IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 4190 of 1991 For Approval and Signature: Hon'ble MR.JUSTICE J.N.BHATT ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? 2. To be referred to the Reporter or not? 3. Whether Their Lordships wish to see the fair copy of the judgement? 4. Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? -------------------------------------------------------------- C U SHAH AROGYA BHARTI A PUBLIC TRUST Versus SAURASHTRA MAJDOOR SANGH -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioners MR DH WAGHELA for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE J.N.BHATT Date of decision: 20/02/97 ORAL JUDGEMENT The petitioners have assailed the validity and legality of the award, dated 11.3.91, recorded by the Labour Court, Bhavnagar, in Reference (LCB) No.9/89 which came to be published on 3.5.91. Both the petitioners are trusts and charitable institutions. One of the activities of the trust is to run a medical centre known as T.M.Vadodaria Medical Centre at Botad, which has a capacity of 50 beds. Both the trusts are registered under the Bombay Public Trust Act. Petitioner No.2 trust has undertaken the management and administration of the said medical centre and hospital at Botad under an agreement dated 16.1.92. Pursuant to the said agreement, liabilities prior to the date of agreement will be that of petitioner No.1 Trust. The impugned award of the Labour Court is challenged by both the petitioners. By the said award, the Labour Court has directed the petitioner No.1 to pay the wages in accordance with 4th Pay Commission Recommendations as also other benefits with regard to uniform, washing allowance, leave and other items pertaining to service conditions. Medical centres, at Botad, provide medical facilities at cheaper cost than the facilities available to the local inhabitants in private nursing homes. The rates charged are highly subsidised. It appears from the record that the main object and design of running of medical centres is to serve and cater to the medical facilities at cheaper rates to the local population. The trusts run the medical centres on donations and receive paltry income by way of service charges for the treatment of the patients. The trust is charging nominal charges for the treatment to the patients and therefore, it is running into losses. As of 1994-95, the accumulated losses came to Rs.22.60 lacs. In view of the impugned award, the petitioner Trust is directed to pay wages to the employees in class III and class IV categories at par with 4th Pay Commission Recommendations with effect from 1.10.89. The respondents workmen raised the demand for rise in wage in terms of the recommendations of the 4th Pay Commission and other benefits and perks. The petitioner trusts filed written statement inter alia contending that the demands of the Union are illegal and not maintainable. It was also contended that if the wages are allowed to be increased on the basis of the 4th Pay Commission recommendations, the trust will have to bear an additional burden of Rs.2.30 lacs per year which will add the the consistent losses made by the trust. The burden will be so heavy that the Trust will not be able to bear and the medical centres may be required to be closed down. It was also the case of the petitioner trust before the Labour Court that the workmen are paid minimum wages and allowances as are required to be paid according to law. All the members of the staff and Class IV employees are given uniforms. They are also provided with washing allowances. The petitioner trust, therefore, opposed the additional demands made by the Union. The Labour Court, Bhavnagar, after hearing the parties and considering the evidence on record passed the impugned award whereby the employees of the Trust are granted the wages and other perks and allowances as per the 4th Pay Commission recommendations. Hence this petition, at the instance of the employer-trusts. On behalf of the petitioner-trusts, following contentions have been raised: (1) That the Labour Court failed to appreciate that the petitioners are charitable organisations suffering huge losses and could not bear further financial burden. (2) The wages paid to the employees of the petitioners were in excess of the minimum wages. The employees are also paid other allowances over and above the minimum on agreed terms with the employees from time to time. (3) That the Labour Court has compared with the wages paid to the employees of private hospitals and that too of city areas as against the evidence produced by the petitioners in respect of Trimurty Hospital, Bavla and other comparable hospitals. (4) That the Labour Court without any documentary evidence has wrongly relied on the deposition of one Gitaben Trivedi for the Union, In fact, in the cross-examination, said witness Smt.Gitaben has conceded that her wage was in excess of the minimum wage. (5) That the Labour Court has failed to place reliance on the wage structure of similarly situated institutions who are paying only minimum wages. (6) That the Labour Court should have appreciated that in such type of charitable institutions, additional financial burden would hamper the furtherance of the avowed objects of the trust. The learned advocate appearing for the respondent workman has strongly opposed the aforesaid contentions. The following contentions were raised for the respondent workmen. (1) That the impugned award granting higher wage structure and other benefits in terms of 4th Pay Commission are legal and valid. (2) That the employees of the petitioner trust are entitled to the pay scales as per the 4th Pay Commission recommendations. (3) That the scope of the petition is very much circumscribed and therefore, the petition should be dismissed and the impugned award of the Labour Court should