DAMODARAM SANJIVAYYA NATIONAL

LAW UNIVERSITY

Labour Law-II Project

Authorized Deduction in Wages

Submitted To:- Submitted By:-

Prof. Bharat Kumar Anshu Singh

(2014015)

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 ACKNOWLEDGEMENT
On completion of this Project it is our present privilege to acknowledge our profound gratitude
and indebtedness towards our teachers for their valuable suggestion and constructive criticism.
Their precious guidance and unrelenting support kept us on the right track throughout the
project.

We gratefully acknowledge our deepest sense of gratitude to:-

Mr. Bharat Kumar sir (Assistant Professor) of Damodaram Sanjivayya National Law University,
Visakhapatnam for providing us with the infrastructure and personal attention which proved to
be a blessings.

TABLE OF CONTENT
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ACKNOWLEDGEMWNT4
INTRODUCTION.5
DEFINITION OF WAGES UNDER PAYMENT OF WAGES ACT, 1936.7
PART AND COMPONENT OF WAGES.9
DEDUCTION FROM WAGES.....9
1. AUTHORIZED.11
2. UNAUTHORIZED14
CASE ANALYSIS16
CONCLUSION AND SUGGESTION.34.
BIBLIOGRAPHY.35

CASE LAWS
1. D.P KELKAR V. AMBADAS

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2. BANK OF INDIA AND ANOTHER V. T.S. KELAWALA BOMBAY AND OTHERS
3. ASSISTANT PROVIDENT FUND COMMISSIONER, GURGAON VS. G4S SECURITY
SERVICES (INDIA) LIMITED & ANR
4. IN RE: MYSORE SPUN SILK MILLS LTD.; IN RE: OFFICIAL LIQUIDATOR, HIGH
COURT OF MYSORE, BANGALORE
5. UPPER DOAB SUGER MILLS MUZAFFARNAGAR V. PRESCRIBED AUTHORITY AND
OTHERS
6.RAJASTHAN STATE WARE HOUSING CORPORATION VS AUTHORITY APPOINTED
UNDER THE PAYMENT OF WAGES ACT
7.DIVISIONAL SUPDT. DELHI DIVISION NORTHERN RLY., NEW DELHI VS
SATYENDER NATH KAPUR CHAND AND ANOTHER
8.THE GENERAL MANAGER, PUNJAB ROADWAYS VS. GURDEV SINGH
9.MRF UNITED WORKERS UNION VS GOVERNMENT OF TAMIL NADU
10.P.K.MEHRA VS CHIEF SECRETARY
11.SURENDRANATHAN NAIR AND OTHERS V. SENIOR DIVISIONAL PERSONAL
OFFICER (RLYS.)
12.OUDH SUGAR MILLS LIMITED CASE
13.THE MODEL INTERMEDIATE COLLEGE VS THE PRESCRIBED AUTHORITY
AND ORS.(2011)
14.MALA SAHKARI CHINI MILLS LTD., MEERUT VS. AUTHORITY UNDER THE
PAYMENT OF WAGES ACT, 1936, MEERUT AND OTHERS
15. ALL INDIA INSTITUTE OF MEDICAL SCIENCES V. RAMBIR YADAV

INTRODUCTION

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The need to protect the wages earned by the worker had been felt from the early years of the 20th
century. Workers had always been exploited from one or the other way. In 1925 a private bill
called weekly payment bill was first time introduced in the legislative assembly. The bill was
however withdrawn on an assurance of the government that the matter was under consideration
of the government. Imposition of fines by employers on workers and deduction of double
amount of wages for absence period by way of fine was very much customary in those days. The
desirability of regulating the extent of fines and other deductions, through legislation was felt by
the government in 1926.

The royal commission on labour in India made some valuable recommendations. The payment
of wages Act is based on these recommendations. The commission was of the opinion that
legislation regarding deduction from wages and fines was essential. These recommendations
were:1

a. Children were exempted from fine

b. The minimum amount which could be deducted should not exceed half an anna in the rupee in
any month

c. Fine should be utilized for some benefit of the employees recognized by an authority

d. A notice specifying the fine must be placed and any other fine shall be deem to be illegal e.
Any deduction made for goods damaged must not exceed its wholesale price

f. Deduction may be made for housing accommodation and tools and raw materials

g. Imposition of any fine and deduction made which is not permitted by law should be made
penal.2

This recommendation was introduced in Legislative Assembly

1933. The Payment of wages Act was passed in 1936 and came into force on 21st March, 1937.

1 http://learningoflaw.blogspot.in/2013/07/authorized-deductions-under-payment-
of.html , last visited on 20/03/2017 at 10:30 PM

2 labourbureau.nic.in/Stat-of-Fact-2k1-Chp.1.htm last accesses on 22/03/17 at 12:00 A.M

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The preamble of the Act states that the object of the Act is to regulate the payment of wages to
certain classes of employed person.

The Bombay high Court has observed in Arvind Mills Ltd. v.

K.R.. Gadgil2 , the general purpose of the Act is to provide that employed persons shall be paid
their wages in a particular form and at regular intervals without any unauthorized deduction.

WAGES
A wage is compensation, usually financial, received by workers in exchange for their labour.
Compensation in terms of wages is given to workers and compensation in terms of salary is
given to employees. Compensation is a monetary benefit given to employees in return for the
services provided by them.

According to Blacks Law Dictionary, wages means

to give security for a performance of a thing. According to Section 2 (vi) of payment of wages
act, wages means all remuneration, whether by way of salaries, allowances or otherwise,
expressed in terms of money or capable of being so expressed which would, if the terms
employment , express or implied were fulfilled, be payable to a person employed in respect of
his employment or of work done in such employment.3

It includes:
a. Any remuneration payable under any award or settlement between the parties or the order of
court

b. Any remuneration to which the person employed is is entitled in respect of overtime work or
holidays or nay leave period

c. Any additional remuneration payable under the terms of employment whether called a bonus
or by any other name.

3 http://thelawdictionary.org/wages, last visited 24/03/2017

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 In case of D.P. Kelkar v. Ambadas4, it was held that, the definition of age is not limited to
remuneration payable under an agreement or contract. The amended definition would apply to all
kinds of remuneration arising out of a contract.

