PETITIONER:

NAGPUR ELECTRIC LIGHT & POWER CO., LTD

Vs.

RESPONDENT:
REGIONAL DIRECTOR EMPLOYEES STATE INSURANCECORPORATION, ETC.

DATE OF JUDGMENT:
02/03/1967

BENCH:
BACHAWAT, R.S.
BENCH:
BACHAWAT, R.S.
WANCHOO, K.N.
BHARGAVA, VISHISHTHA

CITATION:
1967 AIR 1364 1964 SCR (3) 92
CITATOR INFO :
RF 1970 SC 488 (8)
RF 1973 SC 365 (17)
D 1974 SC 759 (27,29)
R 1978 SC 356 (9)
R 1984 SC1916 (9)
R 1987 SC1166 (4)
RF 1992 SC 573 (37)

ACT:
Employees State Insurance Act (34 of 1948), ss. 2(9) and
2(12)--Factory, area comprised in-Company transferring and transmitting
electricity-Workers doing non-manualwork whether employees within the
meaning of s. 2(9).

HEADNOTE:
The appellant company carried on the work of transforming And
transmitting electrical energy. There was dispute between the
company and the respondent whether certain employees of the
company like engineers, draughtsmen, clerks, accountants etc.
mentioned in Appendices III, IV and V of the companys petition before
the Employees Insurance Court, were Employees or not within the meaning
of s. 2(9) of the Employees Insurance Act, 1948. The
Employees Insurance Court held the said workers to be employees under
s. 2(9) and this finding was confirmed by the Single Judge as well
-as the Division Bench of the High Court. The company appealed to
this Court by special leave. HELD : (i) The premises of the company were
a factory within the meaning of the Employees State Insurance Act but
the High Court was wrong in laying down the proposition that every
inch of the area over which the transmission lines were spread
was a factory within the meaning of s. 2(12).
The company’s factory had a fixed site and was located
within the compound wall of its premises. [96 E, H] (ii)All the employees of the
disputed categories clerks or otherwise were employed in connection with the
work of the
factory, that is to say, in connection with the work of transforming and
transmitting electrical power. Some of the employees were not engaged in manual
labour. But a person doing non-manual work can be an employee within the
meaning of s. 2(9) (i) if he is employed in connection with the work of the
factory. The duties of the administrative staff are directly connected within the
work of the factory. [99 C, G]
 Even those employees who worked outside the factory but whose duties were
connected with the work of the factory were employees within the meaning of
s. 2(9)(i). Among such employees were to be included those
attending to sub- stations of the factory. [100 A] Ardeshir H. Bhiwaniwala v.
The State of Bombay, [1961] 3
S.C.R.542, State of Uttar Pradesh v. M. P. Singh, [1960] 2 S.C.R. 605 and
Employees State Insurance Corporation,
Bombay v. Raman, [1957] 1 L.L.J. 267. referred to.

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 491 and 492
of 1965.
Appeals by special leave from the order-, dated September 17, 1963 of the Bombay
High Court
Bench in Letters Patent Appeals Nos. 14 and 15 of 1963,93
S. V. Gupte, Solicitor-General and I. N. Shroff, for the appellant (in
C.A. No. 491 of 1965).
A. G. Ratnaparkhi, for the appellants (in C.A. No. 492 of 1965).
Bishan Narain, M. L. Kapur and I. S. Sawhney, for the respondents Nos. 1
and 2 (in C.As. Nos. 491 and 492 of 1965).
1. N. Shroff, for respondent No. 1 (in C.A. No. 492 of
1965).
The Judgment of the Court was delivered by
Bachawat, J. The question in issue in these appeals is
whether certain employees of the Nagpur Electric Light &
Power Co. Ltd.,am employees within the meaning of s. 2(9) of
the Employees State Insurance Act, 1948 (34 of 1948). The
company and the employees filed two separateapplications
before the Employees Insurance Court under s. 75 of the Act
for the determination of the question. Their case is that
out of the five categories of staff mentioned in appendices
1 to 5 to the companys petition, those connected with the
receiving station and workshop (appendices 1 and 2) were
employees within the meaning of s. 2(9), but those
connected with the engineering, stores and outdoor work,
meter,consumers and allocation department and
administration (appendices 3, 4 and 5) were not such
employees. The Regional Director, Employees State Insurance
Corporation contested the applications, but he admitted that
the workers of the categories mentioned in items 5 to 14 of
appendix 4 and items 1, 7 and 8 of appendix 5 were not
employees within the meaning of s. 2(9). The Employees
Insurance Court found that those workers and also the
workers mentioned in item 12 of appendix 5 were not such
employees. The correctness of this finding is not in issue
in these appeals and we express no opinion on it. The
categories of workers mentioned in appendix 111, items 1-4
in appendix TV and items 2-6 and 9-11 of appendix V are as
follows
Appendix III
Mains Senior : (1) assistant engineers, (2) supervisors, (3)
electricians, (4) overseers.
Mains junior : (1) cable jointers, (2) mistries,
(3) sub-mistries, (4) lineman-H.T.O.H. mains, (5)
mains coolies, (6) mains coolies temporary, (7)
wireman temporary, (8) sub-mistries, (9) sub-
station attendants.
Clerical staff : (1) clerk to asstt. engineers,
(2)draughtsman, (3) mains office peons.
Stores department : (1) storekeeper, (2) asstt.storekeeper,
(3) clerks, (4) coolies.
94
Motor car staff :(1) motor drivers,(2) motor cleaners.
Mason.
Appendix IV
Meter senior & junior : (1) deputy meter superintendent, (2)
senior meter mechanic, (3) junior meter mechanic, (4) meter
testers.
Appendix V
(2) accounts (department accountant, chief cashier, asstt.
accountant, account clerks.
(3) Time-keeping department : group head, clerks,
(4) Filing department : group head, clerks.
(5) Typing department : steno-typists, typists.
(6) Telephone operators.
(9) Record-keeper and daftari.
(9a) Station clerk.
(10) Motor car staff : mechanic, drivers, cleaners.
(11) Menial staff : peons, garden malies, chowkidars,
sweepers, rejas temporary.
The, Employees Insurance Court held that the aforesaid
workers were employees within the meaning of S. 2 (9) of the
Act. The company and the employeesfiled two separate
appeals from this decision to the High Court of Bombay
(Nagpur Bench) under S. 82 of the Act. Abhayankar, J.
affirmed the finding of the Employees Insurance Court and
dismissed the appeals. Letters Patent appeals from his
orders were summarily dismissed by a Bench of the High
Court. The company and the employees have now preferred two
separate appeals to this Court by special leave.
The Nagpur Electric Light & Power Co., Ltd., occupies cer-
tain premises at Kamptee Road, Nagpur where it carries on
the work of transforming and transmitting electrical energy.
Me premises are located within a compound wall. Inside the
premises there are several buildings, yards and open spaces.
The receiving station, the workshop, the meter testing
department, the engineers quarters, the general office, and
stores are in different buildings inside the premises. The
company does not generate electricity. It maintains a
receiving station inside the premises where it receives
electrical energy in bulk from the generating station of the
Maharashtra Electricity Board at Khapparkheda. The energy
when received is of 11,000 volts. From the receiving
station, the energy is either carried through electric
supply lines to a transformer and is stepped down to 3,300
volts and is then carried to the sub-stations in the city
where it is again stepped 95. down to 400 volts by other transformers,
or is carried from the receiving station to sub-stations where it is
stepped
down directly from 11,000 to 400 volts. From the sub-
stations, the energy is transmitted by electric supply lines
and distributed to consumers. The first question is whether
the company maintains a factory and if so, where its factory
is located.
The Employees State Insurance Act, 1948 applies in the
first instance to all factories other than seasonal
factories [s.1(4)] and may be extended to any other
establishment or class of establishments, industrial,
commercial, agricultural or otherwise [s.1(5)]. Sec. 2(12)
defines a factory.The relevant part of that section reads :
Sec.2(12) : factory means any premises
including the precincts thereof whereon twenty
or more persons are working or were working on
any day of the preceding twelve months, and in
any part of which a manufacturing process is
being carried on with the aid of power or is
ordinarily so carried on but does not include
a mine subject to the operation of the Indian
Mines Act, 1923 or a railway running shed;
The expressions manufacturing process and
power shall have the meanings respectively
assigned to them in the Factories Act, 1948.
Any premises including the precincts thereof (excepting a
mine and a railway running shed) constitute a factory if (1)
20 or more persons are working or were working thereon on
any day of the preceding 12 months, and (2) in any part
thereof a manufacturing process is being carried on with the
aid of power. If these two conditions are satisfied, the
entire premises including the precincts thereof constitute
a factory, though the manufacturing process is carried on
in only a part of the premises. The premises constituting a
factory may be a building or open land or both, see Ardeshir
H. Bhiwaniwala v. The State of Bombay(1). Inside the same
compound wall, there may be two or more premises; the
premises used in connection with manufacturing processes may
constitute a factory, and the other premises within the same
compound wall may be used for the purposes unconnected with
any manufacturing process and may form no part of the
factory.
Sections 2(g) and (k) of the Factories Act
1948, define power and manufacturing process.
They are in these terms :
2(g). power means electrical energy, or
any other form of energy which is mechanically
transmitted and is not generated by human or
animal agency;
(1) (1961) 3 S.C.R. 542.
96
2(k). manufacturing process means any
process for-
(i) making, altering, repairing,
ornamenting, finishing, packing, oiling,
washing, cleaning, breaking up, demolishing,
or otherwise treating or adapting any article
or substance with a view to its use, sale,
transport, delivery or disposal, or
(ii) pumping oil, water/or sewage, or
(iii) generating, transforming or transmitting
power; or
(iv) composing types for printing, printing
by letter press, lithography, photogravure
or other similar process or book binding;
(v) constructing, reconstructing, repairing,
refitting, finishing or breaking up ships or
vessels.
In view of s. 2 (k) (iii), the process of transforming
electrical energy from a high to a low potential and the
process of transmitting the energy through supply lines are
both manufacturing processes. In a part of the premises
occupied by the company, the two processes are carried on
with the aid of power by means of electrical gadgets and
other devices. On the premises more than twenty persons
were and are working. No part of the premises is used for
purposes unconnected with the manufacturing process The
premises therefore constitute a factory within the meaning
of s. 2(12) of the Employees State Insurance Act, 1948.
The High Court said:
This manufacturing process is carried on by
the Company not only in the building called
the workshop or the receiving station but over
the whole area over which the process of
transmission is carried on including the sub-
stations where electricity is stored and
supplied to the consumers by further
transmission lines. Thus every part over
which this process is carried on will be a
factory within the meaning of the Employees
State Insurance Act.
We cannot accept this line of reasoning. It seems to us a
startling proposition that every inch of the wide area over
which the transmission lines are spread is a factory within
the meaning of s. 2(12). A factory must occupy a fixed
site, see Halsburys Laws of England, 3rd ed., Vol. 71
,art. 15, p. 15. The companys factory has a fixed site.
It is located inside the Kamptee Road
97
and its boundaries are fixed by the compound wall of the
premises
The next question is whether the members of the staff of the
categories mentioned in appendix 111, items 1-4 of appendix
IV and items 2-6 and 9-11 of appendix V to the companys
petition am employees within the meaning of s. 2(9) of the
Employees State Insurance Act. It is common case that
these workers are employed on remuneration which in the
aggregate does not exceed four hundred rupees a month.
Section 2(9) is in these terms
employee means any person employed for
wages in or in connection with the work of a
factory or establishment to which this Act
applies and
(i) who is directly employed by the
principal employer on any work of, or
incidental or preliminary to or connected with
the work of, the factory or establishment,
whether such work is done by the employee in
the factory or establishment or elsewhere; or
(ii) who is employed by or through an
immediate employer on the premises of the
factory or establishment or under the
supervision of the principal employer or his
agent on work which is ordinarily part of the
work of the factory or establishment or which
is preliminary to the work carried on in or
incidental to the purpose of the factory or
establishment; or
(iii) whose services are temporarily lent or
let on hire to the principal employer by the
person with whom the person whose services am
so lent or let on hire has entered into a
contract of service;
but does not include-
(a) any member of the Indian naval, military
or air forces or;
(b) any person employed on a remuneration
which in the aggregate exceeds four hundreds
rupees a month;
The definition of employee in s. 2(9) may be contrasted with
that of a worker in s. 2 (1) of the Factories Act 1948,
which is in these terms 98
worker means a person employed, directly or
through any agency, whether for wages or not,
in any manufacturing process, or in cleaning
any part of the machinery or premises used for
a manufacturing process, or in any other kind
of work incidental to, or connected with, the
manufacturing process, or the subject of the
manufacturing process;
It is to be seen that the definition of an employee in the
Employees State Insurance Act is wider than that of a worker
in the Factories Act. The object of the Factories Act is to
secure the health, safety, welfare, proper working hours,
leave and other benefits for workers employed in factories.
The benefit of this Act does not extend to field workers
working outside the factory, see the State, of Uttar Pradesh
v. M. P. Singh(1). The object of the Employees State
Insurance Act is to secure sickness, maternity, disablement
and medical benefits to employees of factories and
establishments and dependents benefits to their dependants.
The benefit of this Act extends inter alia to the employees
mentioned in s. 2 (9) (i) whether working inside the factory
or establishment or elsewhere.
The definition of employee in S. 2 (9) deals with three
classes of employees. We are concerned with the class of
employees mentioned in S. 2 (9) (i). The courts below
concurrently found and in our opinion, rightly, that all the
workers of the disputed categories are persons employed for
wages in or in connection with work of the companys factory
and are directly employed by the company on work of or
incidental to or connected with the work of the factory.
Some of them do the work in the factory and some work
elsewhere, but they are all employees within the meaning of
S. 2 (9) (i). Take the case of the workers mentioned in
appendix 111. The assistant engineers, supervisors,
electricians, and overseers are engaged in the erection and
maintenance of the electricity supply lines connected with
transmission of power. The cable jointer, mistries,
linemen, coolies and wiremen are employed for inspection of
the supply lines, digging pits, erecting poles for laying
distribution mains and service lines. The masons attend to
the masonry work of the buildings. The attendants in-charge
of the sub-stations look after the transformation and
transmission of power. The motor drivers and cleaners are
employed for carrying materials and tower ladders in trucks
for maintenance of the supply lines. The clerks,
draughtsmen and main office peons help the assistant
engineers. The store keepers and clerks with The assistance
of coolies issue stores to all the departments and keep
accounts relating to stock. The deputy meter superinten-
dent, meter mechanics and meter testers mentioned in items 1
to 4 of appendix IV attend to the testing calibration and
repairs of (1) [1960] 2 S.C.R. 605. 99
the meters. Let us now take the case of the staff mentioned
in items 2 to 6 and 9 to II of appendix V. The clerks in the
accounts, time-keeping and filing departments are employed
to maintain accounts, attendance registers, muster rolls,
pay-sheets, typing, filing and dispatching documents
required in connection with all the departments including
the receiving station and the workshop. The telephone
operators attend to the telephone calls for all the
departments. The menial staff is required to do mis-
cellaneous work including the cleaning of the office
compound. The motor car staff is employed to look after the
cars employed in the administration section. All these
employees, clerical or otherwise, are employed in connection
with the work of the factory, that is to say, in connection
with the work of transforming and transmitting electrical
power. Some of the employees are clerks; they are not
engaged in manual labour. But a person doing non-manual
work can be an employee within the meaning of s 2 (9) (i)
if he is employed in connection with work of the factory.
The duties of the administrative staff are directly con-
nected with the work of the factory. The case of the
Employees State Insurance Corporation, Bombay v. Raman(1)
is distinguishable. In that case a company had a factory
and an administrative office. The office was situated in a
building which was situated within the same compound in
which the factory was located. The entire compound was
surrounded by one compound wall. It was found that the work
of the factory began with the collection of raw materials
and ended with the production of finished articles and the
work of selling the products was not connected with the work
of the factory. The administrative office handled sales of.
the products manufactured in the factory as well as goods
imported from abroad. The factory and the administrative
office maintained separate muster and wage rolls and
separate accounts. In these circumstances, it was held that
the clerks employed in the administrative office, whose work
consisted mainly of taking down dictations from the manager
and other officers and typing out letters, were not em-
ployees within the meaning of s. 2(9). The facts of the
present case are entirely different. The company maintains
one establishment for its factory. The factory does the
work of transforming and transmitting electrical energy.
All the workers in question including the clerks and the
administrative staff are engaged in connection with this
work. None of them is employed in any separate
establishment unconnected with the work of the factory.
Some of the employees work outside the factory, but their
duties are connected with the work of the factory. They are
therefore employees within the meaning of s. 2 (9) (i).
Some are
(2) [1957] 1 L.L.J. 267.100
employed in the sub-stations. It is common case that the
stations are not independent factories. The sub-stations
attendants attend to work which is directly connected with
the of the factory at the main station. They are therefore
employees within the meaning of s. 2 (9) (i).
In the result the appeals are dismissed withcosts. One
hear fee.
G.C Appeals dismissed.
101

PETITIONER:
THE REGIONAL DIRECTOR, EMPLOYEESSTATE INSURANCE CORPORATION

Vs.

RESPONDENT:
BATA SHOE COMPANY (P) LTD.

DATE OF JUDGMENT11/10/1985

BENCH:
PATHAK, R.S.
BENCH:
PATHAK, R.S.
SEN, A.P. (J)

CITATION:
1986 AIR 237 1985 SCR Supl. (3) 639
1985 SCC (4) 460 1985 SCALE (2)766
ACT:
Employees State Insurance Act, 1948 - S. 2(22) -
Bonus Whether part of wages.

HEADNOTE:
The respondent-company has two branch factories.
Various agreements/settlements were entered into between the
managements of these factories and their employees regarding
the payment of bonus from time to time. The appellant -
Regional Director of Employees State Insurance Corporation
- called upon these factories from time to time to make
requisite contribution to the Employees State Insurance
Fund. Initially the managements of these factories
acknowledged their liability to deposit the amounts as part
of the contract of employment, but subsequently realising
that they were not liable in law to make any such
contribution under the employees State Insurance Act, 1948,
declined to make such payment. The managements of these
factories applied under cl. (g) of sub-s. (1) of s. 75 of
the Act for a decision by the Employees State Insurance
Court on the question of their liability, and contended that
the sum payable or paid by way of bonus to the employees was
not covered by the definition of the term wages in sub-
s.(22) of s.2 of the Act and, therefore, the respondent was
not liable to make any contribution.The Employees State
Insurance Court accepted the contention of the respondent.
Against that order the appellant preferred appeals
under S.82 of the Act, which were dismissed by the High
Court holding that the Employees State Insurance Court was
right in taking the view that the bonus in question did not
form part of the wages as defined in sub-s. (22) of s. 2 of
the Act.
Dismissing the appeals of the appellant to this Court,
^
HELD: 1. The bonus in question, in the instant appeals, does
not fall under any category or class mentioned in the
definition of wages set forth in sub-s.(22) of S. 2 of the
Employees State Insurance Act, 1948. [645 E]
640
In the instant case, the bonus paid by the respondent
to its employees is in the nature of ex-gratia payment or,
as has been described in one of the settlements, paid as a
gesture of goodwill on the part of the respondent. The bonus
in question was neither in the nature of production bonus
nor incentive bonus nor customary bonus nor any statutory
bonus. It cannot be regarded as part of the contract of
employment. Although the provisions relating to it were
included in the Standing Orders and Rules, they were
subsequently excluded from them. Therefore, the bonus paid
or payable by the respondent to its employees under the
successive settlements and agreements made between them
cannot be regarded as remuneration paid or payable to the
employees in fulfillment of the terms of the contract of
employment. [644 C-F]
2. The concept of bonus has been analysed and described
by this Court as representing the cash incentive paid in
addition to wages and given conditionally on certain
standards of attendance and efficiency being attained. When
wages fall short of the living standard or the industry
makes huge profits part of which are due to the contribution
which the workmen make in increasing production, the demand
for bonus becomes an industrial claim. It has not been shown
that this Court has subsequently widened the concept of
bonus to include a payment made by the employer ex-gratia or
as an expression of goodwill towards its employees. [644 F-
H; 645 A - C]
3. The first category of remuneration falling within
the definition of wages in sub-s.(22) of S. 2 of the Act
is not satisfied by the bonus in question in the instant
appeals. The second category of remuneration defined within
the expression wages by sub-s.(22) of S. 2 of the Act
speaks of other additional remuneration paid at intervals
not exceeding two months. The bonus under consideration here
is not paid at intervals not exceeding two months. It is
payable within one month after the end of each quarter.
[645 C-E]
Muir Mills Co. Ltt. v. Suti Mills , [1955] 1 S.C.R.
991; Shree Minakshi Mills Ltd. v. Their Workmen [1958]
S.C.R. 878; and Standard Vacuum Refining Co. of India v. Its
Workmen and Anr., [1961] 3 S.C.R. 536 relied on.

JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 741-42
of 1978.
From the Judgment and Order dated 2.5,1975 of the Patna
High Court in Appeals from Original Orders Nos. 92 and 93 of
1971.
641
Abdul Khader, R.N. Kapoor and Miss A. Subhashini for
the Appellants.
G.B. Pai, Parveen Kumar, Anil Kumar Sharma and P.R. Das
for the Respondent.
The Judgment of the Court was delivered by
PATHAK, J. These appeals by special leave are directed
against the common judgment and order of the Patna High
Court dismissing two appeals filed by the Regional Director,
Employees State Insurance Corporation on the question
whether the respondent is liable to pay the disputed bonus
to its workmen.
The respondent, Bata Shoe Company (P) Ltd., has a
branch factory at Digha Ghat and another at Mokamah in the
State of Bihar. At the Digha Ghat branch, the respondent
entered in to a settlement with its workmen on May 6, 1947,
in which it was agreed that production bonus payable to the
workmen would remain unaltered but employees earning less
than Rs 200 would get an extra bonus called good attendance
bonus at 5% of their yearly salary provided they completed
active service for 265 days annually inclusive of Saturdays.
It was stipulated that attendance bonus would be calculated
in the same way as production bonus On November 28, 1951
there was an agreement by which it was agreed that the
system of attendance bonus for theyear 1952 will be
discontinued and the ex-gratia bonuss percentage will be
increased by 5%, i.e. instead of 10% it will be 15% to all
employees. It was also agreed that corresponding changes
would be made in the Standing Orders and Rules in order to
incorporate these changes Later, another settlement was
recorded, this time before the Chairman, Industrial
Tribunal, Bihar, in a pending Reference of 1955 where it
was mentioned that the respondent had agreed to increase the
general bonus, effective from the first quarter of 1957,
from 15% to 16% Thereafter on July 27, 1961 there was
another settlement which provided
In view of the overall satisfactory settlement on
all the outstanding points of the Union and of
those points raised by the management, as a
gesture of good will the management declared that
with effect from 3rd quarter of 1961 the General
Bonus will be increased from 16-1/2% to 17-1/2%
The workmens representatives appreciated this
gesture of the management and expressed
satisfaction on behalf of the workman on the
increase of General Bonus.642
This was followed by a further settlement dated January 9,
1963 arrived at in the course of conciliation proceedings
before the Conciliation Officer-cum-Deputy Labour
Commissioner, Bihar. It provided that :
BONUS:
The rate of payment of bonus, effective from 4th
quarter of 1962 will stand revised at 19% in place
of 17-1/2% as at present. The payment of bonus
will be made one month after the end of each
quarter at the rate of 19% of the total salary
and/or wages paid to each workman and employee
during the quarter immediately preceding (such
salary or wages are exclusive of any other special
allowance or rewards granted to him during such
period). Such bonus will be payable only to those
who have completed six months approved service
ending on the last day of the quarter; and to
those who have completed less than six months
approved service on the last day of the quarter,
the bonus will be payable at the rate of 19-1/2%
of their total salary or wages as aforesaid. The
bonus will be avail able only to those who are in
the employ of the company on the last day of the
quarter and who have given regular and approved
service during the quarter to which the payment of
bonus is available.
The last document recording a settlement is dated July 17,
1963, and pursuant to it the bonus clause was deleted from
the Standing Orders and Rules.
The facts relating to the respondents Mokamah factory
are substantially similar, except that the bonus scheme was
not incorporated at any time in the Standing Orders and
Rules.
The respondent company at its two factories, Digha and
Mokamah, was called upon from time to time by the Regional
Director, Employees State Insurance Corporation to make the
requisite contribution to the Employees State insurance
Fund. At first, the managements of the two factories
acknowledged their liability to deposit the amounts as part
of the contract of employment, but subsequently realising,
as they allege, that they were not liable in Law to make any
such contribution under the Employees State Insurance Act
1948, they declined to make such
643
payment. Apprehending coercive methods of recovery on the
part of the appellant, the managements of the two factories
applied under the cl.(g) of sub-s.(l) of s. 75 of the Act
for a decision by the employees Insurance Court on the
question of their liability. The contention of the
respondent was that the sum payable or paid by way of bonus
to the employees was not covered by the definition of the
term wages in sub-s. (22) of s. 2 of the Act and, therefore,
the respondent was not liable to make any contribution. The
employees State Insurance Court accepted the contention of
the respondent. Against that order the Regional Director,
Employees State Insurance Corporation, Patna preferred
appeals under s. 82 of the Employees State Insurance Act
1948, and the appeals have been dismissed by the Patna High
Court by its judgment and order dated May 2, 1975. The High
Court has held that the employees State Insurance Court was
right in taking the view that the bonus in question did not
form part of the wages as defined in sub-s. (22) of s. 2 of
the Employees
State Insurance Act, 1948.
The contribution payable by an employer under the Employees
State Insurance Act, 1948 is computed with reference to the
wages of the employee, and in these appeals the only
question is whether the bonus paid by the respondent to its
employees at the Digha Ghat and the Mokamah branch factories
under the settlements mentioned earlier can be regarded as
wages as defined by sub-s. (22) of s. 2 of the Act. Sub-s.
(22) of s. 2 defines wages as follows:-
(22) wages means all remuneration paid or
payable in cash to an employee if the terms of the
contract of employment, express or implied, were
fulfilled and includes any payment to an employee
in respect of any period of authorised leave,
lock-out, strike which is not illegal or lay-of f
and other additional remuneration, if any, paid at
intervals not exceeding two months but does not
include
(a) any contribution paid by the employer to any
Pension fund or provident fund, or under this Act;
(b) any travelling allowance or the value of any
travelling concession;
(c) any sum paid to the person employed to defray
special expenses entailed on him by the nature of
his employment; or
644
(d) any gratuity payable on discharge.
The entire argument of the appellants before the High
Court was that the bonus paid or payable to the employee by
the respondent was in the nature of remuneration paid in
cash to the employees under the express terms of the
contract of employment. In other words, the appellants
relied on that part. of the definition of wages which
speaks of all remuneration paid or payable, in cash to an
employee, if the terms of the contract of employment,
express or implied, were fulfilled. Before us, the
appellants rely on the same provision in the definition.
They also rely on that part of the definition which speaks
of wages as other additional remuneration, if any, paid
at intervals not exceeding two months...... The remaining
provision of the definition were notrelied on. We are
therefore, called upon to consider whether the bonus in
question satisfies the terms of either of the two kinds of
remuneration mentioned above.
It is plain from what has gone before that the bonus
paid by the respondent to its employees is in the nature of
ex-gratia payment or, as has been described in one of the
settlements, it is paid as has been described in one of the
settlements, it is paid as a gesture of goodwill on the part
of the respondent. It is nothing else. In cannot be regarded
as part of the contract of employment. Although the
provisions relating to it were included in the Standing
Orders and Rules, they were subsequently excluded from them.
In our opinion, therefore , the bonus paid or payable by
the respondent to its employees under the successive
settlements and agreements made between them cannot in
fulfilment of the terms of the of employment. Although the
provisions relating to it were included in the Standing
Orders and Rules, they were subsequently excluded from them.
In our opinion, there fore, the bonus paid or payable by the
respondent to its employees under the successive settlements
and agreements made between them. cannot be regarded as
remuneration paid or payable to the employees in fulfilment
of the terms of the contract of employment.
The concept of bonus has received the attention of this
Court in a series of cases, and we need mention only some of
the. One of the first authoritative decisions rendered by
this Court is Muir Mill Co. Ltd. v. Suti Mill, [1955] 1
S.C.R. 991, where N. H. Bhagwati, J. speaking for the Court,
analysed the concept of bonus and described it as
representing the cash incentive paid in addition to wages
and given conditionally on certain standards of attendance
and efficiency being attained. When wages fall short of the
living standard or the industry makes huge profits profits
part of which are due to the contribution
645
Which the workmen make in increasing production, the demand
for bonus, it was said, becomes an industrial claim. The
view was followed by this Court in the Shri Meenakahi Mills,
Ltd. v. Their Workmen, [1958] S.C.R. 878, but the two
conditions, that the wages paid to workmen fall short of
living wages and that the industry should be shown to have
wade profits which are partly the result of the contribution
made by the workmen in increasing production were regarded
as being of cumulative significance. Then followed Standard
Vacuum Refining Co. of India v. Its Workmen and
Ant.,[1961] 3 S.C.R. 536, which dealt with the concept of
bonus elaborately while re-affirming what had been said in
the earlier two cases. It has not been shown to us that this
Court has subsequently widened the concept of bonus to
include a payment made by the employer ex-gratia or as an
expression of goodwill towards its employees. It seems to us
clear that the first category of remuneration falling within
the definition of wages in sub-s.(22) of 8. 2 of the
Employees State Insurance Act, 1948 is not satisfied by the
bonus in question in these appeals.
The second category of remuneration defined within the
expression wages by sub-s. (22) of 8. 2 of the Act speaks
of other additional remuneration paid at intervals not
exceeding two months. It cannot be disputed that the bonus
under consideration here is not paid at intervals not
exceeding two months. It is payable one month after the end
of each quarter .
We have carefully perused the terms of the definition
of wages set forth in sub-s. (22) of 8. 2 of the
Employees State Insurance Act, 1948, and we are satisfied
that the bonus in question in these appeals does not fall
under any category or class mentioned in the definition.
In the result, we find ourselves in agreement with the
high Court, and therefore we dismiss the appeals with costs.
A.P.J. Appeals dismissed.
646
PETITIONER:
TOWN MUNICIPAL COUNCIL, ATHANI

Vs.

RESPONDENT:
PRESIDING OFFICER, LABOUR COURT, HUBLI & ORS.

DATE OF JUDGMENT:
20/03/1969

BENCH:
BHARGAVA, VISHISHTHA
BENCH:
BHARGAVA, VISHISHTHA
SHELAT, J.M.

CITATION:
1969 AIR 1335 1970 SCR (1) 51
1969 SCC (1) 873
CITATOR INFO :
R 1970 SC 196 (17)
RF 1970 SC 209 (2,4)
O 1977 SC 282 (21,22)
D 1979 SC1393 (12)
F 1985 SC1279 (3)
O 1992 SC1918 (8)

ACT:
Industrial Disputes Act (14 of 1947), s. 33C(2)-Applications
for payment for overtime work and work done on off days-If
governed by section -No dispute re : rates-Whether
applications governed by s. 20(1) of the Minimum Wages Act
(11 of 1948).
Limitation Act (36 of 1963),Art. 137-If applies to
applications to quasi-judicial bodies.

HEADNOTE:
Applications, in which the claim of the workmen of the
appellant for computation of their benefit in respect of
over-time work and work done on weekly off-days, were
entertained by the Labour Court, under s. 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. In appeal to this Court, it
was contended that : (1) The jurisdiction of the Labour
Court to proceed with the applications was barred by the
provisions of the Minimum Wages Act, 1948; and (2) Even if
the applications were competent and not barred by the
Minimum Wages Act, they were time-barred under Art. 137 of
the Limitation Act, 1963.
HELD : (1) The Minimum Wages 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, Minimum Wages 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 Minimum
Wages 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 Minimum Wages 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. [59 D-G; 60
B-C]
In the present case, there was no dispute by the appellant
about 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 Minimum
Wages 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 Minimum Wages 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 s.
33C(2) of the industrial Disputes Act being barred because
of the, provisions of the Minimum Wages Act, could not
arise.[61 A-D]
52
(2) (a) Though the question of limitation under Art. 137 of
the 1963Act was not raised either in the Labour Court or the
High Court, it could be allowed to be raised in this Court,
because, a question of limitation raises a plea of want of
jurisdiction and is a pure question of law, when it could be
decided on the basis of the facts on the record, and the
respondents had sufficient notice of the question. [55 G-H]
(b) Article 137 of the Limitation Act, 1963 governs only
applications presented to courts under the Civil and
Criminal Procedure Codes. The use of the word other in
the first column of the article giving the description of
the application as any other application for which no
period of limitation is provided elsewhere in this
division, indicates that the Legislature wanted to make it
clear that the interpretation put by this Court in Mulchand
JUDGMENT:
v. Gopal Bhiva, [1964] 3 S.C.R. 709, 722-723 on Art. 181 of
the 1908-Act on the basis of ejusdem generis should be
applied to Art. 137 of 1963-Act also, the language of which,
is only slightly different from that of Art. 181 of the
1908-Act. That is, in interpreting Art. 137 of the 1963-Act
regard must be had to the provisions contained in the
earlier articles. These articles refer toapplications
under the Code of Civil Procedure, to two cases of
applications under the Arbitration Act, and to two cases of
applications under the Code of Criminal Procedure. This
Court in Mulechand & Co. Ltd. case held that the reference
to applications under the Arbitration Act had no effect on
the interpretation of Art. 181 of the 1908-Act and that,
that article applied only to applications under the Code of
Civil Procedure. On the same principle, the further
alteration made in, the articles in1963-Act containing
reference to applications under the Code of Criminal
Procedure could not alter the scope of Art. 137 of the 1963-
Act. Moreover even the applications under the Arbitration
Act were to be presented to courts whose proceedings are
governed by the Code of Civil Procedure. The further
amendment including applications governed by the Criminal
Procedure Code still shows that the applications must be to
courts. The alterations in the 1963-Act, namely, the
inclusion of the words other proceedings in the long title
to the 1963-Act, the omission of the, preamble and change in
the, definition so -as to includepetition in word
application, do not show an intention to make Art. 137
applicable to proceedings before bodies other than courts
such as quasi-judicial tribunals and executive bodies. [63
D-H; 64 A-G; 65 B-F]
In the present case, since the applications were presented
to the Labour Court, a tribunal which is not a court
governed by the Civil or Criminal Procedure Codes, the
applications are not governed by Art. 137 of 1963-Act. [65
G-H]
Manager Mls. P. K. Porwal v. The Labour Court at Nagpur, 70
B.L.R. 104, overruled.

