The Employees State Insurance ... vs Mrs. A. Bharati Devi
2025 Latest Caselaw 3989 Tel

Citation : 2025 Latest Caselaw 3989 Tel
Judgement Date : 17 June, 2025

Telangana High Court

The Employees State Insurance ... vs Mrs. A. Bharati Devi on 17 June, 2025

     HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY

       CIVIL MISCELLANEOUS APPEAL NO.209 of 2025

JUDGMENT:

This appeal is filed aggrieved by the order dated

08.08.2017 in E.I.C.No.28 of 2012 passed by the Employees

Insurance Court and Chairman, Industrial Tribunal-I at

Hyderabad (for short, 'Tribunal'), whereby and where under, the

application filed by the respondent Nos.1 and 2 was allowed and

the appellants herein were directed to extend the dependent's

benefit in favour of the respondent Nos.1 and 2 as contemplated

under Section 52 of the Employees State Insurance Act, 1948

(for short, 'ESI Act') and the orders dated 16.01.2012 passed by

the appellant No.3 herein was quashed.

2. Heard Sri B.G.Ravinder Reddy, learned counsel for the

appellants. Perused the record.

3. The brief facts leading to filing of the present appeal are

as under:

3.1. The respondent Nos.1 and 2 herein are the dependents of

the deceased-A.Ramesh, who was working as Accountant in

respondent No.3-M/s.Khan Mohammed Diamonds & Jewellers

Pvt.Ltd. since 01.11.2006 and covered under the ESI Act and he LNA,J

was issued with an identity card bearing No.6203290443 by the

office of the appellant No.3 herein for enabling him to avail cash

and medical benefits which are admissible under the ESI Act;

that respondent No.4 regularly deducting the share of

employees contribution @ 1.75% on total salary and depositing

the same into the credit of ESI Fund Account No.1, maintained

by the appellant Nos.1 and 2; that contribution was deducted

and paid to the appellants upto 30.09.2011.

3.2. It is further averred that as per the directions of the

employer, while the deceased was proceeding to Bangalore along

with one of the Directors by car on business purpose on

27.10.2011, met with an accident near Palamneru, as a result,

deceased, the Director and the Driver sustained bleeding

injuries and both died in the hospital while undergoing

treatment; that when the respondent nos.1 and 2 have filed

claim for payment of dependents benefit as per the provisions of

the ESI Act since the deceased was an insured person, however,

the said claim was rejected by the appellant No.3 vide letter

dated 16.01.2012 on the ground that deceased was not an

employee as on the date of accident. Aggrieved by the rejection

letter dated 16.01.2012, respondent Nos.1 and 2 filed

E.I.C.No.28 of 2012 seeking declaration that they are entitled to LNA,J

receive the dependent benefits i.e., cash and medical benefits

admissible under the ESI Act upto the period ended on

30.06.2012.

4. Appellants filed the written statement in the application.

The Tribunal, on due consideration of the material placed on

record, has come to a conclusion that deceased expired on

account of employment with the respondent No.3 as per the

provisions under Sections 51-E and 52 of the ESI Act. The

Tribunal has specifically observed that deceased was drawing

monthly salary of Rs.15,000/- only as on the date of the

accident and his employer paid the ESI contribution upto

September, 2011 on the basis of monthly salary of Rs.15,000/-.

Therefore, the incentives and the allowances cannot be

construed as wages and moreover, such incentives, allowances

are variable and contingent in nature and therefore, the

deceased was treated as an employee within the meaning of

definition under Section 2(9) of the ESI Act as on the date of the

accident i.e., 27.10.2011.

5. Learned counsel for the appellants would submit that the

Tribunal has committed error in allowing the application filed by

the respondent Nos.1 and 2 without considering the fact that

though the deceased was paid salary of Rs.15,000/- per month, LNA,J

he was being paid a sum of Rs.25,000/- as incentives and thus,

the gross salary comes to Rs.40,000/- and therefore, the

deceased cannot be treated as employee within the meaning of

Section 2(9) of the ESI Act and as such, the Tribunal ought to

have dismissed the application filed by the respondent Nos.1

and 2.

6. The only ground urged by the learned counsel for the

appellants is that the Tribunal has erroneously excluded the

incentives of Rs.25,000/- being paid to the deceased and if the

monthly salary and incentives are considered together it comes

to Rs.40,000/- and therefore, the deceased is not an employee

within the meaning of Section 2(9) of ESI Act. However, learned

counsel for the appellants did not place any material in support

of his contention that incentives also forms part of the salary.

Except the above contention, no other ground is raised.

7. It is settled principle of law that payments, such as,

incentives, conveyance allowance, etc., paid to an employee

cannot be considered as 'wages' under Section 2(22) of the ESI

Act and the salary/wages being paid to an employee has to be

considered whether the person is employee within the meaning

of definition of Section 2(9) of the Act or not. The Tribunal has

referred to a decision of High Court of Madras in Regional LNA,J

Director, ESIC, Madras v. Sundaram Clayton Limited 1 in

support of its observation that fixed conveyance, allowance,

incentives etc., cannot be construed as wages under Section

2(22) of the ESI Act.

8. It is relevant to refer to Section 2(22) of the ESI Act.

S.2. Definitions:

(1) to (21) xxx

(22) wages means all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes [any payment

to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay-off and] other additional remuneration, if any, [paid at intervals not

exceeding two months], but does not include--