Payment of Wages Inspector Vs.
Surajmal Mehta & ANR  INSC 306 (3 December 1968)
03/12/1968 SHELAT, J.M.
CITATION: 1969 AIR 590 1969 SCR (3)1051
Payment of Wages Act (4 of 1936), ss. 2(vi)d
and 15, and Industrial Disputes Act, (14 of 1947), ss. 25FF and 33C(2)-
Retrenchment compensation under s. 25FF, Industrial Disputes Act-If wages under
Payment of Wages Act-Jurisdiction of Authority under s. 15, Payment of Wages
The State Electricity . Board revoked the
licence of a company and took over the undertaking. The 1st respondent, who was
the director of the company, served notices on the employees that their
services would not be required. Thereupon, the appellant filed an application under
s. 15(2) of the Payment of Wages Act, 1936, on behalf of the employees, for
recovering from the it respondent wages for the notice month and retrenchment
compensation under s. 25FF of the Industrial Disputes Act.
1947. The 1st respondent contested the claim
as well as the jurisdiction of the authority under the Payment of Wages Act to
deal with the application, on the ground 'that he was not the person
responsible for payment of com- pensation and that the right of the workmen was
defeated by reason of the proviso to s. 25FF of the Industrial Disputes Act,
because there was no interruption in their employment and the new employer (the
Electricity Board) was responsible for payment of the compensation. But the
Authority held against the 1st respondent. The 1st respondent then filed a writ
petition in the High Court and the High Court held that s. 15 of the Act did
not apply and that the proper forum for such an application was the Labour
Court under s. 33C(2) of the Industrial Disputes Act, 1947.
In appeal to this Court, on the questions:
(1) Whether compensation payable under s. 25FF of the Industrial Disputes Act
can fall under the amended definition of wages in s. 2(vi)d of the payment of
Wages Act, as it is a 'sum which by reason of the termination of employment of
the person employed, is payable under any law .... which provides for the
PaYment of such sum whether with or without deductions but does not provide for
the time within which the payment is to be made' and (2) Whether the authority
under s. 15 of the Payment of Wages Act had jurisdiction to entertain the
HELD: (1) The three sections, namely s. 25F
introduced into the Industrial Disputes Act, by Act 43 of 1951, and ss. 25FF
and 25FFF incorporated by Act 18 of 1957, involve termination of service in
consequence of retrenchment, transfer and closure respectively. In ss. 25FF and
25FFF notice and compensation have been provided for 'in accordance with the
provisions of s. 25F'. These words are used only as a measure of compensation
and are not used for laying down any time within which the employer must pay
compensation. Since section 25FF unlike s. 25F, does not contain any conditions
precedent, it can be said not to have provided any time within which such
compensation is to be paid. Therefore, the compensation payable under s. 25FF
read with s. 25F of the Industrial Disputes Act would be wages within the
meaning of s. '2 (vi)(d )of the Payment of..Wages Act. [1055 C--E] 1052 M/s.
Hatisingh Mfg. Co. Ltd. v. Union of India,  3 S.C.R. 528 and ,Anakapalla
Co-operative Agricultural and Industrial Society Ltd. v. Workmen,  Supp.
(2) The words 'where. contrary to the
provisions of the Act, in s. 15(2) of the Payment of Wages Act being the
governing words, the Authority appointed under s. 15(1) has jurisdiction to
entertain applications only in two classes of cases, namely, of deductions and
fines not authorised under ss. 7 to 13 of. the Payment of Wages Act and of
delay in payment of wages beyond the wage periods fixed under s. 4 and time in
payment laid down in s. 5. Section 15(1) provides that the Authority has the
power to determine all matters incidental to the claim arising from deductions
from or delay in payment of wages, but while deciding whether a particular
matter is incidental to the claim or not. care should be taken neither to
unduly expand or curtail the jurisdiction of the Authority, because, the
jurisdiction is a special jurisdiction. Section 15(2) postulates that the wages
payable by the person responsible for payment under s. 3 are certain and such
that they cannot be disputed. [1058 B--D] In the present case, (a) the claim
was not a simple.
case of deduction/ions having been
unauthorisedly made or payment having been delayed beyond the wage periods or
the time of payment fixed under ss. 4 and 5 of the Act;
(b) In view of the defence taken by the 1st
respondent, the failure to pay compensation did not fall under ss. 4 and 5 of
the Act; and (c) The claim for compensation denied by the employer in the
circumstance could not fall within the ambit of s. 15(2). [1059 H] It could not
have been intended that such matters could be tried by the Authority under the
Act as matters incidental to the claim of compensation under s. 25FF. The
proper forum would be the Labour Court which can decide such questions under s.
33C(2) of the Industrial Disputes Act, since such court can go up into those
matters fully, expeditiously and without expense. [1060 C] Punjab National Bank
Ltd. v. Kharbanda,  Supp. 2 S.C.R. 977, Central Bank of India Ltd. v.
Rajagopalan,  3 S.C.R. 140, Bombay Gas Co. Ltd. v. Gopal Bhiva,  3
S.C.R. 709, D'Costa v. B.C. Patel,  1 S.C.R.