&
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 170 to 173
of 1968.
Appeals by special leave from the judgment and order dated
August 25, 1967 of the Mysore High Court in Writ Petitions
Nos. 741, 973, 974 and 975 of 1966.
B. Sen, S. N. Prasad and R. B. Datar, for the appellant
(in all the appeals).
53
Janardan Sharma, for the respondents Nos. 4 to 14 (in C.A.
No. 170 of 1968) respondents Nos. 4 to 24 and 26 to 53 (in
C.A. No. 171 of 1968), respondent No. 4 (in C.A. No. 172 of
1968) and respondents Nos. 4 to 17 (in C.A. No. 173 of
1968).
The Judgment of the Court was delivered by
Bhargava, J. these four connected appeals have been filed,
by special leave, by the Town Municipal Council, Athani, and
are directed against a common judgment of the High Court of
Mysore in four writ petitions, filed by the appellant under
Art., 226 of the Constitution, dismissing the writ
petitions. The circumstances in which these appeals have
arisen may be briefly stated.
Four different applications under section 33C,(2) of the
Industrial Disputes Act No. 14 of 1947 (hereinafter referred
to as the Act) were filed in the Labour Court, Hubli, by
various workmen of the appellant. Application (LCH) No. 139
of 1965 was filed by eleven workmen on 28th July, 1965,
seeking computation of their claim for overtime work for the
period between 1st April, 1955 and 31st December, 1957, and
for work done on weekly off-days for the period between 1st
April, 1955 and 31st December, 1960. The amount claimed by
each workman was separately indicated in the application
under each head. The total claim of all the workmen was
computed at Rs. 62,420/82P according to the workmen
themselves. The second application (LCH) No. 138 of 1965
was presented by 50 workmen on 23rd July, 1965, putting
forward a claim for washing allowance at Rs. 36 each from
1st January, 1964 to 30th June, 1965, and cost of uniform at
Rs. 40 each from 1st January 1964 to 30th June, 1965 in
respect of 18 of those 50 workmen. The third application
(LCH) No. 101 of 1965 was filed by one workman alone on 19th
April, 1965, claiming a sum of Rs. 8,910/72P in respect of
his over-time work and compensation for work done on weekly
off days. The fourth application (LCH ) No. 140 of 1965 was
filed on 26th July 1965 by 14 workmen making a total claim
of Rs. 17,302/60P, for work done on weekly off-days during
the period from 1st December, 1960 to 30th June, 1965. 13 of
the workmen claimed that they were entitled to payment at
Rs, 1190 each, while one workmans claim was to the extent
of Rs. 1832/60P. The Labour Court at Hubli entertained all
these applications under s. 33C(2) of the Act, computed the
amounts due to the various workmen who had filed the
applications, and directed the appellant to make payment of
the amounts found due. Thereupon, the appellant challenged
the decision of the Labour Court before the High Court of
Mysore by four different writ petitions under Art. 226 of
the Constitution. The order in Application (LCH) No.
139/1965 was challenged in,
54
Writ Petition No. 741 of 1966, that in Application (LCH) No.
138/1965 in Writ Petition No. 973 of 1966; that in Applica-
tion (LCH) No. 101 of 1965 in Writ Petition No. 974 of 1966;
and that in Application (LCH) No. 140/1965 in Writ Petition
No. 975/1966. The principal ground for challenging the
decision of the Labour Court was that all these amounts
could have been claimed by the workmen by filing
applications under section 20(1) of the Minimum Wages 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 Minimum
Wages 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. Some other pleas were
also taken in the writ petitions which we need not mention
as they have not been raised before us. The High Court did
not accept the plea put forward on behalf of the appellant
and dismissed the writ petitions by a common order dated
25th August, 1967. These four appeals are directed against
that common order dismissing the four writ petitions. Civil
Appeals Nos. 170, 171, 172 and 173 of 1968 are directed
against the order governing Writ Petitions Nos. 741/ 1966,
973/11966, 974/1966 and 975/1966 respectively.
In these appeals in this Court also, the principal point
urged by learned counsel for the appellant was the same
which was raised before the High Court in the Writ
Petitions, viz., that the jurisdiction of the Labour Court
to deal with the claims of the workmen under S. 33C(2) of
the Act, was barred by the fact that the same relief could
have been claimed by the workmen under s. 20(1) of the
Minimum Wages Act. In the course of the arguments, however,
learned counsel conceded that he could not press this point
in Civil Appeal No. 171 of 1968 arising out of Writ Petition
No. 973 of 1966 which was directed against the order of the
Labour Court in Application (LCH) No. 138 of 1965, because
the claim in that application before the Labour Court was
confined to washing allowance and cost of uniform which are
items not governed by the Minimum Wages Act at all. His
submissions have, therefore, been confined before us to the
other three appeals in which the claim of the workmen was
for computation of their benefit in respect of overtime work
and work done on weekly off-days.
It may be mentioned that the objection to the jurisdiction
of the Labour Court was raised on behalf of the appellant
not
55
only in the writ petitions before the High Court, but even
before the Labour Court itself when that Court took up the
hearing of the applications under s. 33C(2) of the Act.
However, the ground for challenging the jurisdiction of the
Labour Court was confined to the point mentioned by us
above. It was not contended either before the Labour Court
or in the writ petitions before the High Court that the
applications were not covered by the provisions of s. 33C(2)
of the Act. The plea taken was that, even though the
applications could be made under s. 33C(2) of the Act, the
jurisdiction of the Labour Court toproceed under that
provision of law was barred by the provisions of the Minimum
Wages Act. Mr. B. Sen, appearingon behalf of the
appellant, wanted permission to raise the question whether
these applications before the Labour Court were at all
included within the scope of s. 33C(2) of the Act; but, on
the objection of learned counsel for the respondents, the
permission sought was refused. As we have mentioned
earlier, the jurisdiction of the Labour Court on this ground
was not challenged either before the Labour Court itself or
before the High Court. No such ground was raised even in
the special leave petition, nor was it raised at any earlier
stage by any application. It was sought to be raised by Mr.
Sen for the, first time in the course of the arguments in
the appeals at the time of final hearing. We did not
consider it correct to allow such a new point to be raised
at this late stage. However, another new point, which had
not been raised before the Labour Court and in the writ
petitions before the High Court, was permitted to be argued,
because it was raised by a separate application, presented
before the hearing, seeking permission to raise it. The new
question sought to be raised is that, even if the
applications under s. 33C(2) of the Act were competent and
not barred by the provisions of the Minimum Wages Act, they
were time-barred when presented under article 137 of the
Schedule to the Limitation Act No. 36 of 1963. The question
of limitation was incidentally mentioned before the, Labour
Court as well as the High Court, relying on the circumstance
that applications under s. 20(1) of the Minimum Wages Act
could only have been presented within a period of six months
from the date when the claims arose. At that stage,
reliance was not placed on article 137 of the Schedule to
the Limitation Act; but, well before the final hearing, a
written application was presented on behalf of the appellant
seeking permission to raise this plea of limitation in these
appeals. Notice of that application was served on the res-
pondents well in time, so that, by the time the appeals came
up for hearing, they knew that this point was sought to be
raised by the appellant. A question of limitation raises a
plea of want of jurisdiction and, in these cases, this
question could be decided
56
on the basis of the facts on the record, being apure
question of law. It is in this background that we have
permitted this question also to be raised in these appeals,
though it was not put forward either in the High Court or
before the Labour Court. Thus, we are concerned in these
appeals with the two aspects relating to the exclusion of
the jurisdiction of the Labour Court to, entertain
applications under s. 33C(2) of the Act because of the
provisions of the Minimum Wages Act, and the plea that the
applications under s. 33C(2) of the Act were time-barred Dr
at least part of the claims under the applications were ame-
barred in view of article 137 of the schedule to the
Limitation Act, 1963.
On the first question, both the Labour Court and the High
Court held that the contention raised on behalf of the
appellant that the jurisdiction of the Labour Court was
excluded because of s. 20(1) of the Minimum Wages Act has no
force, on the assumption that the claims made in these
applications under s. 33C(2) of the Act could have been
presented before the Labour Court under s. 20(1) of the
Minimum Wages Act. In our view, this assumption was not
justified. As we shall indicate hereafter, the claims made
by the workmen in the applications under S. 33C(2) of the
Act could not have been made before the Labour Court under
s. 20(1) of the Minimum Wages Act, so that it is not
necessary for us to decide the general question of law
whether an application under s. 33C(2) of the Act can or
cannot be competently entertained by a Labour Court if an
application for the same relief is entertainable by the
Labour Court under s. 20(1) of the Minimum Wages Act.
The long title and the preamble to the Minimum Wages Act
show that this Act was passed with the object of making
provision for fixing minimum rates of wageaein certain
employments The word wages has been given a wide meaning
in its definition in S. 2(h) of that Act and, quite clearly,
includes payment in respect of overtime and -for work done
on weekly off-days which are required to be given by any
employer to the workmen under the provisions of that Act
itself. Section 13(1), which deals with weekly off-days,
and section 14(1), which deals with overtime, are as follows
:-
13. (1) In regard to any scheduled employment
minimum rates of wages in respect of which
have been fixed under this Act, the
appropriate Government may-
(a) fix the number of hours of work which
shall constitute a normal working day,
inclusive of one or more specified intervals;
57
(b) provide for a day of rest in every
period of seven days which shall be allowed to
all employees or to any specified class of
employees and for the payment of remuneration
in respect of such days of rest;
(c) provide for payment for work on a day of
rest at a rate not less than the overtime
rate.
14. (1) Where an employee, whose minimum
rate of wages is fixed under this Act by the
hour, by the day or by such a longer wage-
period as may be prescribed, works on any day
in excess of the number of hours constituting
a normal working day, the employer shall pay
him for every hour or for part of an hour so
worked in excess at the overtime rate fixed
under this Act or under any law of the
appropriate Government for the time being in
force, whichever is higher.
In order to provide a remedy against breach of orders made
under ss. 13(1) and 14(1), that Act provides a forum and the
manner of seeking the remedy in section 20 which is as
follows :
20. (1) The appropriate Government may, by notification in
the Official Gazette, appoint any Commissioner for Workmens
Compensation or any officer of the Central Government
exercising functions; as a Labour Commissioner for any
region, or any officer of the State Government not below the
rank of Labour Commissioner or anyother officer with
experience as a Judge of a Civil Court or as a stipendiary
Magistrate to be the Authority to hear and decide for any
specified area all claims arising out of payment ofless
than the minimum rates of wages or in respect of the payment
of remuneration for days of rest or for work done on such
days under clause (b) or clause (c) of subsection (1) of
section 13 or of wages at the overtime rate under section
14, to employees employed or paid in that area.
(2) Where an employee has any claim of the, nature referred
to in sub-section (1), the employee himself, or any legal
practitioner or any official of a registered trade union
authorised in writing to act on his behalf, or any
Inspector, or any person acting with the permission of the
Authority appointed under sub-
58
section (1), may apply to such Authority for a
direction under sub-section (3) :
Provided that every such application shall be
presented within six months from the date on
which the minimum wages or other amount became
payable:
Provided further that any application may be
admitted after the said period of six months
when the applicant satisfies the Authority
that he had sufficient cause for not making
the application within such period.
(3) When any application under sub-section
(2) is entertained, the Authority shall hear
the applicant and the employer, or give them
an opportunity of being heard, and after such
further inquiry, if any, as it may consider
necessary, may, without prejudice to any other
penalty to which the employer may be liable
under this Act, direct-
(i) in the case of a claim arising out of
payment of less than the minimum rates of
wages, the payment to the employee of the
amount by which the minimum wages payable to
him exceed the amount actually paid, together
with the payment of such compensation as the
Authority may think fit, not exceeding ten
times the amount of such excess;
(ii) in any other case, the payment+ of the
amount due to the employee together with the
payment of such compensation as the Authority
may think fit, not exceeding ten rupees,
and the Authority may direct payment of such
compensation in cases where the excess or the
amount due is paid by the employer to the
employee before the disposal of the
application.
(4) If the Authority hearing any application
under this section is satisfied that it was
either malicious, or vexatious, it may direct
that a penalty not exceeding fifty rupees be
paid to the employer by the person presenting
the application.
(5) Any amount directed to be paid under
this section may be recovered-
59
(a) if the Authority is a Magistrate, by the
Authority as if it were a fine imposed by the
Authority as a Magistrate, or
(b) if the Authority is not a Magistrate, by
any Magistrate to whom the Authority makes
application in this behalf, as if it were a
fine imposed by such Magistrate.
(6) Every direction of the Authority under
this section shall be final.
(7) Every Authority appointed under sub-sec-
tion ( 1 ) shall have all the powers of a
Civil Court under the Code of Civil Procedure,
1908, for the purpose of taking evidence and
of enforcing the attendance of witnesses and
compelling the production of documents, and
every such Authority shall be deemed to be a
Civil Court for all the purposes of section
195 and Chapter XXXV of the Code of Criminal
Procedure, 1898.
We have mentioned these provisions of the Minimum Wages Act,
because the language used at all stages in that Act leads to
the clear inference that that Act isprimarily concerned
with fixing of rates-rates of minimum wages, overtime rates,
rate for payment for work on a day of rest-and is not really
intended to be an Act for enforcement of payment of wages
for which provision is made in other laws, such as the
Payment of Wages Act No. 4 of 1936, and the Industrial
Disputes Act No. 14 of 1947. In s. 20(1) of the Minimum
Wages Act also, provision is made for seeking remedy in
respect of claims arising out of payment of less than the
minimum rates, of wages or in respect of payment of
remuneration for days of rest or for work done on such days
under clause (b) or clause (c) of sub-section (1) of section
13 or of wages at the overtime rate under section 14. This
language used in s. 20(1) shows that the Authority appointed
under that provision of law 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. If
there be no dispute as to rates between the employer and the
employees, section 20(1) would notbe attracted. The
purpose of s. 20(1) seems to be to ensure that the rates
prescribed under the Minimum Wages Act are complied with by
the employer in making payments and, if any attempt is made
to make payments at lower rates, the workmen are given the
right to invoke the aid of the Authority appointed under s.
20(1). In cases where there is no dispute as to rates of
wages, and the only question is whether a particular payment
at the agreed rate in respect of minimum wages, overtime
60
or work on off-days is due to a workman or not, the
appropriate remedy is provided in the Payment of Wages Act.
If the payment is withheld beyond the time permitted by the
Payment of Wages Act even on the ground that the amount
claimed by the workman is not due, or if the amount claimed
by the workman is not paid on the ground that deductions are
to be made by the employer, the employee can seek his remedy
by an application under section 15(1) of the Payment of
Wages Act. In cases where section 15 of the Payment of
Wages Act may not provide adequate remedy, the remedy can be
sought either under section 33C of the Act or by raising an
industrial dispute under the Act and having it decided under
the various provisions of that Act. In these circumstances,
we are unable to accept the submission made by Mr. Sen on
behalf of the appellant that s. 20(1) of the Minimum Wages
Act should be interpreted as intended to cover all claims in
respect of minimum wages or overtime payment or payment for
days of rest even though there may be no dispute as to the
rates at which those payments are to be claimed. It is true
that, under s. 20(3), power is given to the Authority
dealing with an application under s. 20(1) to direct payment
of the actual amount found due; but this, it. appears to us,
is only an incidental power granted to that Authority, so
that the directions made by the Authority under s. 20(1) may
be effectively carried out and there may not be unnecessary
multiplicity of proceedings. The power to make orders for
payment of actual amount due to an employee under s. 20(3)
cannot, therefore, be interpreted as indicating that the
jurisdiction to the Authority under s. 20(1) has been given
for the purpose of enforcement of payment of amounts and not
for the purpose of ensuring compliance by the employer with
the various rates fixed under that Act. This
interpretation, in our opinion, also harmonises the
provisions of the Minimum Wages Act with the provisions of
the Payment of Wages Act which was already in existence when
the Minimum Wages Act was passed. In the present appeals,
therefore, we have to see whether the claims which were made
by the workmen in the various applications under s. 33C(2)
of the Act were of such a nature that they could have been
brought before the Authority under s. 20(1) of the Minimum
Wages Act inasmuch as they raised disputes relating to the
rates for payment of overtime and for work done on weekly
off days.
We have examined the applications which were presented
before the Labour Court under s. 33C(2) of the Act in these
appeals and have also taken into account the pleadings which
were put forward on behalf of the appellant in contesting
those applications and we are unable to find that there was
any dispute
61
relating to the rates. It is true that, in their
applications, the workmen did plead the rates at, which
their claims had to be computed; but it was nowhere stated
that those rates were being disputed by the appellant. Even
in the pleadings put forward on behalf of the appellant as
incorporated in the order of the Labour Court, there was no
pleading that the claims of the workmen were payable at a
rate different from the rates claimed by them. Itdoes
appear that, in one case, there was a pleading on behalf of
the appellant that no rates at all had been prescribed by
the Mysore Government. That pleading did not mean that it
became a dispute as to the rates at which the payments were
to be made by the appellant. The only question that arose
was whether there were any rates at all fixed under the
Minimum Wages Act for overtime and for payment for work done
on days of rest. Such a question does not relate to a
dispute as to the rates enforceable between the parties, so
that the remedy under section 20(1) of the Minimum Wages Act
could not have been sought by the applicants in any of these
applications. No question can, therefore, arise of the
jurisdiction of the Labour Court to entertain these
applications under s. 33C(2) of the Act being barred because
of the provisions of the Minimum Wages Act. The first point
raised on behalf of the appellant thus fails.
In dealing with the second question relating to the
applicability of article 137 of the schedule to the
Limitation Act, 1963 to applications under s. 33C(2) of the
Act, we may first take notice of two decisions of this Court
on the scope of the parallel provision contained in article
181 of the First Schedule to the Indian Limitation Act No. 9
of 1908. Article 181 of that Schedule laid down that the
period of limitation for an application, for which no period
of limitation was provided elsewhere in the schedule or by
section 48 of the Code of Civil Procedure, 1908, would be
three years, and the time from which the period would begin
to run would be when the right to apply accrued. The scope
of this article was considered first by this Court in Sha
Mulchand & Co. Ltd. (In Liquidation) v. Jawahar Mills
Ltd.(1) where the Court had to consider the question whether
this article would govern an application made by the
Official Receiver under section 38 of the Indian Companies
Act for rectification of the register of a limited company.
The Court noted the fact that the advocate appearing in the
case relied strongly on article 181 of the Limitation Act
and, thereafter, took notice of the fact that that article
had, in a long series of decisions of most, if not all, of
the High Courts, been held to govern only applications under
the Code of Civil Procedure. The Court also dealt with the
argument advanced
(1) [1953] S. C. R. 351.
62
that the reason for holding that article 181 was confined to
applications under the Code was that the article should be
construed ejusdem generis and that, as all the articles in
the third division of the schedule to the Limitation Act
related to applications under the Code, article 181, which
was the residuary article, must be limited to applications
under the Code. That reasoning, it was pointed out, was no
longer applicable because of the amendment of the Limitation
Act by the introduction of articles 158 and 178 which
governed applications under the Arbitration Act and not thus
under the Code. The Court then considered the views
expressed by the various High Courts in a number of cases
and held :-
It does not appear to us quite convincing,
without further argument, that the mere
amendment of articles 158 and 178 can ipso
facto alter the meaning which, as a result of
a long series of judicial decisions of the
different High Courts in India, came to be
attached to the language used in article 181.
This long catena of decisions may well be said
to have, as it were, added the words under
the Code in the first column of that article.
If those words had actually been used in that
column, then a subsequent amendment of
articles 158 and 178 certainly would not have
affected the meaning of that article. If,
however, as a result of judicial construction,
those words have come to be read into the
first column as if those words actually
occurred therein, we are not of opinion, as at
present advised, that the subsequent amendment
of articles 158 and 178 must necessarily and
automatically have the effect of altering the
long acquired meaning of article 181 on the
sole and simple ground that after the
amendment the reason on which the old
construction was founded is no longer
available.
This earlier decision was relied upon by the Court in Bombay
Gas Co. Ltd. v Gopal Bhiva and Others(1), where the Court
had to deal with the argument that applications under s. 33C
of the Act will be governed by three years limitation
provided by article 181 of the Limitation Act. The Court,
in dealing with this argument held :-
In our opinion, this argument is one of
desperation. It is well settled that art. 181
applies only to applications which are made
under the Code of Civil Procedure,, and so,
its extension to applications made under s. 33C(2)
of the Act would not be justified. As early
(1) [1964] 3 S. C. R. 709, 722-23.
63
as 1880, the Bombay High Court had held in Rai
Manekbai v. Manekji Kavasji(1), that art 181
only relates to applications under the Code of
Civil Procedure in which case no period of
limitation has been prescribed for the
application, and the consensus of judicial
opinion on this point had been noticed by the
Privy Council in Hansraj Gupta v. Official
Liquidators, Dehra Dun Mussoorie Electric
Tramway Company Ltd. (2) An attempt was no
doubt made in the case of Sha Mulchand & Co.
Ltd. v. Jawahar Mills Ltd.() to suggest that
the amendment of article 158 and 178 ipso
facto altered the meaning which had been
attached to the words in art. 181 by judicial
decisions, but this attempt failed, because
this Court held that the long catena of
decisions under art. 181 may well be said to
have, as it were, added the words u
nder the
Code in the first column of that Article.
Therefore, it is not possible to accede to the
argument that the limitation prescribed by
art. 181 can be invoked in dealing with
applications, under s. 33C(2) of the Act.
It appears to us that the view expressed by this Court in
those cases must be held to be applicable, even when
considering the scope and applicability of article 137 in
the new Limitation Act of 1963. The language of article 137
is only slightly different from that of the earlier article
181 inasmuch as, when prescribing the three years period of
limitation, the first column giving the description of the
application reads as any other application -for which no
period of limitation is provided elsewhere in this division.
In fact, the addition of the word other between the words
any and application would indicate that the legislature
wanted to make it clear that the principle of interpretation
of article 181 on the basis of ejusdem generis should be
-applied when interpreting the new article 137. This word
other implies a reference to earlier articles and,
consequently, in interpreting this article, regard must be
had to the provisions contained in all the earlier articles.
The other articles in the third division to the schedule
refer to applications under the Code of Civil Procedure,
with the exception of applications under the Arbitration Act
and also in two cases applicationsunder the Code of
Criminal Procedure. The effect of introduction in the third
division of the schedule of reference to applications under
the Arbitration Act in the old Limitation Act has already
been considered by this Court in the case of Sha Mulchand &
Co. Ltd. (3). We think that, on the same principle, it
(1) (1880) 1. L. R. 7 Bom. 213. (2) (1932) L. R. 60 1.
A. 13, 20
(3) [1953] S. C. R. 351
64
must be held that even the further alteration made in the
articles contained in the third division of the schedule to
the new Limitation Act containing references to applications
under the Code of Criminal Procedure cannot be held to have
materially altered the scope of the residuary article 137
which deals with other applications. It is not possible to
hold that the intention of the legislature was to
drastically alter the scope of this article so as to include
within it all applications, irrespective of the fact whether
they had any reference to the Code of Civil Procedure.
This point, in our opinion, may be looked at from another
angle also. When this Court earlier held that all the
articles in the third division to theschedule, including
article 181 of the Limitation Act of 1908 governed
applications under the Code of CivilProcedure only, it
clearly implied that the application must be presented to a
Court governed by the Code of Civil Procedure. Even the
applications under the Arbitration Act that were included
within the third division by amendment of articles 158 and
178 were to be presented to courts whose proceedings were
governed by the Code of Civil Procedure. At best, the
further amendment now made enlarges the scope of the third
division of the schedule so as also to include some
applications presented to courts governed by the Code of
Criminal Procedure. One factor at least remains constant
and that is that the applications must be to courts to be
governed by the articles in this division. The scope of the
various -articles in this division cannot be held to have
been so enlarged as to include within them applications to
bodies other than courts, such as a quasi-judicial tribunal,
or even an executive authority. An Industrial Tribunal or a
Labour Court dealing with applications or references under
the Act are not courts and they are in no way governed
either by the Code of Civil Procedure or the Code of
Criminal Procedure. We cannot, therefore, accept the
submission made that this article will apply even to
applications made to an Industrial Tribunal or a Labour
Court. The alterations made in the article and in the new
Act cannot, in our opinion, justify the interpretation that
even applications presented to bodies, other than courts,
are now to be governed for purposes of limitation by
-article 137.
Reliance in this connection was placed by learned counsel
for the appellant primarily on the decision of the Bombay
High Court in The Manager, Mls.P. K. Porwal v. The Labour
Court at Nagpur(1). We are unable to agree with the view
taken by the Bombay High Court in that case. The High Court
ignored the circumstance that the provisions of article 137
were sought to be applied to an application which was
presented not to a court but
(1) 70 B. L. R. 104.
65
to a Labour Court dealing with an application under s. 3 3C
(2) of the Act and that such a Labour Court is not governed
by any procedural code relating to civil or criminal
proceedings. That Court appears to have been considerably
impressed by the fact that, in the new Limitation Act of
1963, an alteration was made in the long title which has
been incorrectly described by that Court as preamble. Under
the old Limitation Act, no doubt, the long title was An Act
to consolidate and amend the law for the limitation of suits
and for other purposes, while, in the new Act of 1963, the
long title is An Act to consolidate and amend the law for
the limitation of suits and other proceedings and for
purposes connected therewith. In the long title, thus, the
words other proceedings have been added; but we do not
think that this addition necessarily implies that the
Limitation Act is intended to govern proceedings before any
authority,. whether executive or quasijudicial, when,
earlier, the old Act was intended to govern proceedings
before civil courts only. It is also true that the preamble
which existed in the old Limitation Act of 1908 has been
omitted in the new Act of 1963. The omission of the
preamble does not, however, indicate that there was any
intention of the legislature to change the purposes for
which the Limitation Act has been enforced. The, Bombay
High Court also attached importance to the circumstance that
the scope of the new Limitation Act has been enlarged by
changing the definition of applicant in s. 2(a) of the new
Act so as to include even a petitioner andthe word
application so as to include a petition. The question
still remains whether this alteration can be held to be
intended to cover petitions by a petitioner to authorities
other than Courts. We are unable to find any provision in
the new Limitation Act which would justify holding that
these changes in definition were intended to make the
Limitation Act applicable to proceedings before bodies other
than Courts. We have already taken notice of the change
introduced in the third division of the schedule by includ-
ing references to applications under the Code of Criminal
Procedure, which was the only other aspect relied upon by
the Bombay High Court in supportof its view that
applications under s. 33C of the Act will also be
governed by the new article 137. For the reasons we have
indicated earlier, we are unable to accept the view
expressed by the Bombay High Court; and we hold that article
137 of the schedule to the Limitation Act, 1963 does not
apply to applications under s. 33C(2) of the Act, so that
the previous decision of this Court that no limitation is
prescribed for such applications remains unaffected.
The appeals fail and I are dismissed withcosts.One
hearing fee.
V.P.S. Appeals dismissed.
66
PETITIONER:
SARPANCH, LONAND GRAMPANCHAYAT

Vs.

RESPONDENT:
RAMGIRI GOSAVI & ANR.

DATE OF JUDGMENT:
20/04/1967

BENCH:
BACHAWAT, R.S.
BENCH:
BACHAWAT, R.S.
SHELAT, J.M.

CITATION:
1968 AIR 222 1967 SCR (3) 774
CITATOR INFO :
RF 1972 SC 171 (16)

ACT:
Minimum Wages Act, 1948 s. 20(1) and (2)-Authority under s.
20(2) exercising discretion condoning delay-Whether
circumstances justified interference by superior court in
exercise of discretion.

HEADNOTE:
On March 19, 1963 the first respondent, on behalf of some
employees of the Grampanchayat, applied to the authority
appointed under s. 20(1) of the Minimum Wages Act, 1948, for
a direction upon the Grampanchayat to pay to the employees
certain overtime wages, etc.
The Authority found that since January 2, 1961, the
employees had been making complaints to the Government
authorities regarding nonpayment of overtime wages and as a
result, directions were given from time to time by the
Government Officers concerned to the appellant to comply
with the provisions of the Act and the rules made
thereunder; that the officers assured the employees from
time to time that the matter was receiving their attention
and the employees, relying upon these assurances, refrained
from making the application within six months as required
under the first proviso to s. 20(2). By its order of
September 18, 1963, in exercise of the power conferred by,
the second proviso to s. 20(2) theauthority therefore
condoned the delay in the filing of the application on the
ground that the employees had remained inthe honest
though mistaken belief that relief would be granted to them
through the intervention of the officers and held that the
application should be entertained in respect of the claims
for the period Subsequent to January 1, 1961. A petition
challenging this order under Art. 227 of the Constitution
was summarily dismissed by the High Court.
On appeal to this Court,
HELD : The expression sufficient cause in the second
proviso to s. 20(2) should receive the same liberal
interpretation as in s. 5 of the Indian Limitation Act. It
was not shown that in condoning the delay the Authority had
acted arbitrarily or capriciously or in excess of its
jurisdiction Pr that it committed any error apparent on the
face of the record. This Court could not interfere under
Art. 136 merely because it might take a different view of
the facts and exercise its discretion differently. 1776 B;
777 C-D]
Case law referred to.

JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 87 of 1966.
Appeal by special leave from the judgment andorder dated
November 20, 1963 of the Bombay High Court in Special Civil
Application No. 1886 of 1963.
H. It. Gokhale and R. Gopalakrishnan, for the appellant.
The respondent did not appear.
775
The Judgment of the Court was delivered by
Bachawat, J. On March 19, 1963 respondent No. 1 on behalf of
36 employees of the Lonand Grampanchayat applied to the
Authority appointed under s. 20(1) of the. Minimum Wages
Act, 1948 for a direction upon the Grampanchayat to pay to
the employees overtime wages and damages. A number of
employees claimed overtime wages from October 23, 1960 for a
period of two years two months, and nine days. One employee
claimed wages for a period of seven years and nine months,
one claimed wages for six years and ten months and another
claimed wages for three years. By an order dated September
18, 1963 the Authority held that the application should be
entertained in respect of the claims for the period
subsequent to January 1, 1961 as the employees had
sufficient cause for not making the application within the
prescribed period of six months. A petition challenging
this order under Art. 227 of the Constitution was summarily
dismissed by the Bombay High Court. From the order of the
High Court, the present appeal has been filed by special
leave.
An application for a direction on the employer to pay
minimum wages and other amounts payable underthe Minimum
Wages Act may be made under s. 20(2) of the Act to the
Authority appointed under s. 20(1). The first proviso to s.
20(2) requires that every such application shall be
presented within six months from the, date on which the
minimum wages or other amount became: payable.. The second
proviso to s. 20(2) is in these terms
Provided further that any application may be
admitted after the said period of six months
when the applicant satisfies the Authority
 that he had sufficient cause for not making
the application within such period.
The Authority has a discretion to condone the delay in pre-
senting the application provided sufficient cause for the
entire delay is shown to its satisfaction. This discretion
like other judicial discretion must be exercised with
vigilance and circumspection I according to justice,
commonsense, and sound judgment. The discretion is to know
through law what is just, see Keighleys case(1).
The wording of the second provisois similar to the
provisions, of s. 5 of the Indian Limitation Act. In
Krishna v. Chathappan (2) the Madras High Court indicated in
the following passage how the discretion under s. 5 should
be exercised
We think that section 5 gives the Courts a
discretion which in respect of jurisdiction is
to. be exercised in the way in which judicial
power and discretion ought to be
(1) 10 Cokes Rep. 139, 140=77 E. R. 11 34,
1136.
L9Sup CI/67- 5
(2) I. L. R. 13 Mad. 269-
7 76
exercised upon principles which are well
understood; the words sufficient cause
receiving a liberal construction so as
to advance substantial justice when no negli-
gence not inaction nor want of bona fides is
imputable to the appellant.
This decision received-the approval, of this Court in
Dinabandhu Sahu v. Jadumoni Mangaraj and others(1) and
Ramlal, Motilal and Chhotetal v. Rewa Coalfields Ltd.(2).
The words sufficient cause in the second proviso to s.
20(2) should receive a similar liberal construction.
No appeal lies from an order of the Authority, under s.20.
But the High Court is vested with the power
of judicial superintendence over the tribunal under Art. 227
of the Constitution. This power is not,greater than the
power under Art. 226 and is limited to seeing that the
tribunal functions within the limits of its authority, see
Nagendra Nath Bora and another v. The Commissioner of Hills
Division and Appeals, Assam, and others(3). The High Court
will not review the discretion of the Authority judicially
exercised, but it- may interfere if the exercise of the
discretion is capricious or perverse or ultra vires. In
Sitaram Ramcharan, etc. v. M. N. Nagarshana and
others(4)this Court held that a finding of fact by the
authority under the similarly worded second proviso to s. 15
(2) of the Payment of Wages Act 1936 could not be challenged
in a petition under Art. 227. The High Court may refuse to
interfere. ,under Art. 227 unless there is grave miscarriage
age of justice.
In the, present case, the Authority found that since January
2, 1961 the employees were making complaints to the
government authorities,regarding non-payment of overtime
wages. On January 2, 1961 the employees wrote to the
Inspector, Minimum Wages, government labour office, Sangli,
complaining of overtime work and asking for directions on
the appellant to comply with the provisions of the Minimum
Wages Act. A reminder was sent to him on January 11, 1961.
On January 18, 1961 the Inspector wrote that the matter was
being followed up. On April 22, 1961 the Inspector visited
Lonand and directed the appellant to comply with the
provisions of the Minimum Wages Act and the rules made
-thereunder. On April 26, 1961 the Inspector communicated
this direction to the employees. On January 1, 1962 the
employees lodged a complaint of- overtime work with the
Commissioner, Poona Division, and asked for a direction for
payment of the arrears of overtime wages. OnJanuary 3,
1962 the Commissioner wrote to the employees that the matter
was receiving attention and their application had been sent
to the, Collector of Satara for disposal. Later in
August/September 1962 and early 1963-the
(1) [1955] 1 S. C. R. 140, 146.
(3) [1958] S. C. R. 1240, 1272.
(2) [1962] 2 S. C. R. 762, 767.
(4) [1960] 1 S. C. R. 875, 884.
777
Block Development Officer came to Lonand and made inquiries.
The. revenue officers appointed as inspectors under the
government notification dated May 4,,1955 are under the
administrative control of Commissioner and Collector. The
inspectors have no power to give relief under s. 20(2) but
they have large powers of supervision and control under s.
19 of the Act. The employees relied upon the assurances
of the inspectors and their superiors that proper steps
would, be taken for the remedy of their grievances and
relying upon those assurances, they refrainedfrom taking
steps under s.. 20(2) of the Minimum.Wages Act.. Having
regard to all the circumstances of the case, the employees
were not guilty of inaction or negligence and the entire
delay in presenting the application was due to their honest
though mistaken belief that the relief of, overtime wages
would be granted to them through the intervention of the
inspectors and their superior officers. It is not shown
that in condoning the delay the Authority acted, arbitrarily
or capriciously or in excess of its jurisdiction or that it
committed any error apparent on the face of the record. In
the application under 20(2) some of the employees claimed
overtime wages for periods prior to January 1, 1961.
The Authority declined to condone the delay in respect of
claims for the period prior to January 1, 1961. On a
careful consideration of the relevant materials, the
Authority condoned the delay in respect of claims subsequent
to January 1, 1961 only. The Court cannot interfere merely
because it might take a different view of the facts and
exercise the discretion differently. it is not shown that
the impugned order led to grave miscarriage of justice. The
High Court refused to interfere under Art. 227. We think
that this is not a fit case for interference by us under
Art. 136.
The appeal is dismissed. There will be no order as to
costs.
K. P. S. Appeal dismissed.
778
CASE NO.:
Appeal (civil) 6777 of 2003

PETITIONER:
S.L. Srinivasa Jute Twine Mills P. Ltd

RESPONDENT:
Union of India & Anr

DATE OF JUDGMENT: 15/02/2006

BENCH:
ARIJIT PASAYAT & R.V. RAVEENDRAN

JUDGMENT:
J U D G M E N T
(With Civil Appeal Nos. 6778 to 6780 of 2003)

ARIJIT PASAYAT, J.

These four appeals involve common points of law and, therefore,

are disposed of by this judgment which shall govern each one of them.
Appellant in each appeal has questioned correctness of the judgment
rendered by a Division Bench of the Andhra Pradesh High Court
dismissing the writ petitions filed before the High Court praying
issuance of a writ of mandamus to declare that Act 10 of 1998 seeking to
amend provisions of Section 16 of the Employees Provident Fund and
Miscellaneous Provisions Act, 1952 (in short the Act) shall not apply to
the writ petitioners and they would continue to have the infancy
protection for the period of 3 years starting from the date of
establishment of the industry. The High Court by the impugned
judgments dismissed the writ petitions holding that the amendment was
intended to take away certain benefits by way of necessary amendments
to Section 16 and the question as to whether any vested right are
sought
to be affected would arise only when the provisions are given
retrospective operation.