Minimum Wages in India

In India, 422.6 (94%) million workers out of the total workforce of 457.5 million belong to the
unorganized/informal sector. These workers contribute to more than 60 per cent to India s GDP
growth. Among other sectors, these workers work as farm labourers, landless labourers, factory
workers and construction workers. Currently the number of scheduled employments in the Central
government is 45, whereas in the state sphere the number is 1232.

The Minimum Wage Act, 1948 provides for fixation and enforcement of minimum
wages in respect of schedule employments to prevent sweating or exploitation of labour through
payment of low wages. The objective of the Act is to ensure a minimum subsistence wage for
workers. The Act requires the appropriate government to fix minimum rates of wages in respect of
employment specified in the schedule and review and revise the minimum rates of wages at intervals
not exceeding five years.

COMPONENT OF WAGES

1.Suspension Allowance/ Subsistence Allowance. : Since the relationship between employer

and employee does not cease during suspension and allowance is paid to the employees, in
Employees' State Insurance Corporation v. Popular Automobiles5, 1997, the Supreme Court has
held that suspension/subsistence allowance is wages.

4 (1971) 73 BOMLR 260

5 1997 LLR 1146(SC)

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2.Overtime Allowance.- The employer needs the employees to have work done expeditiously
and payment is made. In Indian Drugs & Pharmaceuticals Ltd. v. Employees' State Insurance
Corporation6, the /Supreme Court held that the ESI contributions will be attracted on overtime
payment.7

3.Lay-off Compensation.- Contributions are payable on such payments. House Rent

Allowance.- In Braithawait & Co. vs. Employees' State Insurance Corporation, AIR 1968 SC
413 and Harihar Polyfibres v. Employees' State Insurance Corporation, Bangalore, 1984(49) FLR
371(SC) the Supreme Court has also held that house rent allowance is a 'wage'.

4.Night Shift/Heat/Gas & Dust Allowance.-This amount is paid by way of incentive under the
scheme of settlement entered into between the management and its workmen and hence wages.
This view was taken by the Full Bench of Karnataka High Court in the case of N.G.E.F. Ltd. v.
Employees' State Insurance Corporation Bangalore8, In Harihar Polyfibres vs. Employees' State
Insurance Corporation, Bangalore, 1984 (49) FLR 371 (SC) the Supreme Court has also
confirmed the same view.

5.Wages and Dearness Allowance for Unsubstituted Holidays. : Such wages and dearness
allowance paid to the employees for the unsubstituted holidays are to be treated as wages. In
Employees' State Insurance Corporation v. New Assarwa Manufacturing Co. Ltd 9., , the Gujarat
High Court has confirmed this view.

6.Interim Relief.- Interim relief paid to the employees is normally paid when either the wage is
under revision or when the payment of Dearness Allowance is delayed due to any reason.
Whatsoever may be the case, if the interim relief is paid to the employees by any employer, the
same will amount to wages

6 1997 LLR 1(SC)

7 https://www.slideshare.net/Anand1010/authorized-deductions-from-wages-under-
the-payment-of-wages-act-1939, last visited on 27/03/2017 at 9:20 PM

8 1979 LLR 463 (Karn HC)

9 981(58) FJR 311 (Guj HC

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7.Life Insurance Premimum subsidy.-In Employees' State Insurance Corporation v. J.S. & W.
Mills Ltd.10, (Raj. HC) the Rajasthan High Court has held that such a subsidy has not been
excluded by the Supreme Court in Harihar Polyfibres v. Employees' State Insurance
Corporation11, while excluding certain allowances and additional remuneration.

8.Medical Allowance.- Where such payments are made by the employer in lieu of the medical
benefit, the same are to be treated as wages. (Earlier instructions were issued vide letter No.
Ins.5(5)/68-Ins.III dt. 21-8-1971 & Ins.III/2(2)2/68 dt. 24-6-1971).

DEDUCTION FROM WAGES

An employer can lawfully withhold amounts from an employees wages only:

(1) When required or empowered to do so by state or federal law,
(2) when a deduction is expressly authorized in writing by the employee to cover insurance
premiums, benefit plan contributions or other deductions not amounting to a rebate on the
employees wages,
(3) When a deduction to cover health, welfare, or pension contributions is expressly authorized
by a wage.

Section 7 of payment of wages act, says about the deduction which may be made from wages.
Section 7 (1) provides that notwithstanding the provisions of Railway Act, wages for employed
person shall be paid to him without deduction of any kind except those authorized by law. It lays
down a general provision against any deduction from the wages of a worker.12

10 1988(57) FLR 32

11 1984 (39) FLR 371 (SC)

12 www.labour.gov.in/sites/default/files/factory_act draft.pdf Lat accessed on 02:ooPM

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Every payment made by the employed person to the employer or his agent shall be deem to be a
deduction from wages. It also lays down that any loss of wages resulting from the imposition,
upon a person, the following penalty should not be considered as deduction from wages:

1. Withholding of increment or promotion including the stoppage of increment at any efficiency

bar.

2. The reduction to a lower post or time scale or to a lower stage in the scale.

3. Suspension.

AUTHORIZED DEDUCTION
The only way an employer can take money from employee pay is:

1. If the employee has specifically authorized the pay deduction. For example, contributions to
a "flower fund" to pay for flowers for funerals, or for United Way or other charities must be
approved in writing by the employee. Employees must also agree to pay deductions for benefit
contributions.

The exception to this, according to the Wage and Hours Law, is that an employer can make
deductions from an employee's pay without consent for items that are "primarily for the benefit
or convenience of the employer" (uniforms, for example). But these deductions cannot take the
employee below minimum wage. So, for example, if an employee is making minimum wage, no
deductions for uniforms could be made.13

13 labourbureau.nic.in/Stat-of-Fact-2k1-Chp.1.htm last accessed on 21 March at 03:AM

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2. For income tax withholding. Every employee must complete Form W-4 at hire specifying the
amount of withholding for federal taxes. For all states where the employee works which have
income tax, the employee must also complete a withholding form.

The withholding form allows the employer to take withholding (a specific form of deduction)
from employee pay. The employee gets to specify the amount of the deduction.