1353 and Shri Ambica Mills Co. Ltd. v. 5. B.
Bhatt  3 S.C.R. 220, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1577 of 1966.
Appeal from the judgment and order dated
March 25, 1964 of the Madhya Pradesh High Court in Misc. Petition No. 31 of
1963., I. N. Shroff for the appellant.
The respondent did not appear.
The Judgment of the Court was delivered by
Shelat, J. This appeal, by certificate, is directed against the judgment and
the High Court of Madhya Pradesh and 1053 raises the question of the scope of
jurisdiction of the Authority under the Payment of Wages Act, 4 of 1936
(hereinafter referred to as the Act.) On the licence of the Barnagar Electric
Supply and Industrial Company, of which respondent 1 was at all material times
'the managing director, having been revoked by the Madhya Pradesh Government
and the company's undertaking having been taken over by the Madhya Pradesh
Electricity Board, respondent 1 served notices on the company's employees that
their services would no longer be required,as from October 1, 1962. Thereupon
the appellant on behalf of 20 employees of the company filed an application
under sec. 15(2) of the Act to recover from respondent 1 wages for the notice
month and retrenchment compensation mounting to Rs. 12,853.60P. payable to the
employees under sec. 25FF of the Industrial Disputes Act, 1947. On respondent 1
contesting the claim as also the jurisdiction of the Authority, the Authority
raised certain preliminary. issues, namely: (1) whether the said application
was maintainable in view of the revocation of the company's licence, (2)
whether the Authority had jurisdiction to determine the liability of respondent
1 for retrenchment compensation before the amount thereof was ascertained under
sec. 33C(2) of the Industrial Disputes Act and (3) whether in view of the
services of the workmen not having been interrupted by the said transfer and
the terms and conditions of service applicable to them after the said transfer
being not in any way less favourable than' before and the said Board as the new
employer being liable after the transfer for compensation in the event of
retrenchment, the employees were entitled to claim any compensation. By his
order dated May 21, 1963 the Authority held against respondent 1 on the
question of jurisdiction. Respondent 1 thereupon filed a writ petition in the
High Court and Division Bench of the High Court held that sec. 15 of the Act
did not apply and that the proper forum for such an application was a Labour
Court under sec. 33C(2) of the Industrial Disputes Act. This appeal challenges
the correctness of this order.
Mr. Shroff for the appellant contended that
after the amendment of the definition of 'wages' in the Act by Act 68 of 1957
and the amended definition having now included "any sum which by reason of
the termination of employment of the person employed is payable under any law,.
contract or instrument which provides for payment of such sum whether with or
without deductions but does not provide for the time within which the payment
is to be made" as wages, there could be no doubt that the legislature has
conferred jurisdiction' on the Authority under the Act to determine
compensation payable under sec. 25FF of the Industrial Disputes Act in an
application under sec. 15(2) of the Act and that therefore the High Court Was
in error in quashing the order :passed by the Authority. Mr, Chagla appearing
for the 1054 Respondents 1 and 2 in ,the next appeal on the other hand,
contended (1 ) that the Authority under the Act was a special Authority with
limited jurisdiction, that it has to deal only with the subject matters
specified in the Act and its jurisdiction must therefore be strictly construed,
and (2) that the Act and the Industrial Disputes Act deal with different
subjects, provide different tribunals with different jurisdictions and
therefore it is not possible to hold that Parliament which enacted both the Acts
could possibly have contemplated that claim arising under the Industrial
Disputes Act should be determined by a tribunal set up under a different Act.
On these contentions the first question'
which arises for determination is whether compensation payable under sec.
25FF of the Industrial Disputes Act can fall
under the amended definition in sec. 2(vi)(d) of the Act and can be Called
'wages'. The High Court. thought that it was not but Mr. Shroff relied on
certain decisions of' this Court to contest that part of the conclusion of the
High Court. The Industrial Disputes Act, which as enacted in 1947, was a piece
of 'legislation which mainly 'provided machinery for investigation and
settlement of industrial` disputes, has since then undergone frequent
modifications. In 1953, by Act 43of that year Chapter VA consisting of secs.
25A to 25J was incorporated providing therein compensation for lay-off and
retrenchment. It also provided a definition of retrenchment in sec. 2(00).
Chapter VA, as it then stood, did not expressly provide for compensation for termination
of service on account of transfer of an undertaking by an agreement or as a
result of operation of law or the closure of the undertaking. Consequently, in
Divikar(1) this Court held that retrenchment
as defined in sec. 2(00) and the word 'retrenched' in sec, 25F meant discharge
of surplus labour or staff by the employer for any reason whatsoever otherwise
than as a punishment inflicted by way of disciplinary action and did not
include termination of services of all workmen on a bona fide closure of an
undertaking or on a change of ownership or management thereof. This decision
was followed first by an ordinance and then by Act 18 of 1957 incorporating in
the Act the present ss..25FF and 25FFF. It will he noticed that -both these sections
use the words "'as 'if the workman had been retrenched". The
intention of the legislature was, therefore, clear that it did not wish to
place transfer and closure 'on the same footing as retrenchment under sec. 25F.
