The Minimum Wages Act 1948 (hereinafter “Minimum Wages Act” or “Act”) provides a framework for statutory fixation of minimum rates of wages in certain select employments where the possibility for exploitation of unorganized labour is acute. The Act had its genesis in the Report of the Royal Commission on Labour in India 1931 which had suggested the introduction of statutory minimum wages at first only in a few ‘sweated industries’ where the wages were inadequate, and collective bargaining was not possible. This blueprint for applying minimum wages only to a few select occupations was adopted by the post-colonial state too through the Industrial Policy Resolution 1948 which called for the fixation of statutory minimum wages in sweated industries only. The newly enacted Minimum Wages Act 1948 incorporated this policy and limited the Act only to the employments listed in the Schedule.
Normatively, the Act also draws its mandate from Article 43 of the Constitution which states as a Directive Principle that “The state shall endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life, and full enjoyment of leisure and social and cultural opportunities in particular.”
Sections 3 and 5 of the Minimum Wages Act provide for the procedure for fixation/revision of minimum wages in any Scheduled Employment.
Binding Character of the Obligation to Pay Minimum Wages
Section 12 of the Minimum Wages Act lays down that where in respect of any scheduled employment a notification under section 5 specifying minimum wages is in force, the employer shall pay to every employee wage at a rate not less than such minimum rate of wages. Section 22 of the Act provides for criminal penalties including imprisonment for a term of six months for failure to pay the minimum wages.
The Supreme Court has confirmed that the obligation to pay the minimum wages is a binding obligation and “the employers cannot be heard to complain if they are compelled to pay minimum wages to their labourers even though the labourers, on account of their poverty and helplessness, are willing to work on lesser wages.”
Bijay Cotton Mills Ltd v. The State of Ajmer, AIR 1955 SC 33 [Supreme Court of India, 5 Judge Bench]
14th October 1954; Supreme Court of India (Constitutional Bench of Five Judges)
Bijay Cotton Mills Ltd. had an industrial dispute with its labourers concerning enhancement of wages which was referred to an industrial tribunal by the Govt. of Ajmer. The tribunal decided in favour of the employer. During the pendency of the appeal, a committee was formed which fixed minimum wage at Rs. 56 under the Minimum Wages Act, 1948. Multiple textile companies including the Company, filed a writ petition against the same.
The Petitioner argued that minimum wage set at Rs. 56 is prohibitive and renders them unable to continue the operations at the mill. Consequently, the Company closed the mill down due to its inability to pay the wages and continue operations. Many workers even expressed their willingness to work at Rs. 35 if that meant that the mill could be reopened.
Petitioner’s Contentions: A) That the Act impinges on employer’s right of carrying on trade or business under Article 19(1)(g) of the Constitution. B) Employees’ rights are restricted as they cannot continue to work for their employer even if they contract to work for a lower wage. C) The minimum wage is arbitrarily fixed by the expansive discretion of the “appropriate government” under the Act and the same is not open to review or challenge in any Court of law.
The Court held that the mandatory nature of minimum wages is conducive to the interest of the general public under Article 19(6) of the Constitution. It ruled that it is inconsequential whether the employees enter into a contract with the employer for a wage lower than the minimum wage. Further, the intentions of the employer, whether good or bad, are irrelevant and their inability to pay such wages is no justification for not complying with minimum wages law.
Moreover, the Court acknowledged that a wide array of power has been given to the “appropriate government”, however there are checks in place for the same. Therefore, the Court held that the restrictions, though they interfere to some extent with rights under Article 19(1) (g) of the Constitution, are reasonable and being imposed in the interest of the general public are protected by Article 19(6).
Notification of “Scheduled Employment”
The power of the Appropriate Government to notify a class of employment as scheduled employment under section 27 of the Act is not unlimited. In the Haryana Unrecognised Schools Association v State of Haryana, the Supreme Court clarified that this power is circumscribed by the definition of ‘employee’ as provided by section 2(i) of the Act. The definition of ‘employee’ requires a person to be employed for hire or reward to do any work skilled or unskilled, manual or clerical. Consequently, only employment that involves ‘skilled, or unskilled manual or clerical work’ can be notified as scheduled employment. The Karnataka High Court has also indicated in Karnataka Small Scale Industries Association v Secretary, Labour Department [2019 Indlaw KAR 8055] that notifications that cover supervisory staff would be bad in law.
Haryana Unrecognised Schools Association v. State of Haryana, 1996 (4) SCC 225 [Supreme Court of India, 2 Judge Bench]
12th April 1996; Supreme Court of India
The Government of Haryana under Section 27 of the Minimum Wages Act (‘the Act’) added different employees in educational institutions to Part I of the Schedule Item No. 40. Under Section 5(2), the state government fixed the rate of wages in respect of the different categories of employees serving in such schools. There was a Writ Petition that was filed challenging the notification on the grounds that teachers do not fall within the purview of the Act as they are not ‘workman’ under Section 2(gg)(rr)(iv)(s) in Industrial Disputes Act, 1947.
High Court’s Holding: A) The power of the state government to add any employment to the Schedule under Section 27 of the Act is without any limitation. B) The objective of the Act was to allow the ‘appropriate government’ under Section 5 of the Act was to reduce the exploitation that teachers face at the hands of management.
Contentions of the Appellant: A) The Appellant contended that even if a liberal interpretation is given to Section 2(i) of the Act, it cannot include teachers within its purview since the duty discharged by a teacher can neither be termed as manual or clerical nor can it be held to be skilled or unskilled. B) Therefore, the state government has no power to fix the minimum wage of a teacher of an educational institution under Section 5(2) read with Section 27 of the Act.
