' The brief facts giving rise to this appeal are as follows: ' The appellant on checking the record of the It pendent issued demand notice on account of less paid social security contribution for the period from January, 1981 to December, 1982 amounting to Rs.1,60,545 on the ground that respondent paid the following allowances to their employees:
(i) Privilege leave encashment.
(ii) Cycle allowance.
(iii) Washing allowance.
(iv) Special compensatory allowance.
2. The respondent aggrieved by the abovementioned demand notice filed a complaint under section 57 of the Provincial Employees' Social Security Ordinance, 1965 before the Commissioner Punjab Employees' Social Security. The learned Commissioner, after completing all the formalities and found all the abovementioned allowances as wages for the purpose of calculation of Social Security under the Ordinance and dismissed the complaint vide its order dated 26-6-1985.
3. The respondent aggrieved by the order of the learned Commissioner filed an appeal under section 59 of the Social Security Ordinance before the Judge, Social Security Court who upheld the finding of the learned Commissioner regarding the privilege, leave encashment, cycle allowance as part of wages and the respondent has no alternative but to pay contribution and the learned Security Judge held that washing allowance and special compensatory allowance do not form the part of wages and the respondent will re-assess liability of the appellant for payment of contribution on privilege, leave encashment and cycle allowance only vide its judgment dated 1-3- 1986; hence the present appeal.
4. The learned counsel for the appellant contended that respondent did not file any appeal against judgment of the Security Judge regarding privilege, leave encashment aid cycle allowance, therefore, the findings of the Security Judge are final qua the respondent regarding these two allowances. The learned counsel further contended that remaining two allowances i.e. washing allowance and special compensatory allowance are also covered under the definition of the Social Security Ordinance, section 2(30). The learned counsel relied upon the judgments: ' Shahbazud Din Ch. and 27 others v. M/s. Services Industries and 4 others (PLD 1988 SC 1).
' M/s. Dawood Cotton Mills Ltd., Karachi v. Social Security Institution, Karachi (PLD 1978 Karachi 744).
' M/s. Bawani Violin Textile Mills Ltd. v. The Employees Social Security Institution (PLD 1978 Karachi 890).
5. The learned counsel for the respondent contended that washing allowance is not a part of wages as defined in section 2(30) of the Ordinance and relied upon 1988 PLC 540. The Karachi High Court in similar circumstances while interpreting definition of wages qua the washing allowance; came to the conclusion that the payment of washing allowance, therefore, fully covered under section 2(30)(b) of the Ordinance and no contribution under section 20 of the Ordinance was payable on such payment. The learned counsel further contended that special compensatory allowance does not form part of wages and is not covered under the abovementioned definition as provided under the said Ordinance. The learned counsel further contended that it is a special compensatory allowance which was granted to the workmen as the request of the CBA was acceded to by the appellant subject to certain conditions agreed between the parties and one of the relevant conditions is reproduced hereunder: "The above special compensatory allowance will not become part of the wages of workmen for the purpose of contribution of provident fund, gratuity, profit, bonus, ex gratia award, social security scheme and calculating wages for overtime work."
The washing allowance is not a part of wages as is held by the Karachi High Court in the abovementioned judgment, therefore, the finding of the learned Security Judge to the extent of washing allowance is upheld. Now I discuss special compensatory allowance as under.
