Non-contributory Pension Fund Recognized as Wages, Enabling Jurisdiction of West Bengal Shops and Establishments Act, 1963
In a landmark decision, the Calcutta High Court, on February 16, 2026, ruled in favor of M/s Heinen & Hopman Engineering (I) Pvt. Ltd.'s former employees, affirming that pension from a non-contributory pension fund qualifies as "wages" under the Payment of Wages Act, 1936. The Division Bench comprising Justices Lanusungkum Jamir and Rai Chattopadhyay dismissed multiple appeals filed by the company challenging the jurisdiction of the statutory authority under the West Bengal Shops and Establishments Act, 1963.
The central issue in the appeals was whether pension payments under a company's non-contributory pension scheme could be considered "wages" and whether such claims fall under the purview of the West Bengal Shops and Establishments Act, 1963. The company's contention was that the pension should not be classified as wages, arguing that the Payment of Wages Act's exclusion clause exempted such funds from being categorized as wages.
However, the Court upheld the decision of the Single Judge, which determined that pensions constitute wages as they are part of the remuneration owed to employees for their service, thereby falling under the jurisdiction of the West Bengal Shops and Establishments Act, 1963. The Court emphasized that resignation does not interrupt pension eligibility when no forfeiture clause is present in the trust deed.
The ruling highlights that pension rights, once crystallized, become a legal entitlement rather than a discretionary benefit. The Court stressed that the non-contributory nature of the pension fund does not negate its enforceability as a legal right. This judgment reinforces the notion that employers must administer pension funds fairly and lawfully, aligning with ethical and legal standards.
The decision sets a precedent for similar cases and reaffirms the legal understanding that pensions, even those from non-contributory funds, are integral to employee remuneration and protected under the Payment of Wages Act, 1936.
Bottom Line:
Pension under a non-contributory pension fund maintained by a company qualifies as "wages" under the Payment of Wages Act, 1936, and is covered under the jurisdiction of the West Bengal Shops and Establishments Act, 1963.
Statutory provision(s): Payment of Wages Act, 1936; West Bengal Shops and Establishments Act, 1963; Industrial Disputes Act, 1947; West Bengal Shops and Establishments Rules, 1964.