A combined reading of Section 27 and Section 2(i)’s definition of an employee, alongside the object and purpose of the Act gave a clear answer. It indicated that only if the employment was “skilled or unskilled or of a manual or clerical nature” then the same can be included within the scope of the Act under Section 27.
Relying on the decision under the Industrial Disputes Act 1947 in Ms. A. Sundarambal v. Government of Goa, Daman & Diu and others, the Court held that teachers are not employees.
Therefore, since the work of teachers is neither skilled or unskilled or of a manual or clerical nature, the state government cannot add the employment in educational institutions in the Schedule in exercise of power under Section 27 of the Act. Therefore, the appeal was allowed and the Writ petition succeeded.
Judicial Review of Minimum Wages
A number of decisions have iterated that courts ought to exercise caution in interfering with notifications fixing minimum wages in the exercise of judicial review. Being a welfare legislation, High Court should refrain from striking down notifications on mere technicalities.
Ministry of Labour and Rehabilitation v. Tiffin’s Barytes Asbestos and Paints Ltd., 1985 (3) SCC 594 [Supreme Court of India, 3 Judge Bench]
16th July 1985; Supreme Court of India
The Ministry of Labour and Rehabilitation issued a notification under Sections 5(1)(a) and 9 of the Minimum Wages Act, 1948 to appoint a Committee for fixing minimum wages in respect to employment in Manganese, Gypsum, Berytes and Bauxite Mines. The Committee comprised of two independent members, five representatives of employers and five representatives for employees. Resultantly, on the advice of the Committee, the Central Govt. issued a notification fixing minimum rates of wages payable to employees in the aforementioned mines. A Writ Petition was filed by several mine owners in the High Court of Andhra Pradesh. The High Court quashed the notification on grounds that the committee was improperly constituted. There was an appeal to the decision to the Supreme Court.
High Court’s Holding: A) The two so-called independent members were Govt. employees under the Labour Department, they were not truly ‘independent’ to be eligible under Sections 5 and 9; B) The so-called representatives for employers were not ‘representatives’ for the aforementioned mining industries and cannot be eligible under Sections 5 and 9.
The Supreme Court disagreed with the decision of the High Court. Firstly, it held that the independent members who were Govt. employees were indeed ‘independent’. If the Govt. is the employer for the purposes of that committee, then they may not be independent and may instead be ‘interested’ or ‘non-independent’.
The Court clarified that within the scope of Section 9, ‘independent persons’ are individuals who belong neither to the category of employers nor to the category of employees.
The Court added a caveat stating that the Article 226 of the Constitution should not be used to lightly interfere with minimum wage notifications on the premise of irregularities with the committee’s constitution. The interference should only be done on the basis of substantial grounds. The Court allowed the appeals and set aside the judgment of the High Court.
Retrospective Fixation of Minimum Wages
The Kerala High Court in Association of Planters of Kerala v State and the Karnataka High Court in M/s. Mizar Govinda Annappa Pai & Sons v. State of Karnataka 1986 LIC 1555 has clarified that the Appropriate Government can fix the wages with a retrospective effect. The provisions of section 3 (i)(b) of the Act cast an obligation on the appropriate Government to review the minimum rates of wages at such intervals not exceeding five years. Admittedly, in most of these cases, the revision of Minimum Wages has been done with a delay ranging from six months to two years & nine months. As a result, several notifications seek to bring the revision into effect retrospectively. Such power has been upheld.
Association of Planters of Kerala v. State, (1996) IILLJ 267 Ker [Kerala High Court, Single Judge]
6th February 1996; Kerala High Court
The Govt. of Kerala issued a draft preliminary notification containing proposals regarding the revision of minimum wages payable to the classes of employees employed in Tea, Rubber, Coffee and Cardamon plantations in the State with effect from 1st April 1995.
The last wage revision was made in the year 1988. Hence, a proposal in the form of draft preliminary notification dated 18th November 1995 was issued for the information of all persons who are likely to be affected calling upon them to submit their objection and suggestions on or before 20th January 1996. The Kerala Association of Planters challenged the said notification in a writ petition. The petitioners objected to giving retrospective effect from 1st April 1995 to the minimum rates of wages.
The Court held that a duty is cast on the State by the provisions of the Act and Article 23 to fix and revise the minimum rate of wages. The continuance of rate of wages fixed from 1993 onwards which would be less than the minimum payable will be illegal and the workers are entitled to the retrospective fixation or revision from the date it is due for revision. Otherwise, Section 3(1)(b) would become meaningless and redundant.
In this background if Section 5(2) is read it would make clear that the revision can be related to an anterior date.
The principle of interpretation of legislation made under power conferred by statute is that it must be construed in the light of the enabling statute generally and particularly in conformity with its substantive provision. The court noted that by express words viz., “otherwise provided” and by necessary implication read with Section 3(1)(b) the State is entitled to revise the minimum rate of wages retrospectively.
Non-Payment of Minimum Wages as Forced Labour
Non-payment of minimum wages has been recognised as a violation of the constitutional prohibition on forced labour under Article 23 of the Constitution. This Supreme Court in PUDR v Union of India recognised that force could arise out of compulsion of economic necessity. Therefore, the non-payment of minimum wages would be considered forced labour. This verdict has significant practical ramifications because by linking minimum wages with Fundamental Right, it opened the door for the remedy of writ petitions under Article 32 for non-compliance with the Minimum Wages Act 1948. Secondly, it also ensured that the government is required to pay minimum wages even as part of public relief works as was clarified in Sanjit Kumar Roy v State of Rajasthan.