be confirmed. In order to appreciate the rival contentions, it would be appropriate to first consider the factual scenario emerging from the record of the present case. Petitioner No.2 is a registered trust registered under Bombay Public Trusts Act, 1950. Petitioner No.2 is a newly, added party in the course of pendency of this petition. Petitioner No.1 is also a registered Trust and original opponent-employer. By virtue of an agreement, dated 16.1.92, the petitioner no.2 trust has undertaken the management and the administration of D.M.Vadodaria medical centre and Hospital, at Botad, which was earlier run by petitioner No.1 trust. As per the said agreement, petitioner No.2 is not liable to pay any amount on any count whatsoever by way of consideration, compensation, remuneration, reimbursement, for discharge of any liability or obligation of petitioner No.1 trust. It appears from the record that originally there were about 47 staff members working in different categories as x-ray technicians, ward boy, chowkidars, compounders, nurse, etc. Out of these 47 members of the staff, on account of voluntary retirement and retrenchment only 12 members of the staff were left in the employment of the hospital. Thus, there were hardly 12 employees of the trust hospital at the relevant time. It is also noticed that petitioner No.2 Trust has entered into a settlement with 8 of the members of the staff/workmen. The consent terms between the petitioner No.2 trust and the 8 workmen have been filed for modification of the Labour Court award. The said employees have also resigned from the membership of the Union which was espousing their case before the Labour Court. As a result of the settlement with 8 workmen, it was agreed that there will be an increase of 33 per cent in the wages with effect from 1.1.96. Besides, they will be entitled to dearness allowance and special allowance as may be fixed by the State Government from time to time. Considering the settlement to be just and valid, other staff members except 4 have signed the settlement. The 8 staff members who have agreed that since the settlement is just and proper, they will not pursue their claim arising out of the award challenged in this petition. It was also the case of petitioner No.2 trust that the workman are paid as per the Minimum Wages Act. There does not seem to be any dispute about this aspect. A copy of the settlement has already been produced on record for obtaining consent of other side. In order to appreciate the merits of the impugned award and the challenge against it, it also would be expedient and proper, at this stage, to consider the relevant legal proposition and the various factors influencing the revision of pay and other monetary benefits and perks. The wage structure and wage revision would obviously and directly depend upon the financial capacity of the establishment or the industry in question and other relevant aspects. The Labour Court has failed to appreciate the important aspects and factors for the purpose of deciding the wage fixation and other benefits. Section 2(rr) of the Industrial Disputes Act, 1947 defines, the expression "wages". This definition is very important. It would, therefore, be expedient and profitable to consider it, which reads as under : "(rr) 'wages' means all remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment, or of work done in such employment, and includes - (i) such allowances (including dearness allowance) as the workman is for the time being entitled to; (ii) the value of any house accommodation, or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of foodgrains or other articles; (iii) any travelling concession; (iv) any commission payable on the promotion of sales or business or both; but does not include -- (a) any bonus; (b) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the workman under any law for the time being in force; (c) any gratuity payable on the termination of his service;" It could very well be seen from the aforesaid definition that it is an exhaustive one with both inclusive and exclusive clauses. Though the definition, elaborately, mentions the constituents of wage, it does not give as to what should be the size of a wage packet of different occupations in an industry nor does it show any means for calculating the same. Ordinarily, a wage packet to be relevant and to reflect the economic development. Socio-economic needs of the employees both as a workman and as a family person, the balance of economic growth to be blended into harmonious consensus so that both the industry and the workman not only survive but could grow. It is true that industrial adjudications over the past many years have evolved certain criteria and guidelines to arrive at this consensus which appeared to have stood the test of time. The definition of 'wages' is in three parts. The first part defines wages to mean all remuneration capable of being expressed in terms of money which would if the term of employment express or implied were fulfilled be payable to a workman in respect of his employment or work done in such employment. The second part is designed to include something more than what the term primarily denotes. This part gives extended connotation by including certain payments, allowances and amenities in the ambit of definition. The third definition excludes three types of payment made by the employer (i) bonus, (ii) contribution towards pension or provident fund or any other benefits of the workman under the law for the time being in force and (iii) gratuity payable on the termination of the service of a workman. Broadly speaking the concept of wages can be articulated in 4 different following categories, (i) minimum wage, (ii) fair wage, (iii) living wage and (iv) need based minimum wage. The first category is covered by