3. By contract. In a union contract, for example, employee pay may be deducted for union dues,
depending on the contract and state laws. The employee may have an individual employment
contract which authorizes certain specific deductions. Employer loans to employees may also be
deducted; the employee should sign a loan agreement.14

4, By a court. A court may require you to garnish employee wages for child support, non-
payment of debts, or other purposes. The employee does not have to consent to this deduction.

5. Employee requested deductions can be made at any time. An example might be an employer
loan to an employee (a loan agreement should be signed), which the employee is paying back
with payroll deductions. Other employee-requested deductions, to United Way, U.S. savings
bonds, or union dues, should also have a signed agreement in the employee's file.

According to Section 7(2) a permissible deduction can be made for absence from duty.
In the bank of India and another v. T.S. Kelawala Bombay and others 15, the bank employees
demanded wage revision and pending acceptance of demand decided to go on four hours strike
daily. The bank issued a circular to deduct full days wages of such employees who participated
in the strike. It was held that strikes and demonstrations are legitimate forms of protest and they
are not banned in this country. By an administrative circular the legitimate mode of protest
allowed and recognized by law cannot be stifled. It was held that payment of wages act is

14 http://asklabourproblem.info/components-forming-part-of-wages-for-deciding-
contribution-under-provident-fund-act-effect-of-splitting-salary-into-
componentsallowances-and-its-effect-on-contribution-under-provident-fund-act/, last
visited on 28/03/2017 at 7:18 PM

15 [1979] 12 LIC 1079

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regulatory. Section 7 (2) read with Section 9 of the act provides the circumstances under which
and the extent to which deduction can be made. It is only when the employer has right to make
deduction, resort should be had to the act to ascertain the extent to which the deduction can be
made. No deduction exceeding the limit provided by the act is permissible even if the contract so
provides. There cannot be contract contrary to or in terms wider than the input of sections 7 and
9 of the act. Therefore wage deduction cannot be made under section 7(2) of the payment of
wages act if there is no such power to the employer under the terms of contract.16

In Surendranathan Nair and others v. Senior divisional personal officer (Rlys.) 17, some of the
railway employees applied for casual leave to participate in an agitation against railway
administration. The leave was refused but the employees participated in the agitation. The
management deducted the wages treating the period of leave applied for as absence from duty. It
was held that the leave rules to the railway are contained in the railway established code and the
rule made there under. The code derives its authority from Article 309 of the constitution and the
rules are made under the delegated power. These rules have general application to all non-
gazatted railway servants. Rejection of leave under such circumstances was legal and proper.
Absence from duty, especially for the purpose pf participation in an agitation against his
management is unauthorized. An unauthorized absentee has no right to compel payment of
wages for the period of unauthorized absence.

In the case of Mineral Miners Union v. Kudremukh Iron Ore Co. Ltd 18., it was held by the
Karnataka High Court that deduction of wages for the Strike period is justified provided strike
was illegal.

16 https://www.thebalance.com/deductions-from-employee-pay-3974579, last
visited on 02/04/2017

17 (2008)2MLJ733

18 ILR 1985 KAR 2833

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In the case of French Motor Car o. Ltd., workers Union v. French Motor Car Co. Ltd 19., three
questions were decided. Some employees of the company indulge in go slow and resorted to
strike for 3 days and 29 employees were not allowed by the employer to resume work unless
they sign a guarantee bond. It has been held that on the principle of no work no pay, the
management was justified in deducting the wages of three days that is, the strike period. Further
the authority under the payment of wages act is not competent to examine whether the strike was
legal or not. The wages of the workmen could be deducted under section 7(2)(b) for absence
from duty. However, the absence from the duty by an employee must be voluntary and it cannot
cover his absence when he is forced by circumstances created by employer from carrying out his
duty. Therefore no deduction can be made from wages of 29 employees whose absence was not
voluntary , in as much as they were not allowed to resume their work without singing the
guarantee bond. The third question was related to nonpayment of variables.

DEDUCTION FOR RECOVERY OF LOANS MADE FROM ANY FUND

Section 7(2) provides that the recovery of loan may be made from any fund constituted for the
welfare of labour in accordance with the rule approved by state govt., and the interest due in
respect thereof.
Deduction from Recovery of Loses The following deduction for recovery of losses may be
made from the wages of an employed person in accordance with the provisions of this ac:
1. Section 7 (2) (m) of the act authorize deduction for recovery of loses sustained by a railway
administration on account of acceptance by the employed person of counterfeit or mutilated or
forged currency notes.

2. Section 7 (2) (n) authorizes deduction sustained on account of failure of employed person to
invoice, bill or appropriate charges due to administration. 20

DEDUCTION BY ORDER OF COURT

19 1990 (60) FLR 709

20 www.irdindia.in/journal_ijrdmr/pdf/vol3_iss2/4.pdf last accessed on 02/03/17 AT 09:00PM

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No deductions can be made from the wages of an emplyoyee except otherwise provided under
the Act.
In Municipal Corporation v. N.L. Abhyankar21, a representative union requested the employer to
collect the levies from the employee and remit the same. The employer refused the request and
the uion made an application to the Labour Court to order the above request. The Labour Court
ordered the employer to accept the request of the Union. In an appeal made by the employer, it
contended that no deductions other than permissible under the act can be made. Therefore it was
held by the court that other than the deductions specified under Section 7(2) no other deductions
can be made by the employer. But umder Section 7(2) (h) it clearly allows deduction which are
required to be made by order of a court or other authority competent to male such deduction. In
view of this the Industrial Court or the Labour Court are competent to make an order for
deduction.

Section 11 provides that any deduction shall not be made from the wages of an employed person
unless the house accommodation, amenity or service has been accepted by him as a term of
employment.
According to Section 12, any deduction for the recovery of advance is subject to certain
conditions:
a. Recovery to be made from first payment of wage and no recovery of travel expenses

b. Advance given after the employment began shall be subject ot such conditions as the
government may impose

c. Extent of loan and the rate of interest thereon should not exceed the amount so stated by the
state government. 22

UNAUTHORIZED DEDUCTION

21 (1979) IILLJ 258 Bom

22 http://asklabourproblem.info/components-forming-part-of-wages-for-deciding-
contribution-under-provident-fund-act-effect-of-splitting-salary-into-
componentsallowances-and-its-effect-on-contribution-under-provident-fund-act/, last
visited on 04/04/2017

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If an employee believes that their employer has made an unlawful deduction from their wages
they are entitled to bring a claim to an Employment Tribunal. A claim must be submitted within
three months of the date of the deduction in question. Even if the tribunal rules in favour of the
employee and orders repayment they have no powers to award interest on the money owed.