However, this principle has not been taken to its logical culmination. In so far as non-payment of minimum wages is seen as forced labour and violation of the fundamental right under Article 23, it is arguable that the obligation to pay minimum wages ought to apply universally to all categories of employment. However, the Supreme Court in Lingegowd Detective & Security Chamber Pvt. Ltd. v. Mysore Kirloskar Ltd held that Minimum Wages Act has no application to non-scheduled employment
People’s Union for Democratic Rights v. Union of India & Ors., 1982 (3) SCC 235 [Supreme Court of India, 2 Judge Bench]
18th September 1982; Supreme Court of India
This case arose when India was hosting the Asian Games in 1982, leading to various infrastructural projects in New Delhi, spearheaded by the Central Government, the Delhi Administration, the Delhi Development Authority, and the New Delhi Municipal Committee. These bodies were registered as Principal Employers under Section 7 of the CLRA, 1970. The contractors employed by the authorities registered as principal employers, employed supervisors, who in turn employed workmen from other states.
The petitioners made four primary averments: A) Minors being employed in these projects constitutes a violation of Employment of Children Act, 1928, read with Article 24 of the Constitution of India, 1950. B) Poor living conditions and lack of facilities for the contract labourers and migrant workmen was constitutive of violations of the CLRA, 1970 and the Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979. C) Non-payment of the minimum wage of Rs. 9.25 a day was argued to be a violation of the Minimum Wages Act, 1948. D) The female workers were being paid Rs. 1.25 less than male workers, per day, for the same work, which was argued to be a violation of Equal Remuneration Act, 1976.
Respondents’ Contentions on the Issue of Minimum Wages: A) The petitioners did not possess locus standi to file the petition on behalf of the workers. B) The contractor is the direct employer of the said workmen and must be held responsible, as opposed to the Authorities. C) Payment less than the minimum wage is still some form of remuneration, if not ‘adequate’, and thus cannot be begar/forced labour. D) Article 32 jurisdiction does not encompass the violation of legal rights, such as the violation of Minimum Wages Act.
The Court relied upon the various barriers faced by the impoverished masses of the country, which also comprise the working class population, in approaching the Court as the basis for relaxing the doctrine of locus standi. Thus, PUDR was held to have sufficient cause and position to bring the said petition to Court.
To allow the application of Article 32 jurisdiction, the Court held that a violation of the Equal Remuneration Act is in substance a violation of Article 14 and similarly violation of the Contract Labour Act, 1970 and Inter-State Migrant Workmen Act, 1979 are a violation of Article 21, while relying on the broad interpretations given to Article 21 on previous occasions. Significantly, for the purposes of this brief, the Court similarly tied the Minimum Wages Act violation to a violation of Article 23. These holdings were such that these violations were now fundamental right violations, and the Court could exercise its writ jurisdiction under Article 32.
The Court clarified that Article 23 is enforceable against the State as well as private citizens, holding that the scope therein is broad and unlimited. It rejected the respondent’s argument which limited the scope of Article 23 merely to the payment of ‘any wage’, and read it to impose a positive burden on the State to pay the minimum wage. It also held that extracting work from a helpless, impoverished labour force, without the minimum wage payment would attract the offence of forced labour as ‘force’ was to be read expansively to include ‘economic force’.
Sanjit Roy v. State of Rajasthan, 1983 (1) SCC 525 [Supreme Court of India, 2 Judge Bench]
20th January 1983; Supreme Court of India
The State of Rajasthan’s Public Works Department had employed several workers in a construction project to provide relief to those victimized by the drought and scarcity. The payment to be made to each cluster of workers was based on work done calculated by the Department, and money was paid to the head of the cluster. The rule maintained by the Department was such that a minimum amount of work had to be done in order to be qualified to receive the minimum wage of Rs. 7, which would otherwise be reduced proportionate to the work done. Also, the wages were paid to the leader to then distribute evenly among the cluster, not proportionately. This public interest petition was filed by the Director of the Social Work and Research Centre. The Rajasthan Famine Relief Works Employees (Exemption from Labour Laws) Act (“Exemption Act”), 1964 provided an exemption from Minimum Wages Act to ‘famine relief works’ as defined in the Act by virtue of Section 2(b) read with Section 3 of the Exemption Act.
Petitioners’ Contentions: The differential payments among the groups of workers, and the payment of wages below minimum wages were argued to be perpetuating inequalities. They also ultimately contended the validity of the Exemption Act itself, on the anvil of Articles 14 and 23. The petitioners argued for a writ of mandamus directing payment as per Minimum Wages Act.
Respondent’s Contentions: The jurisdiction of the Court was excluded from any matter with regard to the workers of famine relief workers under any labour law as per Section 4 of the Exemption Act, and thus the jurisdiction of the Supreme Court also does not remain.
The Court held that any person providing labour or service to an employer for compensation which is not equivalent to the minimum wage puts the employer in violation of Article 23, rendering such labour ‘forced’ in nature. Therefore, the avoidance of Minimum Wages Act, 1948 through a legislation is also rendered unconstitutional in so far as it excludes the application of minimum wages. It was also held, in this factual scenario, that the minimum wage Notification under the Minimum Wages Act is not calculated on a piece-rate basis, but rather it is owed to any person who works throughout the duration of the working hours. Therefore, even work amounting to less than the threshold set by the employer cannot warrant a reduction in wages lower than the minimum wage.
Lingegowd Detective & Security Chamber Pvt. Ltd. v. Mysore Kirloskar Ltd., 2006 (5) SCC 180 [Supreme Court of India, 2 Judge Bench]
4th May 2006; Supreme Court of India
The petitioner’s establishment was providing security personnel to various organizations. The payment of minimum wage as per the Minimum Wages Act is determined through the entries in the Schedule of the Act, the composition of which is left up to the discretion of the appropriate government, and a separate Notification. The Single Judge Bench of the Karnataka HC had held in favour of the petitioner but mandated an ex-gratia amount to be paid, whereas the Division Bench overturned this verdict.
