SCA/150/2006 1/67 JUDGMENT Date on which Judgment was reserved : 31.8.2006 Date on which Judgment pronounced : 19.9.2006 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 150 of 2006 with SPECIAL CIVIL APPLICATION NO. 151 & 152 OF 2006 WITH CIVIL APPLICATION NO. 1488 OF 2006 IN SPECIAL CIVIL APPLICATION NO. 150 OF 2006 For Approval and Signature: HONOURABLE MR.JUSTICE H.K.RATHOD ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================= LUBI ELECTRICALS LTD. - Petitioner(s) Versus A T PAINTER - Respondent(s) ================================================= Appearance : MR KM PATEL for Petitioner(s) : 1, Mr. Sunit Shah, GOVERNMENT PLEADER with Mr. L.B. Dabhi, AGP for Respondent(s) : 1, RULE SERVED for Respondent(s) : 1, SCA/150/2006 2/67 JUDGMENT Mr. T.R. Mishra for Ahmedabad General Mazdoor Union. Mr. Mukul Sinha for Gujarat Mazdoor Sabha. - ================================================= CORAM : HONOURABLE MR.JUSTICE H.K.RATHOD Date : 19/09/2006 COMMON CAV JUDGMENT 1.Heard learned Advocate Mr. K.M. Patel for petitioners, Mr. Sunit Shah, learned Govt. Pleader for the State Authority. Learned Advocates Mr. Mukul Sinha as well as Mr. T.R. Mishra for respective Union. 2.By filing Special Civil Application NO. 150 of 2006, 151 of 2006 and 152 of 2006, petitioners namely Lubi Electricals Ltd., Ahmedabad, Lubi Submersible Pump Ltd. And AP Motors (Hereinafter referred to as “the Management” for short) have challenged the judgment given by the Officer appointed under the Minimum Wages Act and Judge, Labour Court No. 14 Ahmedabad dated 19.12.2005 in Minimum Wages Application No. 51/98, 52/98 and 53 of 1998 which were filed by the applicant Government Labour Officer under section 20 (3) of the Minimum Wages Act, 1948. Under the impugned judgment, the labour court and the authority under the Minimum Wages Act, 1948 has partly allowed said applications and SCA/150/2006 3/67 JUDGMENT directed the establishment to pay minimum wages prescribed under the Minimum Wages Act to all workmen working in the establishment within thirty days from the date of receipt of copy of said order. 3.As per the case of the petitioners in these petitions, the wages and other conditions of service of employees working in the factory of the petitioner are governed by negotiated settlement arrived at from time to time. According to the petitioner, apart from wages and allowances, there is a scheme for payment of production linked incentive wages which is under a settlement with the Ahmedabad General Mazdoor Union which represents majority of the workmen employed by petitioner. According to petitioner, in January, 1998, Gujarat Mazdoor Sabha entered the scene and with a view to getting membership of the workers employed by the petitioner indulged in unfair labour practice of instigating the workmen to resort to mass indiscipline, go slow,intimidation, etc. Therefore, various notices were displayed by petitioner bringing to the notice of the workmen that such mass scale indiscipline is not in the interest of the workers and the Company. On account of go slow in January, 1998 and two to three months thereafter, some SCA/150/2006 4/67 JUDGMENT of the workers could not earn production linked incentive wages. Mazdoor Sabha made complaint to the Government Labour Officer that the wages paid to the workers are less than minimum wages. According to the petitioner, pursuant to the said complaint made by the Gujarat Mazdoor Sabha, the Government Labour Officer visited factory of the petitioner and he was explained the scheme of payment of wages by the petitioner but he has not examined the incentive register and according to the petitioner, on the basis of the truncated and lopsided inspection, he filed Minimum Wages Application No. 51 of 1998 before the Labour Court acting as Authority under the Minimum Wages Act. According to the petitioner, Mazdoor Sabha on the other hand, filed Special Civil Application No. 7814 of 1998 before this Court alleging that the petitioner is not paying minimum wages and prayed for consequential directions. Said petition came to be dismissed by this court by order dated 5.2.1999 on the ground of availability of alternative remedy which was challenged by the Gujarat Mazdor Sabha by filing LPA No. 256 of 1999 which too came to be dismissed by the Division Bench of this Court by judgment and order dated 27.7.2005 SCA/150/2006 5/67 JUDGMENT with a direction that the Minimum Wages Application filed under the Act be decided and disposed of within three months. Thereafter, according to the petitioner, in proceedings pending before the authority, one application was filed by Shri Dayaram Nathuram