KICHHA SUGAR COMPANY LIMITED TH. GEN. MANG.versusTARAI CHINI MILL MAJDOOR UNION, UTTARKHAND

                    [2014] 1 S.C.R. 157


 KICHHA SUGAR COMPANY LIMITED TH. GEN. MANG.                      A
                              v.
  TARAI CHINI MILL MAJDOOR UNION, UTIARKHAND
             (Civil Appeal No.77 of 2014)
                    JANUARY 06, 2014.
                                                                  B
[CHANDRAMAULI KR. PRASAD AND JAGDISH SINGH
               KHEHAR, JJ].

    SERVICE LAW:
                                                                  c
    'Basic wage' - Connotation of - Reckoning of leave
encashment and overtime wages in basic wage to grant Hill
Development Allowance - Held: Those wages which are
universally, necessarily and ordinarily paid to all the
employees across the board are basic wage - Where the             0
payment is available to those who avail the opportunity more
than others, the amount paid for that cannot be included in
the basic wage .:.. Therefore, amount received as leave
encashment and overtime wages is not fit to be included for
calculating Hill Development Allowance.
                                                                  E
    INTERPRETATION OF STATUTES:

     Construing of an expression which has not been defined
- 'Basic wage', not explained in the Order granting Hill
Development Allowance - Held: When an expression is not           F
defined, one can take into account the definition given to such
expression in a statute as a/so the dictionary meaning -
Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 - s. 2 (b)

     WORDS AND PHRASES:                                           G

     Expressions 'basic wages', 'Hill Development Allowance'
- 'Compensatory allowance' - Connotation of.

                              157                                 H
    158       SUPREME COURT REPORTS          [2014] 1 S.C.R.


A      The instant appeal arose out of the order of the High
  Court, whereby it affirmed the award of the Industrial
  Tribunal directing payment of Hill Development Allowance
  after taking into account the amounts received as "leave
  encashment and overtime wages." The case of the
B employer was that the workmen would be entitled to 15%
  of the basic wages only as Hill Development Allowance.

          Allowing the appeal, the Court

        HELD: 1.1. Hill Development Allowance is nothing
C but a compensatory allowance. A compensatory
  allowance broadly falls into three categories; (i) allowance
  to meet the high cost of living in certain, specially costly
  cities and other local areas; (ii) allowance to compensate
  for the hardship of service in certain areas, e.g. areas
D which have a bad climate and/or difficult to access; and
  (iii) allowances granted in areas, e.g. field service areas,
  where, because of special conditions of living or service,
  an employee cannot, besides other disadvantages, have
  his family with him. In the instant case, it seems that
E taking into account bad climate and remote and difficult
  access, the decision was taken to grant the Hill
  Development Allowance at the rate of 15% of the basic
  wage. [para 5] [161-F-H; 162-A-B]

       1.2. When an expression is not defined, one can take
F into account the definition given to such expression in a
  statute as also the dictionary meaning. The expression
  'basic wage' has not been explained by the Government
  in the Order granting Hill Development Allowance. It has
  been defined only u/s 2(b) of the Employees' Provident
G Funds and Miscellaneous Provisions Act, 1952. The term
  'basic wage' has also been defined in Merriam Webster
  Dictionary. This Court, therefore, holds that those wages
  which are universally, necessarily and ordinarily paid to
  all the employees across the board are basic wage.
H Where the payment is available to those who avail the
  KICHHA SUGAR c9M. Lto. TH. GEN. MANG v. TARAI CHINI MILL 159
                 MAJDOOR UNION, UTTARK
                 I



- opportunity more than others, the amount paid for that         A
  cannot be included in the basic wage. [para 8-10] [163-
  B-C; 164-A-D]
      http://www.merriam-webster.com - referred to.
     1.3 Overtime wages or for that matter, leave s
 encashment may be available to each workman but it .
 may vary from one workman to other. The extra bonus
 depends upon the extra hour of work done by the
 workman whereas leave encashment shall depend upon
 the number of days of leave avai~able to workman. Both c
 are variable and, therefore, are not fit to be included for
 calculating the Hill Development Allowance. [para 10]
 [164-D-F]
     Muir Mills Co. Ltd. v. Workmen, 1960 SCR 488 = AIR
 1960 SC 985; and Manipal Academy of Higher Education v.         D
 Provident Fund Commr. 2008 (4) SCR 772      =
                                           (2008) 5 SCC
 428 - relied on.
     1.4. This Court, therefor.e, holds that overtime
 allowance and leave encashment are not fit to be taken          E
 into account for calculating the Hill Development
 Allowance. The impugned award and the judgment of the
 High Court are illegal and, as such, are set aside. [para
 12-13] [165-E]
                      Case Law Reference:                        F
      1960 SCR 488             relied on            para 6
      2008 (4) SCR 772         relied on           para 10
      CIVIL APPELLATE JURISDICTION: Civil Appeal No.77           G
 of 2014.

     From the Judgment & Order dated 24.06.2008 of the High
 Court of Uttarakhand in WPMS No. 3717 of 2001.

