The Kerala High Court has dismissed an appeal by the Employees' State Insurance Corporation against a judgment of the Employees' Insurance Court, Alappuzha, holding that fixed conveyance allowance paid to employees does not constitute wages under the ESI Act.
Background & Facts
The Genesis
The respondent, M/s FCI OEN Connectors Limited, paid a fixed conveyance allowance to its employees pursuant to a settlement (Ext.D4). The ESI Corporation issued an assessment order under Section 45A of the ESI Act, demanding Rs. 6,15,539 towards contribution on the conveyance allowance paid to employees.
Key Facts
- The respondent paid a fixed conveyance allowance to all employees every month.
- The ESI Corporation issued an assessment order dated [date not specified] demanding Rs. 6,15,539 towards contribution on the conveyance allowance.
- The respondent challenged the assessment order before the Employees' Insurance Court, Alappuzha, in I.C.No.90/2011.
- The ESI Corporation contended that the conveyance allowance constituted wages under Section 2(22) of the ESI Act.
Procedural History
- 14.02.2016: Employees' Insurance Court, Alappuzha, set aside the assessment order.
- 15.07.2026: Insurance Appeal No.7 of 2016 admitted for hearing.
- 22.07.2026: High Court of Kerala delivered the judgment.
Relief Sought
The ESI Corporation sought to set aside the judgment of the Employees' Insurance Court and uphold the assessment order demanding Rs. 6,15,539 towards contribution on the conveyance allowance.
The Legal Issue
The central question was whether fixed conveyance allowance paid to employees every month constitutes wages within the meaning of Section 2(22) of the ESI Act.
Arguments Presented
For the Appellant/Petitioner
The ESI Corporation argued that the fixed conveyance allowance paid to employees every month, like house rent allowance, should be considered wages under Section 2(22) of the ESI Act. It relied on the nature and purpose of the allowance and contended that the judgment in Texmo Industries v. Employees State Insurance Corporation [(2021) 18 SCC 771] was distinguishable.
For the Respondent/Applicant
The respondent argued that the legal position was settled by the judgment in Texmo Industries and that the ESI Corporation had accepted the same by issuing a communication dated 08.11.2021. It submitted that no substantial questions of law arose for consideration in the appeal.
The Court's Analysis
The Court examined the definition of wages under Section 2(22) of the ESI Act, which excludes "any travelling allowance or the value of any travelling concession" from the definition of wages. The Court noted that the Hon'ble Supreme Court in Texmo Industries had categorically held that conveyance allowance, being in essence and substance the same as travelling allowance, is excluded from the definition of wages.
The Court observed:
"The definition of wages in Section 2(22) of the ESI Act clearly excludes travelling allowance. The distinction sought to be made by the petitioner Corporation between travelling allowance and conveyance allowance, based on the Single Bench judgment of the Karnataka High Court in ESI Corporation v. IT Solutions (India) (P) Ltd [(2002) SCC OnLine Kar 419], is in our view misconceived. There is no cogent reason why conveyance allowance which is in effect and substance the same as travelling allowance, should be treated differently from travelling allowance."
The Court further noted that the ESI Corporation had issued a communication dated 08.11.2021 accepting the judgment in Texmo Industries and clarifying that conveyance allowance shall not form part of the wages of employees.
The Verdict
The appeal was dismissed. The Court held that no substantial question of law arose for consideration and that the judgment of the Employees' Insurance Court was perfectly in tune with the provisions of Section 2(22) of the ESI Act and the law laid down in Texmo Industries.
What This Means For Similar Cases
Fixed Conveyance Allowance Is Excluded From Wages
- Fixed conveyance allowance paid to employees every month is excluded from the definition of wages under Section 2(22) of the ESI Act.
- The nature and purpose of the allowance are irrelevant if it falls within the exclusion clause.
ESI Corporation's Circulars Bind Its Officers
- The ESI Corporation's communication dated 08.11.2021 accepting the judgment in Texmo Industries binds its officers and must be strictly complied with.
No Substantial Questions Of Law Arise
- Courts will not entertain appeals raising questions of law that are settled by the Supreme Court or High Courts.
- The judgment in Texmo Industries settles the law on the issue of conveyance allowance being excluded from wages.