and others at Exh. 73 for being impleaded as party to the proceedings before the authority which was dismissed by the authority and against such dismissal of that application, Special Civil Application No. 20983 of 2005 was filed wherein this Court granted permission to those workmen to file their written arguments before the authority. Thereafter, the authority by order dated 19.12.2005, partly allowed application and directed the petitioner to pay difference of minimum wages in respect of those workmen who did not file purshis before the authority conceding that their wages were in excess of minimum wages. The petitioner has, therefore, filed this petition with the main grievance that the authority has erred in giving direction on an untenable premise that the production linked incentive wages cannot be included for computing minimum wages and that even if there is go-slow, minimum wages cannot be denied. 4.These petitions have been admitted and SCA/150/2006 6/67 JUDGMENT ad.interim relief have been granted. 5.During the pendency of these petitions, an application being Civil Application No. 1488 of 206 is filed in Special Civil Application No. 150 of 2006 by (1) Dayaram Nathuram, (2) Dinesh Bhalabhai Dhodia and (3) Gujarat Mazdoor Sabha for joining as party respondent to petition which was ordered to be heard with the main matter. 6.Learned Advocate Mr. Patel appearing for the Company has made following submissions before this Court on behalf of the Company: Shri Patel submitted that the wages which are being paid by the petitioner company to the employees are more than the minimum wages as fixed under the notification. His submission is that the Production Linked Wages are being paid by the petitioner CO. each month on 15th and other wages on 7th of each month. According to his submission, these wages are being paid on the basis of settlement arrived at between the petitioner Co. and recognized union. He submits that if the average wages worked out of both the payments of 7th and 15th, then, it will be double than the amount of minimum wages. According to his submission, workmen who are not giving normal work on the basis of settlement pro rata are not entitled for the SCA/150/2006 7/67 JUDGMENT wages as per settlement. It was admitted that if the production linked incentives are excluded, then, some reduction in the minimum wages are bound to occur. He referred to the Government Order under section 10(3) for referring the matter for adjudication. According to him, relevant period of labour situation ultimately adversely affected the production of the petitioner company. If the components of wages, both of 7th and 15th are clubbed together, then, it is more than the minimum wages. According to him, even during the agitation period also, more than minimum wages have been paid to the workers. Union was not a party but written arguments were submitted and it was the contention of the union that the payments of 15th of each month amounts to over time wages and not the minimum wages. Period for which the recovery application was filed by the Government Labour Officer was from January, 1998 to March, 1998 under section 20(3) of the Act. This complaint was filed by the Government Labour Officer before the Authority under the Minimum Wages Act, 1948. He also submits that the incentives are also satisfying the ingredients of section 2(h) of the Minimum Wages Act wherein 'wages' have been defined under the Act. According to his submission, SCA/150/2006 8/67 JUDGMENT section 25 of the Minimum Wages Act is not applicable to the facts of this case. According to him, as per the settlement, the minimum wages have not been reduced by the petitioner company and no workman has relinquished his right for reduction of minimum wages, therefore, settlement is not contrary to the provisions of sec. 25 of the Minimum Wages Act and, therefore, section 25 of the said Act is not applicable in the facts of this case. According to him, purshis were filed by the workmen before the Minimum Wages Authority that they are satisfied with the Scheme and therefore, order in question passed by the Authority under the Minimum Wages Act, 1948 is causing prejudice to the interest of those workmen. Application filed by the Government Labour Officer on 3.7.1998 was replied by the petitioner CO. It was the contention of the union that the amount of incentive wages is nothing but another shape of over time wages. By making reference to section 4, 12, 25 and 2(h) of the Minimum Wages Act, 1948, Mr. Patel submitted that the remuneration covers incentives. Reliance was placed by him on the decision of the Madras High Court in case of