It was held that the real intention was to deal with the
establishments universally on equal footing under the provisions of the
Act and, therefore, no exemption whatsoever was intended to be provided
in favour of any establishment. On and from date of enforcement of the
amended provisions all establishments including the establishments who
had enjoyed the benefit of exemption are brought within the purview of
the operation of the Act and they in no way alter any of the rights
accrued in favour of the writ petitioners establishments.

The factual scenario needs to be noted in brief as the controversy

is whether the appellants are entitled to the protection as claimed.

At the time of enactment of the Act:

Name of the
appellant
Sri Lakshmi
Srinivasa
Navya Jute
Mills
Srinivasa
Jute Mills
Sitaram
Lakshmi
Jute Mills
Civil Appeal No.
6777/2003
6778/2003
6779/2003
6780/2003

Commencement of
infancy
period/commercial
production
November
17, 1995
April 1, 1996
August 19,
1997
February 19,
1997
Expiry of infancy
period as per
Section 16(d) as
claimed by appellant
November
16, 1998
March 31,
1999
August 20,
2000
February 18,
2000
Date of Ordinance
No.17/1997
September
22, 1997
September
22, 1997
September
22, 1997
September
22, 1997
Date of omission of
Section 16(d) (vide
Act 10/1998)
June 22,
1998 w.e.f.
22.9.1997
June 22,
1998 w.e.f.
22.9.1997
June 22,
1998 w.e.f.
22.9.1997
June 22,
1998 w.e.f.
22.9.1997
Balance infancy
period to be availed
1 year
1 month
24 days
1 year
6 month
8days
2 years
10 month
28 days
2 years
5 month
26 days

Learned counsel for the appellants submitted that the High Court
has clearly erred in holding that the accrued rights were in no way
affected or altered. In fact, under the un-amended provisions the
appellants were entitled to the protection for the infancy period as
provided in the Act.

Learned counsel for the respondents on the other hand submitted

that in public interest the amendment can be done and this is a case
where keeping the ultimate welfare of the workers in view the
amendment was made and the exemption was not granted to any
category of establishment. That according to learned counsel for the
respondents meet the requirements of law and the judgment of the High
Court is therefore not open to challenge.

The position of Section 16 at different points of time can be

noticed. Section 16 as originally enacted read as follows:

16. Act not to apply to factories belonging to

Government or local authority and also to infant
factories.

This Act shall not apply to-

(a) any factory belonging to the government or a

local authority, and

(b) any other factory established whether before or

after the commencement, of this Act unless three years
have elapsed from its establishment.

Section 16 was amended by the Employees Provident Funds

(Amendment) Act, 1958 and sub-section (1) of Section 16 of the Principal
Act was substituted as under:

(1) This Act shall not apply to any

establishment until the expiry of three years
from the date on which the establishment is,
or has been set up.

Explanation: For the removal of doubts it is

hereby declared that an establishment shall
not be deemed to be newly set up merely by
reason of a change in its location.

Section 16(1) was once again amended by the Employees Provident

Funds (Amendment) Act, 1960 and sub-section (1) of Section 16 was
substituted as under:

(1) This Act shall not apply:

(a) to any establishment registered

under the Co-operative Societies Act,
1912, or under any other law for the time
being in force in any State relating to Co-
operative Societies, employing less than
fifty persons and working without the aid
of power; or

(b) to any other establishment

employing fifty or more persons or twenty
or more but less than fifty persons until
the expiry of three years in the case of the
former and five years in the case of the
latter, from the date on which the
establishment is, or has been, set up.

Explanation: For the removal of doubts, it

is hereby declared that an establishment
shall not be deemed to be newly set up
merely by reason of a change in its
location.
Section 16 was further amended by the Employees Provident
Funds and Miscellaneous (Amendment) Act, 1988 with effect from
1.8.1988, and Clause (b) of sub-section (1) of Section 16 was
substituted
by clauses (b), (c) and (d) and the said amendment to Section 16 is as
under:

(b) to any other establishment belonging

to or under the control of the Central
Government or the State Government and
whose employees are entitled to the benefit
of contributory provident fund or old age
pension in accordance with any scheme or
rule framed by the Central Government or
the State Government governing such
benefit; or

(c) to any other establishment set up

under any Central Provincial or State Act
and whose employees are entitled to the
benefits of contributory provident fund or
old age pension in accordance with any
scheme or rule framed under that Act
governing such benefits; or

(d) to any other establishment newly set

up, until the expiry of a period of three years
from the date on which such establishment
is, or has been set up.

Thereafter, Section 16 was again amended by Employees Provident

Funds and Miscellaneous Provisions (Amendment) Act, 1988, omitting
clause (d) with explanation in sub-section (1) of Section 16 with effect
from 22.9.1997. (The said omission was initially carried out by
Ordinance No.17/1997 promulgated on 22.9.1997 followed by Ordinance
No.25/1997 dated 25.12.1997 and Ordinance No.8 of 1998 dated
23.4.1998 followed by Act 10 of 1998.)

According to the appellants, the un-amended provisions as it

stood
after the amendment in 1988 under clause(d), apply to their cases and
they were entitled to the protection regarding non-application of the
Act
for a period of 3 years from the date on which such establishment was
set up. According to the High Court, as clause (d) was deleted with
effect
from 22.9.1997, the Act had application to every establishment and no
exemption or infancy period whatsoever was available from 22.9.1997.

The crucial question therefore is the effect of the amendment on

the existing rights.
In Jayantilal Amratlal v. Union of India and Others (AIR 1971 SC
1193), it has been laid down as under :
In order to see whether the rights and liabilities under
the repealed law have been put to an end by the new
enactment, the proper approach is not to enquire if the
new enactment has by its new provisions kept alive the
rights and liabilities under the repealed law but
whether it has taken away those rights and liabilities.
The absence of a saving clause in a new enactment
preserving the rights and liabilities under the repeated
law is neither material nor decisive of the question.
In Govinddas and others v. Income Tax Officer and another (AIR
1977 SC 552), it was laid down that:
Now it is well settled rule of interpretation hallowed
by time and sanctified by judicial decisions that unless
the terms of a statute expressly so provide or
necessarily require it, retrospective operation should
not be given to a statute so as to take away or impair
an existing right or create a new obligation or impose a
new liability otherwise than as regards matters of
procedure. The general-rule as stated by HALSBURY
in Vol. 36 of the LAWS OF ENGLAND (3rd Edn,) and
reiterated in several decisions of this Court as well as
English Courts is that all statutes other than those
which are merely declaratory or which relate only to
matters of procedure or of evidence are prima facie
prospective and retrospective operation should not be
given to a statute so as to affect, alter or destroy an
existing right or create a new liability or obligation
unless that effect cannot be avoided without doing
violence to the language of the enactment. If the
enactment is expressed in language which is fairly
capable of either interpretation, it ought to be
construed as prospective only.

A Division Bench of Bombay High Court while considering the

earlier amendment to Section 16(1)(d) curtailing the infancy period from
5 years to 3 years, held thus, in Magic Wash Industries (P) Ltd v.
Assistant Provident Fund Commissioner, Panaji and Anr. (1999 Lab.I.C.
2197):
There is no doubt that the vested rights or benefits
under the legislation could be retrospectively taken
away by legislation, but then the statute taking away
such rights or benefits must expressly reflect its
intention to that effect. The infancy period prior to the
amended provision Section 16(1)(d) was five years in
the case of establishments employing 20 to 50 workers
and in the event this infancy benefit was to be
withdrawn, it was necessary that the intention of the
Legislature should have been clearly reflected in the
amended provision itself that the rights and benefits
which had already accrued stood withdrawn. The
amended clause 16(1)(d) came on the statute book on
June 2, 1988, when it was assented by the President
of India but the amended Section 16 was put into
operation only with effect from August 1, 1988, which
empowered the Central Government to appoint
different dates for the coming into force of different
provisions of the Act. We find it difficult in the
circumstances, to conclude that the intention of the
Legislature was to take away the benefit of infancy
period which had already accrued to the existing
establishments and this benefit has not been expressly
taken away or by implication by the amended
provision Section 16(1)(d). In the circumstances, we
are of the opinion that the infancy period benefit of the
petitioner for a period of five years with effect from May
26, 1986, is not taken away by the amended provision
Section (1)(d) of the Act; and the petitioner could
continue to enjoy the said infancy benefit for a period
of five years till May, 1991. Therefore, the demand
made by respondent 1 for the period up to May, 1991,
has to be quashed. The petitioners are complying with
the provisions of the Act with effect from June, 1991.
 The matter can be looked at from another angle. Section 6 of the
General Clauses Act, 1897 (in short General Clauses Act) deals with
effect of repeal. The said provision so far relevant reads as follows:

6. Effect of repeal.- Where this Act, or any (Central

Act) or Regulation made after the commencement of
this Act, repeals any enactment hitherto made or
hereafter to be made, then, unless a different intention
appears, the repeal shall not

(a) revive anything not in force or existing at

the time at which the repeal takes effect;
or
(b) affect the previous operation of any
enactment so repealed or anything duly
done or suffered thereunder; or

(c) affect any right, privilege, obligation or

liability acquired, accrued or incurred
under any enactment so repealed; or

(d) affect any penalty, forfeiture or

punishment incurred in respect of any
offence committed against any enactment
so repealed; or

(e) affect any investigation, legal proceeding

or remedy in respect of any such right,
privilege, obligation, liability, penalty,
forfeiture or punishment as aforesaid;

and any such investigation, legal proceeding or remedy

may be instituted, continued or enforced, and any
such penalty, forfeiture or punishment may be
imposed as if the repealing Act or Regulation had not
been passed.

In terms of Clause (c) of Section 6 as quoted above, unless a

different intention appears the repeal shall not affect any right,
privilege
or liability acquired, accrued or incurred under the enactment repeal.
The effect of the amendment in the instant case is the same.

It is a cardinal principle of construction that every statute is prima

facie prospective unless it is expressly or by necessary implication
made
to have retrospective operation.(See Keshvan Madhavan Memon v. State of
Bombay AIR 1951 SC 128).But the rule in general is applicable where the
object of the statute is to affect vested rights or to impose new
burdens or
to impair existing obligations. Unless there are words in the statute
sufficient to show the intention of the Legislature to affect existing
rights,
it is deemed to be prospective only nova constitutio futuris formam
imponere debet non praeteritis. In the words of LORD BLANESBURG,
provisions which touch a right in existence at the passing of the
statute
are not to be applied retrospectively in the absence of express
enactment
or necessary intendment. (See Delhi Cloth Mills & General Co. Ltd. v.
CIT, Delhi AIR 1927 PC 242). Every statute, it has been said, observed
LOPES, L.J., which takes away or impairs vested rights acquired under
existing laws, or creates a new obligation or imposes a new duty, or
attaches a new disability in respect of transactions already past, must
be
presumed to be intended not to have a retrospective effect.(See Amireddi
Raja Gopala Rao v. Amireddi Sitharamamma AIR 1965 SC 1970). As a
logical corollary of the general rule, that retrospective operation is
not
taken to be intended unless that intention is manifested by express
words or necessary implication, there is a subordinate rule to the
effect
that a statute or a section in it is not to be construed so as to have
larger
retrospective operation than its language renders necessary. (See Reid
v.
Reid, (1886) 31 Ch D 402). In other words close attention must be paid
to the language of the statutory provision for determining the scope of
the retrospectivity intended by Parliament. (See Union of India v.
Raghubir Singh (AIR 1989 SC 1933). The above position has been
highlighted in Principles of Statutory Interpretation by Justice G.P.
Singh. (Tenth Edition, 2006) at PP. 474 and 475)

In The State of Jammu and Kashmir v. Shri Triloki Nath Khosa &
Others. (1974 (1) SCC 19) and in Chairman, Railway Board & Ors. v.
C.R. Rangadhamaiah & Ors. (1997 (6) SCC 623), this Court held that
provision which operates to affect only the future rights without
affecting
the benefits or rights which have already accrued or enjoyed, till the
deletion, is not retrospective in operation.

Above being the legal position, the judgments of the High Court
are
indefensible and are set aside. The appellants shall be entitled to the
protection as had accrued to them prior to the amendment in 1997 for
the period of 3 years starting from the date the establishment was set
up
irrespective of repeal of the provision for such infancy protection.

The appeals are accordingly allowed. No costs.

PETITIONER:
ORGANO CHEMICAL INDUSTRIES & ANR.

Vs.

RESPONDENT:
UNION OF INDIA & ORS.

DATE OF JUDGMENT23/07/1979

BENCH:
KRISHNAIYER, V.R.
BENCH:
KRISHNAIYER, V.R.
SEN, A.P. (J)

CITATION:
1979 AIR 1803 1980 SCR (1) 61
1979 SCC (4) 573
CITATOR INFO :
R 1979 SC1918 (14)
R 1985 SC 613 (7)
D 1991 SC 101 (226)
RF 1991 SC1289 (16)
ACT:
Employees Provident Fund and Miscellaneous Provisions
Act 1952-S. 14B and Constitution of India 1950, Art. 14-
Power to recover damages-Absence of appellate review-Whether
violates Art. 14-Damages whether to be credited to general
revenues of State.
Words & Phrases-Damages meaning of-Employees
Provident Fund and Miscellaneous Provisions Act 1952-S. 14B.
Interpretation of Statutes-A policy orientation
interpretation necessary for a welfare legislation-Each
word, phrase or sentence to be considered in the light of
general purpose of the Act.

HEADNOTE:
The Provident Fund Act 1952 as originally enacted
provided for the institution of compulsory provident fund
for employees in factories and other establishments. Under
s. 4 of the Act the Central Government framed the Employees
Provident Fund Scheme, 1952 and s. 6 of the Act enjoined on
every employer to make contributions to the Fund. Section
14 of the Act provided penalties for breach of the
provisions of the Act viz., failure to pay contributions,
failure to submit necessary returns etc., and the penalties
extended to various terms of imprisonment extending upto 6
months or with fine upto Rs. 1000/-.
The Act was amended by Parliament by Act XVI of 1971
and it was re-entitled as the Employees Provident Fund and
Miscellaneous Provisions Act, 1952. The amending Act
inserted s. 6A in the Act for the establishment of the
Family Pension Fund, and in exercise of its powers the
Central Government created the Family Pension Scheme, 1971
and para 9 of the Scheme created a Family Pension Fund and
provided that from and out of contribution payable by the
employer and employees in each month under s. 6 of the Act,
a part of the contribution shall be remitted by the employer
to the Family Pension Fund.
The authorities noticed in the working of the Act and
the Scheme that an employer could delay payment of provident
fund dues without any additional financial liability,
amended the Act and inserted s. 14B for recovery of damages
on the amount of arrears, the object and purpose being to
authorise the Regional Provident Fund Commissioner to impose
exemplary punitive damages and thereby to prevent the
employers from making the defaults. Section 14B as
originally enacted provided, for imposition of such damages
not exceeding twenty five per cent on the amount of
arrears. This, however, did not prove sufficiently
deterrent and the employers were still making defaults in
making contributions to the provident fund and in the
meanwhile utilising both their own contribution as well as
the employees contributions in their business.
62
The National Commission on Labour, recommended that in
order to check the growth of arrears, penalties for default
in payment of provident fund dues should be more stringent
and that the default should be made cognizable. This view
was endorsed by the Estimates Committee in its 116th Report
to the Parliament. Accordingly, the Act was further amended
by Act No. 40 of 1973, and the words twenty five per cent
were omitted from s. 14B and the words not exceeding the
amount of arrears were substituted.
 The employer a chemical industry failed to deposit the
amount of Provident Fund and Family Pension Scheme dues with
the Provident Fund Commissioner. The Regional Provident Fund
Commissioner after issuing a show-cause notice to the
employer, imposed a penalty which was equivalent to the
amount payable by the petitioner company and this penalty
came to nearly Rupees one lakh.
The employer pleaded before the Provident Fund
Commissioner that disputes between the partners of the firm,
power cut of 60% necessitating purchase of generating set on
loan basis leading to loss were the difficulties in making
the contributions in time and these were circumstances
beyond their control. The Regional Provident Fund
Commissioner after affording the petitioner the opportunity
of a hearing, by a reasoned order, considered in detail each
of the grounds taken in mitigation of the default and came
to the conclusion that none of the grounds alleged furnished
a legal justification for the delay in making contributions
in time and held that the petitioner had failed to carry out
their obligations to contribute to the Fund and no
convincing case having been made out to justify the delay in
making the deposits and being habitual defaulters, their
case should be severely dealt with and held that it was a
fit case for imposition of punitive damages to ensure due
compliance of the provisions of the Act.
In the writ petition to this Court it was contended on
behalf of the petitioners (i) that s. 14B of the Act is
violative of Art. 14 of the Constitution as it confers
unguided, uncontrolled, and arbitrary powers on the Regional
Provident Fund Commissioner, (ii) s. 14B deals with the
power to recover damages and the damages imposed must have
co-relation with the loss suffered as a result of delayed
payment, (iii) the period of arrears varies from less than
one month to more than 12 months and therefore the
imposition of damages at the flat rate of 100% for all the
defaults irrespective of their duration is not only
capricious but arbitrary; (iv) the absence of provision of
appeal leaves the defaulter-employer with no remedy and (v)
s. 14B of the Act has not authorised levy of any penal
damages i.e. the penalty or fine but deals with the power to
recover the damages.
Dismissing the petition,
^
HELD : Per Krishna Iyer, J.
1. The Act a social security measure is a humane homage
the State pays to Arts. 39 and 41 of the Constitution. The
viability of the project depends on the employer duly
deducting the workers contribution from their wages, adding
his own little and promptly depositing the same. The
mechanics of the system will suffer paralysis of the
employer fails to perform his function. The dynamics of this
beneficial statute derive its locomotive power from the
funds regularly flowing into the statutory till. [69 B-C]
63
2. If the stream of contributions were frozen by
employers defaults after due deduction for the wages and
diversion for their own purposes the scheme would be
damnified by traumatic starvation of the Fund. [69D]
3. Damages have a wider socially semantic connotation
than pecuniary loss of interest on non-payment when a
social welfare scheme suffers mayhem on account of the
injury. Law expands concepts to embrace social needs so as
to become functionally effectual. [69E]
4. The power to affect citizens rights, especially by
way of punitive impost or damages for wrong doing, is quasi-
judicial in character even if exercised by executive
echelons. This Court has underscored the importance of
injecting the norms of natural justice when statutory
functionaries affect the rights of a person. [71A]
5. (i) The imposition of damages on a party after
statutory hearing is quasi-judicial direction. This Court
has impressed the requirements of natural justice on such
jurisdiction and one such desideratum is spelling out
reasons for the order made, in other words, a speaking
order. The inscrutable face of a sphinx is ordinarily
incongruous with a judicial or quasi-judicial performance.
[71E]
(ii) An imperative of s. 14B is that the Commissioner
shall give reasons for his order imposing damages on an
employer. Such a guarantee ensures rational action by the
officer, because reasons imply relevant reasons, not
capricious ink and the need for cogency rivets the officers
mind to the pertinent material on record. Moreover, once
reasons are set down, the order readily exposes itself to
the writ jurisdiction of the court under Art. 226 so that
perversity, illiteracy, extraneous influence, malafides and
other blatant infirmities straight get caught and corrected.
[71F-G]
6. A high official hears and decides. The maximum harm
is pecuniary liability limited by the statute. The writ
jurisdiction is ready to review glaring errors. Under such
circumstances the needs of the factual situation and the
legal milieu are such that the absence of appellate review
in no way militates against the justice and reasonableness
of the provision. The argument of arbitrariness on this
score is untenable. The section is not bad, though action
under the section can be challenged in writ jurisdiction
when infirmities which attract such jurisdiction vitiate the
order. [71 E-F]
7. The argument that absent detailed guidelines, the
law is void, is not tenable. What is not explicit may still
be implicit. What is not articulated at length may be spun
out from a single phrase. What isnot transparent in
particularised provisions may be immanent in the preamble,
scheme, purpose or subject-matter of the Act. What is real
is not only the gross but also the subtle. Such a
perspective dispels the submission that s. 14B is bad as
uncircumscribed and over-broad. [72H-73A]
8. The word damages under s. 14B has a wealth of
implications and limitations, sufficient to serve as
guideline in fixing the impost. The conceptual limitations
of damages serve as guideline and barricade the exercise.
The Commissioner cannot award anything more than or
unrelated to damages. Nor can he go beyond 100% of the
amount defaulted. Such limitations without further
guidelines are not uncommon in taxing laws to penalise
defaults and suppressions. [73B, H, 74A]
64
C.I.T., M.P. v. Radhakrishan, [1979] 2 SCC 249; P. N.
Kaushal v. Union of India, etc., [1978] 3 SCC 558; referred
to.
9. The expression damages is neither vague nor over-
wide. Its precise import in a given context is not difficult
to discern. A plurality of variants stemming out of a core
concept is seen in such words as actual damages, civil
damages, compensatory damages, consequential damages,
contingent damages, continuing damages, double damages,
excessive damages, exemplary damages, general damages,
irreparable damages, pecuniary damages, prospective damages,
special damages, speculative damages,substantial damages,
unliquidated damages. But the essentials are (a) detriment
to one by the wrong doing of another, (b) reparation awarded
to the injured through legal remedies and (c) its quantum
being determined by the dual components of pecuniary
compensation for the loss suffered and often not always a
punitive addition as a deterrent-cum-denunciation by the
law. [74 B-D]
10. Exemplary damages are damages on an increased
scale, awarded to the plaintiff over and above what will
barely compensate him for his property loss, where the wrong
done to him was aggravated by circumstances of violence,
oppression, malice, fraud or wanton and wicked conduct on
the part of the defendant and are intended to solace the
plaintiff for mental anguish laceration of his feelings,
shame, degradation or other aggravations of the original
wrong, or else to punish the defendant for his evil
behaviour or to make an example of him, for which reason
they are also called punitive or punitory damages or
vindictive damages, and (vulgarly) smart-money. [74E-F]
11. The power conferred to award damages is delimited
by the content and contour of the concept itself and if the
Court finds the Commissioner travelling beyond, the blow
will fall. Section 14B is therefore good for these reasons.
[74G]
12. A policy oriented interpretation when a welfare
legislation falls for determination, especially in the
context of a developing country, is sanctioned by principle
and precedent and is implicit in Art. 37 of the
Constitution, since the judicial branch is, in a sense, part
of the State. So it is reasonable to assign to damages a
larger, fulfilling meaning. [75E]
14. The composite idea of damages includes more than
pecuniary compensation. Moreover, the injured party is the
Board of trustees who administer the Fund. That Fund not
merely loses the interest consequent on the nonpayment but
receives a shock in that its scarce resources are further
famished by employers default. There is great social injury
to the scheme when employers default in number. So the lash
of the law is delivered when its object is frustrated. More
denunciatory is the fact that the employer makes deductions
from the poor wages of the workers and diverts even those
sums for his private purposes by failing to make prompt
remittances. Thus default in contributions is compounded by
embezzlement, as it were. Naturally, damages will take an
exemplary character and inflict a heavy blow on the shady
defaulter. [75F-G]
15. The damages are levied under the Act and the
Authority levying damages is created by Act and is
responsible for the collection of contributions and damages
for the Fund. It is not possible to dichotomise and hold
that the contributions go into the Provident Fund but the
rest of the damages go
65
into the general revenues. This is not a fine under the
criminal law. Nor is it recovery on behalf of the Government
of amounts under a general statute for purposes of revenue.
A special statute creating a special fund, empowers special
officers to recover specially designated contributions and
special damages for default. The entire sum belongs to the
fund except perhaps the administrative charges which are
usually separately indicated. It is wrong therefore to
credit the damages into the general revenues. To that extent
it is a breach of the statutory scheme and a deprivation of
what belongs to the workers Provident Fund. If any State is
diverting the damages under the Act into its own coffers, it
is improper. [76G-77B]
16. Damages as imposed by s. 14B, includes a punitive
sum quantified according to the circumstances of the case.
In exemplary damages this aggravating element is
prominent. Constitutionally speakingsuch a penal levy
included in damages is perfectly within the area of implied
powers and the legislature may, while enforcing collections,
legitimately and reasonably provide for recovery of
additional sums in the shape of penalty so as to see that
avoidance is obviated. Such a penal levy can take the form
of damages. [75H-76B]
Per Sen, J. 1. Section 14B of the Employees Provident
Funds and Miscellaneous Provisions Act, 1952 was enacted to
deter the employers and to thwart them from making defaults
in carrying out their statutory obligations to make payments
to the Provident Fund. The object and purpose of the Section
is to authorise the Regional Provident Fund Commissioner to
impose exemplary or punitive damages and thereby to prevent
employees from making defaults. The intention in increasing
the quantum of damages. namely, not exceeding the amount of
arrears is to invest the Regional Provident Fund
Commissioner with power to impose such damages so that the
employer would not find it profitable to make defaults in
making payments. [82D-G]
2. The word damages in Section 14B of the Employees
Provident Funds and Miscellaneous Provisions Act, 1952
cannot be read in isolation nor can section 14B be read out
of context. The word has to be given its true meaning in
consonance with the objects and purposes of the Legislation.
It must take its colour and content from its context. The
woed damages in section 14B, in the context in which it
appears, means penal damages i.e. a penalty and not merely
actual loss to the beneficiaries. Otherwise the very object
of the Legislation would be frustrated. [87D]
3. The imposition of damages under section 14B serves a
two-fold purpose. It results in damnification and also
serves as a deterrent. The predominent object is to
penalise, so that an employer may be thwarted or deterred
from making any further defaults. [87E]
The expression damages accruing in Section 14B is, in
substance, a penalty imposed on the employer for the breach
of the statutory obligation. The object of imposition of
penalty u/s 14B is not merely to provide compensation for
the employees. The imposition of damages u/s 14B serves
both the purposes. It is meant to penalise defaulting
employer as also to provide reparation for the amount of
loss suffered by the employees. It is not only a warning to
employers in general not to commit a breach of the statutory
requirement of section 6 of the Act, but at the same time it
is meant to provide compensation
66
or redress to the beneficiaries i.e. to recompense the
employees for the loss sustained by them. The damages need
not bear any relationship to the loss which is caused to the
beneficiaries under the scheme. [87F-G]
4. Each word, phrase or sentence must be considered in
the light of the general purpose of the Act itself. A bare
mechanical interpretation of the words devoid of concept or
purpose will reduce most of legislation to futility. It is a
salutary rule well established that the intention of the
legislature must be found by reading the statute as a whole.
[89E]
The word damages in section 14B is related to the
word default. The words used in section 14B are default
in the payment of contribution and, therefore the word
default must be construed in the light of Para 36 of the
Employees Provident Fund Scheme, 1952, which provides that
the payment of contribution has got to be made by the 15th
of the following month and, therefore, the word default in
section 14B must mean failure in performance or failure
to act. At the same time the imposition of damages u/s 14B
is to provide reparation for the amount of loss suffered by
employees. And this is in accord with the intent and purpose
of the legislation. [87H-88B]
5. In assessing the damages, the Regional Provident
Fund Commissioner is not only bound to take into account the
loss to the beneficiaries, but also the default by the
employer in making his contributions, which occasioned the
infliction of damages. The entire amount of damages awarded
under section 14B, except for the amount relatable to
administrative charges, must necessarily be transferred to
the Employees Provident Fund and the Family Pension Fund.
The employees would get damages commensurate with their loss
i.e. the amount of interest on delayed payments, but the
remaining amount would go to augment the Fund constituted
under section 5, for implementing the scheme of the Act.
[89G-90A]
6. Section 14B of the Act does not confer unguided or
uncontrolled discretion upon the Regional Provident Fund
Commissioner to impose such damages as he may think fit,
and, is, therefore, not violative ofArticle 14 of the
Constitution. [83G]
It cannot be said that there are no guidelines provided
for fixing the quantum of damages. The guidelines are
provided in the Act and its various provisions, particularly
in the word damages the liability for which under Section
14B arises on the making of default. The word damages in
Section 14B lays down sufficient guidelines for the Regional
Provident Fund Commissioner to levy damages. [83G-84B]
7. The power of Regional Provident Fund Commissioner to
impose damages under section 14B is quasi-judicial function.
It must be exercised after notice to the defaulter and after
giving him a reasonable opportunity of being heard. The
discretion to award damages could beexercised within the
limits fixed by the statute, by taking into consideration
various factors, namely, the number of defaults, the period
of delay, the frequency of defaults and the amount involved.
Having regard to the punitive nature of the power
exercisable under Section 14B and the consequences that
ensue therefrom, an order under Section 14B must be a
speaking order containing the reasons in support of it.
[83H-84A]
67
Commissioner of Coal Mines Provident Fund, Dhanbad v.
J. Lalla & Sons, [1976] 3 S.C.R. 365; referred to.
8. Mere absence of provision for an appeal in the
Employees Provident Fund and Miscellaneous Provisions Act,
1952 does not imply that the Regional Provident Fund
Commissioner, is invested with arbitrary or uncontrolled
power, without any guidelines. [85B]
The conferral of power to award damages under section
14B is to ensure the success of the measure. It is dependent
on existence of certain facts, there has to be an objective
determination, not subjective. [85C]
The Regional Provident Fund Commissioner has not only
to apply his mind to the requirements of Section 14B but is
cast with the duty of making a speaking order after
conforming to the rules of natural justice. [85C]
The absence of a provision for appeal or revision can
be of no consequence. Where the discretion to apply the
provisions of a particular statute is left with the
Government or one of the highest officers, it will be
presumed that the discretion vested in such a high authority
will not be abused. The Government or such authority is in a
position to have all the relevant and necessary information
in relation to each kind of establishment, the nature of
defaults made by the employer and the necessity to decide
whether the damages to be imposed should be exemplary or
not. When the power has to be exercised by one of the
highest officers, the fact that no appeal has been provided
for is a matter of no moment. There is always a
presumption that public officials would discharge, their
duties honestly and in accordance with the rules of law.
[85G, D-F]
Mohammad Ali and Ors. v. Union of India and Anr.,
[1963] Suppl. 1 SCR 993; K. L. Gupta v. Bombay Municipal
Corporation, [1968] 1 SCR 274; Chintalingam and Ors. v.
Govt. of India and Ors. [1971] 2 SCR 871 and Pannalal
Binjraj v. Union of India, [1957] SCR 233; followed.
9. In the instant case, the petitioners are guilty of
suppressio veri for deliberate concealment of facts
pertaining to the earlier defaults and the attendant levy of
damages under s. 14B. The petitioners instead of making
their contributions, deliberately made willful defaults on
one pretext or another and have been utilising the amounts
deducted from the wages of their employees, including their
own contributions as well as administrative charges, in
running their business. Therefore, this was pre-eminently a
fit case for imposition of punitive damages to ensure due
compliance of the provisions of the Act. [79F, G, 80C]