Some common payroll deductions often made by employers that are unlawful include:

a. Gratuities. An employer cannot collect, take, or receive any gratuity or part thereof given or
left for an employee, or deduct any amount from wages due an employee on account of a gratuity
given or left for an employee.

b. Photographs. If an employer requires a photograph of an applicant or employee, the

employer must pay the cost of the photograph. 23

c. Bond. If an employer requires a bond of an applicant or employee, the employer must pay the
cost of the bond.

d. Uniforms. If an employer requires that an employee wear a uniform, the employer must pay
the cost of the uniform.

CASE ANALYSIS

CASE 1

D.P KELKAR V. AMBADAS24

FACTS

23 www.labour.gov.in/sites/default/files/factory_act_draft.pdf Last accessed on 24/03/17 at 10:00P.M

24 (1971) 73 BOMLR 260

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On 29th November 1965 the Indu Mills was taken under the management of an authorised
controller under Section 18-A of the Industries (Development and Regulation) Act, 1951 by a
notification of the Government of India. One M.D. Bhat was appointed as the authorised
controller. On 21st December, 1967 the 1st respondent Dhondu Mahadeo Ghadi an employee of
the Indu Mills applied before the Authority appointed under the Payment of Wages Act for the
area of Greater Bombay for the payment to him of the minimum bonus payable to him under the
provisions of Section 10 of the Payment of Bonus Act. He claimed to be entitled to receive Rs.
76.40 and Rs. 101.68 as bonus for the years 1965 and 1966. Though the amount claimed by this
particular employee is small, the petitioner before us has averred that upon the decision of this
matter further claims by the other employees of the mills are likely to be made and that even if
only the minimum bonus is payable to all the employees of the mills it will entail an amount of
over Rs. 20 lakhs for the two years 1965 and 1966 although the company has suffered net losses
of Rs. 1.75 crores and Rs. 1.83 crores in the said two years.

ISSUES

Whether Payment of Wages Authority has Jurisdiction to entertain dispute with respect to bonus
payable under Payment of Bonus Act?

REASONING

In the result, we hold that the Payment of Wages Authority had no jurisdiction to grant the
reliefs which it has granted and in any case that relief cannot be granted all to the respondents
workers in either of the two cases before us because both the petitioner companies were
exempt under the provisions of Section 32, Clause (iv) from the provisions of the Payment of
Bonus Act. We set aside the orders of the Payment of Wages Authority in both the cases. The
applications of the workmen in both the cases shall stand dismissed. There shall be no order as
to costs.

JUDGEMENT

Applications dismissed.

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CASE 2
BANK OF INDIA AND ANOTHER V. T.S. KELAWALA BOMBAY AND OTHERS25
FACTS
In the former appeal, the appellant is a nationalised Bank. In 1977, some demands for wage
revision made by the employees of all Banks were pending and in support of their demands, a
call for a country wide strike was given. The appellant-Bank issued a Circular on September 23,
1977 to its managers and agents directing them to deduct wages of the employees for the days
they go on strike. The respondent Unions gave a car for a four hour strike on December 29, 1977.
Two days before the strike, the appellant-Bank issued an Administrative Circular warning the
employees that if they participate in the strike, they would be committing a breach of their
contract of service and they would not be entitled to salary for the full day and they need not
report for work for the rest of the working hours on that day. However, the employees went on
strike as scheduled, for four hours which included banking hours of the public, and re- sumed
duty thereafter.

ISSUE
Whether the lockout was illegal and deduction was permissible for which workers' union filed a
complaint before the Indus- trial Court complaining that the appellant company had indulged in
unfair labour practice?

REASONING

It was held that strikes and demonstrations are legitimate forms of protest and they are not
banned in this country. By an administrative circular the legitimate mode of protest allowed and
recognized by law cannot be stifled. It was held that payment of wages act is regulatory. Section
7 (2) read with Section 9 of the act provides the circumstances under which and the extent to
which deduction can be made. It is only when the employer has right to make deduction, resort
should be had to the act to ascertain the extent to which the deduction can be made. No
deduction exceeding the limit provided by the act is permissible even if the contract so provides.

25 1990 SCR (3) 214

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There cannot be contract contrary to or in terms wider than the input of sections 7 and 9 of the
act.

JUDGEMENT

Lockout was legal and deduction cannot be made from their wages.

CASE 3
ASSISTANT PROVIDENT FUND COMMISSIONER, GURGAON VS. G4S SECURITY SERVICES (INDIA)
LIMITED & ANR26

FACTS

The grievance of the appellant in the appeal is that the order dated 25.06.2010 passed by the EPF
Authority under section 7A of the Act that the employer is liable to pay contributions under the
Act on the wages as fixed under the Minimum Wages Act and not the actual wages paid to the
workmen is illegal.

ISSUE
Whether provident fund contribution is to be calculated on the basic wages or upon the wages
fixed under the Minimum Wages Act ?

REASONING

The Appellate Tribunal observed that the contribution under the Act is to be paid upon the basic
wages as defined under the Act and not upon the wages fixed under the Minimum Wages Act as
also held by the Punjab & Haryana High Court. The EPF Appellate Tribunal observed that the
provident fund contribution is to be calculated on the basic wages and not upon the wages fixed
under the Minimum Wages Act. In the appeal against the order of the EPF Authority under

26 2011 LLR 316

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section 7A of the Act the appellant have stated that directing the appellant to deposit the dues is
illegal as the EPF Authority has assessed the dues considering the allowances as basic wages.

JUDGEMENT

Hence, the impugned order of the EPF Authority is set aside and appeal allowed.