Madras Port Trust (By Chairman) and Claims Authority (Under Minimum Wages Act) reported in AIR 1957 Madras page SCA/150/2006 9/67 JUDGMENT 69 = 1956 II LLJ 490 Madras. According to his submission, the directions issued by the Authority under the Minimum Wages Act are bad since it has issued omnibus directions. He also placed reliance on the apex court decision in case of Accountant General,Bihar and another versus N. Bakshi, reported in AIR 1962 SC 505, para 13, in particular. According to his submission, remuneration cannot be considered to be in a limited sense but re components, pro rata basis or any kind of payments qua work carried out by the workman are covered by the definition of section 2(h) of the Minimum Wages Act, 1948. He emphasized again that all kind of remuneration qua work done by the workmen is to be considered as wages and part of wages which cannot be ignored. He submits that the settlement cannot be considered to be illegal or void because of section 25 of the Act. Reference in respect of section 10(3) is pending for adjudication before the concerned Tribunal. He also relied upon the decision in case of Municipal Committee Tara versus Harpal Singh and Another, 1998 (5) SCC page 635. In short, substance of the submissions made by the learned Advocate Mr. Patel is that the incentive wages is covered by the definition of 'wages' under the Minimum Wages SCA/150/2006 10/67 JUDGMENT Act and the petitioner company is not paying less than the minimum wages but as the agitation of the Union Sabha was taking place, it resulted into such legal proceedings of filing application by the Government Labour Officer under section 20(3) of the Act. According to him, after all, the Court has to consider whether the wages which are being paid by the petitioner company are less than the minimum wages or not. According to him, looking to the record, the company is paying more than the minimum wages prescribed under the Minimum Wages Act and there is no dissatisfaction amongst the workmen about the settlement, therefore, view taken by the Authority under the Minimum Wages Act,1948 is contrary to the provisions of the Minimum Wages Act, 1948. He submitted that the Minimum Wages Authority has committed gross error in partly allowing the application filed by the Government Labour Officer. According to him, the Authority under the minimum Wages Act, 1948 ought to have dismissed the application filed by the Government Labour Officer. He referred to number of decisions harping upon the issue that ultimately, payments of incentive wages is covered by the definition of wages under section 2(h) of the Act, 1948. It is also his SCA/150/2006 11/67 JUDGMENT submission that the definition of wages under section 2(22) of the ESI Act is not applicable to the facts of this case and, therefore, the Minimum Wages Authority has committed an error in relying upon the decision under the ESI Act and, therefore, order of the said authority is liable to be set aside. 7.In support of the aforesaid submissions, reliance was placed by Mr. Patel, learned Advocate for the company on the following decisions : (1) Airfreight Ltd. v. State of Karnataka & Ors. Reported in 1999 II CLR 537. (2) Harilal Jechand Doshi, Ghatkopar Hindu Sabha Hospital v. Maharashtra General Kamgar Union & Anr., 1999 II CLR 799. (Bombay High Court) (3) HN Desai & Ors. v. M/s. Bhor Industries Ltd. & Ors. Reported in 1999 II CLR 803. (Bombay High Court) (4) Management of Ramkrishna Pharmaceuticals, Hyderabad v. State Authority under Minimum Wages Act and Joint Commissioner of Labour, Hyderabad & Ors., reported in 2002 III CLR 416.(High Court of AP) (5) Metal Equipment Jeedimetia, Hyderabad v. P. Venkateshwar Rao & Ors., 2002 III CLR 420. (High Court of AP) SCA/150/2006 12/67 JUDGMENT (6) Bhagaband Colliery and Their Workmen reported in 1962 II LLJ page 356 (SC) (7) Bank of India v. TS Kelawala & Ors., (1990) 4 SCC 744. (8) Madras Port Trust (By Chairman) and Claims Authority (Under Minimum Wages Act) reported in AIR 1957 Madras page 69 = 1956 II LLJ 490 Madras. (9) 1998 (5) SCC 635. 8.Except the submissions recorded herein above and the decisions referred to herein above, no other decision was cited by Mr. Patel before this Court in support of his submissions. 