JUDGMENT:
ORIGINAL JURISDICTION : Writ Petition No. 4319 of 1978.
(Under Article 32 of the Constitution)
Bardridas Sharma and K. R. R. Pillai for the
Petitioners.
Soli J. Sorabjee, Addl. Sol. Genl. of India and A.
Subhashini for the Respondents.
The following Judgments were delivered :
68
KRISHNA IYER, J.-Having had the advantage of reading my
learned brothers judgment I should have stopped mine with a
single sentence, following the example of Diplock, L.J. who
in Hughes v. Hughes(1) merely said: For the reasons given
by my brother Harman I would dismiss the appeal. But I
respect brother Sens request that my concurrence
notwithstanding I should, in a separate opinion, highlight
the quintessential aspects and reinforce the legal
conclusions which are interpretatively decisive and
constitutionally validatory of Section 14B of the Employees
Provident Fund and Miscellaneous Provisions Act,1952
(briefly, the Act). That is the apology for this separate
judgment of mine. Why an apology? Because exordiums are
opprobriums and socio-economic apercus are anathemas for
some judicial psyches; and I should have, for that reason,
abandoned my habitual deviance from the orthodox norm
idealised by some that a judicial judgment shall be a dry
statement of facts, drier presentation of law and logomachy
and driest in least communicating to the law abiding
community, which is the courts constituency, the glow of
life giving principles rooted in social sciences and
translated into juristic rules which legitimate our
institution functionally. The last consideration, in my
humble view, is the elan vital of the justicing process and
jettisoning it is judicial self-alienation from the nation.
Of course, minds differ as rivers differ and habits die hard
The central issues in this civil appeal are whether
Sec. 14B of the E.P.F. and M.P. Act is unconstitutional and,
if not, what is the semantic-juristic sweep of the
expression damages used therein. Other vital but
peripheral matters may be side-stepped for the nonce,
especially because my learned brother has neatly and rightly
dealt with them. The factual settingof the case, without
which the legal contentions argued lose their lucent
relevance, have been stated by my brother Sen, J. but I may
project them in a single sentence to help focus on the vires
of Sec. 14B and the conceptual width of damages in the
given context. Is the imposition by the speaking order of
the Regional Provident Fund Commissioner, Chandigarh, of a
heavy penalty of Rs. 94,996.80 by way of damages under Sec.
14B of the E.P.F. and M.P. Act 1952 upon the writ
petitioners-employers, for chronic and unjustified defaults
in remittances of the provident fund contributions of
themselves and their employees legally sustainable, if
obviously in excess of the pecuniary loss of interest
attributable to the non-payment. Briefly and broadly and
lopping off aspects unnecessary for this case the scheme of
the Act is that each employer and employee in every
establishment falling within the Act do contribute
69
into a statutory fund a tittle, viz. 6 1/4% of the wages to
swell into a large Fund wherewith the workers who toil to
produce the nations wealth during their physically fit span
of life may be provided some retiral benefit which will
keep the pot boiling and some source wherefrom loans to
face unforeseen needs may be obtained. This social security
measure is a humane homage the State pays to Articles 39 and
41 of the Constitution. The viability of the project depends
on the employer duly deducting the workers contribution
from their wages, adding his own little and promptly
depositing the nickle into the chest constituted by the Act.
The mechanics of the system will suffer paralysis if the
employer fails to perform his function. The dynamics of this
beneficial statute derives its locomotive power from the
funds regularly flowing into the statutory till.
The pragmatics of the situation is that if the stream
of contributions were frozen by employers defaults after
due deduction from the wages and diversion for their own
purposes, the scheme would be damnified by traumatic
starvation of the Fund, public frustration from the failure
of the project and psychic demoralisation of the miserable
beneficiaries when they find their wages deducted and the
employer get away with it even after default in his own
contribution and malversation of the workers share.
Damages have a wider socially semantic connotation than
pecuniary loss of interest on non-payment when a social
welfare scheme suffers mayhem on account of the injury. Law
expands concepts to embrace social needs so as to become
functionally effectual.
We may read Sec. 14B and Rule 38 to vivify the
discussion:
14B. Power to recover damages: Where an employer
makes defaults in the payments of any contribution to
the Fund (the Family Fund or the Insurance Fund) or in
the transfer of accumulations required to be
transferred by him under sub-section (2) of Section 15
[for sub-section (5) of Section 17] or in the payment
of any charges payable under any other provision of
 this Act or of (any scheme or Insurance Scheme) or
under any of the conditions specified under Section 17,
(the Central Provident Fund Commissioner or such other
officer as may be authorised by the Central Government
by notification in the Official Gazette in this behalf)
may recover from the employer such damages, not
exceeding the amount of arrear, as it may think fit to
impose.
Provided that before levying and recovering such
damages, the employer shall begiven a reasonable
opportunity of being heard.
70
38 Mode of payment of contribution-(1) The
employer shall, before paying the member his wages in
respect of any period or part of period for which
contributions are payable, deduct the employees
contribution from his wages which together with his own
contribution as well as an administrative charge of
such percentage of the total employers and employees
contribution as may be fixed by the Central Government,
he shall within fifteen days ofthe close of every
months pay to the Fund by separate Bank drafts or
cheques on account of contributions and administrative
charge......
(2) The employer shall forward to the
Commissioner, within fifteen days of the close of the
month, a monthly consolidated statement in such form as
the Commissioner may specify showing recoveries made
from the wages of each employee and the amount
contributed by the employer in respect of each such
employee.
Counsel for the petitioners has turned the
constitutional fusillade on Sec. 14B by charging it with
many-sided, in-built arbitrariness and therefore liable to
be fatally shot down by Art. 14. The provision is simple and
the contention is familiar. The offending words of Sec. 14B
are that the Provident Fund Commissioner may recover from
the employer such damages, not exceeding the amount of
arrear, as it thinks fit to impose. Within the limit of
100%, the enforcing agency is vested with naked and unguided
power to inflict any quantum of damages as he fancies and
this blanket authority is instinctwith discriminatory
possibility, a vice to which Art. 14 is very allergic. No
reasons need be given, no appellate or revisional review is
prescribed and no judicial qualification is required for the
Commissioner. This tiny statutory tyrant must be slain if
equal justice under the law were to be part of our
fundamental rights package. So runs the argument-
traditional, attractive and near-lethal. Indeed, if
executive fiats released from legal restraints, were free to
run amok, our freedoms would be frothy boasts ! Sedulous
scrutiny of this submission of counsel is our solemn duty
since I share with him the pensive thought that arrogance of
power dressed in little, brief authority is the undoing of
our constitutional order. And yet,here the mini-nero
portrait is too naive to meet with approval.
A shower of precedents has rained on Art. 14 but the
cardinal principles have sunk so deep into the
constitutional consciousness of the juristic community that
recapitulation of citations is an act of supererogation. 1
desist from it.
71
The power to affect citizens rights, especially by way
of punitive impost or damages for wrong doing, is quasi-
judicial in character even if exercised by executive
echelons. This Court has underscored the importance of
injecting the norms of natural justice when statutory
functionaries affect the rights of a person. The most recent
of the cases which lay bare the elementals of this branch of
jurisprudence are: (1)Siemens Engineering and Manufacturing
Co. of India Ltd. v. Union of India(1); (2) Maneka Gandhi v.
Union of India(2) and (3) Mohinder Singh Gill & Anr. v. The
Chief Election Commissioner, New Delhi and Ors.(3)
In Siemens case this Court observed:
It is now settled law that where an authority makes an
order in exercise of a quasi-judicial function it must
record its reasons in support of the order it makes.
Every quasi-judicial order must be supported by
reasons. That has been laid down by a long line of
decisions of this Court ending with N. M. Desai v. The
Testeels Ltd. & Anr.(4)
Fair play in Administration is a finer juristic facet,
at once fundamental and inviolable and natural justice is an
inalienable functional component of quasi-judicial acts.
Here, it is indubitable that the imposition of damages on a
party after a statutory hearing is a quasi-judicial
direction. This Court has impressed the requirements of
natural justice on such jurisdictions and one such
desideratum is spelling out reasons for the order made, in
other words, a speaking order. The inscrutable face of a
sphinx is ordinarily incongruous with a judicial or quasi-
judicial performance. It is, in my view, an imperative of
Sec. 14B that the Commissioner shallgive reasons for his
order imposing damages on an employer. The constitutionality
of the power, tested on the anvil of Articles 14 and 19,
necessitates this prescription. Such a guarantee ensures
rational action by the officer, because reasons imply
relevant reasons, not capricious ink and the need for
cogency rivets the officers mind to the pertinent material
on record. Moreover, once reasons are set down, the order
readily exposes itself to the writ jurisdiction of the court
under Article 226 so that perversity, illiteracy, extraneous
influence, malafides and other blatant infirmities straight
get caught and corrected. Thus, viewing the situa-
72
tion from the conspectus of requirements and remedies,
statutory agencies may be inhibited and the scare of
arbitrary behaviour allayed once reasons are required to be
given.
Nor is the plea of absence of guidelines or appellate
review sound enough to subvert the validity of Sec. 14B. It
is attractive to hear the argument that an order passed by
an authority, which becomes infallibly final in the absence
of an appeal or revision, is apt to be arbitrary and bad. An
appeal is a desirable corrective but not an indispensable
imperative and while its presence is an extra check on
wayward orders its absence is not a sure index of arbitrary
potential. It depends on the nature of the subject matter,
other available correctives, possible harm flowing from
wrong orders and a wealth of other factors.
If a death sentence is allowed to become conclusive
without so much as a single appeal, Articles 14 and 21 may
imperil such a provision but if a fine of Rs. 5/- imposed
for a minor offence in a summary trial by a First-Class
Magistrate is imparted a finality, subject, of course, to a
constitutional remedy in the event of perverse or patent
illegality we may still uphold that provision with an easy
constitutional conscience. In the present case, a hearing is
given to the affected party. Reasons have to be recorded in
the order awarding damages. The writ jurisdiction is ready
to review glaring errors. The maximum harm is pecuniary
liability limited by the statute. A high official hears and
decides. Under such circumstances the needs of the factual
situation and the legal milieu are such that the absence of
appellate review in no way militates against the justice and
reasonableness of the provision. The argument of
arbitrariness on this score is untenable. The section is not
bad. Maybe, action under the sectionmay be challenged in
writ jurisdiction provided infirmities which attract such
jurisdiction vitiate the order.
The bogie of absence of guidelines in the provision and
consequential possibility of the authority running berserk
or acting humanistically does not frighten. Of course, the
more bereft of explicit guidelines a statutory power is, the
more searching must be the judicial invigilation to discover
hidden injustice and masked mala fides. Even so, let us
examine the ground that, absent detailed guidelines, the law
is void. What is not explicit may still be implicit. What is
not articulated at length may be spun out from a single
phrase. What is not transparent in particularised provisions
may be immanent in the preamble, scheme, purpose or subject-
matter of the Act. What is real is not only the gross but
also the subtle, if I may strike a deeper note. Such a pers-
73
pective dispels the submission that s. 14B is bad as
uncircumscribed and over-broad.
The power under the Section permits award of damages
and that word has a wealth of implications and limitations,
sufficient to serve as guideline in fixing the impost. In
Arvinder Singhs case(1) this Court upheld an otherwise
unbridled power to levy tax by importing a variety of
factors gathered from the statute and relied on many
precedents. Likewise, in Radhakrishans case(2) this Court
rejected the plea that a power in the Commissioner to choose
one of the two remedies was invalid in the absence of
guidelines and observed, on a review of the case-law:
When power is conferred on high and responsible
officers they are expected to act with caution and
impartiality while discharging their duties and the
circumstances under which they will choose either of
the remedies available should be left to them. The
vesting of discretionary power in the state or public
authorities or an officer of high standing is treated
as a guarantee that the power will be used fairly and
with a sense of responsibility.
It has been held by the Privy Council in Province of
Bombay v. Bombay Municipal Corporation (3), that every
statute must be supposed to be for public good at least
in intention and therefore of few laws can it be said
that the law confers unfettereddiscretionary power
since the policy of law offers guidance for the
exercise of discretionary power.
Although our democratic ethos is incongruous with the
assumption that highly paid officials are more responsible
than low-paid minions, the jurisprudence of power must be
applied workably and not untouched by reality. More to the
point is the decision in Kaushals case(4). There this Court
accepted the submission that the seemingly naked power under
Sec. 59 of the Punjab Excise Actwas guided by the
requirement that it was to be exercised for control of
consumption of intoxicants. (The whole scheme of the statute
proclaims its purpose of control in time and space and
otherwise observed the Court). Here the conceptual
limitations of damages serve as guideline and barricade
74
the exercise. The Commissioner cannot award anything more
than or unrelated to damages. Nor can he go beyond 100% of
the amount defaulted. Such limitations without further
guidelines are not uncommon in taxing laws to penalise
defaults and suppressions.
What do we mean by damages? The expression damages
is neither vague nor over-wide. It has more than one
signification but the precise import in a given context is
not difficult to discern. A plurality of variants stemming
out of a core concept is seen in such words as actual
damages, civil damages, compensatory damages, consequential
damages, contingent damages, continuing damages, double
damages, excessive damages, exemplary damages, general
damages, irreparable damages, pecuniary damages, prospective
damages, special damages, speculativedamages, substantial
damages, unliquidated damages. But the essentials are (a)
detriment to one by the wrong-doing of another
(b)reparation awarded to the injured through legal remedies and
(c) its quantum being determined by the dual components of
pecuniary compensation for the loss suffered and often, not
always, a punitive addition as a deterrent-cum-denunciation
by the law. For instance, exemplary damages are damages on
an increased scale, awarded to the plaintiff over and above
what will barely compensate him for his property loss, where
the wrong done to him was aggravated by circumstances of
violence, oppression, malice, fraud, or wanton and wicked
conduct on the part of the defendant, and are intended to
solace the plaintiff for mental anguish, laceration of his
feelings, shame, degradation, or other aggravations of the
original wrong, or else to punish the defendant for his evil
behavior or to make an example of him, for which reason they
are also called punitive or punitory damages or
vindictive damages, and (vulgarly) smart-money. (See
Blacks Law Dictionary, 4th Edition p. 467/468). It is
sufficient for our present purpose to state that the power
conferred to award damages is delimited by the content and
contour of the concept itself and if the Court finds the
Commissioner travelling beyond, the blow will fall. Sec. 14B
is good for these reasons.
The further submission is that damages being
compensatory in character could not exceed the interest the
amount defaulted would have carried during the period of
delay. The respondent has gone beyond the mere quantum of
interest and has rounded it off to a sum equal to the
defaulted contribution. Is this excess an illegal
extravagance or a legal levy ? This turns on what is
damages in the setting of the Act.
75
The measure was enacted for thesupport of a weaker
sector viz. the working class during the superannuated
winter of their life. The financial reservoir for the
distribution of benefits is filled by the employer
collecting, by deducting from the workers wages, completing
it with his own equal share and duly making over the gross
sums to the Fund. If the employer neglects to remit or
diverts the moneys for alien purposes the Fund gets dry and
the retirees are denied the meagre support when they most
need it. This prospect of destitution demoralises the
working class and frustrates the hopes of the community
itself. The whole project gets stultified if employers
thwart contributory responsibility and this wider fall-out
must colour the concept of damages when the court seeks to
define its content in the special setting of the Act. For,
judicial interpretation must further the purpose of a
statute. In a different context and considering a
fundamental treaty, the European Court of Human Rights, in
the Sunday Times Case, observed :
The Court must interpret them in a way that
reconciles them as far as possible and is most
appropriate in order to realise the aim and achieve the
object of the treaty.
A policy-oriented interpretation, when a welfare
legislation falls for determination, especially in the
context of a developing country, is sanctioned by principle
and precedent and is implicit in Art. 37 of the Constitution
since the judicial branch is, in a sense, part of the State.
So it is reasonable to assign to damages a larger,
fulfilling meaning.
What are the strands which make the fabric of damages
under the Article? I have stated earlier that the composite
idea of damages includes more than pecuniary compensation.
Moreover, the injured party is the Board of Trustees who
administer the Fund. That Fund not merely loses the interest
consequent on the non-payment but receives a shock in that
its scarce resources are further famished by employers
default. There is great social injury to the scheme when
employers default in numbers. So the lash of the law is
delivered when its object is frustrated. What is more
denuciatory is the fact that the employer makes deductions
from the poor wages of the workers (and makes them suffer to
that extent) and diverts even those sums for his private
purposes by failing to make prompt remittances. Thus,
default in contributions is compounded by embezzlement, as
it were, Naturally, damages will take an exemplary character
and inflict a heavy blow on the shady defaulter.
I am clearly of the view that damages, as imposed by
Section 14B, included a punitive sum quantified according to
the circumstances of
76
the case. In exemplary damages this aggravating element is
prominent. Constitutionally speaking,such a penal levy
included in damages is perfectly within the area of implied
powers and the legislature may, while enforcing collections,
legitimately and reasonably provide for recovery of
additional sums in the shape of penalty so as to see that
avoidance is obviated. Such a penal levy can take the form
of damages because the reparation for the injury suffered by
the default is more than the narrow computation of interest
on the contribution.
This Court has in R.S. Joshi, Sales Tax Officer,
Gujarat and Others v. Ajit Mills Limited and Another(1)
considered the constitutionality of a penal forfeiture and a
bench of seven judges in that case has upheld it.
A Patna decision where the levy of damages was attacked
as violative of Article 20(2) has taken the view that the
amount of damages imposed under Section 14B is penal in
character. Of course, the learned judges repelled the
application of Article 20(2) of the Constitution tothis
situation but made some observations which are misleading.
The Court there took the view that the damages imposed under
Section 14B are transferred to the general revenues of the
appropriate government and went on to observe: In other
words, the infliction of the damagesunder section 14B is
not meant to provide compensation or redress to the
employees whose interest may be injured. It is not meant to
provide reparation to such employees and the quantum of
damages imposed has no relation to the amount of loss
suffered by the employees. I consider that the infliction of
the damages under section 14B is penal in its nature. It is
a warning to employers in general not to commit a breach of
the statutory rule.
The above observations, in my view, are unsound and I
am happy to record that my learned brother takes the same
view, although in his separate judgment this aspect has not
been expressly considered. I speak for both of us.
The damages are levied under the Act. The authority levying
penal damages is created by the Act and is responsible for
the collection of contributions and damages for the Fund. It
is not possible to dichotomise and hold that the
contributions go into the Provident Fund but the rest of the
damages go into the general revenues. This is not a fine
under the criminal law. Nor is it recovery, on behalf of the
Government of amounts under a general statute for purposes
of revenue. A special statute creating a special fund, em-
77
powers special officers to recover specially designated
contributions and special damages for default. The entire
sum belongs to the Fund except perhaps the administrative
charges which are usually (as in this case) separately
indicated. In our view, therefore, it is wrong to credit the
damages into the general revenues. To that extent it is a
breach of the statutory scheme and a deprivation of what
belongs to the workers Provident Fund. Indeed, employees
are a needy community and if the Fund is replenished by
damages the scheme can be improved and the benefits
augmented. We, therefore, express the view that if any State
is diverting damages under the Act into its own coffers, it
is improper. Lazarus can ill-afford to lose even a little.
State and citizen alone is subject to the rule of law.
I am in full agreement with the concluding statement
regarding the disposition of the damages made in my learned
brothers judgment:
The learned Additional Solicitor General was fair
enough to concede that the entire amount of damages awarded
under Section 14B except for the amount relatable to
administration charges must necessarily be transferred to
the Fund constituted under the Act. We hope that those
charged with administering the Act will keep this in view
while allocating the damages under Section 14B of the Act to
different heads. The employees would, of course, get damages
commensurate with their loss, thatis, the amount of
interest on delayed payment but the remaining amount should
go to augment the Fund constituted under Section 5 for
implementing the schemes under the Act.
In this view I direct the appropriate Government to
credit the sums allocable to the Fund so that the damages
may reach where it belongs.
I wholly agree with my learned brother, for the reasons
I have given. The Writ Petition deserves tobe dismissed
with costs.
SEN, J.-This is a petition under Article 32 of the
Constitution by M/s. Organo Chemical Industries, Sonepat
directed against an order of the Regional Provident Fund
Commissioner, Chandigarh, dated October 12, 1977, by which
he imposed a penalty of Rs. 94,996.80 on the petitioners as
damages under s. 14B of the Employees Provident Funds and
Miscellaneous Provisions Act, 1952, for delayed remittances
of the Employees Provident Fund, Family Pension Scheme
contributions of their employees, including their own
contributions, and the administrative charges thereon.
Organo Chemical Industries, an establishment within
the meaning of section 1(3) of the Employees Provident
Funds and Miscellaneous
78
Provisions Act, 1952 (hereinafter referred to as the Act)
to which the Act applies, committed defaults in payments of
Provident Fund and Family Pension Scheme dues for the period
from March to October 1975 and again for the period from
December 1975 to November 1976 to the extent of Rs.
92,687.00 and of administrative charges amounting to Rs.
2,309.80 i.e. Rs. 94,996.80 in all. The Regional Provident
Fund Commissioner, Chandigarh, accordingly, issued a show
cause notice dated June 7, 1977 requiring the petitioners to
show cause why damages should not be levied under s. 14B of
the Act. The notice was accompanied by a statement showing a
break-up of the various amounts in arrears and the extent of
delay in respect of each payment and the details of damages
proposed to be imposed on the belated payments. The period
of delay in payment of the amounts remitted varied from a
few months to a year. It was proposed to levy damages at a
uniform rate of hundred per cent on each of the amounts in
arrears. In response to the notice, the petitioners tried to
explain away the delay by alleging that it was due to
difficulties beyond their control and, therefore, the
payments could not be made in time viz., the facts that
there were disputes between the partners of the firm as a
result of which, there was a loss of Rs. 1,40,165.15, there
was a power cut of 60% by the Haryana Electricity Board
w.e.f. May 6, 1974, which compelledthe petitioners to
purchase a Generating set to tide over the difficulties and
that the establishment had borrowed huge sums from the
Haryana Financial Corporation and in payment of which it had
defaulted for want of financial resources etc. It was,
accordingly, contended that the default, if any, was not
willful as they had no intention to commit a default. The
Regional Provident Fund Commissioner after giving to the
petitioners the opportunity of a hearing by his reasoned
order dated August 16, 1977 considered in detail each of the
grounds taken in mitigation of the defaults and came to the
conclusion that none of the grounds alleged furnished a
legal justification for the delay in making contributions in
time. As regards the alleged disputeamong the partners
leading to a loss of Rs. 1,40,165.15, he observed:
Even if it is assumed that there was a loss as
claimed it does not justify the delay in deposit of
Provident Fund money which is in unqualified statutory
obligation and cannot be allowed to be linked with the
financial position of the establishment, over different
points of time. Besides 50% of the contributions
deposited late represented the employees share which
had been deducted from the employees wages and was a
trust money with employer for deposit in the statutory
fund. The delay in the deposit of this part of the
79
contribution amounted to breach of trust and does not
entitle the employer to any consideration for relief.
With respect to the plea that the petitioners had been
subject to a power-cut of 60% w.e.f. May 6, 1974 by the
Haryana Electricity Board, he negatived the plea by
observing that this restriction was not exclusive to them
and further that no cause had been shown as to how this
prevented them from depositing the provident fund dues in
time. Even if the power-cut had resulted in any substantial
loss, it would have reduced the liability on the amount of
provident fund dues also. He went on to observe that where
an employer can pay wages, it is not conceivable why it
cannot pay the provident fund dues. As regards the stand
taken that the establishment had borrowed huge sums from the
Haryana Financial Corporation and in repayment of which it
had default, he held that even if it were so, the fact did
not absolve the establishment of its statutory obligation
for deposit of provident fund dues in time. Similarly, the
other reasons furnished like the purchase of a new
generating plant or internal dispute among the partners and
the dissolution of the partnershipfirm etc. did not
constitute sufficient cause beyond the control of the
petitioners to justify the late deposit of provident fund
dues. He, accordingly, concluded that the petitioners had
failed to carry out their obligationto contribute to the
Employees Provident Fund and Family Pension scheme within
the time limit provided therefor; and that no convincing
case had been made out to justify the delay in making the
deposits. He also on the material on record found, as a
fact, that the petitioners, having regard to their past
record, were habitual defaulters and had, therefore, to be
severely dealt with, and should be visited with the maximum
penalty.
The petitioners are guilty of suppressio veri and this,
by itself, was sufficient to dismiss the writ petition; but,
since it involves a point of importance which was argued at
length, we will have to deal with the same.
There can be no doubt that the petitioners have been
habitual defaulters in the matter of making contributions to
the Employees Provident Fund, Family Pension Scheme and
payment of administrative charges from the very inception.
They have deliberately concealed the facts pertaining to the
earlier defaults and the attendant levy of damages under s.
14B of the Act. For the period between November 1970 and
January 1971, again for the period between October 1971,
February 1972, March and April 1973, August to October,
1973, January and February 1974, then again for the period
March 1974, May to August 1974, October and December 1974,
and
80
January 1975, they made delayed payments of the Employees
Provident Fund and Family Pension Scheme Contribution and
consequently the Regional Provident Fund Commissioner after
notice to them under s. 14B, and after considering the
objections raised and hearing the petitioners, imposed
damages amounting to Rs. 223.35, Rs. 2,452.40 and Rs.
15,214.05 for the periods in question respectively, which
they deposited on February 17, 1972, September 25, 1975 and
December 13, 1976.
It would thus be manifest that the petitioners instead
of making their contributions, deliberately made willful
defaults on one pretext or another and have been utilising
the amounts deducted from the wages of their employees,
including their own contributions as well as administrative
charges, in running their business. The Regional Provident
Fund Commissioner, therefore, rightly observed that the
petitioners having regard to their past record must be
visited with the maximum penalty.
Taking an overall view, the Regional ProvidentFund
Commissioner, by his reasoned order dated October 12, 1977,
adverted to the fact that the petitioners were habitual
defaulters and, therefore, deserve to be dealt with sternly
so as to bring home the deterrent effect of damages under s.
14B of the Act and, accordingly, directed recovery of Rs.
94,996.80 at the rate of hundred per cent i.e. equivalent to
the amount in arrears, for the delayed payment of
contributions to the Employees Provident Fund, the Family
Pension Fund and administrative charges, as detailed below:-
Rs.
(1) Damages on delayed payment of provident
fund and family pension fund contributions
 required to be deposited u/s.6 . 92,687.00
(2) Damages on delayed payment of
administrative charges ... ... 2,309.80
-------------
94,996.80
-------------
This was pre-eminently a fit case for imposition of punitive
damages to ensure due compliance of the provisions of the
Act.
Before stating the contentions raised by learned
counsel for the petitioners, we think it convenient to set
out the scheme of the Act and the relevant provisions
thereof having a bearing on the question to be determined.
It would be relevant to take into account some of the
provisions of the Provident Funds Act which have since its
inception in 1952, been subjected to various amendments. The
Provident Fund Act, 1952 as originally enacted, provides for
the institution of compulsory provident funds for employees
in factories and other
81
establishments. It applies to every establishment which is a
factory engaged in any industry specified in Schedule I and
in which twenty or more persons are employed and to any
other establishment employing twenty or more persons or
class of such establishments which the Central Government
may specify in that behalf by Notification in the Official
Gazette. Under s. 4, the Central Government framed the
Employees Provident Funds Scheme, 1952 by S.R.O. 1509,
dated September 2, 1952. Section 6 of the Act enjoins on
every employer to make contribution to the Employees
Provident Fund at the rate of 6% of the basic wages,
dearness allowance, retaining allowance, if any, for the
time being payable to each of the employees and the
employees contribution shall be equal to the contribution
by the employer in respect of him. The employee at his
option may, however, increase the contribution to the extent
of 8-1/3%.
The initial responsibility for making payment of the
contribution of the employer as well as of the employee,
lies on the employer. Para 30 of the Scheme makes it
incumbent on the employer that he shall, in the first
instance, pay both the contribution payable by himself and
also on behalf of the member employed by him. Under para 38,
the employer is authorised before paying the member employee
his wages in respect of any period or part of period for
which contributions are payable, to deduct the employees
contribution from his wages. It further provides that the
deposit of such contribution shall be made by the employer
within fifteen days of the close of every month, i.e., a
contribution for a particular month has got to be deposited
by the 15th day of the month following. A breach of any of
these requirements is made a penal offence. Section 14 of
the Act provides for penalties. Failure to comply with the
requirements of s. 6 is punishable with various terms of
imprisonment which may extend to a period of six months, or
with fine which may extend to one thousand to two thousand
rupees, under the provisions of s. 14, depending upon the
nature of the breach, viz., failure to pay the
contributions, or failure to submit the necessary returns,
or failure to pay administrative charges. Section 14A
provides for offences by companies and other corporate
bodies. Para 76 of the Scheme provides for punishment for
failure to pay contributions etc., and in particular by cl.
(d), every employer guilty of contravention or of non-
compliance with the requirements of the Scheme, shall be
punishable with imprisonment which may extend to six months
or with fine of Rs. 1,000/-.
Parliament amended the Act by Act No. 16 of 1971, and
it was re-entitled as the Employees Provident Funds and
Miscellaneous
82
Provisions Act, 1952. It inserted s. 6A in the Act for the
establishment of the Family Pension Fund. In exercise of the
powers conferred by s. 6A, the Central Government framed the
Employees Family Pension Scheme, 1971 by G.S.R. 315, dated
March 4, 1971. Under Para 4 of the Scheme, every employee
who is a member of the Employees Provident Fund, is given
the option to join the Family Pension Scheme. Para 9 created
the Family Pension Fund and providesthat from and out of
the contributions payable by the employer and employees in
each month under s. 6 of the Act, a part of the
contribution, representing 1-1/6% ofthe employees pay
along with an equivalent amount of 1-1/6% from out of the
employers contribution, shall be remitted by the employer
to the Family Pension Fund.
In its working, the authorities were faced with certain
administrative difficulties. An employer could delay payment
of Provident Fund dues without any additional financial
liability. Parliament, accordingly, inserted s. 14B for
recovery of damages on the amount of arrears. The reason for
enacting s. 14B is that employers may be deterred and
thwarted from making defaults in carrying out statutory
obligations to make payments to the Provident Fund. The
object and purpose of the section is to authorise the
Regional Provident Fund Commissioner to impose exemplary or
punitive damages and thereby to prevent employers from
making defaults. Section 14B, as originally enacted,
provided for imposition of such damages, not exceeding 25%
of the amount of arrears. This, however, did not prove to be
sufficiently deterrent. The employers were still making
defaults in making contributions to the Provident Fund, and
in the meanwhile utilising both their own contribution as
well as the employees contribution, in their business. The
provision contained in s. 14B for recovery of damages,
therefore, proved to be illusory. Accordingly, by Act No. 40
of 1973, the words twenty-five per cent of were omitted
from s. 14B and the words not exceeding the amount of
arrear were substituted. The intention is to invest the
Regional Provident Fund Commissioner with power to impose
such damages that the employer would not find it profitable
to make defaults in making payments.
In support of the petition, learned counsel for the
petitioners assails the impugned order on two grounds,
namely, (i) s. 14B of the Act is violative of Article 14 of
the Constitution as it confers unguided, uncontrolled and
arbitrary power on the Regional Provident Fund Commissioner
to impose damages which may be to the extent of 100% i.e.,
equal to the amount of arrears. The conferral of such
unguided, uncanalised and arbitrary power on the Regional
Provident
83
Fund Commissioner to arrive at a decision, without any
guide-lines whatsovever, makes s. 14B constitutionally
invalid as offending against Article 14, and (ii) s. 14B
deals with the power to recover damages. It is not the power
to impose penalties. The word damages in s. 14B must,
therefore, be understood in the legal sense. Damages must
have some correlation with the loss suffered as a result of
delayed payments. The authority imposing the penalty or
damages must, therefore, apply its mind to this aspect of
the matter. The defaulting employer under s. 14B is,
accordingly, liable to pay damages which represents the loss
to the beneficiaries of the scheme, such asrecovery of
interest; but not anything more, as such recovery would
amount to penalty, and that is not permitted under the
section. There is no substance in any of the contentions.
Section 14B of the Act reads as follows:
14B. Power to recover damages:-Where an
employer makes defaults in the payment of any
contribution to the Fund (the Family Fund or the
Insurance Fund) or in the transfer of
accumulations required to be transferred by him
under sub-section (2) of Section 15 (or sub-
section (5) of Section 17) or in the payment of
any charges payable under any other provision of
this Act or of (any scheme or Insurance Scheme) or
under any of the conditions specified under
Section 17, (the Central Provident Fund
Commissioner, or such other officer as may be
authorised by the Central Government, by
notification in the Official Gazette in this
behalf) may recover from the employer such
damages, not exceeding the amount of arrear, as it
may think fit to impose.
Provided that before levying and recovering
such damages, the employer shall be given a
reasonable opportunity of being heard.
The contention that section 14B confers unguided and
uncontrolled discretion upon the Regional Provident Fund
Commissioner to impose such damages as he may think fit
is, therefore, violative of Article 14 of the Constitution,
cannot be accepted. Nor can it be accepted that there are no
guide-lines provided for fixing the quantum of damages. The
power of the Regional Provident Fund Commissioner to impose
damages under s. 14B is a quasi-judicial function. It must
be exercised after notice to the defaulter and after giving
him a reasonable opportunity of being heard. The discretion
to award damages could be exercised within the limits fixed
by the Statute. Having regard to the punitive nature of the
power exercisable under s. 14B
84
and the consequences that ensue therefrom, an order under s.
14B must be a speaking order containing the reasons in
support of it. The guide-lines are provided in the Act and
its various provisions, particularly in the word damages
the liability for which under s. 14B arises on the making
of default. While fixing the amount of damages, the
Regional Provident Fund Commissionerusually takes into
consideration, as he has done here, various factors viz. the
number of defaults, the period of delay, the frequency of
defaults and the amounts involved. The word damages in s.
14B lays down sufficient guidelines for him to levy damages.
Learned counsel for the petitioners, however, contends
that in the instant case, the period of arrears varies from
less than one month to more than 12 months and, therefore,
the imposition of damages at the flat rate of hundred per
cent for all the defaults irrespective of their duration, is
not only capricious but arbitrary. The submission is that if
the intention of the legislature was to make good the loss
caused by default of an employer, there could be no rational
basis to quantify the damages at hundred per cent in case of
default for a period less than one month and those for a
period more than 12 months. It is urged that the fixation of
upper limit at hundred per cent is no guide-line. If the
object of the Legislation is to be achieved, the guide-lines
must specify a uniform method to quantify damages after
considering all essentials like loss or injury sustained,
the circumstances under which the default occurred,
negligence, if any, etc. It is said that the damages under
s. 14B which is the pecuniary reparation due must be
correlated to all these factors. In support of his
contention, he drew our attention to s. 10F of the Coal
Mines Provident Fund and Bonus Schemes Act, 1958, which uses
the words damages not exceeding twenty-five per cent like
section 14B of the Act, and also to a tabular chart provided
under that Act itself showing that the amount of damages was
correlated to the period of arrears.We regret, we cannot
appreciate this line of reasoning. Section 10F of the Act of
1958 came up for consideration before this Court in
Commissioner of Coal Mines Provident Fund, Dhanbad v. J.
Lalla & Sons.(1) This Court observed, firstly, that the
determination of damages is not an in flexible application
of a rigid formula, and secondly, the words as it may
think fit to impose show that the authority is required to
apply its mind to the facts and circumstances of the case.
The contention that in the absence of any guide-lines for
the quantification of damages, s. 14B is violative of
Article 14 of the Constitution, must, therefore, fail.
In this connection, it was also urged that the absence
of any provision for appeal, leaves the defaulting employer
with no remedy. The
85
conferral of arbitrary and uncontrolled powers on the
Regional Provident Fund Commissioner to quantify damages, it
is said, without a corresponding right of appeal or
revision, makes the provision contained in s. 14B per se
void and illegal and it is liable to be struck down on that
ground. We are afraid, the contention is wholly devoid of
substance. Mere absence of provision for an appeal does not
imply that the Regional Provident Fund Commissioner is
invested with arbitrary or uncontrolled power, without any
guide-lines. The conferral of power to award damages under
s. 14B is to ensure the success of the measure. It is
dependent on existence of certain facts, there has to be an
objective determination, not subjective. The Regional
Provident Fund Commissioner has not only to apply his mind
to the requirements of s. 14B but is cast with the duty of
making a speaking order, after conforming to the rules of
natural justice.
This Court has repeatedly laid it down that where the
discretion to apply the provisions of a particular statute
is left with the Government or one of the highest officers,
it will be presumed that the discretion vested in such high
authority will not be abused. The Government or such
authority is in a position to have all the relevant and
necessary information in relation to each kind of
establishment, the nature of defaults made by the employer,
and the necessity to decide whether the damages to be
imposed should be exemplary or not: Mohmedalli & Ors. v.
Union of India & Anr.(1) It was stated in K. L. Gupta v.
Bombay Municipal Corporation(2) that when power as to be
exercised by one of the highest officers, the fact that no
appeal has been provided for is a matter of no moment. The
same view was reiterated in Chinta Lingam & Ors. v.
Government of India & Ors.(3) There is always a presumption
that public officials would discharge their duties honestly
and in accordance with the rules of law. This was emphasised
in Pannalal Binjraj v. Union of India,(4) stress being laid
on the power being vested not in any minor official but in
top-ranking authority. In the circumstances, the absence of
a provision for appeal or revision can be of no consequence.
Turning now to the main question, the contention is
that s. 14B of the Act does not authorise levy of any penal
damages, i.e., a penalty or fine but deals with the power to
recover damages. It is not the power to impose a penalty on
the defaulting employer though the
86
maximum amount of damages that can be recovered has been
indicated in the section, it is submitted that the damages
must have some correlation with the loss suffered as a
result of delayed payments and the authority imposing
damages must apply its mind to this aspect of the matter.
The defaulter under s. 14B is, therefore, liable to pay
damages which represents the actual loss, but not anything
more, as such recovery would amount to penalty and that is
not permitted under the section. In support of his
submissions, he has referred to certain authorities.
It is argued that the damages referred to in s. 14B is
different from penalty or fine and is intended to compensate
the loss to the beneficiaries of the Scheme. It has only the
ordinary legal meaning of the term damages viz. actual
loss as in law of Contract or Tort. Thus the award of
damages under s. 14B must be, in essence, the pecuniary
reparation for loss or injury sustained by one person
through the fault or negligence of another.
There is a conflict of opinion between different High
Courts as to the meaning of the word damages in s. 14B of
the Act. According to some of the High Courts, the word
damages in s. 14B means actual loss to the beneficiaries.
The view is that s. 14B clearly indicates that an employer
is liable to pay damages, if he has made defaults in payment
of the contribution. Any delay in paying the amount under s.
6 causes loss to the beneficiaries of the Scheme, such as
loss of the interest and the like. This is the loss that is
sought to be recovered from the defaulting employer for the
purpose of indemnifying the beneficiaries of the Scheme,
namely, the employees to the extent of the loss suffered by
them. The defaulter u/s 14B is, therefore, liable to pay
damages which represent the loss, but not anything more, as
such recovery would amount to penalty, and that is not
permitted under the section. It is, therefore, held by these
High Courts that the damages to be imposed u/s 14B should
have correlation with the loss suffered and that damages u/s
14B are intended to compensate the loss to the beneficiaries
of the Scheme. With respect, these High Courts have
obviously fallen into an error in reading the word damages
in s. 14B in isolation, by trying to construe the word in a
purely legalistic sense. These High Courts have overlooked
that we are not concerned in interpreting what damages means
in the realm of Contract or Tort but the word had to be
given its true meaning, in consonance with the objects and
purpose of the Legislation.
The learned Additional Solicitor General brought to our
notice the conflict of opinion between the different High
Courts on the construction of the word damages used in s.
14B, and submitted that this has
87
given rise to confusion in the mind of those charged with
the duty of administering the Act.He wants that the
conflict should be resolved by placing a proper construction
on the word damages in s. 14B, in the larger public
interest, as the question is one of frequent occurrence. He
rightly contends that the word damages in s. 14B must, in
the context in which it appears, means penal damages i.e. a
penalty and not merely actual loss to the beneficiaries. He
submits that if the word damages appearing therein, were
to mean actual loss to the beneficiaries and not anything
more, as some of the High Courts have held, it would make
the Act unworkable. He also points out that some of the High
Courts have taken a view to the contrary. According to these
High Courts, the expression damages is, in substance, a
penalty imposed on the employer for the breach of the
statutory obligation. The object ofthe Legislature in
enacting s. 14B is clearly to punish the recalcitrant
employers.
The traditional view of damages as meaning actual loss,
does not take into account the social content of a provision
like s. 14B contained in a socio-economic measure like the
Act in question. The word damages has different shades of
meaning. It must take its colour and content from its
context, and it cannot be read in isolation, nor can s. 14B
be read out of context. The very object of the Legislation
would be frustrated if the word damages appearing in s.
14B of the Act was not construed to mean penal damages. The
imposition of damages u/s. 14B serves a two-fold purpose. It
results in damnification and also serves as a deterrent. The
predominant object is to penalise, so that an employer may
be thwarted or deterred from making any further defaults.
The expression damages occurring in s. 14B is, in
substance, a penalty imposed on the employer for the breach
of the statutory obligation. The object of imposition of
penalty u/s 14B is not merely to provide compensation for
the employees. We are clearly of the opinion that the
imposition of damages u/s 14B serves both the purposes. It
is meant to penalise defaulting employer as also to provide
reparation for the amount of loss suffered by the employees.
It is not only a warning to employers in general not to
commit a breach of the statutory requirements of s. 6, but
at the same time it is meant to provide compensation or
redress to the beneficiaries i.e. to recommence the
employees for the loss sustained by them. There is nothing
in the section to show that the damages must bear
relationship to the loss which is caused to the
beneficiaries under the Schemes. The word damages in s.
14B is related to the word default. The words used in s.
14B are default in the payment of contribution and,
therefore,
88
the word default must be construed in the light of Para 38
of the Scheme which provides that the payment of
contribution has got to be made by the 15th of the following
month and, therefore, the word default in s. 14B must mean
failure in performance or failure to act. At the same
time, the imposition of damages u/s14B is to provide
reparation for the amount of loss suffered by the employees.
The construction that we have placed on the word
damages appearing in s. 14B of the Act, is in accord with
the intent and purpose of the Legislation. It was brought on
the statute book by Act 37 of 1953, the objects and reasons
so far material, read:-
There are also certain administrative difficulties to
be set right. There is no provision for inspection of
exempted factories nor is there any provision for the
recovery of dues from such factories. An employer . . .
can delay payment of Provident Fund dues without any
additional financial liability. No punishment has been
laid down for contravention of some of the provisions
of the Act. (Emphasis supplied).
The object and purpose of the section is to authorise the
Regional Provident Fund Commissioner to impose exemplary or
punitive damages and thereby prevent employers from making
defaults. The provision for imposition of damages at twenty-
five per cent of the amount of arrear, however, did not
prove to be effective. Accordingly, but Act 40 of 1973, the
words not exceeding the amount of arrear were substituted,
for the words twenty-five per cent. The necessity for
making this change is brought out in the objects and
reasons, a material portion of which reads:-
STATEMENT OF OBJECTS AND REASONS:
(Act 40 of 1973)
The working of the Employees Provident Fund and
Family Pension Fund Act, 1952and the Employees
Provident Fund Scheme has revealed that the present
provisions of the Act and the Scheme are not effective
in preventing defaults in payment of contributions to
the Employees Provident Fund or in recovery of the dues
on that account. The result is that the amount of
Provident Fund arrears recoverable from the employers
has been streadily increasing. In 1959-60, the arrears
which amounted to Rs. 3.65 crores, rose to Rs. 5.96
crores as on the 31st March 1967. The arrears stood at
Rs. 14.6 crores on 31st March, 1970 and they have been
risen to Rs. 20.65 crores as on the 31st March, 1972.
89
2. The National Commission on Labour has
recommended that in order to check the growth of
arrears, penalties for defaults in payment of Provident
Fund dues should be made more stringent and that the
default should be made cognizable. In its 116th Report
presented to Parliament in April 1970, the Estimates
Committee has endorsed the recommendations made by the
National Commission on Labour and has further suggested
that Government should considerthe feasibility of
providing compulsory imprisonment for certain offences
under the Act. Accordingly, it is proposed to amend the
Act so as to render the penal provisions more stringent
and to make defaults cognizable offences. Provision is
also being made for compulsory imprisonment in cases of
non-payment of contributions and administration or
inspection charges. As recommended by the Estimates
Committee, a further provision is being made to enable
levy of damages equal to the amount of arrears from a
defaulting employer. (Emphasis supplied).
Each word, phrase or sentence is to be considered in the
light of general purpose of the Act itself. A bare
mechanical interpretation of the words devoid of concept or
purpose will reduce most of legislation to futility. It is a
salutary rule, well established, that the intention of the
legislature must be found by reading the statute as a whole.
There appears to be a misconception that the object of
imposition of penalty under s. 14B is not to provide
compensation for the employees whose interest may be
injured, by loss of interest and the like. There is also a
misconception that the damages imposed under s. 14B are not
transferred to the Employees Provident Fund and the Family
Pension Fund, of the employees who may be adversely
affected, but the amount is transferred to the General
Revenues of the appropriate Government. We find that this
assumption is wholly unwarranted. In assessing the damages,
the Regional Provident Fund Commissioner is not only bound
to take into account the loss to the beneficiaries but also
the default by the employer in making his contributions,
which occasions the infliction of damages. The learned
Additional Solicitor General was fair enough to concede that
the entire amount of damages awardedunder s. 14B, except
for the amount relatable to administrative charges, must
necessarily be transferred to the Employees Provident Fund
and the Family Pension Fund. We hope that those charged with
administering the Act will keep this in
90
view while allocating the damages under s. 14B of the Act to
different heads. The employees would, of course, get damages
commensurate with their loss i.e., the amount of interest on
delayed payments; but the remaining amount should go to
augment the Fund constituted under s. 5, for implementing
the Scheme under the Act.
The result, therefore, is that this writ petition fails
and is dismissed with costs.
N.V.K. Petition dismissed.
91