Petitioners’ Contentions: A) The petitioners in this case appealed from a Karnataka HC order which had mandated minimum wage payment. They claimed that the order was without jurisdiction as the detective and security services establishment was not a scheduled employment in the Schedule to the Minimum Wages Act, 1948, and no specific Notification had been issued. B) They also contested the issue of joint and several liability with the principal employer for payment of the ex-gratia amount as determined by the single bench of the Karnataka HC.
Defendants’ Contention: Principal employer’s activities were included in the list of Scheduled employments so there was no need for separate notification for Lingegowd Securities to be brought within the ambit.
The Court held that detective services do not form part of the scheduled employment as detailed in the Schedule and that there was no employee-employer relationship between Lingegowd and the workmen, and therefore Minimum Wages Act did not apply. It distinguished the PUDR v. UOI case from the present case, with no reason provided for this, and also excluded the application of the CLRA, 1970.
Karnataka Prantya Raita Sangha v. Union of India, 2011 SCC Online Kar 4509 [Karnataka High Court, Division Bench]
23rd September 2011; Karnataka High Court
Section 3 read with Section 6 of the Mahatma Gandhi National Rural Employment Guarantee Act 2005 Act empowering the authority to fix wages lower than the minimum wages was challenged.
Petitioner’s Contentions: A) The power under Section 6 (1) of the MGNREGA Act is arbitrary and discriminatory inasmuch as it provides for fixation of wage rate which would be lesser than the minimum wage prescribed under another central enactment. B) The definition of wage rate leads ultimately to the rate fixed under Section 6 (1) of the MGNREGA Act which cannot be less than the prescribed wage, and any reduction would be a violation of Article 23 of the Constitution of India, 1950. Therefore, it must be struck down for unconstitutionality. C) The Notifications issued which prescribe the wages as less than the minimum wage must also be quashed.
Respondent’s Contentions: A) The MGNREGA Scheme is a beneficial scheme having unemployment allowance and other provisions. It is based on a budgetary allocation by the Central Government and therefore wage fixation must be done keeping in mind the budget and scheme applicants. Therefore, the non-obstante clause which excludes the application of the Minimum Wages Act must be adhered to in order to maintain economic capacity. B) Since other advantages are provided under the Act, and the wages are constantly revised upwards even if short of the minimum wage, none should have grievance for the exclusion of the Minimum Wages Act. C) The unskilled workers are not comparable to the skilled agricultural workers and cannot be paid the same minimum wage.
The MGNREGA Act was held to be a general law which seeks to provide employment for a guaranteed number of days, but that the MW Act is a special law in the context of ensuring minimum wages for certain scheduled employments, including the employment covered in the MGNREGA Act. Section 6(2) of the latter act maintains the application of MW Act until Section 6(1) is invoked. The special law must prevail, especially in the absence of a mechanism for calculation of wage rate given under the MGNREGA Act.
The economic capacity argument was cast aside by the Court, strictly observing that a State obligated by DPSPs to provide minimum wages, and having enacted a law to that end cannot then claim otherwise. No false distinctions among the variety of workers would be accepted to negate the obligation to provide minimum wage, even if other advantages were given under the Act.
The High Court held that the section itself did not amount to a forced labour provision but that the payment of less than minimum wage did constitute a violation under Articles 23 and 14, read in the context of the PUDR v. UOI and Sanjit Roy cases.
The appeal from this order was not decided in substance by the Supreme Court in 2014 as the Government issued an order revising the wage rate in accordance with the MW Act. The subsequent revision of minimum wage was treated as the wage rate from the relevant date of fixation of the minimum wage, and the Government was merely directed to pay the difference created from the retrospective application of the law. The legal issues were left open for a future Bench to decide upon if raised again.
R. Gandhi v. The Union Of India, MANU/TN/1896/2020 [Madras High Court, Division Bench]
26th February 2020; Madras High Court
Writ Petition filed under Article 226 of the Constitution of India, praying for a Writ of Declaration, declaring Section 6 of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (Act 42 of 2005) as ultra vires Article 23, 14, and 16 of the Constitution of India and therefore, void ab-initio.
The first ground of challenge raised is that non-payment of minimum wages as per the Minimum Wages Act, 1948 (for brevity, “the 1948 Act”) to those who are engaged under the Mahatma Gandhi National Rural Employment Guarantee Act Scheme (for brevity, “the MGNREGA Scheme”) is violative of Article 14 of the Constitution of India, in as much as persons engaged for performance of similar nature of work are getting the minimum wages in other Government Departments and, therefore, fixing a lower wage notified under the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (for brevity, “the 2005 Act”) is ultra vires the Constitution of India. The second ground is that paying wages less than minimum wages prescribed amounts to compelling the MGNREGA engages to be treated as forced and bonded labour, which is violative of Article 23 of the Constitution of India.
The purpose of the 2005 Act is to extend a helping hand to the unemployed youth and is not to force unwilling labour on any person. The 2005 Act is clearly intended to augment and supplement the penury conditions of poverty and provide financial benefits in the shape of wages.
Further, the nature of work intended to be assigned under the MGNREG Act was separate to be and distinct from those listed under the Schedule to the MW Act. Therefore, any comparison between works assigned under the two legislations seems specious and legally untenable.
The MGNREG Act has been drafted with the principle intent of creating a social security net that can be invoked to enhance or augment livelihood security for the rural households. In other words, it is meant to be used as a last resort. That is why Section 6 (1) prescribes the wage rate in a way that clearly distinguishes it from minimum wages for agricultural labourers.