9.As the Civil Application NO.1488 of 2006 for being joined as a party respondent to petition was ordered to be heard with the main matter, therefore, I have permitted learned Advocate Mr.Mukul Sinha as well as learned Advocate Mr. T.R. Mishra to make submissions on behalf of the respective unions and they have made their submissions as under: 10. Learned Advocate Mr.T.R.Mishra appearing for the General Mazdoor Union has relied upon the settlement and has submitted that the settlement has taken sufficient care to protect the minimum wages of each workmen. He also submitted that due to go slow by workmen SCA/150/2006 13/67 JUDGMENT agitated through another Union Mazdoor Sabha, difficulty had started. Workmen are working on piece rated basis and they are earning more than minimum wages from the Company and no workman is having grievance against the settlement and the settlements are continuing by periodical change from 1982, therefore, his submissions are supporting the submissions made by the learned Advocate Mr. Patel. 11.Learned Advocate Mr.Mukul Sinha appearing for the Mazdoor Sabha has submitted that the period of recovery from January, 1998 to March, 1998 and the period of agitation, according to the petitioner, page 53, paragraph 2 of the reply, suggests alleged agitation from March, 1998 onward. SO, this recovery application filed by the Government Labour Officer is not relating to the period of agitation but prior to the period of agitation, so, the allegation made by the petitioner against the Mazdoor Sabha cannot be accepted. He referred to page 30 para 4 and submitted that out of total workmen, 132 workmen have submitted purshis about no objection for receiving wages from the petitioner company. He submits that more than 800 workmen are working with the petitioner co. but only 132 workmen have given such SCA/150/2006 14/67 JUDGMENT purshis for giving up their statutory right. He submits that the fact of partial lock out has not been declared. He submitted that guarantee has been given by the statutory provisions that each of the workmen will receive at least minimum wages fixed under the notification from the employer. He submitted that in notification fixing minimum wages, the words “ work norms” or '”out put” is not mentioned or not taken into account. He submits that the minimum wages have been fixed under the notification without considering daily out put / norms. He submits that the incentive wages cannot be covered under the definition as per section 2(h) of the Minimum Wages Act. He submits that the incentive starts when compulsion end. There is no compulsion in incentive, if anybody wants to work on the basis of incentive scheme, then, such workman can work on that basis. He submits that looking to the terms of settlement, incentive is putting compulsion on each work to give particular quantity of work or out put and if it is not given by a particular workman, then, such particular workman will not receive even the minimum wages guaranteed under the Scheme of the Minimum Wages Act. According to his submission, the incentive scheme is defeating SCA/150/2006 15/67 JUDGMENT the object of Minimum Wages Act and is, therefore, contrary to the provisions of the Minimum Wages Act. He submits that the minimum wages fixed under the notification is having only two components and such incentive wages is not one of such two components under the Minimum Wages Act. He also submits that the minimum wages is the statutory mandate which cannot be given good bye under the pretext or guise of incentive wages. In support of his submissions, he relied upon the decision of the Apex Court in case of Sanjit Roy v. State of Rajasthan, reported in AIR 1983 SC 328 = 1983 LIC 312. He has drawn attention of this Court to para 5 of said decision which will be considered afterwards. 12. He also placed reliance upon the decision in case of Somiben Mathurbhai Vasava v. Ms.Lalji Hakku, reported in 25(1) GLR page 388 and submitted that whatever wages paid on 7th are considered to be the wages and pay slips are being issued by the petitioner for such payments made on 7th but for the payments made on 15th of each month in the name of incentive wages, no such pay slips are being issued by the petitioner co. to the workmen concerned. He placed reliance upon the apex court decision in case of M/s. Whirlpool of India Ltd. Versus Employees' State Insurance SCA/150/2006 16/67 JUDGMENT Corporation, reported in 2000 AIR SCW 821 and submitted that the definition under sec. 2(22) of the ESI Act is para materia same and, therefore, in ESI Act, incentive payments are not covered under the definition of wages under section 2(22) of the ESI Act. He submits that on the amount of incentive wages, PF contribution is not being deducted by the petitioner co. On incentive wages, petitioner company is also not making any ESI Contribution. He emphasized that the compulsory part of the wages is below the rates prescribed under the Minimum Wages Act. He submits that if the part of the wages paid on 15th in the name of incentive wages are excluded from the total of the wages paid on 7th and 15th respectively, then, net result is that the workmen are receiving the wages which are below the rates prescribed under the Minimum Wages Act. According to him, such theory adopted by the petitioner co. is violative of the notification of minimum wages and petitioner co. cannot be permitted to do so under the guise of incentive wages. 