Legal - Case Law - CiteHR
Harsh Kumar Mehta
Consultant In Labour Laws/hr
Korgaonkar K A
Consultant Hr

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In view of the High Court directions by an interim order, we have deposited the relief of 50% backwages of 15 employees for their non-employment period in view of the relief granted by Labour Court in an ID raised by the Union of behalf of its members. At the disposal of the Writ, the high court upheld the award of the Labour Court with the direction to Union to withdraw the amount in deposit of 50% backwages of 15 employees. Now, my query is whether the relief grated by the Labour Court is treated as compensation or it be the wages considering the direction of High Court to withdraw the amount by Union? Are the Management is liable to remit P.F. & ESI Contributions on the deposited amount which have been received by the employee directly from the Court? what will be the legal implications to be redressed by the Management. The Expert opinion with case law reference in this aspect would help me to advice my management in right way.
Dear Sridharan Venkataraman,
In my view, PF will not attract on Back Wages.
The reasons:
1. Award of Back Wages is not a wages as defined in EPF&MP Act.
2. Award of Back Wages is a Compensation and not wage.
3. Swastik Textile Engineers v Virjibhai Rathod, Gujrat HC, same thing is stated as above.
4. According to Universal Brakes v Presiding Officer, EPF appellate Tribunal 2011 III CLR 662 Mad. HC, EPFO can not claim contribution for the period for which workman neither worked nor agreed to be treated on duty.
Same thing will apply to ESI contribution. ESI is not even applicable on arrears.

Thank you very much Mr Korgaonkar Sir for offering your valuable views with relevant citation. I shall refer the citations. thank u so much once again. regards, V Sridharan
In one case, in view of the non-acceptance of some of the workmen to the wage settlement arrived at between the Management and the recognized union u/s 18(1) of the I.D Act, the workmen were not given the increase in wage and other benefits because of the reason that the group of workmen have not come forward to extend the required undertaking in token of the acceptance in writing as required in the said settlement. The Union filed C.P claiming arrears of wage difference as per the settlement. Labour Court dismissed the CP. However, the decision of High court and the Apex court orders are in favour of the Union. The settlement claim was 3 year from 1989 to 1991. In view of the interim direction of Apex court 50% of arrears claim of workmen are deposited in the Labour Court. Since no workmen in the said claim petition is not in service, we have opted to deposit the remaining amount in the said Labour Court citing the said reason for which the Labour Court allowed the petition for remitting the said remaining amount. My querry is now, whether P.F & ESI contributions on the said arrears amount is payable by the Management even in the case of said workmen are not in service. Request expert views with citations, if any please.
1. Sir, the issue in respect of payment of contribution on "settlement claims" or back wages under ESI Act, 1948 as raised by you as above is an important issue, but on the same, I think, no relevant court judgments appears to be readily available. The Hon'ble Supreme Court in the cases viz.- Kerala State Drugs & Pharmaceuticals Limited (1995,SC) and Hotel Kalpaka International (SC, 1993) had decided the issue of payment of contributions by saying that once the Act is applicable to an establishment, the employer becomes liable to pay the contribution in respect of the employees in his employment directly or indirectly. The court further said that the liability of principal employer not to be absolved even if deduction is not made from the wages of employees. However, these judgments appears to be not relevant in your case.

2. However, I have found following departmental instructions issued by ESIC about 4 years back in one of its publication (which is strictly for OFFICE USE only):-

"Contribution on the wages paid to a terminated employee on his reinstating as a result of a Court Order:

No contribution should be deduct from the wages paid to the reinstated employee for the past period, and the contribution should be payable only from the month in which the Court Order was pronounced."

3. Keeping in view above, if you consider necessary, it may be seen if you approach appropriate Regional Director of ESIC to which your unit is attached to seek guidance and directions on the issue. You may submit to the said authority full facts of your case alongwith copies of judgment of hon'ble court(s). I hope, you will get appropriate instructions from above department on the issue.Similarly, on the same lines, if considered suitable, you can also seek clarifications from the appropriate authority of EPFO to which your unit is attached.

Thank you very much Mr Harsh Kumar Mehta for your clear & right guidance. As advised I shall meet the Authority concerned in person and do the needful. Regards, V Sridharan
His guidance is invisible. kindly post the comments made by Res.Harsh Kumar so that we members could also read what he had posted...
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