MISHRA AND NAVIN SINHA, JJ.] versus VIVEKANANDA VIDYAMANDIR AND OTHERS

Citation: [2019] 2 S.C.R. 275 · Decided: 28-02-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Disposed off

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Judgment (excerpt)

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THE REGIONAL PROVIDENT FUND COMMISSIONER (II)
WEST BENGAL
v.
VIVEKANANDA VIDYAMANDIR AND OTHERS
(Civil Appeal No. 6221 of 2011)
FEBRUARY 28, 2019
[ARUN MISHRA AND NAVIN SINHA, JJ.]
Employees’ Provident Fund and Miscellaneous Provisions
Act, 1952: s. 2(b)(ii) r/w s. 6 – Deduction towards Provident Fund –
Computation of – Special allowances paid by an establishment to
its employees, if to be included within the expression basic wages u/
s. 2 (b)(iii) rw s. 6 for the purpose of computation – Held: Special
allowance was to be included in basic wage for deduction of
provident fund contribution – Test adopted to determine if any
payment was to be excluded from basic wage is that the payment
under the scheme must have a direct access and linkage to the
payment of such special allowance as not being common to all –
Crucial test is one of universality – On facts, the establishments
could not show that the allowances in question being paid to its
employees were either variable or were linked to any incentive for
production resulting in greater output by an employee –Both the
authority and the appellate authority rightly held that allowances
in question were essentially a part of the basic wage camouflaged
as part of an allowance so as to avoid deduction of provident fund
contribution.
Allowing the appeal of the Regional Provident Fund
Commissioner, and dismissing the appeals of the Establishments,
the Court
HELD:1.1 Basic wage, would not ipso-facto take within
its ambit the salary breakup structure to hold it liable for provident
fund deductions when it was paid as special incentive or production
bonus given to more meritorious workmen who put in extra output
which has a direct nexus and linkage with the output by the eligible
workmen. When a worker produces beyond the base or standard,
what he earns was not basic wage. This incentive wage will fall
outside the purview of basic wage. Basic wage, under the
Employees’ Provident Fund and Miscellaneous Provisions Act,
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[2019] 2 S.C.R. 275
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276                    SUPREME COURT REPORTS            [2019] 2 S.C.R.
1952, has been defined as all emoluments paid in cash to an
employee in accordance with the terms of his contract of
employment. But it carves out certain exceptions which would
not fall within the definition of basic wage and which includes
dearness allowance apart from other allowances mentioned
therein. But this exclusion of dearness allowance finds inclusion
in Section 6. The test adopted to determine if any payment was
to be excluded from basic wage is that the payment under the
scheme must have a direct access and linkage to the payment of
such special allowance as not being common to all. The crucial
test is one of universality. The employer, under the Act, has a
statutory obligation to deduct the specified percentage of the
contribution from the employee’s salary and make matching
contribution. The entire amount is then required to be deposited
in the fund within 15 days from the date of such collection.
[Para 7, 9][281-G-H, 282-A, 285-D-E]
1.2 Applying the tests to the facts of the instant appeals,
no material has been placed by the establishments to demonstrate
that the allowances in question being paid to its employees were
either variable or were linked to any incentive for production
resulting in greater output by an employee and that the allowances
in question were not paid across the board to all employees in a
particular category or were being paid especially to those who
avail the opportunity. In order that the amount goes beyond the
basic wages, it has to be shown that the workman concerned had
become eligible to get this extra amount beyond the normal work
which he was otherwise required to put in. There is no data
available on record to show what were the norms of work
prescribed for those workmen during the relevant period. It is
therefore not possible to ascertain whether extra amounts paid
to the workmen were in fact paid for the extra work which had
exceeded the normal output prescribed for the workmen. The
wage structure and the components of salary have been examined
on facts, both by the authority and the appellate authority under
the Act, who have arrived at a factual conclusion that the
allowances in question were essentially a part of the basic wage
camouflaged as part of an allowance so as to avoid deduction and
contribution accordingly to the provident fund account of the
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employees. The

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