Case: The Divisional Engineer, G.I.P. Railway Vs. Mahadeo Raghoo And Another

The 1st respondent is a gangman in the employ of the Central Railway (which previously used to be known as the G.I.P. Rly.), since April 1945. At that time his wages were Rs. 18 per month plus dearness allowance. With effect from the 1st November 1947 the Railway Board under the Ministry of Railways of the Government of India introduced a scheme of grant of compensatory (city) allowance and house rent allowance at rates specified in their memorandum No. E47This scheme was modified by the Railway Boards letter No. E47 CPC/14 dated 1st December 1947. As a result of this scheme certain railway employees stationed at specified headquarters were eligible for the allowance aforesaid at certain specified rates. The 1st respondent thus became entitled to the allowance of Rs. 10 per month. This allowance the 1st respondent drew along with his salary until the 18th August 1948 when he was offered by the Government, quarters suitable to his post, but he refused to occupy the same. On his refusal to occupy the quarters offered by the Government, the house rent allowance was stopped with effect from the 19th August 1948. On the 8th June 1951 the 1st respondent put in his claim before the Authority for Rs. 290 on the ground that the appellant, the Divisional Engineer, G.I.P. Ry., who was the authority responsible under section 4 of the Act for payment of wages, had stopped payment of house rent allowance to him from the 19th August 1948. The claim covered the period the 19th August 1948 to the 18th January 1951 at the rate of Rs. 10 per month. The appellant appeared before the Authority and by his written statement contested the claim on the ground that the house rent allowance which wasthe subject matter of the claim was not "wages" within the meaning of section 2(vi) of the Act. It was, therefore, submitted by the appellant who was the opposite party before the Authority that it had no jurisdiction to entertain the claim which should be dismissed in limine. It was further pleaded that the claim was inadmissible on the ground that there had been no illegal deduction from the respondents wages inasmuch as the respondent had been allotted railway quarters of a suitable type and as he had refused to occupy those quarters he was not entitled under the rules to any house rent allowance. Alternatively, it was further pleaded by the appellant that so much of the claim as, related to a period preceding six months immediately before the date of the application was time-barred under the first proviso to section 15(2) of the Act. The Authority condoned the delay and that part of the order condoning the delay is not in controversy before us.

Court's reasoning:
The house rent allowance in the first instance is not admissible to all the employees of a particular class. It is admissible only to such railway employees as are posted at specified places in order "to compensate railway servants in certain costlier cities for excessive rents paid by them over and above what they might normally be expected to pay"; nor is such an allowance "intended to be a source of profit" or to be "an allowance in lieu of free quarters", as specifically stated in the preamble to the letter No. E47CPC/14, dated 1st December 1947, issued by the Railway Board. The argument on behalf of the 1st respondent would have been valid if the rules in terms contemplated the grant of house rent allowance to every employee of a particular category but the rules do not make the grant in such absolute terms. The house rent allowance is admissible only so long as an employee is stationed at one of the specified places and has not been offered Government quarters. The rules distinctly provide that the allowance will not be ad- raissible to those who occupy Government quarters or to those to whom such quarters have been offered but who have refused to take advantage of the offer. Once an employee of the description given above has been offered suitable house accommodation and he has refused it, he ceases to be entitled to the house rent allowance and that allowance thus ceases to be "wages" within the meaning of the definition in the Act, because it is no more payable under the terms of the contract.In our opinion, it is clear beyond all reasonable doubt that the rules which must be included in the terms of contract between the employer and the employee contemplate that an employee posted at one of the specified places would be entitled to house rent allowance; but that as soon as he is offered Government quarters for his accommodation, he ceases to be so entitled., whether he actually occupies or does not occupy the quarters offered to him. Hence the grant of house rent allowance does not create an indefeasible right in the employee at all places wherever he may be posted and in all circumstances, irrespective of whether or not he has been offered Governmentit has been argued on behalf of the respondent that such a conclusion would be inconsistent with the provisions of sections 7 and 1 1 of the Act. We do not see any such inconsistency. Section 7 of the Act deals with such deductions as may be made from the wages as defined in the Act, of an employee. Subsection (2) of section 7 categorically specifies the heads under which deductions may lawfully be made from wages. Clause (d) of this sub-section has reference to "deductions for house accommodation sup- plied by the employer", and section 11 provides that such a deduction shall not be made unless the house accommodation has been accepted by the employee and shall not exceed the amount equivalent to the value of such accommodation. The definition of "wages" in the Act also excludes from its operation the value of house accommodation referred to in sections 7 and II as aforesaid. The legislature has used the expression "value of any house accommodation" in the definition of "wages" as denoting something which can be deducted from "wages". The one excludes the other. It is thus clear that the definition of "wages" under the Act cannot include the value of any house accommodation supplied by the employer to the employee; otherwise it would not be a legally permissible deduction from wages. It Is equally clear that house rent allowance which may in certain circumstances as aforesaid be included in "wages" is not the same thing as the value of any house accommodation referred to in the Act. That being so, there is no validity in the argument advanced on behalf of the 1st respondent that rule 3(i) aforesaid isinconsistent with the provisions of sections 7 and 11 of theremains to consider the last argument advanced on behalf of the 1st respondent that section 23 of the Act prohibits an employee from relinquishing such a right as is the subject matter of rule 3(i) quoted above. This argument proceeds on the assumption that house rent allowance which is a right conferred on the employee is an absolute right. It has already been held above that the Act read along with the rules which constitute the terms of the contract between the employer and the employee does not create any absolute right in the employee to the house rent allowance. That being so, there is no question of the employee relinquishing any such right as is contemplated by section 23.