CASE 4

IN RE: MYSORE SPUN SILK MILLS LTD.; IN RE: OFFICIAL LIQUIDATOR, HIGH
COURT OF MYSORE, BANGALORE27

FACTS

Workers of the Company were housed in tenements constructed by the Mysore Housing Board
constituted under the Mysore Housing Board Act of 1955 and placed at the disposal of the
company for the purpose of providing the workers with house accommodation. It is also not
denied that before the company went into liquidation, rent in respect of tenements and water
tax for water consumed by the workers were being deducted regularly from the wages payable
to them.

The further argument of the Official Liquidator is that retrenchment compensation directed to
be paid to the workers as a preferential payment within the meaning of the clause (b) of Sub-
section (1) of Section 530 of the Companies Act of 1956 is 'wages' within the meaning of both
the Payment of wages Act and the Industrial Disputes Act, and that therefore the
deduction mentioned above can be lawfully be made therefrom.

Mr. Balaji on behalf of the workers has objected to the deduction being made as claimed by
the Official Liquidator.

ISSUE

27 1963 33 CompCas 713 Kar

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1.Whether retrenchment compensation paid under the provisions of Chapter VA of the
Industrial Disputes Act does or does not come within the meaning of wages' for the purpose of
making deductions therefrom under the Payment of Wages Act?

2.Whether deductions for recovery of advances and rent and water tax in respect of house
accommodation are deductions authorized by Section 7 ?

REASONING

The further argument of the Official Liquidator is that retrenchment compensation directed to
be paid to the workers as a preferential payment within the meaning of the clause (b) of Sub-
section (1) of Section 530 of the Companies Act of 1956 is wages within the meaning of both
the Payment of Wages Act and the Industrial Disputes Act, and that therefore the
deductions mentioned above can be lawfully be made therefrom.

It is an admitted fact that the workers of the Company were housed in tenements constructed
by the Mysore Housing Board constituted under the Mysore Housing Board Act of 1955 and
placed at the disposal of the company for the purpose of providing the workers with house
accommodation. It is also not denied that before the company went into liquidation, rent in
respect of tenements and water tax for water consumed by the workers were being deducted
regularly from the wages by section 7 payable to them.

JUDGEMENT

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As no further directions are required in this matter, this application will stand closed.

CASE 5
UPPER DOAB SUGER MILLS MUZAFFARNAGAR V. PRESCRIBED AUTHORITY
AND OTHERS28
FACTS
In the present case the petitioner, is a sugar industry engaged in the manufacturing of sugar for
which it purchased sugarcane from sugarcane grower and is engaged in all incidental activities
for manufacturing of sugar. Petitioner (V.B. Singh and S.D. Singh) got engaged with the
transporter for carrying out their goods. Issue aroused between petitioner and transporters
claimant. Petitioner filed petition before Prescribed Authority. In petition, pleaded by petitioners
that they had only engaged a transporter for carrying out their goods. There was no relationship
of employer and employees between them. As the claimants were the employees of the
Transporter who has contracted with the petitioners for the purpose of transportation only.

ISSUE

Whether Prescribed Authority under Payment of Wages Act, 1936 has jurisdiction to decide the
issue between employer and employees, whether it is competent authority to decide the
Employment-Non-payment of wages of employees under Sec 15(1) and (2) ?

REASONING :

Court observed if issues raised are outside the scope of Section 15(deduction or delayed
payment) of the Act, it is the competent authority who will decide claims. Court also said where
claims raised are of serious, bona-fide, genuine dispute of relationship between the employer and
the employees, it is necessary that the claims must be decided by the competent authority (who
has jurisdiction) only. In the present case, the issue was raised before the Prescribed Authority

28 AIR 1936 All 493

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who does not have jurisdiction. Hence, orders passed by Prescribed Authority is impugned and
quashed.

JUDGEMENT
Order was quashed and writ petition was allowed.

CASE 6
RAJASTHAN STATE WARE HOUSING CORPORATION VS AUTHORITY
APPOINTED UNDER THE PAYMENT OF WAGES ACT29

FACTS

The petitioner Corporation has been constituted under the Ware Housing Corporation Act, 1962
(hereinafter referred to as 'the Act') in which 50% shares belong to the State Government. It has
its own staff and the service conditions of the staff are governed by regulations framed
under Section 42 of the Act and are called the Rajasthan State Ware Housing Corporation (Staff)
Regulations 1574 (here in after referred to as the Regulations). The Act provides for the
constitution of the Corporation and other bodies in order to carry its functions. Section
20 provides for the constitution of the Board of Directors in which shall vest the general
superintendence and management of the affairs of the Corporation.

ISSUE

Whether Board of Director or State Government is a competent authority to pass an order to

make deduction?

REASONING

It is the decision of the Board of Directors which will apply to the employees of the Corporation
and not the decision of the State Government. In order to make a deduction authorized
deduction under Section 7(2)(h) of the Wages Act, the Deduction should be made by order of a

29 1987 (1) WLN 503

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court or other authority competent to make such order. In the present case, the competent
authority can be Board of Directors which has pot passed any order for the deduction of
wages but it is the State Government which has passed the order which is not the competent
authority under the Act or the Regulations.

JUDGEMENT

State government can pass the order.

CASE 7

DIVISIONAL SUPDT. DELHI DIVISION NORTHERN RLY., NEW DELHI VS

SATYENDER NATH KAPUR CHAND AND ANOTHER30

FACTS

This petition purporting to be under Section 115 of the Code of Civil Procedure and Article
227 of the Constitution of India by the Divisional Superintendent, Delhi Division of the
Northern Railway, has been placed before this Bench in view of the orders of Mahajan, J.,
dated the 18th January 1963, in which it was observed that the principal contention raised was
regarding the vires of Section 7, Explanation II, of the Payment of Wages Act, and it was
proper that the matter bet heard by a Division Bench after a notice was issued to the Attorney-
General of India. A notice was so issued but there is no representation on behalf of the
Attorney-General of India.

The petition does not appear to be maintainable under Section 115 of the Code of
Civil Procedure since the Authority under the Payment of Wages Act (Act IV of 1936)
(hereinafter referred to as the Act) is not a Court subordinate to the High Court, and so Section
115 of the Code of Civil Procedure or Section 44 of the Punjab Courts Act will not apply. In
this connection Union of India v. Triloki Nath : AIR 1961 P&H 154, may be referred to. We
have, therefore, treated this as a petition under Article 227 of the Constitution of India.

