Subject - NO EPF Contribution on Leave encashment
Dear All
In decision of the Madras High Court of Mr Justice K.Chandru in the case of Thiru Arooran Sugars Ltd. And Five Ors. vs Asstt. Provident Fund Commissioner (Enf) Employees' Provident Funds Organisation And Anr *decided on 12/10/2007 wherein it was the stand of the respondent/PF Department that the leave encashment given to the workman is covered by the term of basic wages. In support of their stand, they were relying upon the judgment of the Bombay High Court as well as the Karnataka High Court and claimed all the petitioners/managements were bound to make contribution in terms of the leave encashment given to the workman as part of the basic wages.
But the Court rejected the contention of the Department and held
"If the two decisions of the Supreme Court in Bridge & Roof Company (India) Ltd's case (supra) as well as TI Cycles of India's case (supra) read together, there will be no difficulty in arriving at the conclusion that the basic wage was never intended to include in the leave with wages for which encashment is allowed. The term basic wage which includes all emoluments which are 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, it cannot mean it can only mean the weekly holidays, national festival holidays. In many cases, the employees do not take leave and encash it only at the time of retirement or as legal heirs at the time of his death, which is an uncertain contingency. Even though the employer made annual provisions for such contingency unless the contingency of encashing of leave takes place, the question of the actual payment to the workmen never takes place. In case, he avails the entire leave, during his tenure, then the question of payment of any contribution may not arise. Any payment of contribution cannot be based upon different contingencies and uncertainties.
Finally the Court precluded the Department from claiming Contribution on Leave Encashment and further held :
"By allowing the deduction on the encashment of annual leave, in no way, the employees are benefited and at the time of death or retirement or resignation, a lump-sum amount in his hand will give him a greater relief because at that time only, he is receiving the entire PF contributions standing to his credit also."
With Regards
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634
Dear All
In decision of the Madras High Court of Mr Justice K.Chandru in the case of Thiru Arooran Sugars Ltd. And Five Ors. vs Asstt. Provident Fund Commissioner (Enf) Employees' Provident Funds Organisation And Anr *decided on 12/10/2007 wherein it was the stand of the respondent/PF Department that the leave encashment given to the workman is covered by the term of basic wages. In support of their stand, they were relying upon the judgment of the Bombay High Court as well as the Karnataka High Court and claimed all the petitioners/managements were bound to make contribution in terms of the leave encashment given to the workman as part of the basic wages.
But the Court rejected the contention of the Department and held
"If the two decisions of the Supreme Court in Bridge & Roof Company (India) Ltd's case (supra) as well as TI Cycles of India's case (supra) read together, there will be no difficulty in arriving at the conclusion that the basic wage was never intended to include in the leave with wages for which encashment is allowed. The term basic wage which includes all emoluments which are 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, it cannot mean it can only mean the weekly holidays, national festival holidays. In many cases, the employees do not take leave and encash it only at the time of retirement or as legal heirs at the time of his death, which is an uncertain contingency. Even though the employer made annual provisions for such contingency unless the contingency of encashing of leave takes place, the question of the actual payment to the workmen never takes place. In case, he avails the entire leave, during his tenure, then the question of payment of any contribution may not arise. Any payment of contribution cannot be based upon different contingencies and uncertainties.
Finally the Court precluded the Department from claiming Contribution on Leave Encashment and further held :
"By allowing the deduction on the encashment of annual leave, in no way, the employees are benefited and at the time of death or retirement or resignation, a lump-sum amount in his hand will give him a greater relief because at that time only, he is receiving the entire PF contributions standing to his credit also."
With Regards
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634