13. Replying the submissions made by the learned Advocate Mr. Sinha, learned Advocate Mr. Patel submitted that as per page 30, total 758 workmen have given purshis and according to him, the decision in case SCA/150/2006 17/67 JUDGMENT of Sanjit Roy, (supra), relied upon by Mr. Sinha would not apply to the facts of the present case. He submits that while considering the case, payments made on 15th cannot be ignored and the decision of the apex court in M/s. Whirlpool of India Ltd. Versus Employees' State Insurance Corporation reported in 2000 AIR SCW 821 is not applicable. He also submits that for the payments made on 15th, petitioner co. is issuing pay slip in favour of each workman and, therefore, according to his submission, the Authority under the Minimum Wages Act, 1948 has committed gross error in partly allowing the application. 14. Except the submissions recorded herein above, and decisions referred to above, no other submission have been made and no other decision was cited by either of the Advocates before this Court. 15.Before adverting to the facts of the matters on hand, it would be proper to refer to the relevant provisions of the Minimum Wages Act, 1948. Wages have been defined as per section 2(h) of the Minimum Wages Act, 1948. Same is reproduced as under: 2(h) 'wages' means all remuneration, capable SCA/150/2006 18/67 JUDGMENT 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 and includes house rent allowance but does not include - (i) the value of (a) any house accommodation, supply of light, water, medical attendance, or (b) any other amenity or any service excluded by general or special order of the appropriate Government; (iii) any travelling allowance or the value of any travelling concession; (iv) any sum paid to the person employed to defray special expenses entitled on him by the nature of his employment; or (v) any gratuity payable on discharge; “ 16.Section 3 of the Minimum Wages Act, 1948 relates to fixing of minimum rates of wages. Section 4 provides for minimum rate of wages. Same is, therefore, reproduced as under: “4. Minimum rate of wages.- (1) Any minimum rate of wages fixed or revised by the appropriate Government in respect of scheduled employments under section 3 may consists of (i) a basic rate of wages and special SCA/150/2006 19/67 JUDGMENT allowances at a rate to be adjusted, at such intervals and in such manner as the appropriate Government may direct to accord as nearly as practicable with the variation in the cost of living index number applicable to such workers (hereinafter referred to as 'the cost of living allowance allowance') or (ii) a basic rate of wages with or without the cost of living allowance, and the cash value of the concessions in respect of supplies of essential commodities at concession rates, where so autorized; or (iii) an all inclusive rate allwing for the basic rate, the cost of living allowance and the cash value of the concessions, if any (2) The cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities at concession rates shall be computed by the competent authority at such intervals and in accordance with such directions as may be specified or given by the appropriate Government. “ 17. As per the decision in Karnataka Film Chamber of Commerce, Bangalrore v. State of Karnataka, 1986 Lab IC 1890, ILR 1986, Kant, 2183, Section 4 is a definite indication that basic wages is an integral part of the SCA/150/2006 20/67 JUDGMENT minimum wages. It is not correct to say that a minimum wages under section 4(1) necessarily should consist of basic wage and dearness allowance. The language of section 4 does not lent itself to such an interpretation. On the plain terms of section 4(1) it is clear that the payment of dearness allowance would arise only if the basic wage fixed for a category of workmen fell short of the minimum wages which the State Government has to fix taking into consideration the needs of the workers' family consisting of three consumption units. 18.Section 12 of the Act relates to Payment of minimum rates of wages. It is reproduced as under: “12. Payment of minimum rates of wages.-(1) Where in respect of any scheduled employment a notification under section 5 is in force, the employer shall pay to every employee engaged