6. The learned counsel further contended that the controversy has been finally decided by the Supreme Court in case of National Embroidery Mills Ltd. and others v. Punjab Employees Social Security Institution (1993 SCMR 1201): "Before deducing the principles from the a fore stated judgments it will be proper to first analyses the definition of "wages" under section 2(30) of the Ordinance. The manner in which term "wages" has been defined indicates that the intention of the Legislature is to make it comprehensive and exhaustive. It is a remuneration which by itself is wider than "wages" for services rendered under a contract of service express or implied. Therefore, the employee who is in employment or is .available for service can claim wages. The remuneration paid are payable under law or contract without giving credit to any deduction made for any purpose will be treated as wages. Such remuneration may be in cash or kind. As the amount of wages is related to playability remuneration in kind will have to be evaluated in terms of money. By including remuneration in kind in the definition of "wages", its scope has been further widened. The definition further proceeds to include in it any dearness allowance or any amount paid towards cost of living allowance. It further gives to it any amount paid by the employer to a secured person toward authorize leave or any period of illegal lock-out or legal strike. Payments made against these three items indicate situations where the employee does not render any service but his absence is not illegal and he be deemed to be available for service. In the end the definition excludes from the term "wages" payments made for overtime, some paid to defray special expense entailed by the nature of employment, gratuity payable on discharge and bonus. The definition extends the frontier of term "wages" by describing it as "remuneration". By deeming such items which may perhaps not have been considered as wages, have been brought under its net. The exclusion provided is neither general, nor wide. It categorises four items with clarity and precision in specific terms.
(8) On the basis of the judgments referred above it crystallises that rendering of service or availability for service is a precondition for payment of remuneration. The amount paid by the employer is in discharge of his legal and contractual obligation for the services rendered by the employee. Such payment, the employee gets as a matter of right and entitlement under the contract or law and not as ex gratia, charity, dole grace, reward, gift or compensation on compassionate grounds at the mercy and will of the employer. The other characteristic is that the payment should not be irregular in character and must have direct nexus with the actual performance of work. There is unanimity of view that any payment ex gratia to an employee does not fall within the definition of "wages". The ex gratia payment is not made under any contract or law but at the sweet will of the employer. However, any payment made under an agreement for the services rendered describing it as ex gratia will not have the effect of excluding it from the definition of wages. As observed by Ajmal Mian, J. (1991 SCMR 862) by settlement any amount paid by the employer towards his statutory and contractual obligation cannot be excluded from being 'wages' ."
7. The term 'wages' was also interpreted by Supreme Court in case of M/s. Consolidated Sugar Mills Ltd. v. Employees' Social Security Institution and another (PLD 1991 SC 862) and the relevant observation are reproduced as under: "In this case educational scholarship amount paid by the employer to its employees was held to fall within the definition of wages. While considering the definition of wages, Ajmal Mian, J. observed:-- ' From the above definition of the term "wages", it is obvious that it includes remuneration for service paid or payable in cash or in kind excluding the items mentioned in above clauses (a) to (d). It must, therefore, follow that unless the appellants can bring the payment of the above educational scholarship amount within the purview of any of the above excluded items, the same would be covered by the definition of the term 'wages' given in the Ordinance.
8. Keeping in view the above mentioned observation of the Hon'ble Supreme Court while it interpreting word "wages", it is crystal clear that for the purpose of excluding any allowances, from wages it must have been covered in any of the clauses (a) to (d) of section 2(30) of the Act. The allowances in question are not covered under the exclusion clause, therefore, the judgment of the first Appellate Court is not based on correct interpretation of the above mentioned section. It is pertinent to mention here that the appellant has specifically raised the plea that the allowances were made to the employees on the basis of the settlement, therefore, it is not an ex gratia payment. The payment has direct nexus with the service rendered and cannot be termed to be ex gratia payment or merely reward or gift to the employees. The allowances paid by the employer were granted to the employees on the basis of settlement, therefore, employees get as a matter of right, necessary ingredients of ex gratia payment is always with the person liable to pay has an opinion to withdraw it of his own sweet will. The said allowances having been granted by settlement, therefore, the employer has no option in the matter but to pay the same. The payment of the said allowances are a right granted to worker, therefore, the same can be enforced under section 25-A of the I.R.O., 1969 being a right granted or secured to them under the law in case the employer refuses to make payment. In this view of the matter the arguments of respondent's counsel has no force.
' The basic point in this case is whether compensatory allowance is a part of wages or not.
9. In view of what has been discussed above, the result is that this appeal is accepted to the extent of special compensatory allowance. There is no order as to costs.