     'Tanmaya Agarwal, Vinay Garg for the Appellant.             H
    160       SUPREME COURT REPORTS                 [2014] 1 S.C.R.


A         Jatin Zaveri (A.C.) for the Respondent.

          The Judgment of the Court was delivered by

          CHANDRAMAULI KR. PRASAD, J. 1. Kichha Sugar
  Company Limited aggrieved by the order dated 24th of June,
B 2008 passed by the Uttarakhand High Court in WPMS No.
  3717 of 2001, affirming the award dated 12th of November,
  1992 directing payment of Hill Development Allowance after
  taking into account the amount received as "leave encashment
  and overtime wages", has preferred this special leave petition.
c         2. Leave granted.

          3. Facts lie in a narrow compass;

        4. The Government of Uttar Pradesh, by its order dated
D 5th of January, 1981, had directed for payment of Hill
  Development Allowance to its employees working at specified
  hill areas at the rate of 15% of the basic wage. Kichha Sugar
  Company Limited, the appellant herein (hereinafter referred to
  as 'the employer'), being a unit of a subsidiary of U.P.
E Government Corporation, adopted the same and started paying
  Hill Development Allowance at the rate of 15% of the basic
  wage. The workmen demanded calculation of 15% of the said
  allowance by taking into account the amount paid as overtime,
  leave encashment and all other allowances. When the employer
F did not agree to the calculation of the Hill Development
  Allowance as suggested by the workmen, a dispute was raised.
  It wa.s referred to conciliation and on its failure, the competent
    Government made the following reference.

          Whether the exclusion of payment of overtime, leave
G         encashment, bonus and retaining allowance while
          calculating the Hill Development Allowance by the
          Employer is legal and justified? If not, to what relief, the
          workmen concerned are entitled to get?

H         It is common ground that while calculating Hill
KICHHA SUGAR COM. LTD. TH. GEN. MANG v. TARAI CHINI MILL 161
 MAJDOOR UNION, UTTARK. [CHANDRAMAULI KR PRASAD, J.]

Development Allowance, the employer has not taken into                 A
account any other amount including amount received as bonus,
leave encashment, retaining allowance or overtime wages. It
is the claim of the workmen that 15% of the Hill Development
Allowance is to be calculated and paid after taking into account
the payments made under the aforesaid headings. The                    B
employer repudiated their claim and according to it, the
workmen shall be entitled to 15% of the basic wages as Hill
Development Allowance. The Industrial Tribunal gave
opportunity to both the employer and the workmen to file their
claim and produce material and on consideration of the same,           c
gave award dated. 12th qf November, 1992 directing the
employer to "give Hill Development Allowance to their
permanent and regular workers on the amount received
regarding leave encashment and overtime wages." However,
the Tribunal observed that "Hill Development Allowance shall           D
not be payable on bonus and retaining allowance or on any
other allowances". The employer, aggrieved by the award
preferred writ petition before the High Court, which affirmed the
same without any discussion or assigning any reason in the
following words: ·
                                                                       E
    "9. After going through the aforesaid finding recorded by
    the tribunal concerned, I find no infirmity or illegality in the
    impugned award passed by the tribunal concerned and the
    same is hereby confirmed."
                                                                       F
     5. Before we enter into the merit of the case, it is apt to
understand what Hill Development Allowance is. In our opinion,
Hill Development Allowances is nothing but a compensatory
allowance. A compensatory allowance broadly falls into three
categories; (i) allowance to meet the high cost of living in           G
certain, specially costly cities and other local areas; (ii)
allowance to compensate for the hardship of service in certain
areas, e.g. areas which have a bad climate and/or difficult to
access; and (iii) allowances granted in areas, e.g. field service
areas; where, because of special conditions of living or service,
                                                                       H
    162        SUPREME COURT REPORTS                [2014) 1 S.C.R.


A an employee cannot, besides other disadvantages, have his
  family with him. There may be cases in which more than one
  of these conditions for grant of compensatory allowance is
  fulfilled. It seems that taking into account bad climate and
  remote and difficult access, the decision was taken to grant the
B Hill Development Allowance at the rate of 15% of the basic
  wage.

       6. We have heard Mr. Tanmaya Agarwal for the appellant
  and Mr. Jatin Zaveri for the respondent. Mr. Agarwal submits
C that basic wage will not include the amount received as leave          1




  encashment and overtime wages. According to him, basic wage
  would mean the wage which is paid to all the employees. He
  submits that leave encashment and overtime wages would vary
  from workman to workman and, therefore, those cannot be
  included in the basic wage. In support of the submission he
D placed reliance on a judgment of this Court in the case of Muir
  Mills Co. Ltd. v. Workmen, AIR 1960 SC 985 and our attention
  has been drawn to the following passage from Paragraph 11
  of the judgment, which reads as follows:

E         "11. Thus understood "basic wage" never includes the
          additional emoluments which some workmen may earn, on
          the basis of a system of bonuses related to the production.
          The quantum of earnings in such bonuses varies from
          individual to individual according to their efficiency and
F         diligence; it will vary sometimes from season to season
          with the variations of working conditions in the factory or
          other place where the work is done; it will vary also with
          variations in the rate of supplies of raw material or in the
          assistance obtainable from machinery. This very element
          of variation, excludes this part of workmen's emoluments
G
          from the connotation of "basic wages"."