Liability of Principal Employer and Contractor
The Minimum Wages Act does not explicitly use the term ‘principal employer’. This has, however, led to some confusion and inconsistency between various High Courts. Some decisions suggest that “any person who employees” another person in any scheduled employment falls under the category of employer and both parties – the principal employer and the contractor, meet the definition of employer and are jointly and severally responsible for payment of minimum wages to the employed. A decision of the Jharkhand High Court, in contrast, has ruled that there is no concept of a principal employer as per the definition of ‘employer’ under Section 2(e) of the MWA and consequently, principal employers cannot be held liable as a result for any default.
Surya Rau V. V., E.D. Nocil & Others v. Surendra Ramkrishna Tendulkar, 1998 (3) MahLJ 281 [Bombay High Court, Single Judge]
3rd February 1997; Bombay High Court
Complaints have been filed against the Petitioner, the Executive Director of National organic Chemical Industries Limited (NOCIL), by the respondent for violation of Sections 18 and 19(4) of the Minimum Wages Act, 1948 (“MWA”) read with Rules 27(1), 27(2), 22 and 28 of the Maharashtra Minimum Wages Rules, 1963. The alleged violation is of the obligation of the petitioner as the Principal Employer, to maintain registers regarding employees engaged through contractors to work in the establishment. The learned Magistrate has convicted the contractor for commission of the above-mentioned offences and directed the case to proceed against the Petitioner as well.
Petitioner’s Contentions: A) The obligation to maintain records and registers lies on the contractor according to the Rules framed with respect to contract labour, specifically Rule 59 of the Minimum Wages Act and Section 29 and 30 of the Contract Labour (Regulation and Abolition) Act (“CLRA”). B) The employer of a factory is its manager as per Section 2(e) of MWA whereas the petitioner has been described as the occupier of the factory in the complaint, and thus the complaint with respect to him must be quashed.
The court held that the responsibility to maintain records and registers falls upon the employer as per Section 18 of the MWA and Rules 22, 27 and 28 of Minimum Wages Rules. The Court observed that ‘employer’ as defined under Section 2(e) of the MWA includes a person who employs a worker directly or through another person, thereby including both principal employers and contractors within its ambit. The MWA does not differentiate between principal employer and a contractor, unlike the CLRA. A reading of the definition of employer as a person who employs on behalf of any other person read with clause (iv) of the definition will also include a contractor. Further as normally understood the employer for the contract workers would be the contractor as there exists a relationship of master and servant between them, but the inclusive definition of the word employer in the definition clause of Minimum Wages Act also brings in the person who employs through another person. Therefore, the person who engages workers through another like a Contractor would also be an employer for the purpose of the definition under the Minimum Wages Act.
Section 27 of the CLRA read with the Rules clearly prescribe which records and registers have to be maintained by the principal employer and contractor respectively. A conjoint reading of Section7, Section 21 and other provisions of the CLRA reflects that the principal employer is mandated to apply for registration to engage contract labour, nominate representatives to ensure timely payment of wages by the contractor to its employees and provide facilities such as restrooms, canteens etc to the workers if the contractor fails to do so. The Court also relied on provisions of Maharashtra Contract Labour (Regulation and Abolition) Rules, 1971. It noted that Rule 55 requires every principal employer to maintain in respect of each registered establishment a register of contractors in Form No. VIII. The Court observed that a combined reading of these obligations reflects that even though the principal employer does not have any obligation cast on them under the Act and Rules from Rule 56 onwards, to ensure effective compliance of their other duties under the Act they must maintain records and registers of the employees.
The petitioner also relied on Rule 59 of the Contract Labour Rules to support his argument. Rule 59 states that if the contractor has to maintain records under the MWA then that suffices for the purposes of the CLRA. However, the Court noted that this does not alter the definition of employer under the MWA that includes both contractor and principal employer, and does not dispense the principal employer’s obligation of maintaining records under the MWA. Therefore, NOCIL has the responsibility to maintain registers and records of these employees. The contention that the petitioner, being only the occupier of the factory, is not responsible for the offence was rejected by the Court by relying on Section 22(C) (1) and (2) of the Act.
Niroop Mohanty & Ors v. State of Jharkhand & Ors., 2005 IILLJ 207 Jar [Jharkhand High Court, Single Judge]
5th August 2004; Jharkhand High Court
The petitioners Niroop Mohanty, Arun Narayan Singh and A.K. Choudhary are the Vice President of H.R.M, Deputy Managing Director, Corporate Service and Head of H.R of Tata Iron and Steel Company Ltd. (TISCO) respectively. The petitioners have challenged orders passed by the Chief Judicial Magistrate, Jamshedpur wherein cognizance was taken against the petitioners for offences punishable under Section 22A of the MWA.
Petitioner’s Contentions: The main contention of the petitioners is that TISCO is not the principal employer of the workmen and the work involved is being performed by the contractors. Therefore, the petitioners have contended that they are not liable to maintain registers of fine and deduction of damages or loss caused to the employer, as they are merely employees of TISCO and not the employer of these workmen. Moreover, they also contended that they were not responsible for displaying minimum rate of wages at the site or maintain a register showing overtime payment as these duties were being performed by the contractor under whom the workmen were performing duties.
Respondent’s Contentions: TISCO is the principal employer of the workmen as the contractors have been engaged by TISCO and it is benefitting from their work.
The Court upheld an earlier order dated 22.09.2004 wherein a Bench of this Court held that there is no concept of a principal employer as per the definition of ‘employer’ under Section 2(e) of the MWA. The Court thereby held that the petitioners Niroop Mohanty and Arun Narayan Singh are not employers as defined under Section 2(e) for purposes of observance of Section 12(1) or 18 of the MWA. Therefore, the Court set aside the impugned orders passed by the Chief Judicial Magistrate, Jamshedpur which held them liable under Section 22A.