PETITIONER:
SHRI B. P. HIRA, WORKS MANAGER,CENTRAL RAILWAY, PAREL, BOMBA
 Vs.

RESPONDENT:
SHRI C. M. PRADHAN ETC.

DATE OF JUDGMENT:
08/05/1959

BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
SINHA, BHUVNESHWAR P.
WANCHOO, K.N.

CITATION:
1959 AIR 1226 1960 SCR (1) 137

ACT:
Overtime Wages-Claim by employees in railway factory-
Validity-Factories Act, 1948 (LXIII of 1948), SS. 2(1),59-
The Bombay Shops and Establishments Act, 1948 (Bom. 79 of
1948). SS. 4, 70.

HEADNOTE:
These appeals by special leave arose from applications made
by the respondents, who were employed as timekeepers in the
time office of the Central Railway Workshop and Factory,
Parel, Bombay, claiming payment of overtime wages under the
Payment of Wages Act, 1936 (4 of 1936). The case of the
respondents was that they were workers within the meaning of
S. 2(1) of the Factories Act, 1948 (LXIII Of 1948) and as
such were entitled to overtime wages under s. 59 of the said
Act. Alternatively, they urged that even if they were not
workers within the meaning of S. 2(1) of the said Act, they
would nevertheless be entitled to overtime wages under the
s. 59 by reason Of s. 70 of the Bombay Shops and
Establishments Act, 1948 (Bom. 79 of 1948). The validity of
the claim on both the grounds was disputed by the appellant.
The Authority under the Payment of Wages Act found that only
four of the respondents, who were required to do the work of
progress timekeepers, could claim the status of workers
within the meaning Of S. 2(1) Of the Factories Act and the
rest were merely employees of theworkshop, but the
Authority accepted the alternative case made by the respond-
ents and directed the appellant to file a statement showing
the overtime wages due to each of the respondents and
ordered it to pay the same.
Held, that the Authority was right in the view that it took
Of S. 70 Of the Bombay Shops and Establishments Act, 1948,
and its decision must be affirmed.
On a proper construction Of S. 70 Of the Act it is clear
that the first part of the section excludes a factory and
its employees from the operation of the Act; but the second
part makes the relevant provisions of the Factories Act
applicable to them. The non-obstante clause in the section
shows that the employees in a factory, although they might
not be workers within the meaning Of S. 2(1) of the
Factories Act, are entitled to claim overtime wages as
provided for by that Act.
It is not correct to say that S. 4 Of the Bombay Shops and
Establishments Act, 1948, has the effect of excluding the
operation Of S. 70 Of the Act. Section 4 applies only to
establishments and not to factories; but even if it applied,
to factories
18
138
that cannot materially affect the application Of s. 70 which
is intended to operate not withstanding the other provisions
of the Act.
Consistently with its policy, the Act, which provides for
overtime wages for employees in all establishments, provides
for overtime wages for employees in factories as well by
making the relevant provisions of the Factories Act
applicable to them.

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.131 to 304
of 1957.
Appeals by special leave from the judgments and order dated
October 19, 1955 and January 31, 1956, of the Authority
under Payment of Wages Act, Bombay, in ApplicationsNos.
950-961, 963-967, 970-989, 992, 994-1013, 1015-1016, 1049-
1050 and 11510-11511 and 11513-11517 of 1955 respectively.
M.C. Setalvad, Attorney-General for India, R. Ganapathy Iyer
and R. H. Dhebar, for the appellants.
Purshottam Tricumdas and G. N. Srivastava, for the
respondents in all the appeals except C. A. No. 186 of 1957.
1959 May 8. The Judgment of the Court was delivered by
GAJENDRAGADKAR J.-This group of 174 appeals by special leave
arises from the several applications made against Mr. B. P.
Hira, Works Manager, Central Railway Workshop and Factory,
Parel, Bombay (hereafter called the appellant) by the
employees at the said factory (hereafter called the
respondents) under the Payment of Wages Act, 1936 (IV of
1936) claiming payment of overtime wages since 1948. All
these applications were heard by the Payment of Wages
Authority, Bombay, as companion matters and they have been
disposed of by a common judgment. The main judgment has,
however, been delivered by the said Authority in the
application filed by Mr. C. M. Pradhan (hereafter called the
respondent) which gives rise to Civil Appeal No. 131 of 1957
before us. We would, therefore, deal with this appeal in
particular and our decision in this appeal will govern the
rest of the appeals in this group.
139
In his application made before the Payment of Wages
Authority the respondent alleged that he had been employed
in the factory called the Central Railway Workshop and
Factory, Parel, Bombay, and that hehad not been paid
overtime wages due to him from April 1, 1949, to September
30, 1954. The respondent claimed that the delay made by him
in filing the present application should be condoned because
jointly with his co-workers he had been in correspondence
with the railway administration in regard to the said
payment of overtime wages since, 1948 and that the claim
made by him and his colleagues had been finally rejected by
the railway administration on August 31, 1954. His case was
that he had filed the present application soon thereafter
and so the delay made by him ,in making the claim before the
Authority should be condoned. The Authority heard the
parties on the; question of delay and held that the delay
only in respect of the claim for the period after May 1953
should be condoned. In the result the claim for overtime
wages for the period prior to May 19, 1953, was rejected on
the preliminary ground of delay whereas the claim. for the
period subsequent to the said date was considered on the
merits.
The respondents case was that he was entitled to the
overtime wages for work on such Sundays when he was not
given a holiday within three days prior to or three days
subsequent to the Sundays on which he worked. The appellant
conceded that the respondent had not been given a holiday
within the three days prior to or the three days subsequent
to the Sundays on which he had worked as required by s. 52
of the Indian Factories Act. The respondent alleged that he
was a worker within the meaning of s. 2, sub-s. (1) of the
said Factories Act (LXIII of 1948) and as such he was
entitled to overtime wages under s 59 of the said Act.
Alternatively he urged that even if he was not a worker
within the meaning of s. 2(1) of the said Act, he would
nevertheless be entitled to overtime wages under the said s.
59 by reason of s. 70 of the Bombay Shops and Establishments
Act, 1948 (Bom. 79 of 1948) (hereafter called the Act).
Thus the claim for
140
overtime wages was made by the respondent on two alternative
grounds.
The appellant disputed the validity of this claim. It was
urged on its behalf that the respondent was not a worker
under s. 2(1) of the Factories Act and that s. 70 of the Act
did not justfy the claim alternatively made by the
respondent for overtime wages.
The Authority considered the evidence led before it in
respect of all the repondents for overtime wages. It
appears that these respondents are employed by the appellant
in the time office of the Parel Workshop andnot in the
factory itself. The duties of these timekeepers are to
maintain initial records of attendance of workshop staff, to
prepare pay-sheets for them to maintain their leave
accounts, to dispose of final settlement cases of the said
staff and to maintain records for statistical information.
The Authority held that the time office where the
timekeepers work is an integral part of the factory and so
it came to the conclusion that the timekeepers are employed
in the factory called the Central Railway Workshop and
Factory, Parel, Bombay.
The Authority then examined the question as to whether the
timekeepers are workers within the meaning of s. 2(1) of the
Factories Act. Evidence showed that four timekeepers, are
required to do the work of progress timekeepers. This work
consists in preparing the progress time-sheets and operation
time-sheets of machine-shop staff working on various jobs
dealing with the production of railway spareparts. The
Authority was disposed to take the view that having regard
to the nature of the work assigned to the progress time-
keepers they must be held to be persons employed in work
incidental to, or connected with the manufacturing process
or the subject of the manufacturing process and as such they
are workers within the meaning of s. 2(1) of the Factories
Act. In the result, the finding made by the Authority was
that timekeepers are employees of the workshop, but are not
workers under the Factories Act; while the progress time-
keepers can claim the status of workers under the said Act.
141
The Authority then considered the respondents argument that
even if he was not a worker under the Factories Act he was
neverthless entitled to claim the benefit of s. 59 of the
said Act by virtue of s. 70 of the Act. The Authority
accepted this contention and held that, even if the
respondent was not a worker under the Factories Act, s. 70
of the Act entitled him to claim overtime wages under s. 59
of the Factories Act. That is why the Authority ordered
that the respondents would be entitled for the period 19-5-
1953 to 30-9-1954 to overtime wages at double the ordinary
rate for the Sundays on which they worked when they were not
given a a holiday on one of the three days immediately
preceding or after the said Sunday. The appellant was
accordingly directed to file a statement showing the
overtime wages to which the several respondents were
entitled and orders were passed on each one of the
applications directing the appellant to pay the respective
amounts to. each one of the respondents. -It is against
these orders that the appellant has filed the present group
of appeals by special leave.
The first point which has been urged before us by the
learned Attorney-General on behalf of the appellant is that
the Authority was in error in holding that the progress
timekeepers are workers under s. 2(1) of the Factories Act.
A worker under s. 2(1) means a person employed directly or
through any agency, whether for wages or not, in any
manufacturing process, or in cleaning any part of the
machinery or premises used for manufacturing process, or in
any other kind of work incidental to, or connected with, the
manufacturing process, or the subject of the manufacturing
process; and the manufacturing process under s. 2(k) means
any process for inter alia (1) making, altering, repairing,
ornamenting, finishing, packing, oiling, washing, cleaning,
breaking-up, demolishing or otherwise treating or adapting
any article or substance with a view to its use, sale,
transport, delivery or disposal. It is clear that the
duties of the progress timekeepers do not fall within the
first part of a. 2(k). The Authority has however,
142
held that the said duties can be treated as incidental to,
or connected with, the manufacturing process or the subject
of manufacturing process; it is the correctness of this
finding that is challenged by the appellant.
On the other hand, Mr. Purshottam, for therespondents,
argues that the Authority was in error in holding that the
timekeepers are not workers under s. 2 (1). His contention
is that the expression incidental to, or connected with,
the manufacturing process is wide enough to include not
only the cases of the progress timekeepers but the cases of
all timekeepers as a class. It is true that the finding of
the.Authority in respect of the timekeepers is against the
respondents; but Mr. Purshottam says that he is entitled to
support the final order passed by the Authority on the
additional ground that the time. keepers, like the progress
timekeepers, are workers under s. 2(1) and as such they are
entitled to claim overtime wages under s. 59 of the
Factories Act.
The final decision of the Authority is, however, based on
the view that under s. 70 of the Act the respondents would
be entitled to overtime wages under s. 59 of the Factories
Act even if they are not workers under s. 2(1). That being
so, we think it is necessary first to consider the
correctness of this view. If the conclusion of the
Authority on the scope and effect of the provisions of s. 70
of the Act is correct, then it would be unnecessary to
consider whether the timekeepers and the progress
timekeepers are workers under s. 2(1) of the Factories Act.
We would, therefore, deal with that question first.
It appears that there are three statutes which pro. vide for
the payment of extra wages for overtime work. The proviso
to s. 71 (c) of the Indian Railways Act (IX of 1890) lays
down that the exempted railway servant specified in it shall
be paid for overtime at not less than one and a quarter
times his ordinary rate of pay. This provision has been
subsequently amended by Act 59 of 1956, which makes the rate
for overtime one and one-half times the ordinary rate of
pay; but it is common ground that we are not
143
concerned with the amended provision in these appeals since
the respondents claim is for. a period prior to the date of
the amendment. It is suggested by the appellant that the
respondents are railway servants under s. 3 (7) of the said
Act, and as such they may be entitled to make a claim for
overtime wages under the said proviso; but the respondents
have not made, and do not wish to make, a claim under the
said provision; and so the question as to the application of
the said section need not detain us. If the construction
placed on s. 70 of the Act by the Authority is correct, the
claims of employees who are working in a factory in the
State of Bombay would be governed by that provision; this
position is not seriously disputed before us.
Section 59 of the Factories Act also deals with the question
of extra wages for overtime. It provides for the payment of
wages in respect of overtime work at the rate of twice the
ordinary rate of wages. This benefit is, however, available
only to persons who are workers within the meaning of s.
2(1) of the said Act Since we are dealing with the case on
the assumption that the respondents are not -workers under
s 2(1) it follows that s. 59 by itself would not be
applicable to them.
The Bombay Shops and Establishments Act, 1948, is the third
statute which makes a provision for the payment of extra
wages for overtime work. Section 63 of the Act deals with
this topic. Section 63(1) provides for the payment of
overtime work at the rate of 1-1/2 times the ordinary rate
of wages in the case of employees in any establishment other
than a residential hotel, restaurant, or eating-house,
whereas sub-s. (2) provides for wages for overtime at the
rate of twice the ordinary rate of wages in respect of
employees in a residential hotel, restaurant or eatinghouse,
subject to the other conditions specified in the said
section. It is clear that this section does not apply to
the respondents because they are employees in a factory and
not in any of the establishments enumerated in its two sub-
sections.
144
The respondents case, however, is that by virtue of s. 70
of the. Act the provisions of the Factories Act,including
a. 59, are extended to the cases of all employees in
factories, and so they are entitled to claim wages for
overtime under the said section of the Factories Act. This
contention has been upheld by the Authority. It is not
disputed by the appellant that the Bombay Legislature was
competent to prescribe for the extension of the provisions
of the Factories Act to employees in the factories within
the territory of the State of Bombay; and since sanction for
this legislation has been duly obtained from the Governor-
General of India on January 3, 1949(1), no question about
any repugnance between the provisions of s. 70 and those of
the Factories Act can possibly arise. Thus the validity of
the said section is not in dispute; and so the only point
which calls for our decision is one of construction: Does s.
70 supplement the provisions of the Factories Act by
extending them to all employees in factories like the
respondents though they are not workers under s. 2(1) of the
said Act ?
Before dealing with this point it is necessary to refer
briefly to the broad features of the Act. The Act no doubt
is a piece of beneficent social legislation intended to
serve the cause of labour welfare. It has been passed in
order to consolidate and amend the law relating to the
regulation and conditions of work and employment in shops,
commercial establishments, residential hotels, restaurants,
eating-houses, theaters, other places of public amusements
and entertainments and other establishments. Section 2,
sub-ss. (3), (4) and (27) define respectivly the
establishment, commercial establishment and shop. The
definitions of commercial establishment and shop exclude
inter alia factory. Establishment is defend as meaning a
shop, commercial establishment, residential hotel,
restaurant, eating-house, theatre or other place of public
amusement are entertainment to which the Act applies and
includes such other establishment as the State Government
may by notification in the official gazette declare
(1) Published in the Bombay Government Gazette, Part IV,
dated 11-1-1949.
145
to be, an establishment for the purposes of this Act. It
would be noticed that the definition of establishment is
very wide, and it does not purport to be exhaustive because
it expressly empowers the State Government to include within
its purview by notification other establishments not
specified in it. Section 2, sub-s. (6) defines an employee
as meaning a person wholly or principally employed in, and
in connection with, any establishment, and includes an
apprentice but does not include a member of the employers
family. This definition shows that the Act intends to
confer the benefit of its provision on all persons who fall
within the wide definition of the expression Employee .
It is necessary at this stage to refer to the definition of
factory under the Act. Section 2(9) defines a factory as
meaning any premises which is a factory within the meaning
of cl. (m) of s. 2 of the Factories Act or which is deemed
to be a factory under s. 85 of the said Act.
Now s. 2(m) of the Factories Act defines a factory as
meaning any premises including the precincts thereof
(i) whereon ten or more workers are working, orwere
working on any day of the preceding twelve months, and in
any part of which a manufacturing process is being carried
on with the aid of power, or is ordinarily so carried on, or
(ii) whereon twenty or more workers are working, or were
working on any day of the preceding twelve months, and in
any part of which a manufacturing process is being carried
on without the aid of power, or is ordinarily so carried
on,-
but does not include a mine subject to the operation of the
Mines Act, 1952 (XXXV of 1952), or a railway running shed;
and s. 85 confers authority on the State Government to
extend the definition of factory to other places subject to
the requirements specified in the said section. It is
common ground that the place where the respondents are
employed is a factory under s. 2(m) of the Factories Act,
and so it satisfies the definition of s. 2(9) of the Act.
19
146
The scheme of the Act shows that it deals separately with
shops and commercial establishments (ch. 111), residential
hotels, restaurants and eating-houses (ch., IV) and theaters
and other places of public amusement (ch. V). Separate
provisions are made to regulate these different
establishments having regard to the special needs ofeach
one of them. There are, however, general provisions
applicable to and regulating all the establishments alike
and these are found in chs. VI to IX. It is significant
that with the exception of s. 70, no other section of the
Act deals with factories.
We have already noticed that in defining commercial
establishment and shop respectively the Act has
expressly excluded factories from the said expressions.
It is true that the definition of establishment does not
expressly exclude factory; but it is plain that factory is
treated by the Act as separate and distinct and there can be
no doubt that the provisions in the Act which apply to
establishment are not intended to, and do not, apply to
factories. In other words, though the definition of
establishment is wide enough, it does not include factory
for the purposes of the Act. It is conceivable that a
kitchen attached to an establishment like a residential
hotel may satisfy the definition of factory; but it seems to
us that such an adjunct of an establishment is prima facie
not intended by the Act to be treated apart and separately
from the main establishment itself, and so it would be taken
as a part of the establishment and be governed by the
provisions of the Act in relation thereto. The factory
where the respondents are employed is not connected with,
much less an inseparable adjunct of, any establishment, and
so this academic aspect of the matter which was incidentally
posed before us by the learned Attorney-General need not be
pursued any further in the present appeal.
The conclusion of the Authority has been challenged by the
appellant on the ground that s. 70 on which it is based
cannot be invoked by the respondents. In support of this
argument reliance is placed on s. 4 of the Act. Section 4
provides that notwithstanding anything contained in the Act
its provisions mentioned
147
in the third column of sch. 11 shall not apply to the
establishments, employees and other persons mentioned
against them in the second column of the said schedule. The
proviso to this section authorises the State Government to
add to, omit or alter any of the entries in thesaid
schedule in the manner indicated( by it. It is urged that
the establishment of any railway administration is mentioned
as sr. no. 5 in sch. II and the entry against it in col. 3
of the said schedule shows that the provisions of the Act
are inapplicable to the said establishments. If the
establishment in question is exempted from the application
of all the provisions of the Act, how can s. 70 be said to
apply to it? asks the learned Attorney-General. It is
obvious that s. 4 mentions and applies only to
establishments and it has no application to factories; and
we are dealing with employees in a factory. Indeed as we
have already observed, no provision of the Act except s. 70
applies to factories and so it would not be legitimate to
base any argument on the assumption that s. 4 is applicable
to the present case.
Incidentally the learned Attorney-General suggested, though
faintly, that the establishments mentioned at sr. nos. 1 to
6 in col. 2 of sch. II are wider than and different from
the establishment as defined by s. 2(8). We do not think
that this suggestion is well-founded. There can be no doubt
that s. 4 grants exemptions to the said establishments from
the application of the provisions mentioned in col. 3 of
sch. II; and that itself postulates that but for the
exemption thus granted the provisions of the Act would have
applied to them. Indeed the scheme of sch. 11 shows that
whereas all the provisions of the Act are made inapplicable
to the establishments and offices enumerated at sr. nos. 1
to 6 including 6(a) to 6(k), in regard to the others which
are enumerated at sr. nos. 7 to 55 it is only some
provisions of the Act specified in col. 3 that are excluded.
In other words, the remaining sections not so specified
would apply to them. If that is so, they must be and are
establishments under s. 2(8) of the Act.
148
In this connection it must be borne in mind thats. 2(8)
empowers the State Government to include by notification any
office or institution within the definition of
establishment; and so the inclusion of any such office or
institution in col. 2 of sch. 11 would make it -an
establishment under the Act, and as such it would be
governed by it subject of course to the corresponding entry
in col. 3. That is why we think that the suggestion of the
learned Attorney-General as to the denotation and character
of establishments enumerated in sr. nos. 1 to 5 in col. 2
of sch. 11 cannot be accepted. All the offices,
establishments and other institutions mentioned in col. 2 of
sch. II are and must be held to be establishments under s.
2(8).
In regard to the argument that the operation of s. 4
excludes the application of s. 70 we have held that s. 4
applies only to establishments and not to factories. But
even if s. 4 is assumed to be applicable to factories, we do
not think it would materially affect the application of s.
70. The plain object underlying s. 70 and its context
emphatically point out that it is intended to operate
independently of the other provisions of the Act and in that
sense it stands apart from them. It is this aspect of the
matter which is clarified by the Legislature by laying down
in s. 70 that nothing in the Act shall be deemed to apply to
any persons employed in the factory. That, however,
anticipates the argument on the construction of s., 70. Let
us therefore,cite the said section and construe it.
Section 70 provides that nothing in this Act shall be deemed
to apply to any person employed in or within the precincts
of a factory and the provisions of the Factories Act shall,
notwithstanding anything in the said Act, apply tosuch
person. This section consists of two parts. The first part
makes it clear that no provision in the Act shall be deemed
to apply to the persons specified in it. The Legislature
knew that in fact the Act contained no provision which in
terms or expressly applies to any such person; but in order
to remove any possible doubt it has provided that no
provision in the Act shall even by inference or fiction be
deemed to apply to them. In other words this clause
149
is intended to clarify the position that though factory has
been defined by s. 2(9) of the Act, no provision of the Act
is intended to be applied to a factory or employees in. it.
Having clarified this position the second part of the
section extends the application of the Factories Act to the
said persons.
It would have been possible for the Legislature to include
in the present statute all the relevant provisions of the
Factories Act and make them applicable to factories as
defined by s. 2(9); but apparently the Legislature thought
that the same object can be achieved by enacting the second
part of s. 70. This part provides that the provisions of
the Factories Act shall apply to the persons in question
notwithstanding anything contained in the said Act. The
said Act contains the provision by which workers are defined
under s. 2(1), and it necessarily involves the consequence
that the relevant provision about the payment of overtime
wages applies only to workers as defined and not to
employees in factories who are not workers. It is in
reference to this provision that s. 70 has provided that
notwithstanding the said provision the relevant provisions
of the Factories Act will apply to persons employed in a
factory. The non-obstante clause in s. 70 thus serves the
purpose of clarifying the position that the Factories Act is
made applicable to employees in factories and that they are
not governed by any of the provisions of the Act. This
conclusion is obviously consistent -with the policy of the
Act. It has itself made provision for the payment of
overtime wages to employees in all establishments by s. 63;
and it has made applicable inter alia the relevant
provisions of the Factories Act in regard to employees in
factories. That is the view which the Authority has taken,
and in our opinion its validity or correctness is not open
to doubt.
In the result the orders passed by the authority are
confirmed and the appeals are dismissed with costs in one
set.
Appeals dismissed.
150

PETITIONER:
THE STATE OF UTTAR PRADESH

Vs.

RESPONDENT:
M. P. SINGH AND OTHERS

DATE OF JUDGMENT:
15/12/1959

BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
SINHA, BHUVNESHWAR P.(CJ)
GAJENDRAGADKAR, P.B.
SUBBARAO, K.
GUPTA, K.C. DAS

CITATION:
1960 AIR 569 1960 SCR (2) 605
CITATOR INFO :
F 1966 SC1995 (5)
R 1967 SC1364 (9)
R 1978 SC 849 (5,7)

ACT:
Commercial Establishment-Field Workers of a Sugar Factory-
If workers of a Commercial Establishment-United Provinces
Shop and Commercial Establishment Act, 1947 (U. P. Act No.
XXII of 1947), s. 2(3), Factories Act, 1948 (Act LXIII of
1948), s. 2(1).

HEADNOTE:
The three respondents, who were the General Manager, the
Assistant Manager and the Secretary of the Laxmi Devi Sugar
Mills Ltd., were charged under ss. 12, 13 and 26 of the
United Provinces Shop and Commercial Establishment Act,
1947, for contravening the provisions of the Act relating to
holidays, leave and maintenance of certain registers
regarding a class of field workers employed by the company
to guide, supervise and control growth and supply of sugar
cane for use in the factory. It was contended on their
behalf that those employees were workers within the meaning
of the Factories Act and the United Provinces Shop and
Establishment Act did not apply to them. The Judicial
Magistrate rejected that contentionand convicted the
respondents under S. 26 of the Act and sentenced them to pay
a fine of Rs. 30 each. On a reference by the Sessions judge
recommending that the said convictions and sentences may be
set aside, the High Court acquitted the respondents. The
State Government appealed to this Court by Special Leave.
Held, that the order of acquittal passed by the High Court
was erroneous.
The provisions of the Factories Act were intended to benefit
only workers employed in a factory and since field workers
guiding, supervising and controlling growth and supply of
sugar cane for use in the factory were not employed in the
factory, the Factories Act did not apply to them and they
fell within the definition of Commercial Establishment
under the United Provinces Shop and Commercial Establishment
Act, 1947.

JUDGMENT:
CRIMINAL APPELLATE JURISDICTION: Criminal Appeals Nos. 157
and 158 of 1957 and 5 of 1958.
Appeals by special leave from the judgment and order dated
October 31, 1955, of the Allahabad High Court, in Criminal
Reference Nos. 28, 29 and 30 of 1955, arising out of the
judgment and order dated December 18, 1954, of the Sessions
Judge, Deoria, in Criminal Revisions Nos. 7, 8 and 9 of
1954.
606
G. C. Mathur, C. P. Lal and G. N. Dikshit, for the
appellant.
W. S. Barlingay and A. G. Ratnaparkhi, for the respondents.
1959. December 15. The Judgment of the Court was
delivered by
SHAH J.-The question which falls to be determined in this
group of appeals is whether field workers, i.e., Supervisors
and Kamdars employed by a sugar factory to guide, supervise
and control the growth and supply of sugarcane for use in
the, sugar factory are employees of a Commercial
Establishment with in the meaning of the United Provinces
Shop and Commercial Establishment Act, XXII of 1947 (herein-
after referred to as the Act). The Magistrate who tried the
respondents for offences under s. 27 of the Act held that
the field workers were employees of a Commercial
Establishment. The High Court at Allahabad took a contrary
view, and the State of Uttar Pradesh has appealed to this
court against the order of the High Court with special leave
under Art. 136 of the Constitution.
The United Provinces Shop and Commercial Establishment Act,
1947 was enacted to regulate the hours of employment and
certain other conditions of employment in shops and
commercial establishments. Commercial Establishment is
defined by s. 2, cl. 3 of the Act. By s. 12 of the Act,
provision is made for giving to theemployees a weekly
holiday besides holidays which may be granted under s. 11.
Section 13 provides for granting, ordinary, casual and
sickness leave. Section 26 requires the employer to
maintain such registers and records and to displaysuch
notices as may be prescribed and s. 27 penalises
contraventions of the Act and the rules made thereunder.
The Lakshmi Devi Sugar Mills Ltd. (hereinafter referred to
as the company) owns a factory at Chhitauni for
manufacturing sugar. The three respondents are respectively
the General Manager, Assistant Manager and Secretary of the
company. The company employs certain classes of field
workers to guide,
607
supervise and control the growth and supply of sugarcane for
use in the Factory. The Deputy Chief inspector of Shops and
Commercial Establishment, Uttar Pradesh, filed three
complaints against the respondents in the court of the
Judicial Magistrate, Deoria, charging them with
contravention of the provisions of ss. 12, 13 and 26 of the
Act in respect of certain field workers employed by the
company for - guiding, supervising and controlling the
growth and supply of sugarcane. The respondents contended
that the Act did not apply to those employees as they were
workers within the meaning of the Factories Act and
accordingly exempt from the operation of the Act. The
Judicial Magistrate rejected the contention and convicted
the respondents of contravention of s. 26 of the Act and
sentenced each of them to pay a fine of Rs. 30 in each of
the three cases. Against the orders of conviction and
sentence, the respondents preferred revision applications to
the Court of Session at Deoria. The Sessions Judge
disagreed with the view of the Trial Magistrate and referred
the cases to the High Court at Allahabad recommending that
the orders of conviction and sentence passed by the Trial
Magistrate be set aside. The High Court accepted the
references and ordered that the respondents be acquitted.
By the definition of a Commercial Establishment in s. 2 cl.
3 of the Act, the clerical and other establishments of a
factory to whom the provisions of the Factories Act, 1934,
do not apply, are included in the connotation ofthat
expression. It is true that the reference in the definition
by which clerical and other establishments of factories are
included is to the Factories Act of 1934, but by virtue of
s. 8 of the General Clauses Act X of 1897, it must be
construed as a reference to the provisions of the Factories
Act LXIII of 1948 which repealed the Factories Act of 1934
and re-enacted it. The contention raised by the State by
special leave, that since the repeal of the Factories Act,
1934, in the definition of Commercial Establishment in s. 2
cl. 3, are included all clerical and other establishments of
a factory without any exemption has therefore no force.
608
The Factories Act, 1948 defines a worker by s. 2 (1) as
meaning, it a person employed, directly or through any
a person employed, directly or thought any agency, whether
for wages or not, in any manufacturing process or in
cleaning any part of the machinery or premises used for a
manufacturing process, or in any other kind of work
incidental to, or connected with, the manufacturing process,
or the subject of the manufacturing process.
and a factory is defined by s. 2(m) as meaning any premises
including the precints thereof wherein a specified number of
workers on any day of the preceding twelve months is
employed. By the combined operation of these definitions,
persons employed in any manufacturing process or in cleaning
any part of the machinery or part of the premises used for
the manufacturing process or any other kind of work
incidental to or connected with the manufacturing process or
the subject of the manufacturing process are deemed to be
workers in a factory. By the use in s. 2 (1) of the
Factories Act of the expression, I employed in any other
kind of work incidental to or connected with the subject of
manufacturing process, not only workers directly connected
in the manufacturing process, but those who are connected
with the subject of manufacturing process in a factory are
included. It is unnecessary for the purpose of this case to
decide the precise meaning of the expression I subject of
the manufacturing process in s. 2 cl. (1), because the
diverse provisions of the Factories Act areintended to
benefit only workers employed in a factory, i.e., in the
precincts or premises of a factory. It is difficult to
hold that field workers who are employed in guiding,
supervising and controlling the growth and supply of
sugarcane to be used in the factory are employed either in
the precincts of the factory or in the premises of the
factory; and if these workers are not employed in a factory,
the-provisions of the Factories Act, 1948 do not apply to
them and they evidently fall within the definition of
Commercial Establishment.
The High Court was of the view that the Supervisors and
Kamdars connected with the subject of
609
manufacturing process, namely sugarcane, were workers within
the meaning of the Factories Act and accordingly they were
excluded from the definition of Commercial Establishment
under the Act. However, even if the Supervisors and Kamdars
were employed in any other kind of work connected with the
subject of manufacturing process , unless they were
employed in the factory, the provisions of the Factories Act
do not apply to them, there is no dispute that they are
employees of a Commercial Establishment within the
meaning of the Act.
The High Court was therefore in error in acquitting the
respondents of the offences of which they were convicted by
the Trial Magistrate. The orders of acquittal passed by the
High Court are set aside and the orders of conviction and
sentence passed by the Trial Magistrate are restored. In
view of the order of this Court dated October 1, 1956, made
at the time of granting special leave, the respondents are
entitled to their costs of hearing in this court.
Appeal allowed.
PETITIONER:
BUCKINGHAM AND CARNATIC CO. LTD.