30( 2014) 7 SCC 264

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Satyendar Nath Respondent to this petition made an application under Sub-section (3) of
Section 15 of the Act praying for a direction to the Divisional Superintendent of the Delhi
Division of the Northern Railway for refund of a sum of Rs. 759.50 nP. to the Applicant which
amount had not been paid to him on account of the Divisional Superintendent having by an
order made in the year 1951 withheld his annual increment which was at the rate of Rs. 4/- per
month for one year with permanent effect. This was during the period 7-12-1952 to 7-3-1960.

ISSUE

Whether the deduction order is legal when made by the authority not competent to authorize?

REASONING

Held that Explanation II to sub-section (1) of section 7 of the Act does not really import anything
new into the provisions. Clause (h) of sub-section (2) already provided that one of the categories
of authorized deduction was-- deduction required to be made by order of a Court or other
authority competent to make such order". It is, no doubt, correct that deduction consequent upon
punishment under the service rules are authorized deduction under the Act, but Explanations II
lays down the qualifications that the rules under which the penalty has been imposed shall be in
conformity with the requirement, if any, which may be specified in this behalf by a notification
in the Official Gazette. The Government of India has promulgated the rules in pursuance of
Explanation II which, inter alia, apply to employees in railway so far as the penalty of
withholding of increment or promotion (but excluding the penalty of stoppage of increment at
any efficiency bar) was concerned, It was to be imposed only after the person concerned had
been informed in writing of the proposed action together with the allegations and given an
opportunity to make any representation that he may wish to make. This is substantially the same
as rule 1712 of the Indian Railway Establishment Code.

JUDGEMENT

Held, that a deduction from wages made under the orders of an authority not competent to make
that order is unauthorized

CASE 8

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THE GENERAL MANAGER, PUNJAB ROADWAYS VS. GURDEV SINGH31

FACTS
In this case, respondent Gurdev Singh, who was working as a Conductor with the respondent,
filed an application under Section 15(2) of the Act before the Authority under the Act
challenging certain orders of with-holding of his increments, being illegal and seeking direction
to the petitioner-department to refund the wages, which have been illegally deducted under the
said orders. In the application, it has been averred by the respondent that the said orders are not
speaking orders.

ISSUE

Whether Application filed under Section 15(2) of Payment of Wages Act for refunding of wages,
which had been deducted by Petitioner was legal?

REASONING

The Authority partly allowed the said application while holding that the deductions made in
pursuance of orders dated 10.4.1973, 4.9.1975 and 5.8.1975 are unauthorized deductions being
not speaking orders and on the basis of such orders, no deduction from the salary of the
respondent can be made. However, with regard to the deductions made in pursuance of the orders
dated 6.10.1975 and 30.6.1983, it was held that the same are authorized deduction. The appeal
filed against the said order has also been dismissed.

JUDGEMENT

Appeal was dismissed.

CASE 9
MRF UNITED WORKERS UNION VS GOVERNMENT OF TAMIL NADU32

FACTS
31 1991 AIR 2219

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Labour & Industrial Law unauthorized absence of deduction of wages. There was a necessity of
enquiry. Under settlement respondent no.2 was recognized union as sole collective bargaining
agent on behalf of petitioner's no.1 employees .General Secretary of respondent no.2 granted
time off concession for attending his union's Court cases .However, General Secretary started
misusing same .After issuance of show cause notices, company deducted his salary on account of
wastage of time and failure to attend office work. Complaint filed was allowed by Industrial
Court holding that action of company was unlawful on account that no enquiry was conducted
before deducting wages. Hence, instant Petition was filed

ISSUE

Whether it was necessary for company to hold inquiry before deducting wages on account of
alleged unauthorized absence of workman from duty?

REASONING

Held, when notice is directed to be issued in case of certain deductions and there is no such
notice contemplated before deduction for absence implication is that no notice is contemplated in
such cases. In instant case, employer has deducted wages on the ground that General Secretary of
respondent no.2 remained unauthorisedly absent misusing the time off concession given to him.
As such show cause notice was duly issued to him and reply was called. However, order of
deduction was made only after considering explanation given by General Secretary of respondent
no.2. Under these circumstances, Industrial Tribunal clearly erred in holding that it was
necessary for management to have held full-fledged inquiry before ordering deduction. Further,
having regard to fact that amount involved is very small and workman has already recovered
amount as per order of Industrial Court, company does not want to press claim for refund of said
amount from General Secretary of respondent no.2. Hence, it is not necessary to express any
opinion on controversy as to General Secretary. If action taken by employer after giving
opportunity being heard to employee then in such situation enquiry is not necessary.

32

26 | P a g e
JUDGEMENT

Respondent no.2 was guilty of whiling away time using time off concession. Petition disposed.

CASE 10
P.K.MEHRA VS CHIEF SECRETARY33
FACTS
Disciplinary proceedings initiated and punishment was given under Payment of Wages Act,
1936, ss. 7, 7(1), 15(2) .Appellant/employee's 2 increments with cumulative effect were stopped
by respondent/department and sum of Rs.1000/- out of wages was directed to be deducted in
monthly instalments of Rs.200. Appellant challenged said order by way of application filed u/s.
15(2) of the Act, which was allowed by Trial Court . Appeals were filed by both appellant and
respondent, appeal filed by respondent was dismissed by Appellate Court, whereas appeal filed
by appellant was allowed partly. Thus, by virtue of appeal, only grievance left with appellant to
be redressed was with regard to stoppage of 2 increments with cumulative effect .Hence, instant
appeal was filed.

ISSUE
Whether appellant was entitled to quash of stoppage of 2 increments with cumulative effect ?

REASONING
Held, finding of fact recorded by Court below was that no loss had been caused by appellant to
respondent and therefore, withholding of increments was punishment which ran contrary to
Section 7(1) Explanation II of the Act and was thus illegal - Thus, question posed in revision
gone in favour of appellant and it was held that in case where there was no loss caused by
appellant, no deduction from his wages much less on account of withholding of increments could
be ordered .

33 W.P.Nos.30539 to 30541 of 2016

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JUDGEMENT
Hence instant appeal was allowed and impugned order was quashed - Appeal allowed.