Executive Engineer, Rural Works Division, Mayurbhanj v Addl. District Magistrate, Mayurbhanj & Ors., 2005 IILLJ 32 Ori [Orissa High Court, Single Judge]
16th July 2004; Orissa High Court
The Executive Engineer, Rural Works Division, Mayurbhanj has filed this writ application challenging the order passed by the Addl. District Magistrate and Authority under the MWA directing the petitioner to pay arrear differential wages for the period from July, 1990 till February, 1994 for an amount of Rs. 90,05,640/-. The case of the opposite parties is that they were employed as casual labourers by the petitioner in six Engineering Sub-Divisions but were paid lesser wages than that fixed by the State Government. The petitioners objected and contended that the claim of differential arrear dues as well as compensation was barred by limitation and that the same dispute having been raised before the Orissa Administrative Tribunal, the dispute cannot be entertained by the Authority under the Act. However, in the impugned order the authority under the Act condoned the delay and allowed the application of the opposite parties.
Petitioner’s Contentions: A) Application filed under Section 20(2) of the MWA was time-barred and could not have been entertained by the Authority under the Act. B) The same dispute has been raised before the Orissa Administrative Tribunal and the respondents cannot approach two courts for the same relief.
Respondent’s Contentions: A) The delay has already been condoned by the Authority under the Act on consideration of facts before him. B) The Original Application filed before the Orissa Administrative Tribunal was regarding the regularization of services rendered by them as casual workers and was unrelated to payment of arrear differential wages.
The Court upheld the impugned order that condoned the delay in application for differential wages as the same was caused due to the matter being adjudicated before the Labour Office until before this relief was claimed. Moreover, the Court observed that the application before the Orissa Administrative Tribunal was regarding an unrelated matter and that the Orissa Administrative Tribunal could not enter into the question of payment of arrear wages, there being a different statutory authority for the same. Further, the Court also upheld the authority’s decision that even though the respondents were employed by different contractors under the provisions of the CLRA, the petitioner as the principal employer was liable to pay the differential wages. The Court upheld the impugned order completely and dismissed the writ petition.
Sulabh International Social Service Organization & Ors v. Regional Labour Commissioner (Central) & Ors., 2013 (198) DLT 13 [Delhi High Court, Single Judge]
18th October 2012; Delhi High Court
The petitioner Sulabh International Social Service Organization, a voluntary charitable organization and All India Institutes of Medical Sciences (Respondent No. 3) entered into an agreement for deployment of the alleged volunteers (Respondent No. 2) for cleaning and sweeping at the premises of Respondent No. 3. Thereafter, the respondent No. 2 filed a writ petition before this Court for the payment of minimum wages and the same has been allowed by the impugned order passed by the Authority under the MWA. The petitioner and respondent No. 3 have subsequently challenged the sustainability of sustainability of the order dated 25th June 2012 passed by the Regional Labor Commissioner. The moot question for the consideration in these writ petitions is whether the alleged volunteers, deployed through the petitioner, namely Sulabh International Organization, are entitled to get the minimum wages under the Minimum Wages Act.
The petitioner’s contention was that it is not an industry and the provisions of MWA are not applicable to them as it is a voluntary social service organization of charitable and philanthropic nature, working on no profit and no loss basis. Therefore, it is neither an establishment nor an employer and does not have the responsibility to pay minimum wages. Respondent No.3 has also made the same contentions and submitted that non-existence of relationship of employer and employee between the petitioner and Respondent No. 2 would render the impugned order void ab initio. The above mentioned parties also relied on the contractual agreement entered between them to support their argument regarding non-existence of any obligation to pay minimum wages.
The Court observed that the petitioner may not be an industry under the Industrial Disputes Act, 1947, and may be a voluntary organization, but the issue in hand is whether for the services rendered for the petitioner the alleged volunteers are entitled to payment of minimum wages under the MWA.
It noted that according to Section 2(e) of MWA “any person who employees” another person in any scheduled employment falls under the category of employer; unlike the definition of the employer in the Industrial Disputes Act which is solely based on the definition of industry. The Act thus applies to an employment which is scheduled irrespective of who carries on that scheduled employment.
Here, the “volunteers” were deployed in the scheduled employment of sweeping and cleaning by Respondent 3 indirectly through the petitioner Sulabh International Organization.
The Court held that both parties meet the definition of employer and are jointly and severally responsible for payment of minimum wages to the employed or deployed. Respondent No. 3 as employer cannot escape the responsibility of payment of minimum wages to the employed as the amount paid by it to the petitioner for the purpose of payment to the employed was less than the minimum rates of wages fixed by the Government. The Court observed that the petitioner being a voluntary organization does not automatically render all persons deployed by it as volunteers as demonstrated by the very fact of them claiming minimum wages.
Moreover, Section 25 of the MWA stipulates that any contract or agreement that relinquishes or reduces an employee’s right to minimum wages shall be null and void as far as it purports to reduce the minimum wages determined under the Act. Therefore, the Court held that the contract entered into between the principal employer and the contractor would not disentitle workers’ claim for minimum wages.
Liability of Directors of Companies
As mentioned earlier, the Minimum Wages Act criminalises the failure to pay wages not less than the statutorily fixed rate of minimum wages. Section 22 of the Act states that any employer who pays to any employee less than the minimum rates of wages fixed or contravenes any rule or order on hours of work used under this Act shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five hundred rupees, or with both.
