Greysham and Co. Vs. Regional Provident Fund Commissioner

Citation: (1978) IILLJ 95 Del

Decided on: 17.08.1977

Court: Delhi High Court


On 26th October 1965, the petitioner company recorded a settlement (Incentive scheme) with its employees wherein it was agreed that excess production will be rewarded by payment of incentives at the determined rates. In 1971, a proceeding was initiated against the petitioner for payment of provident fund due. During the pendency of the proceedings before respondent, the petitioner filed a representation and raised the question that the amount paid by him as “Inam” under the incentive scheme should not be made part of the basic wages for the purpose of calculating the contributions under the Employees provident Funds and Miscellaneous Provisions Act, 1952 (“Act“).  The Central Government rejected the representation.

The petitioner filed a petition before the Central Government seeking review of the aforesaid order of the Central Government. On 30th May, 1975, respondent issued another notice for determination of the dues of the provident fund which was determined vide order dated 7th July, 1975. The present petition is seeking a writ of certiorari quashing the aforesaid order and for a declaration that the payment of “Inam” under the incentive scheme does not form part of the wages as defined under the Act.


Whether “Inam” under the incentive scheme is excluded from the definition of “basic wages” as given in Section 2(b) of the Act.


Petitioner: The petitioner cannot be made liable to pay share of the employees with retrospective effect. Reliance was placed on K.R. Subbaier v. Regional Provident Fund Commissioner, Madras [(1963)ILLJ23Mad]

Respondent: The issue has already been decided under Section 19A of the Act. Accordingly, this decision, having attained finality is not open to challenge in a proceeding under Article 226 of the Constitution of India.


On 1st contention of respondent (Maintainability of Petition)

It is well-settled that no authority, much less a judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion that the quasi-judicial authority has clutched at the jurisdiction by deciding the jurisdictional fact erroneously, then the aggrieved person is entitled to the writ of certiorari prayed for by him.

Whether Inam under the incentive scheme is excluded from the definition of “basic wages” as given in Section 2(b) of the Act.

The Delhi High Court relied on the judgments of Supreme Court in  Bridge and Roof Co. (India) Ltd. v. Union of India [AIR 1963 SC 1474] and Jay Engineering Works Ltd. v. Union of India [AIR 1963 SC 1480] to reiterate that the extra payment made by company under production bonus scheme be called incentive wage. In all such cases, however, the workers are not bound to produce anything beyond the base or standard that is set out. The performance may even fall below the base or standard but the minimum basic wages will have to be paid whether the base or standard is reached or not. When, however, the workers produce beyond base or standard what they earn is not basic wages but production bonus or incentive wage. It is this production bonus which is held as outside the definition of “basic wages” in Section 2(b).

Applying the above principles, Court held that

  1. Inam under the incentive scheme in pursuance of the voluntary settlement reached between the petitioner and its employees and recorded on 26th October, 1965, is an incentive bonus or production bonus and is excluded from the definition of basic wages under Section 2(b).
  2. The terms of settlement dated 26th October, 1965, is more or less same as regards the nature of payment and has to be held as outside the definition of Section 2(b) of the Act.

Consequently, Court quashed both the orders of Central Government and determination of dues by respondent.

Author: Swati Agrawal

Editor: Vivek Verma

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