Vs.

RESPONDENT:
WORKERS OF THE BUCKINGHAM ANDCARNATIC CO. LTD.

DATE OF JUDGMENT:
02/12/1952

BENCH:
MAHAJAN, MEHR CHAND
BENCH:
MAHAJAN, MEHR CHAND
DAS, SUDHI RANJAN
BHAGWATI, NATWARLAL H.

CITATION:
1953 AIR 47 1953 SCR 219
CITATOR INFO :
F 1957 SC 82 (12)
D 1961 SC1567 (4)
RF 1981 SC 340 (14)

ACT:
Indian Factories Act (XXV of 1934), s. 49-B-Industrial
Disputes Act (XIV of 1947), s. 2 (q)-Employees stopping work
for a few hours by concerted action-Whether strike-
Continuity of service, whether interrupted-Loss of right to
holidays with pay.

HEADNOTE:
Where the night-shift operatives of a department of a
textile mills stopped work from about 4 p.m. up to about 8
p.m. on a certain day, the apparent cause of the strike
being that the management of the mills had expressed its
inability to comply with the request of the workers to
declare the forenoon of that day as a holiday for solar
eclipse, and it was found that the stoppage of work was the
result of concerted action:
Held (i) that the stoppage of work fell within the
definition of a strike in s. 2 (q) of the Industrial
Disputes Act, 1947;
(ii) that the strike was an illegal strike as the
textile mills was a public utility industry and no notice
had been given to the management, even though the refusal to
work continued only for a few hours; and
(iii) that the continuity of service of the workers was
interrupted by this illegal strike and they were not
entitled to claim holidays with pay under S. 49-B (1) of the
Indian Factories Act, 1934.

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil - Appeal No. 89 of
1952. Appeal by special leave from the Judgment dated June
27, 1951, of the Labour Appellate Tribunal of India at
Calcutta in Appeals Nos. 94 and 142 of 1950 arising out of
the Award of the Second Industrial Tribunal, Madras
(published in the Fort St. George Gazette, Madras, dated
October 3, (1950).
N. C. Chatterjee (S. N. Mukherjee, with him) for the
appellant.
S. C. C. Anthoni Pillai (President, Madras Labour Union)
for the respondents.
1952. December 2. The Judgment of the Court Was delivered
by MAHAJAN J.
220
MAHAJAN J.-This is an appeal by special leave from a
decision dated 27th June, 1951, of the Labour Appellate
Tribunal of India at Calcutta in appeals Nos. 94 and 142 of
1950, arising out of the award of the Second Industrial
Tribunal, Madras.
The relevant facts and circumstances giving rise to the
appeal are as follows: On 1st November, 1948, 859 night
shift operatives of the carding and spinning department of
the Carnatic Mills stopped work, some at 4 p.m., some at 4-
30 p.m. and some at 5 p.m. The stoppage ended at 8 p.m. in
both the departments. By 10 p.m, the strike ended
completely. The apparent cause for the strike was that the
management of the Mills had expressed its inability to
comply with the request of the workers todeclare the
forenoon of the 1st November, 1948, as a holiday for solar
eclipse. On the 3rd November, 1948, the management put up a
notice that the stoppage of work on the 1st November
amounted to an illegal strike and a break in service within
the meaning of the Factories Act (XXV of 1934) and that the
management had decided that the workers who had participated
in the said strike would not be entitled to holidays with
pay as provided by the Act. This position was not accepted
by the Madras Labour Union. The Madras Government by an
order dated the 11th July, 1949, made under section 10(1)
(c) of the Industrial Disputes Act (XIV of 1947), referred
this dispute along with certain other disputes to the
Industrial Tribunal, Madras. The adjudicator gave the award
which was published in the Gazette on 12th October, 1950.
By his award the adjudicator found that there could be
little doubt that the stoppage of work by thenight shift
workers on the night of the last November,, 1948, was a
strike, that it was an illegal strike, sincethe textile
industry is notified as a public utility industry and there
could be no legal strike without a proper issue of notice in
the terms prescribed by the Industrial Disputes Act. No
such notice had been given. In view of this finding he
upheld the view of the management that the continuity of
service of the workers was broken by the interruption
221
caused by the illegal strike and that as a consequence the
workers who participated in such strike were not entitled to
annual holidays with pay under section 49-B (1) of the
Factories Act. He, however, considered that the total
deprivation of leave with pay ordered by the management was
a severe punishment and on the assumption that he had power
to scrutinize the exercise of the discretion by the
management in awarding punishment, reduced the punishment by
50 per cent and held that the workers would be deprived of
only half their holidays with pay. The decision of the
management was varied to this extent.
The Mills as well as the-Union appealed againstthis
decision to the Labour Appellate Tribunal. That Tribunal
upheld the contention of the Mills that the adjudicator had
no power to interfere with and revise the, discretion of the
management exercised by it under section 49-B (1). It also
upheld the contention of the Union that what happened on the
night of the 1st November did not amount to a strike and did
not cause any interruption in the workers service. This is
what the Tribunal said:-
It would be absurd to hold that non-permitted absence from
work even for half an hour or less in the course of a
working day would be regarded as interruption of service of
a workman for the purpose of the said section. We are
inclined to hold that the stoppage of Work for the period
for about 2 to 4 hours in the circumstances of the case is
not to be regarded as a strike so as to amount to a break in
the continuity of service of the workman concerned.
In the result the appeal of the Union on this point was
allowed and it was ordered that holidays at full rates as
provided for in section 49-A of the Factories Act will have
to be calculated in respect of the operatives concerned on
the footing that there was no break in the continuity of
their service by the stoppage of work on 1st November, 1948.
In this appeal it was contended on behalf of the Mills that
on a proper construction of section 49-B (1)
29
222
of the Factories Act: (XXV of 1934) the management was right
in its decision that the continuity of service was broken by
the interruption caused by the illegal strike and that the
workers were not entitled to annual holidays with pay under
the said section inasmuch as they would not have completed a
period of twelve months continuous service in the factory,
and that the non-permitted absence as a result of concerted
refusal to work even for 2 to 4 hours in the course of a
working day amounts to an illegal strike and consequently an
interruption of service of a workman for the purpose of
section 49-B.
In our judgment, this contention is well founded. Section
49-B provides-
Every worker who has completed a period of twelve months
continuous service in a factory shall be allowed, during the
subsequent period of twelve months, holidays for a period of
ten, or, if a child, fourteen Consecutive days, inclusive
of the day or days, if any, on which he is entitled to a
holiday under subsection (1) of section 35......
Explanation.-A worker shall be deemed to have completed a
period of twelve months continuous service in a factory
notwithstanding any interruption in service during those
twelve months brought about by sickness, accident or
authorized leave not exceeding ninety days in the aggregate
for all three or by a lookout, or by a strike which is not
an illegal strike, or by intermittent periods of involuntary
unemployment not exceeding thirty
days........................
It is clear that the benefit of this section is not avail-
able in cases where the interruption in service is brought
about by an illegal strike. Section 2 q ) of the
Industrial, Disputes Act (Act XIV of 1947) defines strike
as meaning-
a cessation of work by a body of persons employed in any
industry acting in combination, or a concerted refusal, or a
refusal under a common understanding, of any number of
persons who are or have
223
been so employed to continue to work or to
accept
employment.
The adjudicator found on the evidence and circumstances of
the case that there was concert and combination of the
workers in stopping and :refusing resume work on the night
of the 1st November He observed that the fact that a very
large number of leave applications was put in for various
reasons pointed to the concerted action and that the appli-
cation given by the workers and their representatives also
indicated that they were acting in combination both in
striking and refusing to go back to work on the ground that
they were entitled to leave for the night shift whenever a
half a days leave was granted to the day shift workers. He
further hold that the refusal of the workers to resume work
in spite of the attempts made by the officers and their own
Madras Labour Union representatives indicated that they were
not as a body prepared to resume work unless their demand
was conceded.
In our opinion, the conclusion reached by the adjudicator
was clearly right and the conclusion cannot be avoided that
the workers were acting in concert. That being so, the
action of the workers on the night of the 1st November
clearly fell within the definition of the expression
strike in section 2(q) of the Industrial Disputes Act. We
have not been able to appreciate the view expressed by the
Appellate Tribunal that stoppage of work for a period of two
to four hours and such non-permitted absence from work
cannot be regarded as strike. Before the adjudicator the
only point raised by the Union was that it was a spontaneous
and lightning strike but it was not said by them that
stoppage of work did not fall within the definition of
strike as given in the Act. It cannot be disputed -that
there was a cessation of work by a body of persons employed
in the Mills and that they were acting in combination and
their refusal to go back to work was concerted. All the
necessary ingredients,. therefore, of the definition exist
in the present case and the stoppage of work on 1st
November,
224
1948, amounted to a strike. It was not a case of an
individual workers failure to turn up for work. It was a
concerted action on the part of a large number of workers.
The Appellate Tribunal was thus in error in not regarding it
as a strike and it had no discretion not to regard what in
law was a strike as not amounting to a strike. If it cannot
be denied that the stoppage of work on 1st November, 1948,
amounted to a strike, then it was certainly an illegal
strike because no notice had been given to the management,
the Mills being a public utility industry.
It was contended by the President of the Union, who argued
the case on behalf of the workers, that the Factories Act
had no application to this case, because by a notification
of the Government of Madras dated 23rd August, 1946, the
Buckingham an Carnatic Mills had been exempted from the
provisions of Chapter IV-A of the Act and the provisions of
sections 49-A and 49-B were not therefore attracted to it
and that no substantial question of law in respect to the
construction of the section fell to be decided by this Court
and that being so, this Court shouldnot entertain this
appeal under article 136 of the Constitution. This
contention has no validity. The Mills were granted
exemption from the provisions of Chapter IV-A of the
Factories Act because their leave rules were in accordance
with the provisions of Chapter IV-A of the Factories Act.
These rules being in similar terms, the decision of the
matter depends on the construction of the rules and this in-
volves a substantial question of law.
Reliance was next placed on section 49-A of the Factories
Act which provides that the provisions of the new Act would
not operate to the prejudice of any rights which the workers
were entitled to under the earlier rules and it was argued
that under the leave rules of the Mills which prevailed
prior to the coming into force of the Factories Act, the
workers were entitled to privilege leave and there was no
provision in those rules similar to the one that has been
made in section 49-B or in the new rules and that the Mills
225
had no right to deprive them of leave by reason of the
strike. This contention cannot be sustained because section
49-A (2) of the Factories Act has no application to the case
of the Carnatic Mills in view of the notification dated
23rd August, 1946.
Lastly, it was urged that the stoppage of work on 1st
November, 1948, was not a concerted action -on the part of
the workers and that several workers in their own individual
capacity wanted leave on that date. In our opinion, in view
of the facts and circumstances detailed in the adjudicators
award this contention cannot be seriously considered. We
concur in the view of the facts taken by the adjudicator
that the action of the 859 workers on the night of 1st
November, 1948, fell within the definition of the word
strike as given in section 2(q) of the Industrial Disputes
Act and it was an illegal strike and the workers thus lost
the benefit of holidays that they would have otherwise got
under the rules.
The learned counsel for the appellant undertook on behalf of
the management ex gratia that it would condone the default
of the workers on 1st November, 1948, and the cessation of
work on that night would not be treated as depriving them of
the holidays under the rules and we appreciate -the spirit
in which this undertaking was given and hope that the
workers would also take it in that spirit.
The result is that the appeal is allowed, and the decision
of the Labour Appellate Tribunal on this point is set aside.
In the circumstances of this case we make no order as to
costs.
Appeal allowed.
Agent for the appellant: S. P. Varma.
226

PETITIONER:
SHRI BIRDHICHAND SHARMA

Vs.

RESPONDENT:
FIRST CIVIL JUDGE NAGPUR AND OTHERS.

DATE OF JUDGMENT:
09/12/1960

BENCH:
WANCHOO, K.N.
BENCH:
WANCHOO, K.N.
GAJENDRAGADKAR, P.B.

CITATION:
1961 AIR 644 1961 SCR (3) 161
CITATOR INFO :
R 1962 SC 517 (11,31)
RF 1963 SC1591 (16)
R 1966 SC 370 (9,10,11,13)
RF 1970 SC 66 (10,11)
F 1971 SC 832 (2,6)
R 1974 SC 37 (12,14,16,19)
RF 1974 SC1832 (62,64,65,67)
R 1987 SC 447 (9)
RF 1992 SC 573 (37)

ACT:
Industrial Dispute--Workers in bidi factory-- Liberty to
come and go when they liked-Payment on Piece-rate-Control by
rejection of work not upto the standard--If workmen-Test-
Factories Act, 1948 (LXIII of 1948), ss. 2(1) and 79.

HEADNOTE:
The appellant employed workmen in his bidi factory who had
to work at the factory and were not at liberty to work at
their houses; their attendance were noted in the factory and
they had to work within the factory hours, though they were
not bound to work for the entire period and could come and
go away when they liked; but if they came after midday they
were not supplied with tobacco and thus not allowed to work
even though the factory closed at 7 p.m.; further they could
be removed from service if absent for 8 days. Payment was
made on piece rates according to the amount of work done,
and the bidis which did not come upto the proper standard
could be rejected.
The respondent workmen applied for leave for 15 days and did
not go to work, for which period the appellants did not pay
their wages; in consequence the concerned workmen applied to
the Payment of Wages Authority for payment of wages to them.
The appellants contention that the respondent workmen were
not his workmen within the meaning of the Factories Act, was
rejected and the claim for payment of wages was allowed.
The question therefore was whether the appellants were
workmen within the meaning of the Factories Act.
Held, that the nature of extent of control varies in
different industries and cannot by its very nature be
precisely defined. When the operation was of a simple
nature and could not be supervised all the time and the
control was at the end of day by the method of rejecting the
work done which did not come up to proper standard, then, it
was the right to supervise and not so much the mode in which
it was exercised which would determine whether a person was
a workman or an independent contractor.
The mere fact that a worker was a piece-rate worker would
not necessarily take him out of the category of a worker
within the meaning of S. 2(1) Of the Factories Act. In the
instant case the respondent workmen could not be said to be
independent contractors and were workmen within the meaning
of s. 2(1) of the Factories Act.
Held, further, that the leave provided for under S. 79 of
the Factories Act arose as a matter of right when a worker
had put
21
162
in a minimum number of working days and he was entitled to
it. The fact that the workman remained absent for a longer
period had no bearing on his right to leave.
State v. Shankar Balaji Waje, A.I.R. 1960 Bom. 296,
approved.
Dharangadhara Chemical Works Ltd. v. State of Saurashtra,
[1957] S.C.R. 152 and Shri Chintaman Rao v. The State of
Madhya Pradesh, [1958] S.C.R. 1340, referred to.

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 370 of 1959.
Appeal by special leave from the judgment andorder dated
August 6, 1957, of the Bombay High Court, Nagpur, in Misc.
Petition No. 512 of 1956.
M. N. Phadke and Naunit Lal, for the appellant.
Shankar Anand and A. G. Ratnaparkhi, for the respondents
Nos. 2-4.
N.P. Nathvahi, K. L. Hathi and R. H. Dhebar, for the
Intervener (State of Bombay).
1960. December 9. The Judgment of the Court was delivered
by
WANCHOO, J.-This is an appeal by special leave in an
industrial matter. The appellant is the manager of a biri
factory in Nagpur. Respondents 2 to 4 are working in that
factory. They applied for leave for fifteen days from
December 18, 1955, to January 1, 1956, and did not go to
work during that period. The appellant did not pay their
wages for these days and in consequence they applied to the
Payment of Wages Authority (hereinafter called the
Authority) for payment to them of wages which hadbeen
withheld. Their claim was that they were entitled to
fifteen days leave in the year under ss. 79 and 80 of the
Factories Act, 1948. The Authority allowed the claim and
granted them a sum of Rs. 90/16/- in all as wages which had
been withheld for the period of leave. Thereupon, the
appellant filed an application under Art. 226 of the
Constitution before the High Court at Nagpur. His main
contention was that respondents 2 to 4 were not workers
within the meaning of the Factories Act and could not
therefore claim the benefit
163
of a. 79 thereof The respondents contended that they were
workers within the meaning of the Factories Act andwere
entitled to the sum awarded to them by the Authority. The
High Court on a consideration of the circumstances came to
the conclusion that respondents Fir2 to 4 were workers under
s. 2(1) of the Factories Act and therefore the order of the
Authority was correct and dismissed the petition. The
appellant then applied for a certificate to appeal to this
Court which was refused. He then obtained special leave
from this Court and that is how the matter has come up
before US.
Sec. 2(1) defines a worker to meana person employed,
directly or through any agency, whether for wages or not, in
any manufacturing process, or in cleaning any part of the
machinery or premises used for a manufacturing process or in
any other kind of work incidental to, or connected with, the
manufacturing process, or the subject of the manufacturing
process. The main contention of the appellant is that
respondents 2 to 4 are not employed in the factory within
the meaning of that word in s. 2(1). Reliance in this
connection is placed on two decisions of this Court, namely,
Dharangadhara Chemical Works Ltd. v. State of Saurashtra (1)
and Shri Chintaman Rao v. The State of Madhya Pradesh (2).
In Dharangadhara Chemical Works (1), this Court held with
reference to s. 2 (s) of the Industrial Disputes Act, which
defined workman that the word employed used therein
implied a relationship of master and servant or employer and
employee and it was not enough that a person was merely
working in the premises belonging to another person. A
distinCtion was also drawn between a workman and an
independent contractor. The prima facie test whether the
relationship of master and servant or employer and employee
existed was laid down as the existence of the right in the
employer not merely to direct what work was to be done but
also to control the manner in which it was to be done, the
nature or extent of such control varying in different
industries and being
(1) [1957] S.C.R. 152.
(2) [1958] S.C.R. 1340.
164
by its nature incapable of being precisely defined. The
correct approach therefore to the question was held to be
whether having regard to the nature of the work, there was
due control and supervision of the employer.
The matter came up again for consideration in Chintaman
Raos case (1) which also happened to relate to biri
workers, and s. 2(1) of the Factories Act had to be
considered in it. It was held that the test laid down in
Dharangadhara Chemical Works (2) with respect to s. 2(s) of
the Industrial Disputes Act would also apply to s. 2(1) of
the Factories Act. Finally, it was pointed out that the
question whether a particular person working in a factory
was an independent contractor or a worker would depend upon
the terms of the contract entered into between him and the
employer and no general proposition could be laid down,
which would apply to all cases. Thus in order to arrive at
the conclusion whether a person working in a factory (like
respondents 2 to 4 in this case) is an independent
contractor or a worker the matter would depend upon the
facts of each case.
Let us then turn-to the facts which have been found in this
case. It has been found that the respondents work at the
factory and are not at liberty to work at their homes.
Further they work within certain hours which are the factory
hours, though it appears that they are not bound to work for
the entire period and can go away whenever they like; their
attendance is noted in the factory; and they can come and go
away at any time they like, but if any worker comes after
midday he is not supplied with tobacco and is thus not
allowed to work, even though the factory closes at 7 p.m. in
accordance with the provisions of the Factories Act and when
it is said that they can return at any time, it is subject
to the condition that they cannot remain later than 7 p.m.
There are standing orders in the factory and according to
those standing orders a worker who remains absent for eight
days (presumably without leave) can be removed. The payment
is made on piece-rates according to the amount of work done
but the management has the
(1) [1958] S.C.R. 1340.
(2) [1957] S.C.R. 152.
165
right to reject such biris as do not come up to the proper
standard. It is on these facts that we have to decide the
question whether respondents 2 to 4 were employed by the
appellant.
It will be immediately noticed that the facts in this case
are substantially different from the facts in Shri Chintaman
Raos case (1). In that case the factory entered into
contracts with independent contractors, namely, the
Sattedars, for the supply of biris. The Sattedars were
supplied tobacco by the factories and in some cases biri
leaves also. The Sattedars were not bound to work in the
factory nor were they bound to prepare the biris themselves
but could get them prepared by others. The Sattedars also
employed some coolies to work for them and payment to the
coolies was made by the Sattedars and not by the factory.
The Sattedars in their turn collected the biris prepared by
the coolies and took them to the factory where they were
sorted and checked by the workers of the factory and such of
them as were rejected were taken back by the Sattedars to be
remade. The payment by the factory was to the Sattedars and
not to the coolies. In these circumstances it was held that
the Sattedars were independent contractors and the coolies
who worked for them were not the workers of the factory.
The facts of the present case, however, are different.
Respondents 2 to 4 have to work at the factory and that in
itself implies a certain amount of supervision by the
management. Their attendance is noted and they cannot get
the Work done by others but must do it themselves. Even
though they are not bound to work for the entire period
during which the factory is open it is not in dispute that
if they come after midday, they are not given any work and
thus lose wages for that day, the payment being at piece-
rates. Further though they can stay away without asking for
leave, the management has the right to remove them if they
so stay away for a continuous period of eight days. Lastly,
there is some amount of supervision inasmuch as the
management has the right of rejection of the biris prepared
if they do not come up to the proper standard.
(1) (1958) S.C.R. 1340.
166
The question therefore that arises is whether in these
circumstances it can be said whether the appellant merely
directs what work is to be done but cannot control the
manner in which it has to be done; of course, the nature or
extent of control varies in different industries and cannot
by its very nature be precisely defined. Taking the nature
of the work in the present case it can hardly be said that
there must be supervision all the time when biris are being
prepared and unless there is such supervision there can be
no direction as to the manner of work.In the present case
the operation being a simple one, the control of the manner
in which the work is done is exercised at the end of the
day, when biris are ready, by the method of rejecting those
which do not come up to the proper standard. In such a case
it is the right to supervise and not so much the mode in
which it is exercised which is important. In these
circumstances, we are of opinion that respondents 2 to 4 who
work in this factory cannot be said to be independent con-
tractors. The limited freedom which respondents 2 to 4 have
of coming and going away whenever they like or of absenting
themselves (presumably without leave) is due to the fact
that they are piece-rate workers; but the mere fact that a
worker is a piece-rate worker would not necessarily take him
out of the category of a worker within the meaning of s.
2(1) of the Factories Act. Considering the entire
circumstances and particularly the facts that if the worker
does not reach the factory before midday he is given no
work, he is to work at the factory and cannot work else-
where, he can be removed if lie is absent for eight days
continuously and finally his attendance is noted and biris
prepared by him are liable to rejection if they do not come
up to the standard, there can be no doubt that respondents 2
to 4 are workers within the meaning of s. 2(1) of the
Factories Act. This is also the view taken by the Bombay
High Court in State v. Shankar Balaji Waje (1) in similar
circumstances and that we think is the right view.
Then it was urged that even if the respondents are
(1) A.I.R. 1960 Bom. 296.
167
workers under s. 2(1), s. 79 should not be applied to them
as they can absent themselves whenever they like. In this
very case it is said that the respondents remained absent
for a longer period than that provided in the Act and
therefore they do not need any leave. This argument has in
our opinion no force. The leave provided under s. 79 arises
as a matter of right when a worker has put in a minimum
number of working days and he is entitled to it. The fact
that the respondents remained absent for a longer period
than that provided in s, 79 has no bearing on their right to
leave, for if they so remained absent for such period they
lost the wages for that period which they would have
otherwise earned. That however does not mean that they
should also lose the leave earned by them under s. 79. In
the circumstances they were entitled under s. 79 of the
Factories Act to proportionate leave during the subsequent
calendar year if they had worked during the previous
calendar year for 240 days or more in the factory. There is
nothing on the record to show that this was not so. In the
circumstances the appeal fails and is hereby dismissed with
costs. One set of hearing costs.
Appeal dismissed.
PETITIONER:
A.V. DCOSTA

Vs.

RESPONDENT:
B. C. PATEL AND ANOTHER.

DATE OF JUDGMENT:
04/03/1955

BENCH:
SINHA, BHUVNESHWAR P.
BENCH:
SINHA, BHUVNESHWAR P.
BOSE, VIVIAN
JAGANNADHADAS, B.
AIYYAR, T.L. VENKATARAMA

CITATION:
1955 AIR 412 1955 SCR (1)1353

ACT:
Payment of Wages Act, 1936, (IV of 1936), Ss. 5, 7, 15(1)
(2)--Claim for wages due on account of the introduction of
upgrading of persons-Claimants right to be placed on
monthly wages ignored--No delay in payment of wages or
deduction of wages alleged--Authority under the Act--Whether
had jurisdiction to decide the complaint of the applicant.

HEADNOTE:
The second respondent had been an employee of the Central
Railway as a daily rated casual labourer on specified daily
wages since 1941. He continued to receive his wages at the
specified rate until October 1949. In October 1949 he made
an application through an official of the Registered Trade
Union-a person permitted by the authority under sub-section
(2) of s. 15 of the Payment of Wages Act, 1936-claiming his
wages due in respect of six months from May to October 1949.
The respondent did not allege delay in the
1354
payment of his wages or deduction of his wages in
contravention of the provisions of s. 5 or s. 7 of Act IV of
1936 respectively. The respondent alleged that he had been
paid his actual wages as fixed by the railway administration
but that after the introduction of the scheme of upgrading
of persons employed under the daily wages scheme, others who
were junior to him had been placed on the monthly wages
scheme whereas his claim to be so placed, had been ignored
and that he had not been paid wages on the scale to which he
would have been entitled if he had been placed on the
monthly wages scheme.
Held, per SINHA J. (VIVIAN BosE and VENYATARAMA AYYAR JJ.
concurring, JAGANNADHADAS J. dissenting), that the
respondents complaint fell under the category of potential
wages and the authority appointed under the Act had no
jurisdiction to decide the question of potential wages. It
had the jurisdiction to decide what actually the terms of
the contract between the parties were, that is to say, to
determine the actual wages.
On the case as made on behalf of the respondent, orders of
the superior officers were necessary to upgrade him from a
daily wageearner to a higher cadre. The authority under the
Act has not been empowered under s. 15 to make any such
direction to the superior officers.
Per JAGANNADHADAS J.-Undoubtedly a claim to a higher
potential wage cannot be brought in under the category of
claim arising out of deduction from the wages or delay in
payment of the wages if that wage depended on the
determination by a superior departmental or other authority
as to whether or not a particular employee is entitled to
the higher wage-a determination which involves the exercise
of administrative judgment or discretion or certification,
and which would, in such a situation, be a condition of the
payability of the wage. But where the higher wage does not
depend upon such determination but depends on the
application of and giving effect to certain rules and orders
which, for this purpose, must be deemed to beincorporated
in the contract of employment, such a wage is not a
prospective wage merely because the paying authority
concerned makes default or commits error in working out the
application of the rules. The wage under the Act is not
necessarily the immediately pre-existing wage but the
presently payable wage. Whether or not an employee was
entitled to wages of a higher category than what he was till
then drawing would depend entirely on the scope of the rules
with reference to which he is entitled to become one in the
higher category and it cannot be assumed a priori that such
a claim is a claim to prospective wages.
On the facts of the case as found the dispute as to the wage
was one that fell within the jurisdiction of the authority
concerned.

