rates of wages and there was 
no offer of any reward or prize or inam to be paid for any work E 
done by the employees. An inam Scheme was introduced later by 
the appellant under which, there was an offer to make incentive 
payments, if certain specified conditions were fulfilled by the. em-
ployees. The appellant, however, reserved the right to withdraw 
the Scheme altogether without assigning any reason, or to revise its 
conditions at its sole discretion, even if the production target was not 
achieved for reasons for which the employees were·not to be blamed. 
The appellant had also laid down that, if any deterioration of work- F 
manship was noticed on the part pf the employees in order to 
achieve the targets prescribed for ~arning the inam, the Scheme 
could be abondoned forthwith. It was also made clear to the work-
men that this payment of reward was in no way connected with or 
part of wages. The last paragraph of the Scheme stated that the 
appellant also reserved the right to discontinue the Scheme at the 
end of any period, if the Scheme wa• found to be in any respect un- G 
workable or to be a source of Jabour discontent or for any other 
reason. 
The appellant filed an application before the Employees' Insu-
rance Court constituted under the Act for a declaration that the 
inam paid or to be paid to its workmen was not wages as defined 
in· the Act an? for other reliefs. The application was allowed. On 
~ppeal, the High Court held that the inam was wages. because: (1) 
it was covered by the first part of the definition of wages; (2) even H 
if the terms of the contract of employment were not in fact fulfilled 
but we~e only deemed to have been fulfilled. the remunera-
tion paid would be wages 
by virtue of the Explanation to 
E. 41; and (3) the Scheme contained an offer bv the employer 
of payments to the employees for services rendered by them and as 
that offer was accepted by the employees impliedly, by having 
L;P(N)7SCI-!O 
771 
772 
RUPllEME COURT BEl'OllTS 
[1968] 1 a.a.a. 
A worked on the terms of the Scheme and having received payments 
on that basis, the payment became a part of the contract of em-
ployment. 
In appeal to this Court, the respondent sought 'co support the 
judgment of the High Court, also on the ground that, the fact that 
the Scheme could only be discontinued at the end of a prescribed 
period as laid down in the last paragraph of the Scheme and not 
in the midst of a period, showed that the inam was payable as one 
B of the conditions of the contract of employment. 
HELD: (1) A remuneration paid to an employee can only be 
covered by the definition of wages if it is payable under a clause of 
the contract of employment. [778 HJ. 
Bala Subrahmanya Rajaram v. B. C. Patil & Ors., [1958] S.C.R. 
1504, followed. 
C 
In this case· there was a payment to the employees and since 
that payment depended on their achieving certain targets, It Is re-
mqn~r-&tion, but this payinent of inam cannot be held to have 
become a term of the contract of employment. There was no express 
clause in the contract of employment for the payment of inam to 
the employees, and the Scheme, when brought into force, expreuly 
excluded it from tile contract of employment. The terms in the 
D Scheme were also not consistent with the Scheme having become a 
part of the contract of employment. The fact that the appellant 
dould withdraw the payment at its discretion and on grounds for 
which the employees could not be blamed, showed that the payment 
was

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