Further section 22C clarifies that where the employer is a company, every person who at the time the offence was committed, was incharge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence. This is only subject to the exception where he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
This provision implies that Directors of companies can be held liable for offences by companies. At the same time, it has been clarified that Directors cannot be held automatically liable merely on the basis of designation. Whether a Director is responsible for day to day affairs is a question of fact and the person in charge regardless of the nomenclature of the post should be liable for the conduct of business at the relevant time. It has been further ruled that it is mandatory while initiating proceedings against any of the Directors of the Company under the Act to make the company a party to the proceedings as well.
Deputy Manager, BHEL v. State of HP & Anr., 2014 (2) CLR 461 [Himachal Pradesh High Court, Single Judge]
26th April 2014; Himachal Pradesh High Court
A complaint was filed u/s 18(1), (2), and (3) of the Minimum Wages Act,1948 for non-maintenance of registers and records before the Chief Judicial Magistrate, Mandi. This has been transferred to JM First Class who started proceedings.
Petitioner’s Contentions: A) Company was a necessary party u/s 22 C of the Minimum Wages Act, 1948. B) The name of the person who at the time of committing the offence was in charge and responsible to the company and conduct of business has not been disclosed. C) Labour Inspector was not authorized to conduct the inspection.
The Court went into an analysis of a wide gamut of judgments, to interpret the role of a director and vicarious Liability (based on State of Haryana v. Brij Lal Mittal (1998) 5 SCC 343) and whether a person can be held liable without being a director u/s 34 (1) of the Act.
It reiterated that no universal rule exists that a Director is responsible for day to day affairs and his work is thus a question of fact. The person in charge regardless of the nomenclature of the post should be liable for the conduct of business at the relevant time. This line of reasoning is borrowed from Company Law and the Negotiable Instruments Act. The essential prerequisite is the person should be connected to the commission of the crime and in charge of affairs. No deemed liability can exist. The person spared from culpability of the offence needs to prove that he exercised all due diligence to prevent the commission of a crime.
D. Shesha Reddy v. State of Karnataka, 2019 IndLaw Kar 13075 [Karnataka High Court, Single Judge]
7th August 2019; Karnataka High Court
The in-charge Labour Inspector visited the premises of Dodla Diary Limited at Koppal and found that there is a violation of the provisions of the Minimum Wages Act and Rules,1948 (“Act”) by the Contractors. In pursuant to that, he informed the Assistant Manager and handed a report and a show cause notice to the Contractor. The Contractor did not reply to the notice. Subsequently, the Labour Inspector filed a criminal complaint in pursuance of the Act, along with the Contract Labour (Regulation and Abolition) Act 1970 before the Magistrate and the same is now pending before the Principal Civil Judge and JMFC, Koppal. The petitioner (D Shesha Reddy, Chairman of the Dodla Dairy Ltd.) approached the High Court to quash the proceedings before the JMFC.
Petitioner Contentions: A) Limitation u/s 22 A of the Act is three months which has elapsed. B) The Company has not been made a party to the proceedings whereas show cause has been issued to the manager.
Respondent Contentions: A) Merely because the Company was not made a party the proceedings can’t be quashed. B) The final notice was issued and the proceedings were initiated within the period of issuance of final notice.
The company is not made as a party to the proceedings. It is mandatory while initiating proceedings against any of the Directors of the Company under the Act to make the company a party to the proceedings as well. On perusal of the complaint, the company is not made as a party to the proceedings and on that ground also the complaint is liable to be quashed.
The offence is invoked under Section 22-A of the Minimum Wages Act and the Court below has taken cognizance under Section 22A of the Contract Labour Act and the very complaint and taking cognizance is inconsistent.
Cognisance of Complaint
Section 22-B of the Act states that a Court can take cognisance of a complaint against any person for an offence under the Act only on a complaint made by or with the sanction of an Inspector.
Dr. D.B. Gupta & Ors v. State Of Bihar & Ors., MANU/BH/1764/2016 [Patna High Court, SIngle Judge]
30th November 2016; Patna High Court
The petitioners are senior officials of M/s Lupin Ltd. whereas the respondents are the State of Bihar and a medical representative under the same company. After a claim was filed under the Minimum Wages Act, 1948, notices were issued to the officials of M/s Lupin Limited by the Court of the Assistant Labour Commissioner, Saharsa, with a direction not to alter the service condition of the respondent no. 2 ( Ramashish Kumar). Yet, despite this order, the petitioners terminated the services of the respondent no. 2 terminated. Thus, they committed offence under Section 22-A of the Minimum Wages Act, 1948 (Bihar Amendment).
The court found that Sec 22 A and Sec 22 B of the Bihar Amendment to the Minimum Wages Act allow for condonation of delay. This allows the complaint to be made even after the expiry of the said period. Further, Section 22-B of the Minimum Wages Act, 1948 (with Bihar Amendment) read with Section 190 of the Code of Criminal Procedure, 1973, leaves no scope for any doubt that the Magistrate could not have taken cognizance without receiving a complaint made by, or with the sanction of the inspector, the person authorized under the provisions of Section 22-B of the Minimum Wages Act, 1948 (with Bihar Amendment). This leads to the conclusion that he was not authorized to make an order under Section 156 (3) of the Code of Criminal Procedure, 1973, he having no authority to take cognizance on a complaint filed by the Respondent No.2, who had filed a complaint without the sanction of the inspector.
(A) The Power to Award Compensation
Section 20 of the Act provides for filing of claims arising out of payment of less than the minimum rates of wages. Under this provision, the Authority hearing the claims can award, in addition to the money due, compensation that has a maximum cap of ten times the difference between minimum rate of wages and wages actually paid. Courts have clarified that the compensation may be payable even where the employer has consent to pay the deficit wages. At the same time, it has been held that compensation is not mandated to be awarded in every case and the power to award compensation must be exercised given the circumstances of the case.