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No, 147 of 1953,
1355
Appeal by Special Leave from the Judgment andOrder dated
the 24th day of August 1951 of the High Court of Judicature
at Bombay in Appeal No. 50 of 1951 arising out of the Order
dated the 19th day of June 1951 of the said Court exercising
Original Jurisdiction in Misc. No. 143 of 1951.
M. C. Setalvad, Attorney-General.for India (Porus A. Mehta
and P. G. Gokhale, with him), for the appellant.
J. B. Dadachanji, M. V. Jayakar and Rajinder Narain for
respondent No. 2.
1955. March 4. The Judgment of Vivian Bose, Venkatarama
Ayyar and Sinha JJ. was delivered by Sinha J. Jagannadhadas
J. delivered a separate judgment.
SINHA J.-This is an appeal by special leave from the order
of the High Court of Judicature at Bombay dated the 24th
August 1951 upholding that of a single Judge of that court
sitting on the Original Side, dismissing the appellants
petition under art. 226 of the Constitution for a writ of
certiorari quashing the order dated the 23rd January 1951
passed by the 1st respondent, the Authority under the
Payment of Wages Act (hereinafter referred to as the Act).
The facts leading up to this appeal may shortly be stated as
follows: The 2nd respondent is and has been at all material
times an employee of the Central Railway (formerly called
the G.I.P. Rly.) represented by the appellant who has been
nominated by the Railway Administration as responsible for
payment of wages under section 3 of the Act. Ever since
1941, the 2nd respondent has been employed by the Railway
Administration as a carpenter on daily wages, and hasbeen
treated as a daily rated casual labourer and has been paid
his wages at the rate of Rs. 3-4-0 per day. He continued
receiving his wages at that rate until October,, 1949
without any demur, and granting receipts for the wages thus
received. On the 2nd December, 1949 an application was made
by one K. N. Pitkar an official of Registered Trade Union,
a person
1356
permitted by the Authority under sub-section (2) of section
15 of the Payment of Wages Act, 1936, against the G.I.P. Ry.
administration through its Divisional Engineer, Parel,
Bombay. It was alleged on behalf of the 2nd respondent that
his wages due in respect of six months from May to October
1949 amounting to Rs. 245 had not been paid or hadbeen
subjected to illegal deductions as shown in the schedule.
The schedule will be set out hereinafter. A claim for Rs.
245 plus Rs. 15 by way of compensation was made.
The appellant, as the opposite party before the Authority,
resisted the claim, inter alia, on the grounds-
(1) that Rs. 245 had not been illegally deducted from the
wages of the 2nd respondent; and
(2) that the claim of the 2nd respondent who was employed
as a daily rated casual labourer on specified daily wages,
to be placed on a permanent cadre on the scale of monthly
rates of pay was unfounded.
It was further alleged that the 2nd respondent did not come
within the purview of the Railway Services (Revision of Pay)
Rules as he was a daily rated casual labourer charged to
works and that no rules had been laid down governing the
rates of pay and the conditions of service of daily rated
casual laborers like the 2nd respondent. Hence his terms of
service were the daily wages paid to him all along. It was
thus contended that there had been no deduction from his
wages. In this connection reference was made to the award
of the Railway Workers Classification Tribunal, dated the
28th May 1948.
The Authority by its orders dated the 23rd January 1951
decided that the position of the 2nd respondent was not that
of a casual labourer but that of a temporary employee and
that therefore he was entitled to be on the scale of Rs. 55-
150 plus the allowances admissible. In coming to this
conclusion the Authority observed that the work done by the
2nd respondent is of the same nature as that of a member of
the permanent staff. Hence the 2nd respondent could not be
called a casual labourer. It also made reference to
1357
article 39 (d) of the Constitution containing the direction
that there should be equal pay for equal work. The
Authority also negatived the contention raised on behalf of
the appellant that the question of classification of an
employee was outside its jurisdiction.In pursuance of the
said order the Authority allowed the 2nd respondents
application by its further orders dated the 2nd March 1951.
Against the said orders of the Authority the appellant moved
the High Court of Judicature at Bombay by an application
under article 226 of the Constitution for quashing the
aforesaid orders. The matter was heard in the first
instance by a learned single Judge of that court who by his
orders dated the 19th June 1951 dismissed theapplication.
The appellant preferred an appeal under the Letters Patent
which was heard by a Division Bench of that court. The
Division Bench by its order dated the 24th August 1951
dismissed the appeal and agreed with the conclusions of the
Judge on the Original Side that the Authority had not acted
without jurisdiction or had not exceeded its jurisdiction in
entertaining the 2nd respondents application. On the
appellants application for leave to appeal to this court
being rejected by the High Court, the appellant moved this
court and obtained special leave toappeal on the 2nd
February 1953.
The main controversy between the parties in this court is
whether, having regard to the relevant provisions of the
Act, the 1st respondent was competent to pass the orders it
did, which orders had been upheld by the High Court of
Bombay.
The Authority set up under section 15 of the statute in
question is undisputably a tribunal of limited jurisdiction.
Its power to hear and determine disputes must necessarily be
found in the provisions of the Act. Such a tribunal, it is
undoubted,, cannot determine any controversy which is not
within the ambit of those provisions. On examining the
relevant provisions of the Act it will be noticed that it
aims at regulating the payment of wages to certain classes
of persons employed in industry. It applies
1358
in the first instance to the payment of wages to persons
employed in any factory or employed by a railway
administration; but the State Government has the power after
giving three months notice to extend the provisions of the
Act or any of them to the payment of wages to any class of
persons employed in any class or group of industrial
establishments. Wages means-
all remuneration, capable of being expressed in terms of
money, which would, if the terms of the contract of
employment, express or implied, were fulfilled, be
payable........ to a person employed in respect of his
employment or of work done in such employment.... (omitting
words not necessary for our present purpose).
Section 3 lays down that every employer or his re-
presentative or nominee shall be responsible for the payment
to persons employed by him of all wages Sections provides
for fixation of wage-periods which shall not exceed one
month in any case. Section 5 indicates the last date within
which, with reference to the particular wage-period, wages
shall be paid. Section 7 lays down that the wages of an em-
ployed person shall be paid to him without deductions of any
kind except those authorized by or under the Act. Section
7(2) in clauses (a) to (k) specifies the heads under which
deductions from wages may be made, namely, fines; deductions
for absence from duty; deductions for damage to or loss of
goods of the employer; deductions forhouse accommodation
supplied by the employer; deductions for amenities and
services supplied by the employer; deductions for recovery
of advances or for adjustment of overpayments of wages;
deductions of income-tax payable by the employee; deductions
to be made under orders of a court or other competent
authority; deductions for subscriptions to, and for
repayment of advances from any provident fund; deductions
for payments to cooperative societies, etc.; and finally,
deductions made with the concurrence of the employed person
in furtherance of certain schemes approved by Government.
No other deductions are permissible. It is also laid
1359
down that every payment made by the employed person to the
employer or his agent shall be deemed to be deduction from
wages. Each of the several heads of deductions aforesaid is
dealt with in detail in sections 8 to 13. Section 8 lays
down the conditions and limits subject to which fines may be
imposed and the procedure for imposing such fines. It also
requires a register of such fines to be maintained by the
person responsible for the payment of wages. Section 9
deals with deductions on account of absence from duty and
prescribes the limits and the proportion thereof to wages.
Section 10 similarly deals with deductions for damage or
loss to the employer and the procedure for determining the
same. Like section 8, this section also requires a register
of such deductions and realizations to be maintained by the
person responsible for the payment of wages. Section 11
lays down the limits of deductions for house accommodation
and other amenities or services which may have been accepted
by the employee, subject to such conditions as the State
Government may impose. Section 12 lays down the conditions
subject to which deductions for recovery of advances may be
made from wages. Finally section 13 provides that the
deductions for payment to co-operative societies and
insurance schemes shall be subject to such conditions as the
State Government may prescribe. Section 14 makes -provision
for the appointment of Inspectors for carrying out the
purpose of the Act, with power to enter on any premises and
to examine any registers or documents relating to the
calculation or payment of wages and to take evidence on the
spot. His function is to see that the registers or
documents prescribed by the Act containing the necessary
entries as regards deductions and other matters have been
properly kept by the employers or their agents in order to
be able to ascertain whether any deductions from wages in
excess of the provisions of sections 7 to 13 aforesaid have
been made. We then come to section 15 which makes provision
for the appointment of the Authority to hear and decide for
any specified area all claims arising out of deductions from
the wages, or delay in payment of
174
1360
the wages of persons employed or paid in that area. Where
the Authority finds that any deduction has been made from
the wages of an employed person or the payment of any wages
had been delayed, he may at the instance of the wage-earner
himself or any legal practitioner or any official of a
registered trade union authorized in writing to act on his
behalf, or any Inspector under the Act or any other person
acting with the permission of the Authority, after making
such enquiry as he thinks fit and after giving an
opportunity to the person responsible for the payment of
wages under section 3 to show cause, direct the refund to
the employed person of the amount deducted or the payment of
delayed wages together with such compensation as he may
determine. The section also lays down the limits and
conditions of his power to direct payment of compensation to
the employed person or of penalty to the employer, if he is
satisfied that the application made on behalf of an employee
was either malicious or vexatious. His determination is
final subject to a very limited right of appeal under
section 17. Section 18 vests the Authority with all the
powers of a civil court under the Code of Civil Procedure,
for the purpose of taking evidence, of enforcing the
attendance of witnesses and of compelling the production of
documents. Section 22 lays down that no court shall
entertain any suit in respect of wages or of deduction from
wages in so far as the claim forms the subject matter of a
pending proceeding under the Act or has formed the subject
of a direction in favour of or against the plaintiff under
section 15, or which could have been recovered by the
application under that section. Section 26 empowers the
State Government to make rules to regulate the procedure to
be followed by the authorities and courts referred to in
sections 15 and 17 and provides that rules may be made inter
alia, requiring the maintenance ofrecords, registers,
returns and notices necessary under the Act and the display
in a conspicuous place of notices specifying the rates of
wages payable to persons employed on such premises; and
prescribing the authority for making a list of
1361
acts and omissions in respect of which fines may be imposed
and the procedure for imposing such fines.
We have set out above in some detail the relevant provisions
of the Act in order to point out that those provisions are
not applicable to the complaint made in the present case.
In this connection it is necessary to set out in extenso the
particulars of claim in the schedule appended to his
application which are as follows:
The applicant is working as a carpenter-mason with the
opposite party under I.O.W., Byculla. According to the
orders on introduction of the prescribed scales, the Railway
Administration has to make the staff working under I.O.W. on
permanent monthly wages scheme under the rules of the
prescribed scales. The applicant along with others was up
till now under daily wages scheme. About 20 posts under
I.O.W. where the applicant is working were to be made per-
manent. The opposite party in supersession of claim of the
applicant has confirmed his juniors on the permanent scales
as a skilled workman in the scale of55-3-85-4-125-5-130,
whereas the opposite party continued to pay the applicant on
daily wages scheme thus depriving him of his legitimate
wages under the prescribed scale, which resulted in the
monetary loss to the applicant of Rs. 40-13-4 per month.
Notice on behalf of the applicant was served on this count
on the opposite party but of no avail and hence this
application. The juniors have been paid under the
prescribed scales from April, 1949, from which date the
applicant was also entitled to the prescribed scale 55-130
(scale for skilled workman)..
There is no allegation of delay in payment of wages inasmuch
as it is not the respondents case that his wages were not
paid within the time limit laid down in section 5; nor are
there allegations to show that any payments have been made
by the employed person to the employer or his agent which
could be deemed to be a deduction from his wages within the
meaning of section 7. None of the categories of deductions
as laid down in section 7 have been referred to. In other
words, it is not alleged that his Wages
1362
were so much and that so much had been deducted under any of
the heads set out under section 7(2). The allegations made
by the respondent only amount to saying that he had been
paid his actual wages as fixed by the railway administration
but that after the introduction of the scheme of upgrading
of persons employed under the daily wages scheme, others who
were junior to him had been placed on the monthly wages
scheme whereas his claim to be so placed had been ignored.
The respondents main grievance, therefore, appears to be
that he had not been paid wages on the scale to which he
would have been entitled if he had been placed on the
monthly wages scheme.
In our opinion, the scheme of the Act as set forth above
shows that if an employee were to state that his wages were,
say Rs. 100 per month and that Rs. 10 had been wrongly
deducted by authority responsible for the payment of wages
that is to say, that the deductions could not come under any
one of the categories laid down in section 7 (2), that a
would be a straight case within the purview of the Act and
the authority appointed under section 15 could entertain the
dispute. But it is said on behalf of the respondent that
the authority has the jurisdiction not only to make
directions contemplated by sub-section (3) of section 15 to
refund to the employed person any amount unlawfully deducted
but also to find out what the terms of the contract were so
as to -determine what the wages of the employed person were.
There is no difficulty in accepting that proposition. If
the parties entered into the contract of service, say by
correspondence and the contract is to be determinedwith
reference to the letters that passed between them, it may be
open to the authority to decide the controversy and find out
what the terms of the contract withreference to those
letters were. But if an employee were to say that his wages
were Rs. 100 per month which he actually received as and
when they fell due but that he would be entitled to higher
wages if his claims to be placed on the higher wages scheme
had been recognized and given effect to,
1363
that would not in our opinion, be a matter within the ambit
of his jurisdiction. The authority has the jurisdiction to
decide what actually the terms of the contract between the
parties were, that is to say, to determine the actual wages;
but the authority has no jurisdiction to determine the
question of potential wages. The respondents complaint in
the present case comes within the latter illustration. If
the respondents claim to be placed on the scheme of higher
wages had been. unduly passed over by the appellant, if
indeed he had the power to do so, the obvious remedy of the
respondent was to approach the higher authorities of the
railway administration by way of departmental appeal or
revision; but instead of doing that, he has sought his
redress by making his claim before the authority under the
Act. The question is, has the authority the power to direct
the appellant or his superior officers who may havebeen
responsible for the classification, to revise the
classification so as to upgrade him from the category of a
daily wageearner to that of an employee on the monthly wages
scheme. If the respondent had been on the cadre of monthly
wages and if the appellant had withheld his rise in wages to
which he was automatically entitled, without any orders of
his superior officers, be might justly have claimed the
redress of his grievance from the authority under the Act,
as it would have amounted to an underpayment. But in the
present case, on the case as made on behalf of the
respondent, orders of the superior officers were necessary
to upgrade him from a daily wage-earner to a higher care.
The authority under the Act has not been empowered under
section 15 to make any such direction to those superior
officers. The appellant is responsible to pay the
respondent only such wages as are shown in the relevant
register of wages presumably maintained by the department
under the provisions of the Act, but he cannot be directed
to pay the respondent higher wages on the determination by
the authority that he should have been placed on the monthly
wages scheme.
In that view of the matter it is not necessary to go
1364
into the merits of the controversy as to what classification
as adumbrated by the Railway Workers Classification
Tribunal, and adopted by the Railway administration, the
second respondent should have been brought under. If that
question were open to determination by the Authority, we
would have had to remit the case to the Authority to give a
fresh opportunity to the parties to adduce all the relevant
evidence and then to come to its final conclusions, as it
appeared to us during the hearing of the case that all
relevant information had not been placed before the
Authority. But, as, in our opinion, that is not a matter
within its limited jurisdiction, that contingency does not
arise.
For the reasons given above we allow this appeal, quash the
orders of the Authority and of the High Court, but in the
special circumstances of this case we make no order as to
costs.
JAGANNADHADAS J.-I regret that I find myself unable to
agree.
The second respondent before us, employed as a carpenter in
the Railway since 1941, has been working as a daily-rated
casual labourer. He claimed that he should have been
absorbed as a monthly-rated permanent employee and that he
has been wrongly superseded. His claim to be treated as a
permanent employee was apparently not accepted by the Tribu-
nal (the Authority under section 15 of the Payment of Wages
Act for Bombay). But it was held that the position of the
applicant is not that of a daily-rated casual labourer but
that of a monthly-rated temporary employee. His claim was
treated and upheld by the Tribunal as one substantially
based on the ground that the Award of the Railway Workers
Classification Tribunal in relation to the recommendations
of the Central Pay Commission was approved by the Railway
Board and directed to be implemented, and that by virtue
thereof he was no longer a mere casual labourer but was
entitled to higher wages on the footing of a monthly-rated
labourer. No question arises that the order of the Tribunal
is bad owing to the
1365
variation between the claim made and the relief granted. As
held by the High Court, pleadings in these cases have to be
liberally construed. That his claim was understood as
having been based on the Award of Railway Workers
Classification Tribunal, by the Railway Authorities
themselves, is clear from the statement filed on their
behalf in answer to the J. employees claim. Apart from the
question of jurisdiction, the defence was two-fold. (1) The
applicant being a daily-rated casual labourer, charged to
works, the directive of the Railway Board did not apply to
him. (2) Even if it applied to a person in the situation of
the applicant, he was not entitled to be brought on to the
monthly-rates of pay in the skilled grade, without his
previously passing a trade test to establish himself as
skilled in his trade and he did not pass the test. The
Tribunal. on the material referred to by it in its order,
came to the conclusion (1) that the applicant did not fall
within the category of workcharged staff, (2) that under the
Award of the Railway Workers Classification Tribunal, no
trade test was necessary for the applicant who was a
carpenter, and (3) that as per certain instructions of the
concerned authority, the period of casual labour was to be
limited to six months, and that since this applicant was
admittedly a casual labourer under the Railway for a much
larger period, i.e. since 1941, he became entitled to be
treated as a temporary employee and not as a casual labourer
and to receive wages as such. Whether these conclusions are
right or wrong is not the question before us. The only
question is whether or not the Tribunal had the jurisdiction
to find that the applicant was entitled to the emoluments of
a monthly-rated temporary employee and not to that of a
daily-rated casual labourer, as the result of the order of
the Railway Board directing implementation of the Award of
the Classification Tribunal.
The jurisdiction of the Tribunal arises under section 15 of
the Payment of Wages Act, 1936 (Act IV of 1936) (hereinafter
referred to as the Act). The Tribunal is set up to decide
all claims arising out of deductions from the wages or
delay in payment of
1366
wages. The relief which it is authorised toaward,is to
direct the refund of the amount deducted, or the payment of
the wages delayed. Such a direction made by the Tribunal
is final, under section 17 of the Act, subject to the right
of appeal provided therein. Under section 22, no suit lies
in any court for the recovery of wages or of any deduction
therefrom which could have been recovered by an application
under section 15. However limited this jurisdiction of the
Tribunal, and however elaborate the provisions in the Act
for the preparation and display by the employer of the table
of wages payable to the employees, and for the inspection
thereof by the Factory Inspectors, it cannotbe supposed
that the jurisdiction of the Tribunal is only to enforce the
wages so displayed or otherwise admitted. Such a narrow
construction would rob the machinery of the Act of a great
deal of its utility and would confine its application to
cases which are not likely to arise often, in a wellordered
administration like the Railways. Indeed, I do not gather
that such a construction was pressed for, before us, in the
arguments. Even a Tribunal of limited jurisdiction, like
the one under consideration, must necessarily have the
jurisdiction to decide, for itself, the preliminary facts on
which the claim or dispute before it depends. In the
instant case, it must have jurisdiction to decide what the
wages payable are and, for that purpose, what the contract
of employment and the terms thereof are. The judgment of my
learned brothers in this case apparently recognizes the
jurisdiction of the Tribunal as above stated, when it said
that the Tribunal has the power to find out what the terms
of the contract were to determine what the wages of the
employed person were. Whether the Tribunals decision in
this behalf is conclusive or not is a matter that does not
arise for decision in this case.
But, it is said that the Tribunal has no authority to
determine the question of potential wages. Undoubtedly a
claim to a higher potential wage cannot be brought in under
the category of claim arising out of deduction from the
wages or delay in pay-
1367
ment of the wages if that wage depended on the
determination by a superior departmental or other authority
as to whether or not a particular employee is entitled to
the higher wage-a determination which involves the exercise
of administrative judgment or discretion or certification,
and which would, in such a situation., be a condition of the
payability of the wage. But where the higher wage does not
depend upon such determination but depends on the applica-
tion of, and giving effect to, certain rules and orders
which, for this purpose, must be deemed to beincorporated
in the contract of employment, such a wage is, in my view,
not a prospective wage, merely because the paying authority
concerned makes default or commits error in working out the
application of the rules. In this context it is relevant to
notice that the definition of wages in the Act is all
remuneration which would if the terms of the contract,
express or implied, were fulfilled, be payable. The word
were in this definition which I have underlined, seems to
indicate that even a prospective wage which would be
payable on the proper application of the rules in the sense
which I have explained above may well fall within its scope.
he wage under the Act is not, necessarily, the immediately
pre-existing wage but the presently-payable wage.
In the case before us, the order of the Tribunal proceeded
on the view that the applicant was presently entitled to be
treated as a monthly-rated temporary employee and not as a
daily-rated casual labourer, by virtue of the directions of
the Railway Board for the implementation of the scheme of
classification and that therefore he was entitled to the
appropriate higher wage. We have not been shown any
material to indicate that this higher classification of the
applicant depended not on the mere application, of the
classification scheme and the rules thereunder, to him but
upon any determination by a departmental higher authority.
If it was the latter, undoubtedly the Tribunal cannot claim
to sit in judgment over that determination, whether it was
right or wrong. Such
175
1368
determination, if wrong, could be corrected only by a
further departmental appeal, if any, available. But the
Tribunal had, to my mind, the authority to find whether the
applicants case falls within the scope of determination by
the departmental authority or is one of mere application of
the rules to the facts of this case. If the decision of the
Tribunal in this behalf was wrong, the appropriate remedy
for the Railway Authority was by way of an appeal under
section 17 of the Act. Since the finding of the Tribunal in
this case involved the case of as many as six persons and
the net additional amount ordered was a sum of Rs. 1,341,
its finding was appealable under section 17 of the Act.
Whether or not an employee was entitled to wages of a higher
category than what he was till then drawing would depend
entirely on the scope of the rules with reference to which
he is entitled to become one in the higher category and it
cannot be assumed a priori that such a claim is a claim to
prospective wages.
In my view, therefore, there is no sufficient reason to
reverse the judgment of the learned Judges of the Bombay
High Court and this appeal should be dismissed with costs.
BY THE COURT. In accordance with the decision of the
majority, the appeal is allowed and the orders of the
Authority and of the High Court are quashed. There will be
no order as to costs throughout.
Appeal allowed.
1369
PETITIONER:
MODI INDUSTRIES LTD.

Vs.

RESPONDENT:
STATE OF U.P.

DATE OF JUDGMENT14/10/1993

BENCH:
SAWANT, P.B.
BENCH:
SAWANT, P.B.
ANAND, A.S. (J)

CITATION:
1994 AIR 536 1994 SCC (1) 159
JT 1993 (6) 103 1993 SCALE (4)155

ACT:

HEADNOTE:

JUDGMENT:
The Judgment of the Court was delivered by SAWANT, J.- Leave
granted.
2.The appellant-company runs a unit known as Modi
Vanaspati Manufacturing Company at Modinagar, District
Ghaziabad. At the relevant time, there were about 350
workmen working in this unit. On December 19, 1990, there
was a dispute between the management and thetrade union
leaders which resulted in two cross first information
reports being lodged by the management and the trade union
leaders against each other and suspension of 30 workmen from
service. According to the company, from December 21, 1990
the workmen came to the companys premises but did not
discharge their duties. On account of this, there was a
complete halt in production. According to the respondent-
trade unions, however, the workmen reported for duty
regularly but the production could not be carried on as the
suspended 30 workmen were technicians and in their absence
it was not possible to operate the machines. On December
27, 1990 an agreement was arrived at between the management
and the trade unions which provided that except the
suspended workmen, the other workmen will join work and
discharge their duties. It appears that in spite of this
162
agreement, the work could not be carried on. According to
the management, it was the non-cooperation of the workmen
which was responsible for the situation whereas according to
the trade unions, the management did not permit the workmen
to work and hence the said stalemate.While the situation
continued thus, the District Administration and the Labour
Department of the State Government took initiative by making
efforts to enable the workmen to work in the company. On
February 8, 1991, a meeting was held in the presence of the
Additional District Magistrate andthe Deputy Labour
Commissioner in which the representatives of the management
and the leaders of the trade unions participated. In this
meeting, the Additional District Magistrate suggested that
out of the suspended workmen, those who had no serious
charges against them be reinstated and the inquiry be
conducted against all the suspended workmen including those
so reinstated so that work could be carried on. The
representatives of the management, however, did not agree to
the said suggestion and requested for postponement of the
meeting to enable them to consult their higher officials.
The meeting was, therefore, postponed to February 11, 1991.
No positive reply was received from the management with the
result that work could not be carried on up to and inclusive
of March 3, 1991. The work startedand the production
commenced only on March 4, 1991. The management did not pay
wages to the workmen for the period from December 21, 1990
to March 3, 1991.
3.The Additional Labour Commissionerissued a notice
dated February 27, 1991 under Section 3 of theU.P.
Industrial Peace (Timely Payment of Wages) Act, 1978
(hereinafter referred to as the Act) whereby the
appellant-company was called upon to show cause as to why
order for payment of wages to the workmen under Section 3 of
the Act be not made against it. The hearing of the notice
was fixed on March 10, 1991. The appellant-company
submitted its representation including the supplementary
representation. The company was given personal hearing.
After considering the material placed by the company on
record, the Additional Labour Commissioner passed an order
on April 29, 1991 directing the recovery of Rs 3,67,474 from
the company for payment of wages to the workmen for the
month of January 1991 only. This order was challenged by
the company on various grounds by a writ petition filed in
the High Court. The High Court bythe impugned order
negatived all the contentions and dismissed the petition.
The operative part of the order of the High Court is as
follows:
When order is passed under Section 3 of the
Act for recovery of wages and the aggrieved
party approaches the Government to refer the
dispute under the Industrial Disputes Act, the
Government has hardly any option in view of
the reasons given above. The Government if
required by any party to refer the dispute to
the Industrial Tribunal, it has to pass an
appropriate order in connection therewith.
The writ petition is accordingly dismissed.
There shall be no order as to costs. In case
the petitioner approaches the Government for
reference under the Industrial Disputes Act to
the Industrial Tribunal, Labour Court, the
State Government shall pass appropriate order
within six
163
weeks from the date of presentation of the
application for reference along with the
certified copy of this order. After reference
is made, the Industrial Tribunal Labour Court
will decide the dispute expeditiously in
accordance with law.
4.The short question that falls forconsideration is
whether the order passed by the Labour Commissioner on April
29, 1991 directing the recovery of the amount is valid.
Shri Salve, the learned counsel appearing for the appellant-
company contends that since in the present case there was a
dispute as to whether the workmen were entitled to receive
the payment of wages for the period in question, the Labour
Commissioner ought to have directed the workmen to raise an
industrial dispute or to approach the civil court. He had
no jurisdiction to decide the said dispute which he
virtually did by passing the impugned order. The learned
counsel further contended that assuming that the Labour
Commissioner had such power, he ought to have passed a
speaking order dealing with the contentions of the parties
and since in the present case the Labour Commissioner has
merely given a certificate of recovery without giving any
reasons, the order is prima facie bad in law. His third
submission was that the Labour Commissioner could not have
entertained the complaint of non-payment of wages since
Section 3 of the Act under which the Labour Commissioner has
chosen to exercise his power, confers on him jurisdiction to
make an order of payment only when the industrial
establishment is in default of the payment of a wage-bill in
respect of the entire establishment and not of a few
individual workmen. Shri Tarkunde, the learned counsel
appearing for the workmen, while not questioning the
submission that the Labour Commissioner under the Act cannot
go into the disputed questions of law and fact submitted
that the disputed question in the present case was only of
an incidental nature and the Labour Commissioner has the
authority to decide the same in order to give relief to the
workmen. He submitted that the power conferred on the
Labour Commissioner under Section 3 of the Act is of a
summary nature and it has been conferred on him with a view
to give a speedy relief to the workmen who are deprived of
their wages. He further contended that the order passed by
the Commissioner being administrative in nature, he was not
bound to give reasons for the same.
5.In order to resolve the controversy between the
parties, it is first necessary to examine the provisions of
the Act. As the title of the Act itself suggests it has
been enacted to secure industrial peace by ensuring timely
payment of wages to the workmen. The preamble of the Act
states that it is an Act to provide for in the interest of
maintenance of industrial peace, a timely payment of wages
in bigger industrial establishments and for matters
connected therewith. The Statement of Objects and Reasons
of the Act states that delays in payment of wages of workmen
lead to simmering discontent among them. Sometimes a grave
threat to law and order is also forced on this account. The
provisions of the Payment of Wages Act, 1936 have been found
to be inadequate to ensure timely payment ofwages. The
incidence of disturbance of industrial peace being greater
in comparatively bigger establishments, it was considered
necessary to provide that if the
164
wage-bill in default exceeds Rs 50,000 the amount should be
recoverable as arrears of land revenue. Further, in order
to curb the tendency of the employers to keep large amounts
of wages in arrears, it was also necessary to make it a
penal offence to be in default of a wage-bill exceeding Rs 1
lakh.
6.Section 2(a) of the Act defines industrial
establishment to mean any factory, workshop or other
establishment in which articles are produced, processed,
adopted or manufactured with a view to their use, transport
or sale. Wage-bill is defined by Section 2(d) to mean
the total amount of wages payable by an industrial
establishment to its workmen. Sub-section (1) of Section 3
then states that where the Labour Commissioner is
satisfied that the occupier of an industrial establishment
is in default of payment of wages and that the wage-bill
in respect of which such occupier is in default exceeds
fifty thousand rupees, he may, without prejudice to the
provisions of Sections 5 and 6, forward to the Collector, a
certificate ... specifying the amount of wages due from the
industrial establishment concerned. Sub-section (2) of that
section states that upon receipt of the certificate
referred to in sub-section (1), the Collector shall proceed
to realise from the industrial establishment, the amount
specified therein, besides recovery charges at the rate of
ten per cent, as if such amount was an arrear of land
revenue. Sub-section (3) of that section states that the
amount so realised shall be placed at the disposal of the
Labour Commissioner and he shall disburse the same among the
workmen entitled thereto. Sub-section (4) states that when
the amount so realised falls short of the wage-bill in
respect of which there has been a default, the Labour
Commissioner may arrange for disbursement of such proportion
or respective proportions of the wages due to various
categories of workmen, as he may think fit. Subsection (5)
then states that the liability of the occupier towards each
workman in respect of payment of wages shall to the extent
of the amount paid to such workman, stand discharged.
Section 4 specifies the powers of the Labour Commissioner
when he entertains the complaint of the default of payment
of the wage-bill. It states that for thepurposes of
ascertaining the wage-bill of an establishment in respect
of which default has been committed, the Labour Commissioner
shall have all the powers of a civil court while trying a
suit under the Code of Civil Procedure, 1908 in respect of
enforcing the attendance of witnesses, examining them on
oath and compelling production of documents, and shall be
deemed to be a civil court for the purposes of Section 195
and Chapter XXVI of the Code of Criminal Procedure, 1973.
Section 5 prescribes penalty. It states that no occupier of
an industrial establishment shall at any time be in default
of a wage-bill exceeding Rs 1 lakh, and every occupier who
is so in default shall be punishable with imprisonment for a
term which shall not be less than three months but which may
extend to three years and shall also be liable to fine. The
Court is given power to impose a sentence of imprisonment
for a term of less than three months for adequate and
special reasons to be recorded in writing. Section 6
provides,for punishment of persons when the offence is by
the company, which includes firms and association of
individuals.
165
7.It will thus be clear from the preamble, the statement
of objects and reasons and the provisions of the Act that,
firstly, the Act has been placed on the statute book to
ensure timely payment of wages by the bigger establishments,
the incidence of disturbance of industrial peace being
greater in such establishments on account of the default in
payment of wages. Secondly, the Act deals with defaults in
payment of the wage-bill of all the workmen in the
establishment. It is not meant to provide a remedy for the
default in payment of wages of individual workmen. That can
be taken care of by the provisions of the Payment of Wages
Act, 1936 which provisions are found inadequate to ensure
timely payment of wages of the whole complement of workmen
in an establishment. Thirdly, it is not in respect of the
default in payment of every wage-bill but only of a wage-
bill exceeding Rs 50,000 that the Labour Commissioner can be
approached under the Act for redressable of the grievance.
Fourthly, the Act is not applicable to all establishments
but only those establishments which produce, process, adopt
or manufacture some articles. It will, therefore, be
evident that the Act does not supplant or substitute the
Payment of Wages Act, 1936 but supplements the said Act, in
the limited area, viz., where the establishment, as stated
above, (i) produces, processes, adopts or manufactures some
articles, (ii) wherethere is a default in the wage-bill
of the entire such establishment and (iii)where such
wage-bill exceeds Rs 50,000. The object of the Act as
stated aboveis not so much to secure payment of wages to
individual workmen but to prevent industrial unrest and
disturbance of industrial peace on account of the default on
the part of the establishment in making payment of wages to
their work force as a whole. It appears that many
establishments had a tendency to delay the payment of wages
to their workmen and were playing with the lives of the
workmen with impunity. This naturally led to a widespread
disturbance of industrial peace in the State. Hence the
legislature felt the need for enacting the present statute.
This being the case, the inquiry by the Labour Commissioner
contemplated under Section 3 of the Act is of a very limited
nature, viz., whether the establishment has made a default
in timely payment of wages to its workmen as a whole when
there is no dispute that the workmen are entitled to them.
8.The inquiry under Section 3 being thus limited in its
scope, the Labour Commissioners powers extend only to
finding out whether the workmen who have put in the work
were paid their wages as per the terms of their employment
and within the time stipulated by such terms. If the Labour
Commissioner is satisfied that the workmen, though they have
worked and are, therefore, entitled to their wages, are not
paid the same within time, he has further to satisfy himself
that the arrears of wages so due exceed Rs 50,000. It is
only if he is satisfied on both counts that he can issue the
certificate in question. Under the Act, the Labour
Commissioner acts to assist the workmen to recover their
wages which are admittedly due to them but are withheld for
no fault on their behalf. He does not act as an adjudicator
if the entitlement of the workmen to the wages is disputed
otherwise than on frivolous or prima facie untenable
grounds. When the liability to pay the wages, as in the
present case, is under dispute which
166
involves investigation of the questions of fact and/or law,
it is not the function of the Labour Commissioner to
adjudicate the same. In such cases, he has to refer the
parties to the appropriate forum.
9.The powers conferred on the Labour Commissioner under
Section 3 of the Act are to prevent apprehended or present
breach of industrial peace. That is why the inquiry
contemplated is of a summary nature. The exercise of the
said powers by the Labour Commissioner does not prevent
either party from approaching the regular forum for the
redressal of its grievance. Construing a more or less
similar provision of Section 3(b) of the U.P. Industrial
Disputes Act, 1947 in State of U.P. v. Basti Sugar Mills
Co. Ltd. this Court had taken the same view. The
provisions of the said Section 3(b) read as follows:
3. Power to prevent strikes, lockouts, etc.-
If, in the opinion of the State Government, it
is necessary or expedient so to do for
securing the public safety or convenience or
the maintenance of public order or supplies
and services essential to the life of the
community, or for maintaining employment, it
may, by general or special order, make
provision
(a)
(b)for requiring employers, workmen or both
to observe for such period, as may be
specified in the order, such terms and
conditions of employment as may be determined
in accordance with the order;
10.In that case, the State Government under the above
provision had directed the sugar factories to pay bonus to
the workmen. Repelling the challenge to the direction of
the Government, this Court observed as follows:
We entirely agree with Mr Pathak that the
normal way of dealing with an industrial
dispute under the Act would be to have it
dealt with judicially either by conciliation
or by adjudication and that judicial process
cannot be circumvented by resort to executive
action. The proceeding before a conciliator
or an adjudicator is, in a sense, a judicial
proceeding because therein both the parties to
the dispute would have the opportunity of
being heard and of placing the relevant
material before the conciliator or
adjudicator. But there may be an emergency
and the Government may have to act promptly
for securing the public safety or convenience
or the maintenance, of public order or
supplies and services essential to the life of
the community or maintaining employment. It
was, therefore, necessary to arm it with
additional powers for dealing with such an
emergency. Clause (b) of Section 3 was
apparently enacted for this purpose. An order
made thereunder would be in the nature of a
temporary or interim order as would be clear
from the words for such period as may be
specified appearing therein and from the
second proviso to Section 3. Under this
proviso where an industrial dispute is
referred for adjudication under clause (d) an
order made under clause (b)
1(1961) 2 SCR 330: AIR 1961 SC 420: (1961) 1 LLJ 220
167
cannot be enforced after the decision of the
adjudicating authority is announced by or with
the consent of the State Government. It
would, therefore, follow from this that where
the Government has made an executive order, as
it did in this case, under clause (b) of
Section 3, it is open to the aggrieved party
to move the Government to refer the industrial
dispute for conciliation or adjudication under
clause (d) of Section 3........
11.A similar view is expressed in Basti Sugar Mills Co.
Ltd. v. State Of U.p.2 This nature of the provisions of
Section 3 of the present Act emphasises two aspects which
are relevant for our purpose. Firstly, the power conferred
on the Labour Commissioner being meant to be used speedily
to prevent apprehended or continuing industrial unrest, the
procedure to be adopted by him is essentially of a summary
nature. It does not contemplate a protracted inquiry.
Secondly, the purpose of the inquiry being to redress the,
grievance of the non-payment of wages, the authority of the
Labour Commissioner extends only to finding out whether on
the admitted fact that the workmen had worked, the grievance
of the workmen has a substance in it or not. It does not,
however, mean that the employer can defeat the provisions of
the Act by raising frivolous pleas to avoid the payment of
wages and when the employer does so, the Labour Commissioner
has to wash his hands of the complaint of the workmen.
While looking into the grievance of the workmen, the Labour
Commissioner will undoubtedly have power to find out whether
the employer has a plausible defence or not. Hence the
Labour Commissioner would have to examine the pleas and to
deal with them. He would have, therefore, to give. reasons
for accepting or not accepting them. To that extent, he is
called upon to give reasons while issuing orrefusing to
issue the certificate. It must be remembered that Labour
Commissioner is not a mere recovery officer. While the
recovery officer acts on a claim which is already
crystallised in some order, the Labour Commissioner in the
present case, has to ascertain himself whether and to what
extent, the workmen are entitled to the wages and then issue
or refuse to issue the certificate. The inquiry that the
Labour Commissioner conducts for the purpose is thus of a
quasi-judicial nature. It is the Collector to whom he
forwards the certificate who in fact acts as the recovery
officer. As is provided in Section 3 itself, on receipt of
the claim or complaint of the workmen, the Labour
Commissioner has to satisfy himself that the occupier of the
industrial establishment concerned is in default of payment
of wages and that the wage-bill in respect of which the
default is complained of exceeds Rs 50,000.
He cannot satisfy himself without hearing the occupier of
the
industrial establishment on the claim made. That is why
under Section 4, he is clothed with the powers of the civil
court in the matter of enforcing the attendance of the
witnesses, examining them on oath and compelling production
of documents. It has further to be home in mind that the
consequences to the parties of the issuance or non-issuance
of the certificate are grave. When the certificate is not
issued, the employees claim stands deferred to an
indefinite period. When, however, it is issued, the
2 (1979) 2 SCC 88: 1979 SCC (L&S) 61: (1979) 1 SCR 590
168
employer is saddled with a sizeable financial liability and
the non-payment of the amount indicated in the certificate
visits him with penal consequences of both imprisonment and
fine. The decisions of this Court in Mahabir Jute Mills
Ltd., Gorakhpur v. Shibban Lal Saxena3; Maharashtra State
Board of Secondary and Higher Secondary Education v. K.S.
Gandhi4 and C.B. Gautam v. Union of India5 on which Shri
Tarkunde relied in support of his proposition that
administrative orders need not contain reasons for the same,
according to us, therefore, have only a limited application
in the present case. The Labour Commissioner may have to
deal with broadly three different situations, viz., (i)
where there is no defence whatsoever raised by the employer
to the claim of the workmen; (ii) where the employer raises
frivolous and untenable pleas to resist the claim; and (iii)
where there is a genuine dispute with regard to the
entitlement of the workmen to the wages and the said dispute
cannot be resolved without investigating the disputed
questions of fact or law. In the first case, the Labour
Commissioner is not called upon to give any reasons while
issuing the certificate. In the second case, the Labour
Commissioner has to give reasons as to why according to him,
the pleas raised are untenable. In the third situation, the
Labour Commissioner when he rejects the claim of the
workmen, has to indicate the disputed questions of law or
fact which prevent him from exercising his limited
jurisdiction. Thus, both for issuing the certificate as
well as for rejecting it, the Labour Commissioner may be
called upon to give his reasons depending upon the facts in
each case. It is well settled by a series of decisions
beginning with A.K. Kraipak v. Union of India6 thateven
administrative decisions must bear reasons for some of them
may have more vital consequences on the rights of the
parties than even judicial decisions. It is not, therefore,
correct to say that the Labour Commissioner is not required
to give reasons for his orders.
12.As stated earlier, whether the certificate is issued or
not, the parties remedy to approach the appropriate forum
for the adjudication of their claim is not taken away. They
can still approach the regular forum meant for the
resolution of the dispute. The provisions of the Act are
only of a summary nature meant todeal speedily with
situations requiring urgent solution.
13.On the facts of the present case, we are more than
satisfied that there did exist a genuine dispute between the
parties as to whose acts of omission or commission were
responsible for the halting of the production in the factory
for the period in question. This was put into issue before
the Labour Commissioner by the appellant-company. The
Labour Commissioner, in the circumstances, could not have
proceeded to issue the certificate. He ought to have
referred the parties to industrial adjudication which was
the proper forum for the purpose. Under the circumstances,
we set aside the impugned certificate dated April 29, 1991
issued by the Labour Commissioner.
3 (1975) 2 SCC 818: 1975 SCC (L&S) 460: (1976) 1 SCR 168
4 (1991) 2 SCC 716
5 (1993) 1 SCC 78
6 (1969) 2 SCC 262: (1970) 1 SCR 457
169
14.The record shows that this Court, while granting
interim stay of the recovery proceedings, directed the
appellant-company to pay to the workmen, 50 per cent of the
wages as per the certificate issued by the Labour
Commissioner. The dispute has been pending since 1990. We,
therefore, direct the respondent-State of Uttar Pradesh to
refer the dispute between the parties with regard to the
entitlement of the workmen to receive the wages and the
liability of the appellant-company to pay the same for the
period between December 21, 1990 to March 3, 1991, for
adjudication to the appropriate authority under the U.P.
Industrial Disputes Act, 1947, within four weeks from today.
In the meanwhile, with a view to mitigate hardship of the
workmen, the appellant-company will pay to the workmen
additional 25 per cent of the wages as found due by the
Labour Commissioner under his impugned certificate. The
payments made shall be subject to the outcome of industrial
adjudication. The appeal is allowed accordingly and the
order of the High Court is modified in the above terms. In
the circumstances of the case, there will be no order as to
costs.
171

CASE NO.:
Appeal (civil) 224-226 of 2003

PETITIONER:
State of Karnataka & Ors.