the provisions of Minimum Wages Act, 1948. Thus, the first category owes its origin to the provisions of Minimum Wages Act. The second has, generally, been used in industrial award and judicial pronouncements, whereas, the living wage and need based minimum wage are categorized and introduced in the reports of various committees. The statutory definition of 'wages' includes allowances and other monetary remunerations, but excludes three types of payment made by the employer like (i) bonus, (ii) contribution towards pension or provident fund and (iii) gratuity payable on the termination of the service of a workman. Minimum wage is defined and quantified in the Minimum Wages Act, whereas, fair and living wage concept has not been statutorily defined. The court is obliged to consider various factors and aspects while fixing the wage. Some of the important facts to be considered by the court or the appropriate authority may be mentioned at this stage, which are as follows: (1) Condition of wages scales prevalent in the Company. (2) Condition of the wage level prevalent in the industry in the region. (3) The wage packet as a whole of each earner in the company with all incidental amenities and facilities. (4) The position of the company viewed in relation to other comparable concerns in the industry and the region. (5) Peremptive necessity for full neutralisation of the cost of living at the rock bottom of wage-scale if at or just above the subsistence level. (6) The rate of neutralisation which is being given to the employees in each salary slab. (7) Avoidance of huge distortion of wage differentials taking into reckoning all persons employed in the concern. (8) Degree of sacrifice necessary even on the part of workers in general and public interest. (9) The compulsive necessity of security social and distributive justice to the workmen. (10) The capacity of the master to bear the additional burden. (11) The effect of inflationary trend on the purchasing power of rupee . (12) The interest of national economy. (13) The impact and ramification of other industries and society as a whole. (14) The state of the consumer price index at the time of decision. The Committee on fair wages has defined three distinct level of wages, living wage, fair wage and minimum wage. The minium wage is the lowest wage in the scale below which the efficiency of a worker is likely to be impaired. Be it noted that the expression 'minimum wage' too is not fixed and static. It varies from time to time and place to place and at times industry to industry. It is bound to vary with the growth and development of national economy. As a matter of fact, the concept of 'minimum wages' has undergone a progressive change. Obviously, it would not be based upon the subsistence theory according to which minimum wage equals the cost of commodities necessary to feed and clothe the worker and his family. The committee on fair wages has rightly reported that a minimum wage must provide not merely for the sustenance of life but for preservation of efficiency of the employees. For this purpose, the minimum wage must also accommodate some measure of education, medical requirements and amenities. It is also reported by the Committee that an establishment or an industry which is incapable of paying the minimum wage has no right to exist. In cases where the continued existence of such industry is imperative in the larger interest of the country, it was the responsibility of the State to take steps to enable that industry to pay at least minimum wage. The Committee was also of the definite opinion that for fixing the minimum wage even regard should not be paid to the capacity of the employer or the industry to pay. As such, it should be solely based on the requirement of the worker and his family. Standard of minimum wage laid down by the Committee was also adopted by the Supreme Court in holding that the minimum wage must provide not merely for the bare subsistence of life but also for the preservation of the efficiency of the worker and for this purpose the minimum wage must also provide for some measure of education, medical requirements and amenities and facilities. The recommendations of the Committee on fair wages that in awarding the minimum wage, the capacity of the employer to pay is irrelevant and when an industry cannot afford to pay minimum wage, it has no right to exist has also been emphasized in number of judicial decisions. It is held in many cases that minimum wage must be paid irrespective of the extent of profits, the financial conditions of the establishment or the industry or the availability of the workmen on lower wages. Thus minimum wages, independent of kind of industry, applies to all alike big or small. It thus sets the lowest limit below which the wages cannot be allowed to sink in all humility. The passing of the Minimum Wages Act, 1948, is a landmark in the history of labour legislations in the country. This Act recognises that the wages cannot be allowed to determine entirely by the market force. The whole philosophy underlying the enactment of Minimum Wages Act is to prevent exploitation of labour through the payment of unduly low wages. The Minimum Wages Act aims at providing a structure of wage which at least preserves the efficiency of the employee. As per the report of the National Commission on Labour, the Legislature realised that if the rule of market was to prevail, it would be difficult to prevent sweating or exploitation of labour through payment of unduly low wages and with a view to check this position that the Act was enacted and specific provisions were made for determining minimum wages in respect of scheduled industries. Once the minimum wages is, statutorily, determined and prescribed under the Act, it is, obligatory, for the employer to follow and pay