Ponnambalam v. Authority under Minimum Wages Act, 1993 LLR 735 [Kerala High Court, Division Bench]
2nd September 1994; Kerala High Court
The employee-respondent had claimed his due wages from a period preceding and succeeding September 11, 1988. In pursuance of the same, the courts granted the employee respondent wages from September 12, 1988 and a compensation of Rs. 3,235/- instead of Rs. 500/- which was initially sought by the respondent. The employer preferred an appeal.
The thrust of the employer’s contention is that in as much as he has expressed his willingness to pay the amount of minimum wages, the Authority should not have ordered payment of any compensation at all in favour of the employee. It was further contended that the Authority can award only such amount of compensation as is expressly claimed by the employee in his application and the Authority has no jurisdiction to award any amount in excess of the amount claimed
The liability for payment of compensation is not relatable to the factum of the consent on the part of the employer. The fact that the employer has consented to pay the minimum rates of wages as per Ext.P3 statement will not absolve him from the liability to pay compensation to the employee. The liability of the employer to pay minimum wages to the employee does not depend upon the employer’s consent.
In the matter of compensation even in cases where the claim made by the employee is less than the amount he is entitled to under the Act, it is open for the Authority under the Act to step in and to award an amount which is in excess of the amount so claimed by the employee, but within the limit prescribed under the Act.
Amcon Construction v. Labour Enforcement Officer and Anr., 2019 Indlaw DEL 3551 [Delhi High Court, Single Judge]
19th December 2019; Delhi High Court
An appeal is preferred by the employer who has been asked to pay a sum of Rs. 5305/- as wages along with a compensation that is ten times the differential amount between the minimum wages and the wages actually paid totalling to about Rs. 50,350/-.
Contention of the employer: Even if the Competent Authority had come to the conclusion that there was a shortfall of Rs.5035/- in the wages paid to its employees by the petitioner, there was no justification for awarding them compensation equivalent to 10 times of the said differential amount.
Contention of the Labour Department: -Since the petitioner did not comply with the statutory requirement to pay minimum wages, the Competent Authority could not be faulted for awarding the respondents compensation in accordance with the MW Act.
The courts took cognizance of the disparate nature of the damages awarded and stated that the amount of Rs.50,355/- be set aside. The courts acknowledged that while the courts retained the discretion to award as much as ten times of the differential amount, the same is not mandated to be applied in all cases and must be exercised given the circumstances of the case. This power cannot be used arbitrarily or punitively and must be exercised after due diligence analysing inter alia the nature of the employment, the financial condition of the employer, amount involved and any delay in payment of the wages.
While upholding the direction to the petitioner to pay the differential amount of Rs.5035/, the amount of compensation as awarded under the impugned order is reduced to twice the differential amount.
Maintainability of Application under Industrial Disputes Act and Bar of Suit
Section 24 of the Minimum Wages Act which deals with bar of suits, bars any court from entertaining any suit for the recovery of wages which could be recovered by a claim under section 20 of the Act. However, it has been ruled by the Supreme Court that this provision does not necessarily bar an application for recovery under the Industrial Disputes Act.
Athani Municipality v. Labour Court, Hubli & Ors., 1996 (1) SCC 873 [Supreme Court of India, 2 Judge Bench]
Certain applications were filed for computation of benefit in respect of over-time work and work done on weekly off-days, which were entertained by the Labour Court, under Sec 33C (2) of the Industrial Disputes Act, 1947. The Labour Court computed the amounts due to the various workmen and directed the appellant to make the payments. Writ petitions filed by the appellant in the High Court challenging the decision of the Labour Court were dismissed.
Contentions of the appellant: The employer contended that all these amounts could have been claimed by the workmen by filing applications under section 20(1) of the MW Act No. 11 of 1948; and, since that Act was a self-contained Act making provision for relief in such cases, the jurisdiction of the Labour Court under the general Act, viz., the Industrial Disputes Act, 1947 was taken away and excluded. It was further pleaded that the jurisdiction of the Labour Court to deal with the claims under s. 20(1) of the MW Act had become time-barred and such claims, which had become time-barred, could not be entertained by the Labour Court under S. 33C (2) of the Act.
The MW Act is concerned with the fixing of rates-rates of minimum wages, overtime rates, rates for payment of work on a day of rest-and is not intended for enforcement of payment of wages. Under s.20(1) of the, MW Act, in which provision is made for seeking remedy in respect of claims arising out of payment of less than minimum rates, or in respect of remuneration for days of rest, or for work on such days, or of wages at the overtime rates, the Authority is to exercise jurisdiction for deciding claims which relate to rates of wages, rates for payment of work done on days of rest and overtime rates. The power under s. 20(3) of the MW Act given to the Authority dealing with an application under s. 20(1) to direct payment of the actual amount found due, is only an incidental power for working out effectively the directions under s. 20(1) fixing various rates under the Act. That is, if there is no dispute as to rates between the employer and the employee and the only question is whether a particular payment at the agreed rate is due or not, then s. 20(1) of the MW Act would not be attracted at all, and the appropriate remedy would only be either under s. 15(1) of the Payment of Wages Act, 1936, or under s. 33C(2) of the Industrial Disputes Act.
There was however, no dispute in the present case with regards to the rates put forward by the workmen, and a pleading by the, appellant in one’ of the applications that the State Government had not prescribed any rates under the MW Act, did not mean that there was a dispute as to the rates claimed by the workmen. Therefore, the remedy under s. 20(1) of the MW Act could not have been sought by the workmen, and hence, the question of the jurisdiction of the Labour Court to entertain the applications under sec 33C (2) of the Industrial Disputes Act being barred because of the provisions of the MW Act, could not arise.