CASE 11

SURENDRANATHAN NAIR AND OTHERS V. SENIOR DIVISIONAL PERSONAL

OFFICER (RLYS.)34

FACTS

Some of the railway employees applied for casual leave to participate in an agitation against
railway administration. The leave was refused but the employees participated in the agitation.
The management deducted the wages treating the period of leave applied for as absence from
duty

ISSUES

Whether deduction made under the Payment of Wages Act was legal?

REASONING

It was held that the leave rules to the railway are contained in the railway established code and
the rule made there under. The code derives its authority from Article 309 of the constitution and
the rules are made under the delegated power. These rules have general application to all non-
gazatted railway servants. Rejection of leave under such circumstances was legal and proper.
Absence from duty, especially for the purpose pf participation in an agitation against his
management is unauthorized. An unauthorized absentee has no right to compel payment of
wages for the period of unauthorized absence.

34 (2008)2MLJ733

28 | P a g e
JUDGEMENT
It was held that deduction was authorized.

CASE 12
OUDH SUGAR MILLS LIMITED CASE35
FACTS
In the present case the petitioner, is a sugar industry engaged in the manufacturing of sugar for
which it purchased sugarcane from sugarcane grower and is engaged in all incidental activities
for manufacturing of sugar. Petitioner (V.B. Singh and S.D. Singh) got engaged with the
transporter for carrying out their goods. Issue aroused between petitioner and transporters
claimant. Petitioner filed petition before Prescribed Authority. In petition, pleaded by petitioners
that they had only engaged a transporter for carrying out their goods. There was no relationship
of employer and employees between them. As the claimants were the employees of the
Transporter who has contracted with the petitioners for the purpose of transportation only.

ISSUE

Whether Prescribed Authority under Payment of Wages Act, 1936 has jurisdiction to decide the
issue between employer and employees, whether it is competent authority to decide the
Employment-Non-payment of wages of employees under Sec 15(1) and (2) ?

REASONING :

Court observed if issues raised are outside the scope of Section 15(deduction or delayed
payment) of the Act, it is the competent authority who will decide claims. Court also said where
claims raised are of serious, bona-fide, genuine dispute of relationship between the employer and
the employees, it is necessary that the claims must be decided by the competent authority (who

35 AIR 1936 All 493

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has jurisdiction) only. In the present case, the issue was raised before the Prescribed Authority
who does not have jurisdiction. Hence, orders passed by Prescribed Authority is impugned and
quashed.

JUDGEMENT
Order was quashed and writ petition was allowed.

CASE 13
THE MODEL INTERMEDIATE COLLEGE VS THE PRESCRIBED AUTHORITY
AND ORS.(2011)36

FACTS
In all the three writ petitions, the Prescribed Authority appointed under the Minimum Wages Act,
1948, has found that the employees concerned were being paid less than the minimum rates of
wages and therefore, issued direction to the employers to pay difference of minimum rates of
wages with one time compensation.
Counsel for the petitioner has raised a common argument in all the three writ petitions and
submits that the grounds of challenge in these petitions are also the same, hence these three
petitions which are connected together are being decided by this common judgment.

ISSUES
Non payment of minimum wages is a deduction within meaning of Payment of Wages Act,which
can be recovered under section 15 of the said Act?

REASONING
When question of applicability of section 15 considered in the case of non payment of
minimum wages, it is a question of entitlement and not a question of deduction which can be
recovered under section 15. It is settled law that the claim arising out of deduction from
the wages i.e. where rate of wages is not disputed by the parties, the case is covered by section
15 of the Payment of Wages Act and remedy of the employee lies under the said Act.
36 2011 AIR 2219

30 | P a g e
A deduction of certain amount per month from the future pay of the employee as penalty or
punishment for his delinquencies in the absence of fresh contract of service at the reduced rate
of wages, would fall within section 15 of the Act. Similar is the position in respect of delay
of wages.

JUDGEMENT
Court find that there appears to be no illegality or infirmity in the order impugned order, hence
the Court is not inclined to interfere in exercise of its extra ordinary powers under Art. 226 of the
Constitution of India. All the three petitions are accordingly dismissed.

CASE 14

ALL INDIA INSTITUTE OF MEDICAL SCIENCES V. RAMBIR YADAV37

FACTS

The petitioner awarded contract to contractors namely HTS Enterprise, Swastik Enterprise,
Bhanot Electric Works, M/s. Competent Engineering Works and M/s. S.K. Consumers for
carrying out some work in the institute. The work awarded to the contractors was said to have
been carried out by the contractor through its employees including the respondent herein. The
respondent alongwith other employees filed several writ petitions seeking their regularisation
with the petitioner on the ground that the work in which they were engaged was of perennial
nature and further seeking that the salary be paid to them as per their counter parts engaged on a
regular basis with the petitioner. Directions were also sought in these petitions that the
respondents therein (including the present respondent) be employed directly under the
petitioner's institute instead of appointing them through a contractor.
The said report was filed by the Chief Labour Commissioner before this court whereby the writ
petitions filed by the said employees were disposed of vide its order dated 26.09.2000 referring
the dispute between the parties to the Central Advisory Contract Labour Board for decision on
merits. It was further directed that pending the recommendations made by the Central Advisory

37 2011 LLR 316

31 | P a g e
Contract Labour Board, the service of the respondent should not be substituted with other
contract labours.
Thereafter, the respondent along with other employees filed an application under Section 33C (2)
of the ID Act claiming their wages which were pending payment before the Tribunal. By such an
application the respondent and said employees claimed wages for the period w.e.f. 01.08.1999 to
30.01.2000. The petitioner filed its reply to the said application, stating that the present
respondent and the said employees had already been paid their wages by the contractor and this
fact was already reported by the Chief Labour Commissioner appointed by this court in his
report. The contractor also filed its reply stating that the contract awarded to it by the petitioner
had come to an end by November 1999 and the concerned workmen had already been paid their
salary which fact has already been substantiated by the report of the Chief Labour
Commissioner.
On 17.07.2009, the learned Presiding Officer of the Tribunal passed an order thereby appointing
Mr. D.K. Tyagi, Advocate as a Local Commissioner with the directions to go to the spot and
conduct the inquiry from the associate workman, contractor and the principal employer to
ascertain as to what period the workman and his associate have worked with the contractor for
which their wages were not released to them.
It was also contended on behalf of the petitioner that as per Rule 63 of the Industrial Disputes
(Central) Rules, 1957 only that person could be appointed as a local commissioner for the
purpose of Section 33C(2) ID Act who has experience in the particular industry, trade and
business involved in the industrial disputes or a person who has experience as a Judge of Civil
Court or Magistrate or Registrar or Secretary to Labour Court or a Tribunal. However, Mr. D.K.
Tyagi, Advocate who was appointed as the local commissioner, did not possess these
qualifications. The said local commissioner did not conduct the proceedings as per the law and
did not give any opportunity to the parties to cross examine the respective parties.