the said wage and it is absolute. The following recommendations of the National Commission of Labour in connection with fixing of minimum wages are apposite : "The minimum wage may thus vary from region to region and even within the same region from time to time depending on particular situations. Prescribing some rigid criteria in regard to minimum wage fixation is, therefore, neither feasible nor desirable. It will necessarily have to be left flexible. We are further of the opinion that laying down a rigid cash equivalent of the content of the statutory minimum wage whose coverage is essentially transitional under conditions of development would not serve any useful purpose." The concept of fair wage shows that the wage is something above the minimum wage and something less or below the living wage. In Kamani Metals & Alloys Ltd v. Their Workmen, (1967) 2 LLJ 55 (SC), the Supreme Court has observed that "fair wage lies between the minimum wage which must be paid in any event and the living wage which is the goal". In Express Newspapers (P) Ltd v. Union of India, (1961) 1 LLJ 339 (SC), the Supreme Court has described fair wage as a "mean between the living wage and the minimum wage". The rate of wages prevailing in an occupation as 'fair' if it is about on level with the average payment for tasks in other trades which are of equal difficulty and disagreeableness which require equally rare natural abilities and an equally expensive training. The fair wage must also take note of the economic reality of the situation and the minimum needs of the worker having a fair sized family with an eye to the preservation of his efficiency as a worker. It can, therefore, be concluded that the concept of fair wage involves a rate sufficiently high to enable the worker to provide a standard family with food, shelter, clothing, medical care and education of children appropriate to his status in life but not at a rate exceeding the wage earning capacity of the class of establishment concerned. But only such of the items which go directly to reduce the expenditure that would otherwise go into the family budget are relevant in fixing fair wage. As time passes and prices rise even the fair wage fixed for the time-being tends to sag downwards and then a revision becomes obvious and obligatory. A fair wage is, therefore, related to the earning capacity and pressure of work and workload. It must be remembered very well that fair wage is not 'living wage' by which is meant a wage which is sufficient to provide not only the essentials above mentioned but a fair measure of frugal comfort with an ability to provide for December days of life and evil days. Fair wage lies between the minimum wage which must be paid in any event and the living wage which is the goal. Thus, while the lower limit of fair wage must, obviously, be minimum wage, the upper limit is equally set by what may, broadly, be called the capacity of the industry to pay. The capacity of a particular industry in a specified region should be taken into account to determine 'the capacity to pay and this in turn could be ascertained by taking a fair cross section of the industry in the region concerned. It was, therefore, accepted by the Committee that the present level of our national income does not permit of payment of a 'living wage' on standards prevalent in more advanced and developed countries and regions. It must, therefore, be remembered that capacity to pay of the industry and also the financial status and the position of the industry or an establishment or an employer are very relevant factors in determining the 'fair wage'. No doubt, the concept of living wage which has influenced the fixation of wages, statutorily, or otherwise in all economically advanced countries is an old and well established one. The expression 'living wage' has a wide connotation. The 'living wage' means an amount of wage which should not only provide essentials contemplated by the 'fair wage' but should also be sufficient to provide for a fair measure of frugal comfort with an ability to provide for old-age and evil days. The 'living wage', according to the Committee on Fair Wages, represented the higher level of wage and, naturally, it would include all amenities which a citizen living in modern civilised society is entitled to when the economy of the country is sufficiently advanced and the employer is able to meet the expanding aspirations of his workers. It is, therefore, rightly said that its pursuit belongs to the same category as 'squaring the circle'. In Hindustan Times Ltd v. Their Workmen, (1963) I LLJ 108 (SC), the Supreme Court has observed that "while the industrial adjudication will be happy to fix a wage-structure which would give the workmen generally a living wage, economic considerations make that only a dream for the future. That is why the Industrial Tribunals in this country generally confine their horizon to the target of fixing a fair wage". Later in All India Reserve Bank Employees' Association vs. Reserve Bank of India, (1965) II LLJ 175 (SC), the Supreme Court has observed that "..... our political aim is 'living wage' though in actual practice living wage has been an ideal which has eluded our efforts like an ever-receding horizon and will so remain for sometime to come. Our general wage structure has at best reached the lower levels of fair wage though some employers are paying much higher wages than the general average". In Hindustan Antibiotics Ltd v. Their Workmen, (1967) 1 LLJ 114, the Supreme Court has, however, struck an optimistic note that prosperity in the country would help to improve the conditions of labour and the standard of life of the labour can be progressively raised from the stage of minimum wage, passing through need-found wage, fair wage, to living wage. It is true that even the