Ad-hoc payments pursuant to interim order of court not 'wages' under Payment of Gratuity Act: Supreme Court

The Supreme Court on Thursday held that monthly ad-hoc payments made pursuant to interim orders cannot be considered "wages" under Section 2(s) of the Payment of Gratuity Act [Chairman-cum-Managing Diretor Fertilizer Corporation of India and Anr vs Rajesh Chandra Shrivastava and ors]..A Bench of Justices Hemant Gupta and V Ramasubaramanian held that it is the fundamental principle of law that the benefits of an interim order are lost when final orders go against the party. "It is not possible to go against the fundamental rule that the benefits of an interim order would automatically go when the party who secured it, failed in the final stage," the Court said. The Bench in the instant case ruled that the ad-hoc payment made pursuant to its interim orders in the matter will not form part of the wages to be computed..In 2002, the appellant-company was closed down and the employees were given an option to choose voluntary separation scheme, which was chosen by 5,675 out of 5,712 employees. Thereafter, the top court passed a final order stating that "economic viability or the financial capacity of the employer is an important factor which cannot be ignored while fixing the wage structure and that the materials on record clearly revealed that both these companies were suffering heavy losses for several years." It was clarified that the interim relief given to the employees was "purely on ad hoc" basis..The employees then approached the controlling authority for payment of their wages and included the ad hoc payments made through the interim orders of the apex court as part of their wages. The authority allowed the applications and later dismissed the appeals filed by the management. Thereafter, the management filed writ petitions regarding the same before the High Court.In respect of writ petition filed against one employee before the High Court against the earlier order of computation of wages made by the authorities, a single-judge and the Division Bench ruled in favour of the management. The employee then filed an appeal before the top court which was allowed. The apex court in the special leave petition filed by the employee then allowed the claims of the authority and had held that, "we are of the view that the High Court should not have interfered with the calculation of payment of gratuity and ad hoc payment with interest. Hence, the appellant shall succeed 2 in this appeal. Accordingly, the appeal is allowed." The review and curative petitions of the management against this order were also dismissed.Based on this order, the High Court dismissed all other writ petitions filed by the management.The management of the appellant company then moved the apex court for clarification on its final order as to the voluntary scheme. .The issue before the Supreme Court was whether the ad-hoc monthly payments made by the management in light of the two interim orders passed by it were liable to be treated as wages..The Court said that the order passed in the lone employee's case was made in light of specific facts of that matter. The top court in that case had not gone into the question of law."The order passed in the case of Kashi Prasad Tripathi cannot be taken to have laid down any law to the effect that the ad hoc payment will form part of wages," the Court made it clear.The respondents, therefore, cannot really take advantage of the order passed in the case of Kashi Prasad Tripathi, merely on the ground that the very same question of law was raised by the management in the civil appeal and thereafter in the petition for review and curative petition..The Court, therefore, proceeded to examine the definition of 'wages' under Section 2(s) of the Payment of Gratuity Act.It held that wages as per the definition, the emphasis is on what is earned by the employee “in accordance with the terms and conditions of employment". "Irrespective of whether what was earned has been paid or remained payable, the same is included in the definition, provided it is in accordance with the terms and conditions of his employment," the Court said.Applying the same to the instant case, the Court noted that what was claimed in the first round of litigation was not what was payable in accordance with the terms and conditions of employment. "It is a fundamental principle of law that a party who is in enjoyment of an interim order, is bound to lose the benefit of such interim order when the ultimate outcome of the case goes against him. Merely because of the fortuitous circumstance of the Voluntary Separation Scheme coming into effect before the transferred cases were finally dismissed by this Court by an order dated 25.04.2003, creating an illusion as though the last drawn pay included this ad hoc payment, it is not possible to go against the fundamental rule that the benefits of an interim order would automatically go when the party who secured it, failed in the final stage," the Court ruled.However, in view of the efflux of time and taking into account the fact that few employees are now no more, the Court directed the management not to effect any recovery, if payment has already been made to any of the respondents or their families..Advocate Ghanshyam Joshi appeared for the appellants and advocate Nagarkatti Uday represented the respondents. Advocate Vernika Tomar appeared for the intervenor. 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