RESPONDENT:
KGSD Canteen Employees Welfare Association & Ors.

DATE OF JUDGMENT: 03/01/2006

BENCH:
S.B. Sinha & P.P. Naolekar

JUDGMENT:
J U D G M E N T
W I T H
CIVIL APPEAL NOS. 449-468 OF 2003 & 4180-82 OF 2003

S.B. SINHA, J:

Both the State of Karnataka and K.G.S.D. Canteen Employees

Welfare Association are in appeal before us aggrieved by and
dissatisfied
with the judgments and orders dated 29.05.2002 and 30.50.2002 passed by
a
Division Bench of the Karnataka High Court in Writ Appeal Nos.5690-5692
of 2000 and 4613-32 of 2000.

WRIT PROCEEDINGS
 The First Respondent herein is an Association of the employees of
the
Karnataka Government Secretariat Departmental Canteen. The Respondent
Nos.2 and 3 are its members. They filed a writ petition before the
Karnataka
High Court, inter alia, contending that the said canteen having been
run by
the State Government for the benefit of the secretariat employees and 74
employees working therein having completed more than 10 years of service
were in effect and substance the employees of the State Government
itself,
although they were termed as employees of the canteen. Further
contention of the respondents herein was that their wages were
absolutely
meagre being little more than the minimum wages, but despite several
representations made by them, they were not paid the same salary as was
payable to the employees of the State who were similarly situated.

The Appellant herein rejected their request for grant of scale of

pay
and other service benefits applicable to the Government servants, inter
alia,
on the premise that they were not its employees.

HIGH COURT

A learned Single Judge of the High Court opined that the canteen
can
be equated to the Government Hospitality Organization where the canteen
facilities are made available and consequently directed the Appellant to
implement the notification dated 22.6.1996 which was applicable in
relation
to the Government Hospitality Organization, as far as possible to the
said
canteen employees with such revisions as are permissible under law as on
the said date.

The learned Single Judge opining that the employees of the

canteen
are employees of the State Government directed :

The second prayer of the petitioners is to declare

them as Government Servants. In this regard I deem it
proper to modify the relief by issuing a direction to the
Government to regularize the services of the petitioners
in the following manner :

Government is directed to regularize the services

of such of those petitioners who have put in ten years of
service subject to the Government satisfaction of
qualification if any for the post held by them and keeping
in view the long services rendered by them.

It is declared that the petitioners are the employees

of the Government and are entitled for pay parity as per
Annexure-O with revision from time to time.

The petitioners have approached this Court in the

year 1996 and the petition is heard and disposed of in the
year 2000. Petitioners have been provided some increase
in the wages from time to time. In these circumstances, I
deem it proper that the petitioners are not to be given any
arrears for the past period and the direction is to with
effect from 1.1.2000 and not for the earlier period. The
arrears from 1.1.2000 is to be made available to the
petitioners within three months from the date of receipt
of this order.

Appeals having been preferred by the State thereagainst, a

Division
Bench of the High Court disposed of the appeals modifying the judgment
of
the learned Single Judge as regard the date of regularization of their
services
as also payment of back wages, directing :

(i) The effective date from which the pay-scales

and other service benefits should be extended to the
employees of KGSD Canteen by regularizing their
service is changed from 01.01.2000 to 29.05.2002.

The learned Single Judge as also the Division Bench despite the
fact
that the Appellant herein had denied and disputed the relationship of
employer and employee between it and the employees of the canteen,
proceeded to determine the said question on the basis of various
documents
produced before it.

PRESENT APPEALS

The State of Karnataka has filed Civil Appeal Nos.224-226 of 2003

and 449-468 of 2003, questioning the impugned judgment in its entirety
whereas the K.G.S.D. Canteen Employees Welfare Association preferred
Civil Appeal Nos.4180-82 of 2003 questioning that part of the judgment
whereby the judgment and order of the learned Single Judge was modified
restricting the benefit of regularization from the date of the judgment
and
back wages from 29.05.2002 instead of 01.01.2000.

CONTENTIONS OF THE PARTIES

Mr. P.P. Rao, the learned Senior Counsel appearing on behalf of

the
Appellants, would, inter alia, submit that the High Court committed a
serious error in passing the impugned judgment insofar as it
misconstrued
and misinterpreted various Government orders as regard establishment and
management of the canteen issued in their proper perspective. The High
Court, Mr. Rao urged, furthermore misdirected itself in passing the
impugned judgment insofar as it failed to take into consideration that
the
canteen was not required to be run by the State Government in terms of
any
statute or otherwise.

Mr. Naveen R. Nath, the learned counsel appearing on behalf of

the
respondents herein, on the other hand, would support the judgment of the
High Court contending that a finding of fact has been arrived at by the
High
Court that there existed a relationship of employer and employee between
the State and the concerned employees as the State exercised total
control
over them and, therefore, this Court should not interfere therewith.

It was contended that the employees of the canteen in view of

Article
14 of the Constitution of India, were entitled to parity in wages with
that of
the employees of the State Government for the period they had worked
and,
furthermore, they having been in such employment for a long time their
services have rightly been directed to be regularized.

SCHEME

The canteen was being run by private contractors for a long time.
In
the year 1974, the State of Karnataka intended to run the canteen by a
committee, consisting of ten persons, six of them representing the
Government and the remaining four representing the Association as
mentioned in order bearing No. GAD 106 DBM dated 19th November, 1974.
Amenities and facilities, e.g., premises, furniture, cooking utensils,
crockery,
cutlery etc. for running the canteen were to be provided by the State
only for
a period of one year. Some of the relevant provisions laid down in the
Scheme for running the said canteen were as under :

An outright grant of Rs. 25,000 (Rs. Twenty five

thousand only) is sanctioned towards working expenses,
namely, initial purchase of provisions, salaries of staff to
be appointed like cooks, services, etc

The grant of Rs.25,000 (Rupees Twenty five thousand

only) will be debited to the new sub-heard IV Grant to
the Karnataka Govt., Secretariat Canteen (Non Plan)
under the major, minor, and Group sub-Head 288-
Social Security and Welfare-E-Other social Security and
Welfare Programmes & Others Programmes-C. Welfare
of Government Employees pending re-appropriation
of savings under the above major head.

The Chairman of the Committee is requested to

take action to start the canteen.

The working of the Canteen under the above

arrangement would be reviewed at the end of the one
year and then the future set up shall be decided.

The State by reason thereof, thus, made a provision for grant of

Rs.25,000/-. In terms of the said scheme, all the furniture and
equipments
which were handed over to the committee were required to be accounted
for
and returned to the Government upon the closure of the canteen. The
employees were appointed, indisputably, by the committee on an ad hoc
basis/daily wages.
It, furthermore, appears that the Government had sanctioned grant
in
aid from time to time. The management of the said canteen was handed
over
to the Respondent Association. Constitution of the Managing Committee
was being changed on a regular basis. In the order dated 27.7.2000
issued
by the Government of Karnataka, it was stated :

This canteen is running under constant loss for the

past few years and consequently Government had to
sanction Grant-in-aid a few times. These Grant-in-aids
were sanctioned keeping in view the welfare of the
Secretariat Employees. In this background, all the
members of the Management Committee have tendered
their resignation to Government with a request to make
alternate arrangements in view of the fact that they are
unable to run the canteen on No Profit No Loss basis
and also considering the fact that Government has not
agreed to give further Grant-in-aid to the Managing
Committee. In this background, a meeting was convened
under the chairmanship of Additional Chief Secretary to
Government to consider making alternate arrangements
for running the canteen. Finally in a meeting convened
on 23.2.2000 under the chairmanship of Secretary to
Department of Personnel & Administrative Reforms, it
was decided to handover the Management of the canteen
to Karnataka Government Secretariat Employees
Association temporarily for a period of one year
commencing from 6.4.2000 and it is also proposed to
continue the existing Grant-in-aid and other facilities to
Karnataka Government Secretariat Employees
Association for running the canteen. Apart from this, it
is also proposed to provide the services of six secretariat
employees (Junior assistants & assistants) for supervising
the affairs of the canteen by treating them as on other
duty for a period of one year. These proposals were
examined and accordingly order was issued as given
below :

ORDER NO. DPAR 5 DSW 2000, BANGALORE,

DATED : 27.7.2000

Keeping in view the interest/welfare of Karnataka

Government Secretariat Employees, sanction is accorded
to handover the Management of the Karnataka
Government Secretariat Canteen to Karnataka
Government Secretariat Employees Association w.e.f.
4.8.2000 temporarily for a period of one year, from the
Management Committee constituted by the
Government

The facilities and terms and conditions were also stated

therein,
some of which are as under :

6) While taking over the Management of the Canteen,

the Karnataka Government Secretariat Employees
Association should prepare a list of furnitures,
utensils, L.P.G. etc. and receive a proper
acknowledgement from the Management
Committee and submit a copy to the Government.

7) It is the responsibility of the Karnataka

Government Secretariat Employees Association to
keep all the assets of the canteen like furnitures,
utensils, gas etc. safe and secure.

8) Karnataka Government Secretariat Employees

Association can take the assistance of DPAR
(Executive-A) section for maintenance and repair
of canteen building.

In an affidavit filed before us, it is stated that the Karnataka

Government Secretariat Employees Association which was running the
canteen from 04.08.2000 to 31.03.2003 by a letter dated 10.03.2003,
expressed its inability to run the canteen beyond 31.03.2003 and, thus,
the
canteen services were closed from 01.04.2003. It is further stated that
the
State Government demolished the main canteen building pursuant to the
Government Note dated 04.08.2003. Certain litigations had thereafter
been
initiated before several authorities. A writ petition had also been
filed by the
Association before the High Court, which was marked as Writ Petition
No.41207 of 2004 seeking direction to make the balance payment of LIC
premium and contribution towards EPF for the period from 01.01.2003 to
31.03.2003.

This Court evidently is not concerned with the pending litigation but
we have noticed the said fact only for the purpose of showing that the
State
intended to run the canteen departmentally through a committee, but
according to the State, the committee has a distinct and different
existence or
different entity than the Government.

The fact situation obtaining in this case already suggests that the
State
had no intention to run and maintain the canteen as a department. Had
the
intention of the State been to run the said canteen as one of its
departments,
the question of giving any grant or for that matter making of a
provision for
return of the furniture and equipments would not have arisen.

EMPLOYEES OF A CANTEEN - STATUS

The question as to whether the employees of the canteen are

employees of the State or whether their services should be directed to
be
regularized or not, in view of several decisions of this Court would be
dependent upon the issues as to whether the canteens are required to be
made in terms of the provisions of a statute or otherwise. Admittedly,
the
State had no statutory compulsion to run and maintain any canteen for
its
employees.

In The Saraspur Mills Co. Ltd. v. Ramanlal Chimanlal and Others

[(1974) 3 SCC 66] where the Management was under a statutory obligation
in terms of Section 46 of the Factories Act and the rules made
thereunder to
maintain the canteen for the workers which was being run by a Co-
operative
Society wherewith the Management had nothing to do. This Court relied
upon its earlier decision in Basti Sugar Mills Ltd. v. Ram Ujagar
[(1964) 2
SCR 838] holding:

The above case was treated as an authority for the

proposition that an employee engaged in a work or
operation which was incidentally connected with
the main industry was a workman if other
requirements of the statute were satisfied and that
the malis in that case were workers. It was pointed
out that the bungalows and gardens on which the
malis in that case worked were a kind of amenity
supplied by the mills to its officers and on this
reasoning the malis were held to be engaged in
operation incidentally connected with the main
industry carried out by the employer. The High
Court in Ahmedabad Mfg. & Calico Printing Co.
Ltd. v. Workmen had relied on the above ratio and
come to the conclusion that the workers in order to
come within the definition of an employee need
not necessarily be directly connected with the
manufacture of textile fabrics. The decision in
Basti Sugar Mills case1 was treated as binding in
the former case.

In Parimal Chandra Raha and Others v. Life Insurance Corporation

of
India and Others [1995 Supp (2) SCC 611], relying upon a large number of
decisions of this Court including M.M.R. Khan v. Union of India [1990
Supp SCC 191], in the peculiar facts and circumstances, it was held that
the
canteen which was being run by a Co-operative Society became a part of
the
establishment of the Corporation. The said decision was arrived at upon
lifting the corporate veil of the cooperative society. In that case,
although
there was no statutory liability on the part of the Respondent therein,
to
maintain a canteen for their employees, this Court observed:

What emerges from the statute law and the

judicial decisions is as follows:
(i) Whereas under the provisions of the Factories
Act, it is statutorily obligatory on the employer to
provide and maintain canteen for the use of his
employees, the canteen becomes a part of the
establishment and, therefore, the workers
employed in such canteen are the employees of the
management.
(ii) Where, although it is not statutorily obligatory
to provide a canteen, it is otherwise an obligation
on the employer to provide a canteen, the canteen
becomes a part of the establishment and the
workers working in the canteen, the employees of
the management. The obligation to provide a
canteen has to be distinguished from the obligation
to provide facilities to run canteen. The canteen
run pursuant to the latter obligation, does not
become a part of the establishment.
(iii) The obligation to provide canteen may be
explicit or implicit. Where the obligation is not
explicitly accepted by or cast upon the employer
either by an agreement or an award, etc., it may be
inferred from the circumstances, and the provision
of the canteen may be held to have become a part
of the service conditions of the employees.
Whether the provision for canteen services has
become a part of the service conditions or not, is a
question of fact to be determined on the facts and
circumstances in each case.
Where to provide canteen services has become a
part of the service conditions of the employees, the
canteen becomes a part of the establishment and
the workers in such canteen become the employees
of the management.
(iv) Whether a particular facility or service has
become implicitly a part of the service conditions
of the employees or not, will depend, among
others, on the nature of the service/facility, the
contribution the service in question makes to the
efficiency of the employees and the establishment,
whether the service is available as a matter of right
to all the employees in their capacity as employees
and nothing more, the number of employees
employed in the establishment and the number of
employees who avail of the service, the length of
time for which the service has been continuously
available, the hours during which it is available,
the nature and character of management, the
interest taken by the employer in providing,
maintaining, supervising and controlling the
service, the contribution made by the management
in the form of infrastructure and funds for making
the service available etc.
[Emphasis supplied]

The said decision, however, was distinguished by a 3-Judge Bench

of
this Court in Employees in relation to the Management of Reserve Bank of
India v. Workmen [(1996) 3 SCC 267] stating that M.M.R. Khan (supra)
was decided on the facts of that case. Although, a question was raised
therein that the propositions 3 and 4 laid down in Parimal Chandra Raha
(supra) are very wide and require reconsideration and appropriate
modification, this Court refused to go thereinto holding that it was not
required to do so therein as the Tribunal had proceeded to follow M.M.R.
Khan (supra) only, holding:

On the facts of this case, in the absence of any

statutory or other legal obligation and in the
absence of any right in the Bank to supervise and
control the work or the details thereof in any
manner regarding the canteen workers employed in
the three types of canteens, it cannot be said that
the relationship of master and servant existed
between the Bank and the various persons
employed in three types of canteens. 166 persons
mentioned in the list attached to the reference are
not workmen of the Reserve Bank of India and that
they are not comparable employees employed in
the Officers lounge. Therefore, the demand for
regularisation is unsustainable and they are not
entitled to any relief. We hold that the award
passed by the Tribunal is factually and legally
unsustainable.

[Emphasis supplied]

A new gloss to the question, however, was given by this Court in

Indian Petrochemicals Corporation Ltd. v. Shramik Sena and Others
[(1999)
6 SCC 439]. This Court following the judgment M.M.R. Khan (supra) and
Reserve Bank of India (supra) opined that the ratio sought to be laid
down in
Parimal Chandra Raha (supra) that the workers employed in such canteen
are the employees of the Management is not correct and further opined
that
the workmen of a statutory canteen would be the workmen of the
establishment for the purpose of the Factories Act only and not for all
other
purposes. [Emphasis supplied]

However, in Indian Overseas Bank v. I.O.B. Staff Canteen Workers

Union and Another [(2000) 4 SCC 245] whereupon the High Court relied
upon, in the peculiar facts and circumstances of the said case, this
Court
relied on M.M.R. Khan (supra) and Parimal Chandra Raha (supra) and
distinguished Indian Petrochemicals Corporation Ltd. (supra) holding:

A cumulative consideration of a few or more of

them, by themselves or in combination with any
other relevant aspects, may also serve to be a safe
and effective method to ultimately decide this
often agitated question. Expecting similarity or
identity of facts in all such variety or class of cases
involving different type of establishments and in
dealing with different employers would mean
seeking for things, which are only impossible to
find.
The decision in Indian Petrochemical case does
not, in our view, lay down any different criteria
than those declared in the other decisions for
adjudging the issue, except that it had also
considered specifically the further question as to
the effect of a declaration, that the workers of a
particular canteen, statutorily obligated to be run
render no more than to deem them to be workers
for the limited purpose of the Factories Act and not
for all purposes. In the case before us, the claim is
not that there was any such statutory obligation
and the entire consideration proceeded only on the
footing that it is a non-statutory recognised canteen
falling within the second of the three categories
envisaged in the earlier decisions and the Tribunal
as well as the Division Bench of the High Court
endeavoured to find out whether the obligation to
run was explicit or implicit, on the facts proved in
this case.

A Constitution Bench of this Court in Steel Authority of India

Ltd.
and Ors. v. National Union Waterfront Workers and Ors. [(2001) 7 SCC 1]
noticed the following circumstances under which contract labour could be
held to be the workman of the principal employer:

An analysis of the cases, discussed above, shows

that they fall in three classes: (i) where contract labour is
engaged in or in connection with the work of an
establishment and employment of contract labour is
prohibited either because the industrial adjudicator/court
ordered abolition of contract labour or because the
appropriate Government issued notification under
Section 10(1) of the CLRA Act, no automatic absorption
of the contract labour working in the establishment was
ordered; (ii) where the contract was found to be a sham
and nominal, rather a camouflage, in which case the
contract labour working in the establishment of the
principal employer were held, in fact and in reality, the
employees of the principal employer himself. Indeed,
such cases do not relate to abolition of contract labour
but present instances wherein the Court pierced the veil
and declared the correct position as a fact at the stage
after employment of contract labour stood prohibited;
(iii) where in discharge of a statutory obligation of
maintaining a canteen in an establishment the principal
employer availed the services of a contractor the courts
have held that the contract labour would indeed be the
employees of the principal employer.

Such observation, however, was made in the light of the

provisions
contained in Contract Labour (Regulation and Abolition) Act, 1970.

Rajendra Babu, J., as the learned Chief Justice then was,

speaking for
a Division Bench of this Court in Barat Fritz Werner Ltd. v. State of
Karnataka [(2001) 4 SCC 498] observed:

Of course, in Indian Petrochemicals Corpn.

Ltd. v. Shramik Sena a new gloss was given to this
decision by stating that the presumption arising
under the Factories Act in relation to such workers
is available only for the purpose of the Act and no
further. However, in Employers of Reserve Bank
of India v. Workmen this Court struck a different
note. Again this Court in Indian Overseas Bank v.
I.O.B. Staff Canteen Workers Union considered
the effect of the decisions in M.M.R. Khan,
Parimal Chandra Raha, Reserve Bank of India and
Indian Petrochemicals Corpn. Ltd. v. Shramik
Sena and it was made clear that the workers of a
particular canteen statutorily obligated to be run
render no more than to deem them to be workers
for limited purpose of the Factories Act and not for
all purposes and in cases where it is a non-
statutory recognised canteen the court should find
out whether the obligation to run was implicit or
explicit on the facts proved in that case and the
ordinary test of control, supervision and the nature
of facilities provided were taken note of to find out
whether the employees therein are those of the
main establishment

However, in that case, the court was only concerned with a

notification abolishing contract labour under Contract Labour
(Regulation
and Abolition) Act.

Yet again in Hari Shankar Sharma and Others v. Artificial Limbs

Manufacturing Corpn. and Others [(2002) 1 SCC 337], this Court,
following
Barat Fritz Werner Ltd (supra) opined:

The submission of the appellants that because the

canteen had been set up pursuant to a statutory
obligation under Section 46 of the Factories Act
therefore the employees in the canteen were the
employees of Respondent 1, is unacceptable. First,
Respondent 1 has disputed that Section 46 of the
Factories Act at all applies to it. Indeed, the High
Court has noted that this was never the case of the
appellants either before the Labour Court or the
High Court. Second, assuming that Section 46 of
the Factories Act was applicable to Respondent 1,
it cannot be said as an absolute proposition of law
that whenever in discharge of a statutory mandate,
a canteen is set up or other facility is provided by
an establishment, the employees of the canteen or
such other facility become the employees of that
establishment. It would depend on how the
obligation is discharged by the establishment. It
may be carried out wholly or substantially by the
establishment itself or the burden may be
delegated to an independent contractor. There is
nothing in Section 46 of the Factories Act, nor has
any provision of any other statute been pointed out
to us by the appellants, which provides for the
mode in which the specified establishment must
set up a canteen. Where it is left to the discretion
of the establishment concerned to discharge its
obligation of setting up a canteen either by way of
direct recruitment or by employment of a
contractor, it cannot be postulated that in the latter
event, the persons working in the canteen would be
the employees of the establishment. Therefore,
even assuming that Respondent 1 is a specified
industry within the meaning of Section 46 of the
Factories Act, 1946, this by itself would not lead to
the inevitable conclusion that the employees in the
canteen are the employees of Respondent 1.

In National Thermal Power Corporation Ltd. v. Karri Pothuraju and

Others [(2003) 7 SCC 384], Rajendra Babu, J., speaking for himself and
Raju, J., however, held that in view of a catena of decisions of this
Court it is
aptly clear that where in discharge of a statutory obligation of
maintaining a
canteen in an establishment the principal employer availed the services
of a
contractor the contract labour would indeed be the employees of the
principal employer.

The same bench in Mishra Dhatu Nigam Ltd. and Others v. M.

Venkataiah and Others [(2003) 7 SCC 488], having regard to the
provisions
contained in Rules 65 and 71 of Andhra Pradesh Factories Rules, 1950,
reiterated the same view.

In Haldia Refinery Canteen Employees Union and Others v. Indian

Oil Corporation Ltd. and Others [(2005) 5 SCC 51], Ashok Bhan, J.,
speaking for a Division Bench of this Court, distinguished Indian
Petrochemicals Corporation Ltd. (supra) opining:

The management unlike in Indian

Petrochemicals Corpn. Ltd. case is not reimbursing
the wages of the workmen engaged in the canteen.
Rather the contractor has been made liable to pay
provident fund contribution, leave salary, medical
benefits to his employees and to observe statutory
working hours. The contractor has also been made
responsible for the proper maintenance of
registers, records and accounts so far as
compliance with any statutory
provisions/obligations is concerned. A duty has
been cast on the contractor to keep proper records
pertaining to payment of wages, etc. and also for
depositing the provident fund contributions with
the authorities concerned. The contractor has been
made liable to defend, indemnify and hold
harmless the employer from any liability or
penalty which may be imposed by the Central,
State or local authorities by reason of any violation
by the contractor of such laws, regulations and also
from all claims, suits or proceedings that may be
brought against the management arising under or
incidental to or by reason of the work
provided/assigned under the contract brought by
the employees of the contractor, third party or by
the Central or State Government authorities.

It was specifically noticed that the workmen of the Canteen and

the
contractor had entered into independent settlements without impleading
the
owner or occupier of the factory as a party therein which also went to
show
that the workmen were treating themselves the workmen of the contractor
and not that of the owners.

We have referred to the aforementioned decisions in order to show

that in each of the aforementioned cases the industrial adjudicator was
required to apply the relevant tests laid down by this Court in the fact
situation obtaining therein. Most of the cases referred to hereinbefore
were
considered by this Court in the peculiar facts and circumstances
obtaining
therein and, thus, it is even not proper for the industrial adjudicator
to apply
the ratio of one decision to the exclusion of other without considering
the
facts and circumstances involved therein. The law, however, does not
appear to be settled as to whether even in a case where the employer is
required to run and maintain a canteen in terms of the provisions of the
statute, the employees of the canteen would automatically be held to be
the
workers of the principal employer for all intent and purport and not for
the
purpose of the Factories Act alone. We, however, are not concerned with
the said question in this matter and refrain ourselves from making any
observation in respect thereof.

We, however, intend to point out that in a case of this nature

even an
industrial adjudicator may have some difficulty in coming to the
conclusion
that employees of a canteen for all intent and purport are employees of
the
principal employer.

Question of issuance of direction to regularize the services of

the
employees stand absolutely on a different footing to which we shall
advert to
a little later.

MAINTAINABILITY OF THE WRIT PETITION

In a case of this nature, where serious disputed questions fact were

raised, in our opinion, it was not proper for the High Court for embark
thereupon an exercise under Article 226 of the Constitution. The High
Court
in its judgment relied upon a large number of decisions of this Court,
inter
alia, in Reserve Bank of India (supra) and State Bank of India & Ors. v.
State Bank of India Canteen Employees Union (Bengal Circle) and Ors.
[AIR 2000 SC 1518] ignoring the fact that all such disputes were
adjudicated in an industrial adjudication.

The High Court arrived at a finding that the Committee was merely a
cloak of the Government and an arm of the State. When allegations are
made that a body is a cloak and/or smoke screen or a camouflage, the
adjudication of such a disputed question should be left to the
Industrial
Court. In Steel Authority of India Ltd. (supra), as noticed
hereinbefore, this
Court analysed the decision of this Court to say that they fall in three
classes.
It was observed :

We have quoted the definitions of these terms above

and elucidated their import. The word workman is
defined in wide terms. It is a generic term of which
contract labour is a species. It is true that a combined
reading of the terms establishment and workman
shows that a workman engaged in an establishment
would have direct relationship with the principal
employer as a servant of master. But what is true of a
workman could not be correct of contract labour. The
circumstances under which contract labour could be
treated as direct workman of the principal employer have
already been pointed out above.

The legal position was reiterated in Rourkela Shramik Sangh v.

Steel
Authority of India Ltd. and Another [(2003) 4 SCC 317] stating:

There cannot, thus, be any doubt whatsoever that

the appellants were fully aware of the fact that they
were required to approach the Industrial Tribunal
in terms of the provisions of the Industrial
Disputes Act for ventilating their grievances. The
submission of Mr Shanti Bhushan to the effect that
the High Court acts as an authority while
exercising its power under Article 226 of the
Constitution of India cannot be countenanced. The
order of this Court dated 16-10-1995, as quoted
supra, is absolutely clear and unambiguous. The
term authority used in this Courts order dated
16-10-1995 must be read in the context in which it
was used. The appellant in terms thereof could
seek a reference which would mean a reference in
terms of Section 10 of the Industrial Disputes Act.
It could also approach the authority in accordance
with law which would mean authority under a
statute. The High Court, by no stretch of
imagination, can be an authority under a statute.

It was, furthermore, reiterated that a disputed question of fact

normally would not be entertained in a writ proceeding.
 To the same effect is the decision of this Court in Workmen of
Nilgiri
Coop. Mkt. Society Ltd. v. State of T.N. and Others [(2004) 3 SCC 514]
wherein this Court considered in detail the relevant factors for
determining
the relationship of employer and workman. It was held that the burden
of
proof was upon the workman. In what circumstances, control test taken
recourse to by the High Court can inter alia be applicable for
determining a
disputed question of relation of employer and employee has also been
considered therein at some details. It was firmly laid down that
whether a
contract is a sham or camouflage is not a question of law but of fact.
Hussainbhai, Calicut v. The Alath Factory Thezhilali Union, Kozhikode
and
Others [(1978) 4 SCC 257], whereupon the High Court has placed strong
reliance, was held to be falling under Class (ii) envisaged in Steel
Authority
of India Ltd. (supra).

We may, moreover, notice that in Workmen of the Canteen of Coates

of India Ltd. v. Coates of India Ltd. and Others [(2004) 3 SCC 547], a
Division Bench of this Court observed:

Learned counsel for the appellant strenuously

urged that the respondent Company has the
statutory obligation to provide a canteen in the
premises and therefore, the employees of the
canteen must be presumed to be the workmen
employed by the respondent Company and no one
else. Learned counsel referred to certain decisions
for this purpose. It is sufficient for us to state that
some requirement under the Factories Act of
providing a canteen in the industrial establishment,
is by itself not decisive of the question or sufficient
to determine the status of the persons employed in
the canteen. The effect, if any, relating to
compliance with the provisions of the Factories
Act is a different matter which does not arise for
consideration in the present case, for which reason
we express no opinion on any such question. It is
sufficient for us to say that the finding recorded by
the learned Single Judge also leaves no escape
from the conclusion that these workmen cannot be
held to be workmen employed by the respondent
Company.

Albeit in a different context, this Court in U.P. State Bridge

Corporation Ltd. and Others v. U.P. Rajya Setu Nigam S. Karamchari Sangh
[(2004) 4 SCC 268] emphasised the need of adjudication of a disputed
question of fact before Industrial Court stating:

The only reason given by the High Court to

finally dispose of the issues in its writ jurisdiction
which appears to be sustainable, is the factor of
delay, on the part of the High Court in disposing of
the dispute. Doubtless the issue of alternative
remedy should be raised and decided at the earliest
opportunity so that a litigant is not prejudiced by
the action of the Court since the objection is one in
the nature of a demurrer. Nevertheless even when
there has been such a delay where the issue raised
requires the resolution of factual controversies, the
High Court should not, even when there is a delay,
short-circuit the process for effectively
determining the facts. Indeed the factual
controversies which have arisen in this case remain
unresolved. They must be resolved in a manner
which is just and fair to both the parties. The High
Court was not the appropriate forum for the
enforcement of the right and the learned Single
Judge in Anand Prakash case had correctly refused
to entertain the writ petition for such relief.

Yet recently, this Court in Rajasthan State Road Transport Corpn.

And Others v. Zakir Hussain [(2005) 7 SCC 447] in the context of the
jurisdiction of the Industrial Court vis-`-vis the Civil Court
highlighted the
object of the Industrial Disputes Act stating:

The object of the Industrial Disputes Act, as its

preamble indicates, is to make provision for the
investigation and settlement of industrial disputes,
which means adjudication of such disputes also.
The Act envisages collective bargaining, contracts
between union representing the workmen and the
management, a matter which is outside the realm
of the common law or the Indian law of
contract

Keeping in view of the facts and circumstances of this case as

also the
principle of law enunciated in the above referred decisions of this
Court, we
are, thus, of the opinion that recourse to writ remedy was not apposite
in this
case.

REGULARISATION

The question which now arises for consideration is as to whether

the
High Court was justified in directing regularization of the services of
the
Respondents. It was evidently not. In a large number of decisions,
this
Court has categorically held that it is not open to a High Court to
exercise its
discretion under Article 226 of the Constitution of India either to
frame a
scheme by itself or to direct the State to frame a scheme for
regularising the
services of ad hoc employees or daily wages employees who had not been
appointed in terms of the extant service rules framed either under a
statute or
under the proviso to Article 309 of the Constitution of India. Such a
scheme, even if framed by the State, would not meet the requirements of
law
as the executive order made under Article 162 of the Constitution of
India
cannot prevail over a statute or statutory rules framed under proviso to
Article 309 thereof. The State is obligated to make appointments only
in
fulfilment of its constitutional obligation as laid down in Articles 14,
15 and
16 of the Constitution of India and not by way of any regularization
scheme.
In our constitutional schemes, all eligible persons similarly situated
must be
given opportunity to apply for and receive considerations for
appointments
at the hands of the authorities of the State. Denial of such a claim by
some
officers of the State times and again had been deprecated by this Court.
In
any view, in our democratic polity, an authority howsoever high it may
be
cannot act in breach of an existing statute or the rules which hold the
field.

It is not necessary for us to dilate further on the issue as

recently in
State of U.P. v. Neeraj Awasthi and Ors. [2005 (10) SCALE 286], it has
been clearly held that the High Court has no jurisdiction to frame a
scheme
by itself or direct framing of such a scheme by the State.

In Mahendra L. Jain and Others v. Indore Development Authority

and
Others [(2005) 1 SCC 639], it was categorically held:

The question, therefore, which arises for

consideration is as to whether they could lay a
valid claim for regularisation of their services. The
answer thereto must be rendered in the negative.
Regularisation cannot be claimed as a matter of
right. An illegal appointment cannot be legalised
by taking recourse to regularisation. What can be
regularised is an irregularity and not an illegality.
The constitutional scheme which the country has
adopted does not contemplate any back-door
appointment. A State before offering public
service to a person must comply with the
constitutional requirements of Articles 14 and 16
of the Constitution. All actions of the State must
conform to the constitutional requirements. A
daily-wager in the absence of a statutory provision
in this behalf would not be entitled to
regularisation. (See State of U.P. v. Ajay Kumar
and Jawaharlal Nehru Krishi Vishwa Vidyalaya v.
Bal Kishan Soni.)

In Zakir Hussain (supra), even in relation to the temporary

employee,
it was stated:

The respondent is a temporary employee of the

Corporation and a probationer and not a
government servant and, therefore, is not entitled
for any protection under Article 311 of the
Constitution. He was a party to the contract. In
view of the fact that the respondent was appointed
on probation and the services were terminated
during the period of probation simpliciter as the
same were not found to be satisfactory, the
appellant Corporation is not obliged to hold an
enquiry before terminating the services. The
respondent being a probationer has got no
substantive right to hold the post and was not
entitled to a decree of declaration as erroneously
granted by the lower courts and also of the High
Court.

PARITY IN THE SCALE OF PAY

The contention that at least for the period they have worked they
were
entitled to the remuneration in the scale of pay as that of the
government
employees cannot be accepted for more than one reason. They did not
hold
any post. No post for the canteen was sanctioned by the State.
According to
the State, they were not its employees. Salary on a regular scale of
pay, it is
trite, is payable to an employee only when he holds a status. [See
Mahendra
L. Jain and Others (supra)]

The High Court was, thus, not correct in holding that the members
of
the First Respondent could be treated at par with the Hospitality
Organization of the State of Karnataka. Such equation is impermissible
in
law. In the Hospitality Organization of the State, the posts might have
been
sanctioned. Only because, food is prepared and served, the same would
not
mean that a canteen run by a Committee can be equated thereto.

SUBSEQUENT EVENT

Subsequent events which had taken place is also worth taking note
of.
The fact remains that the canteen now is closed. The judgment and order
of
the High Court, thus, otherwise also cannot be implemented. The
employees
concerned, therefore, cannot be directed to be reinstated in service.
We have
noticed, hereinbefore, that other proceedings have been initiated by
them.
The said proceedings may be disposed of in accordance with law.

CONCLUSION

For the reasons aforementioned, we are of the opinion that the

impugned judgment cannot be sustained, which is set aside accordingly.
Consequently the appeals filed by the State Government being Civil
Appeal
Nos. 224-226 of 2003 and 449-468 of 2003 are allowed and that of the
First
Respondent being Civil Appeal Nos. 4180-82 of 2003 are dismissed.
However, in the facts and circumstances of this case, the parties shall
bear
their own costs.