MANIPAL ACADEMY OF HIGHER EDUCATION versus PROVIDENT FUND COMMISSIONER

Citation: [2008] 4 S.C.R. 772 · Decided: 12-03-2008 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed
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Judgment (excerpt)

[2008] 4 S.C.R 772 
A 
· MANIPAL ACADEMY OF HIGHER EDUCATION 
v. 
PROVIDENT FUND COMMISSIONER 
(Civil Appea! No. 1832 of 2004) 
B 
MARCH 12, 2008 
: 
(DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.) 
LabowLaw: 
Employees' Provident Fund and Miscellaneous 
c Provisions Act, 1952: 
s.2(b) - 'Basic. Wage' - 'Leave encashment' - HELD: 
Amount received by encashing earned leave is not a part of 
"basic wage" under s.2(b) requiring pro rata contribution by 
0 employer. 
In the instant appeals filed by the employer, the 
question for consideration before the Court was: whether 
the amount received by encashing the earned' leave is a 
part of "basic wage" under Section 2(b) of the Employees' 
E Provident Fund and Miscellaneous Provisions Act, 1952 
requiring pro rata employer's contribution? 
Allowing the appeals, the Court 
HELD: 1.1 It is to be noted that any amount of 
F contribution cannot be based on contingencies and 
uncertainties. The test is one of universality. In the case 
of encashment of leave the option may be available to all 
the employees but some may avail and some may not 
avail. That does not satisfy the test of universality. 
G [para 11] [781-G, H; 782-A] 
Bridge & Roof Co. (India) Ltd. v. Union of India 1963 (2) 
SCR 978; Jay Engineering Works Ltd. and Ors. v. Union of 
India and Ors. 1963 (3) SCR 995; Tl Cycles of India, Ambattur 
v. M.K. Gurumani and Ors. 2001 (7) sec 204; Daily Partap V. 
H 
772 
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MANIPALACADEMY OF HIGHER EDUCATION v. 
773 
PROVIDENT FUND COMMISSIONER 
Regional Provident Fund Commissioner 1998 (8) SCC 90 -
A 
-\' 
relied on. 
Hindustan Lever Employees' Union v. Regional 
Provident Fund Commissioner and Anr. 1995 (2) LLJ. 279 -
distinguished. 
B 
1.2 The term 'basic wage', which includes all 
emoluments earned by an employee while on duty or on 
leave or on holidays with wages in accordance with the 
terms of the contract of employment, can, for the purpos~s 
of emoluments earned while on leave, only mean basic c 
wages for weekly holidays, national holidays and festival 
holidays etc. In many cases the employees do not take 
leave and encash it at the time of retirement or same is 
encashed after his death which can be said to be 
uncertainties and contingencies. Though pr_ovisions D 
have been made for the employer for such contingencies 
unless the contingency of encashing the leave is there, 
" 
the question of actual payment to the workman does 
-<. 
not take place. Basic wage was never intended to 
include amounts received for leave encashment. 
[para 12] [782-A-D] 
E 
2. Though the statute in question is a beneficial one, 
the concept of beneficial legislation becomes relevant 
only when two views are possible. [para 13] [782-D] 
3 If any payment has already been made, it can be 
F 
-
adjusted for future liabilities and there shall not be any 
i 
refund claim since the fund is a running one. [para 14] 
[782-E] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
G 
1832 of 2004 
I 
From the final Judgment and Order dated 14.10.2003 of 
the High Court of Karnataka at Bangalore in Writ Appeal No. 
7 466 of 2000 (L-PF) 
H 
774 
SUPREME COURT REPORTS 
[2008] 4 S.C.R. 
A 
WITH 
Civil Appeal Nos. 2535, 2536, 2539, 2540 and 2541 of 
2004. 
Dr. Rajeev Dhawan, Lakshmi Raman Singh for the 
B Appellant. 
Ashok Bhan, Kiran Bhardwaj, A. Tarique, B. Krishna 
Prasad and D.S. Mahra for the Respondent. 
The Judgment of the Court was delivered by 
c 
DR. ARIJIT PASAYAT, J. 1. In all these appeals common 
points of law are involved and therefore they are disposed of by 
a .common judgment. 
2. The dispute in each case is whether the amount 
D received by encashing the earned leave is a part of "basic wage" 
under Section 2(b) of the Employees' Provident Fund and 
Miscellaneous Provisions Act, 1952 (in short the 'Act') requiring 
pro rata employer's contribution. In each case the Regional 
Provident Fund Commissioner (in short the 'Commissioner') 
E 
held that the amount received on encashment of earned leave 
has to be reckoned for the purpose of Section 2(b) of the_Act. 
Accordingly, demands were raised. Appeal was preferred 
before the Employees Provident Fund Appellate Tribunal (in 
short the 'Tr_ibunal') which held that it is not a part of basic wages. 
F 
However, it was observed that a different view was taken by the 
Bombay High Court and, therefore, the respondent in the 
appeals i.e. the Commissioner should take up the matter b
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