         7. Mr. Garg, however submits that any amount including
    the amount paid as leave encashment and overtime wages do
    come within the expression 'basic wage' and, hence, have to
H
KICHHA SUGAR COM. LTD. TH. GEN. MANG v. TARA! CHIN! MILL 163
 MAJDOOR UNION, UTTARK. [CHANDRAMAULI KR. PRASAD, J.]

be accounted for the purpose of calculating 15% of the basic         A
pay.

     8. In view of the rival submissions, the question which falls
for our determination is as to the meaning of the expression
'basic wage'. The expression 'basic wage' has not been
                                                                     8
explained by the Government in the order granting Hill
Development Allowance. It has been defined only under
Section 2(b) of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952. Therefore, we have to see
what meaning is to be given to this expression in the present        C
context. Section 2(b) of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 defines 'basic wages' as
follows:

     "2. Definitions. - In this Act, unless the context otherwise
     requires, -                                                     D

     (a)      xxx                  )()()(           )()()(


     (b) "basic wages" means all emoluments which are earned
     by an employee while on duty or on leave or on holidays
     with wages in either case in accordance with the terms of       E
     the contract of employment and which are paid or payable
     in cash to him, but does not include-

      (i)     the cash value of any food concession;
                                                                     F
      (ii)    any dearness allowance that is to say, all cash
              payments by whatever name called paid to an
              employee on account of a rise in the cost of living,
              house-rent allowance, overtime allowance, bonus
              cornmission or any other similar allowance payable     G
              to the employee in respect of his employment or of
              work done in such employment;

      (iii)   any presents made by the employer;"

                                                                     H
    164       SUPREME COURT REPORTS              (2014] 1 S.C.R.


A      9. According to http://www.merriam-webster.com (Merriam
    Webster Dictionary) the word 'basic wage' means as follows:

          "1. A wage or salary based on the cost of living and used
          as a standard for calculating rates of pay
B         2. A rate of pay for a standard work period exclusive of
          such additional payments as bonuses and overtime."

       10. When an expression is not defined, one can take into
  account the definition given to such expression in a statute as
C also the dictionary meaning. In our opinion, those wages which
  are universally, necessarily and ordinarily paid to all the
  employees across the board are basic wage. Where the,,
  payment is available to those who avail the opportunity more
  than others, the amount paid for that cannot be included in the
o basic wage. As for example, the overtime allowance, though it
  is generally enforced across the board but not earned by all
  employees equally. Overtime wages or for that matter, leave
  encashment may be available to each workman but it may vary
  from one workman to other. The extra bonus depends upon the
E extra hour of work done by the workman whereas leave
  encashment shall depend upon the number of days of leave
  available to workman. Both are variable. In view of what we have
  observed above, we are of the opinion that the amount received
  as leave encashment and overtime wages is not fit to be
F included for calculating 15% of the Hill Development Allowance.
  The view which we have taken finds support from the judgment
  of this Court in Muir Mills Co. Ltd. (supra), relied on by the
  appellant, in which it has been specifically held that the basic
  wage shall not include bonus.
G       11. It also finds support from a judgment of this Court in
    the case of Manipal Academy of Higher Education v.
    Provident Fund Commr.,(2008) 5 SCC 428 in which it has
    been held as follows:

H
          "10. The basic principles as laid down in Bridge & Roofs
KICHHA SUGAR COM. LTD. TH. GEN. MANG v. TARA! CHINI MILL 165
 MAJDOOR UNION, UTTARK [CHANDRAMAULI KR. PRASAD, J.)

       case, AIR 1963 SC 1474, on a combined reading of                A
       Sections 2(b} and 6 are as follows:

       (a) Where the wage is universally, necessarily and
       ordinarily paid to all across the board such emoluments
       are basic wages.                                                B

       (b) Where the payment is available to be specially paid to
       those who avail of the opportunity is not basic wages. By
       way of example it was held that overtime allowance, though
       it is generally in force in all concerns is not earned by all
       employees of a concern. It is also earned in accordance         C
       with the terms of the contract of employment but because
       it may not be earned by all employees of a concern, it is
       excluded from basic wages.

       (c) Conversely, any payment by way of a special incentive       o
       or work is not basic wages."

    12. In view of what we have observed above, the impugned·
award and the judgment of the High Court are illegal and cannot
be allowed to stand.
                                                                       E
       13. In the result, we allow this appeal, set aside the &ward
and the judgment of the High Court and hold that overtime
allowance and leave encashment are not fit to be taken into
account for calculating the Hill Development Allowance. No
costs.

R.P.                                              Appeal allowed.