ISSUES-
Do the orders violate principles of natural justice?
Was the appointnment of mr d.k tyagi valid?
Have the workmen been paid for the period stated?

REASONING-

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The court discussed section 33 of the ID Act.
The primary contention of the petitioner before this court is that the Tribunal was not competent
to order the appointment of the labour commissioner while exercising its power under Section 33
C(2) of the ID Act which is purely in a nature of an execution proceeding. This contention does
not find favour with this court. A perusal of Section 33-C of the ID Act shows that the Tribunal is
invested with the power under sub-section (3) of Section 33-C of the ID Act to take such
evidence as may be necessary for the purposes of computing the money value of a benefit and
for such purpose to appoint a commissioner who shall, after taking such evidence as may be
necessary, submit a report to the Labour Court.
Although, Mr. Tyagi was neither experienced in the field in which the petitioner was working,
nor was a person with experience as a Judge of civil court or Stipendiary Magistrate, Registrar,
Secretary of a labour court etc. However no fault can be found in his appointment since the trial
court has already observed that Mr. Tyagi had a long standing and experience on the issue which
he was supposed to address to and collect facts. The purpose behind appointment of a local
commissioner, as observed above is to collect evidence in the matter in issue and any person of
experience in such a field who the trial court finds competent enough can be appointed by it. In
such case, pure grammatical and technical application of the provisions is not required. The rules
are meant to aid justice and not to delay it by technicalities. Therefore, no fault can be found in
the said impugned order dated 27.02.2013.

JUDGEMENT
In the light of the aforesaid discussion, the present petition deserves to be dismissed and the
same is hereby dismissed. So far as the objection regarding the fact that vide impugned order
dated 22.06.2012 the Tribunal directed the labour commissioner to give its report for even the
disputed period for which the respondent had worked with the petitioner, the petitioner is granted
liberty to raise the said objection at an appropriate stage before the Tribunal.

CASE 15
MALA SAHKARI CHINI MILLS LTD., MEERUT VS. AUTHORITY UNDER THE
PAYMENT OF WAGES ACT, 1936, MEERUT AND OTHERS38

38 IR 1962 All 77

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FACTS
Writ petition is directed against the order passed by Prescribed Authority on 30.5.1996 declaring
that Rs. 4,429.60 and Rs.6,163.00 from the wages of respondents 2 and 3 were wrongfully
deducted by the petitioner and, therefore, this amount shall be paid along with the compensation
of ` 17,718.40 and 24.652.00.
Petitioner did not avail statutory remedy of appeal under Section 17 of Payment of Wages Act,
1936 straight-way filed writ petition on the ground that impugned order is wholly without
jurisdiction. On a query as to how the order is without jurisdiction, he submitted that sum of
1,529.19 and 3,263.91 was deducted by the petitioner being loss caused by respondents and,
therefore, the same could not have been claimed under Section 15 of the Act before the
Prescribed Authority. However, on enquiry learned counsel for petitioner could not show any
order of punishment of recovery passed by employer for recovering the said amount as the
alleged loss. He only says that show cause notice was issued to respondents 2 and 3 but,
thereafter, he could not show any final order passed by the petitioner.

ISSUES
Is impugned order is without jurisdiction?

REASONING
After analyzing the case court find that under the circumstances, it cannot be said that the
amount was not wrongfully deducted by employer and Prescribed Authority under Section 15
had no jurisdiction to entertain the matter.

The rest of the amount is with respect to overtime claimed by respondents 2 and 3 on the ground
that they worked during holidays but were not paid wages at the rate overtime payment is made
which has been allowed by Prescribed Authority and this is well within the jurisdiction of
Prescribed Authority under Section 15 of the Act. Hence there is no jurisdictional error in the
order impugned in this writ petition.

So far as nonpayment of certain amount alleging to be a penal recovery is concerned, in absence

of any order passed by competent authority to such extent, non-payment of such amount in the
garb of recovery is impermissible and wholly without jurisdiction. The order, if any, passed by

34 | P a g e
authority competent to do so in accordance with law could have only authorized to retain certain
part of wages of employee concerned otherwise it amounts to illegal and unauthorized deduction.
Similarly, where the fact that the workman has worked
beyond the normal period of working, but was not paid wages, the Court find no reason to
interfere with such finding of fact unless shown perverse which petitioner has failed.

JUDGEMENT
Court held that in the interest of Justice, writ petition was dismissed with exemplary cost.

CONCLUSION
The need to protect the wages earned by the worker had been felt from the early years. Workers
had always been exploited from one or the other way. Today also the wages are not paid to the
labours to their satisfaction. The employer and employee are always been in conflict for one or
the other reasons. Wages are one of those issues. And deduction from wages has always been
criticized by the employees. Though there are various provisions made under the Payment of
Wages Act, 1936 where deduction can be made in certain circumstances. But such deduction
must be permissible deduction so that the employers do not get resentful with such deduction.
Therefore Section 7 to Section 12 specifically provides for the deduction that can be made from
the wages of the employee.

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BIBLIOGRAPHY

Books

1. Dr V.G Goswami, Labour and Industrial Law, Central Law Agency

2. Khan and Khan, Commentary on Labour Industrial Law, Asia Law House, Hyderabad
3. S.M. Chaturvedi, Labour and Industrial Law, 13th Edition , Central Law Agency

Online Sources

1. www.manupatrafast.com
2. www.scconline.in
3. www.lexisnexis.co.in

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