This is apparent also from the fact that it
left the definition of retrenchment in sec, 2(00) untouched in spite of the
decision in Hariprasad's case(1). The three sections, ss. 25F, 25FF and 25FFF
'also ;show' that while under sec. 25F.no retrenchment Can be made until
Conditions therein set out are Carried. out the other two sections do' not lay
down any such conditions. All the ,three sections however, (1) S.C.R.
1055 involve termination of service whether
it results in consequence of retrenchment or transfer or closure, and notice
and compensation in both ss. 25FF and 25FFF have been provided for "in
accordance with the provisions of sec.
25F". (see M/s Harisingh Mfg. Co. Ltd.
v. Union of India(1) and Anakapalla Co-operative Agricultural and Industrial
Society Ltd. v. Workmen(2). That being the position a workman whose service is
terminated in consequence of a transfer of an undertaking, whether by agreement
or by operation of law, has a statutory right under sec. 25FF to compensation
unless such right is defeated under the proviso to that section. The same is
the position in the case of closure under sec. 25FFF. Such compensation would
be wages as defined by sec. 2(vi)(d) of the Act as it is a "sum which by
reason of the termination of employment of the person employed, is payable
under any law .... which provides for the payment of such sum whether with or
without deductions but does not provide for the time within which the payment
is to be made." Since ss. 25FF and 25FFF do not contain any conditions
precedent, as in the case of retrenchment under sec. 25F, and transfer and
closure can validly take place without notice or payment of a month's wages in
lieu thereof or payment of compensation, sec. 25FF can be said not to have
provided any time within which such compensation is to be paid. It is well
established that the words "in accordance with the provisions of sec.
25F" in ss. 25FF and 25FFF are used only as a measure of compensation and
are not used for laying down any time within which the employer must pay the
compensation. It would, therefore, appear that compensation payable under ss.
25FF and 25FFF read with sec. 25F would be 'wages' within the meaning of sec.
2(vi)(d) of the Act.
It must, however, be remembered that though
such compensation falls within the definition of wages, cases may arise where
it would not be a simple question of recovery of wages. In the present case,
for instance, the defence taken by respondent 1 was that he was not the person
responsible for payment of compensation and that the right of the workmen was
defeated by reason of the proviso to sec. 25FF being, according to him,
applicable inasmuch as these workmen were continued in the employment by the
said Board, the new employer, that therefore there had been no interruption in
their employment, that the terms and conditions of service given to them by the
new employer were in no way less favourable than those they. had when the
company was the employer, and that the new employer was responsible for payment
of compensation if any retrenchment took place in future. The question,
therefore, is whether in view of the limited jurisdiction of the Authority
under see. 15(2) of the Act, it was intended to deal with such questions, which
in some cases might well raise complicated problems of both fact and law.
(1)  3 S.C.R. 528. (2)  Supp. (1)
L 6Sup CI/69-16 1056 While considering the
scope of jurisdiction of the Authority under sec. 15 of the Act it is relevant
to bear in mind the fact that the right to compensation is conferred by the Industrial
Disputes Act which itself provides a special tribunal for trying cases of
individual workmen to whom compensation payable under Ch. VA has not been paid.
Section 33C of that Act provides both a forum
and the procedure for computing both monetary as well as non- monetary benefits
in terms of money and further provides machinery for recovery of such claims.
In Punjab National Bank Ltd. v. Kharbanda(1) this Court held that while sub-
sec. 1 of sec. 33C applied to cases where any money was due to a workman from
an employer under a settlement, award or under the provisions of Ch. VA and the
amount was already computed or calculated or at any rate there could be no dispute
about its calculation or computation, sub-sec. 2 applied to benefits including
monetary benefits conferred on a workman under an award, settlement etc., but
which had not been calculated or computed and there was a dispute as to their
calculation or computation. The Court rejected the contention that sub-sec. 2
applied only to a non-monetary benefit which had to be converted in terms of
money. The Court also observed that sec. 33C was a provision in the nature of
execution and where the amount to be executed was worked out or where it might
be worked out without any dispute sub-sec. 1 would apply, but where such amount
due to the workman was not stated or worked out and there was a dispute as to
its calculation, sub.sec. 2 would apply and the workman would be entitled to
apply thereunder to have the amount computed provided he was entitled to a
benefit, whether monetary or non-monetary, which was capable of being paid in
terms of money. In the Central Bank of India Ltd.
v. Rajagopalan(2) this Court held that where
the right of a workman was disputed by his employer the Labour Court could go
into the question as to whether he had a right to receive such a benefit.
Sub-sec. 3 of sec. 33C under which the Labour Court can appoint a commissioner
to take evidence for computing the benefit postulates that it has the
jurisdiction to decide whether the workman claiming benefit was entitled to it
where such right was disputed by the employer. In Bombay Gas Co. Ltd. v. Gopal
Bhiva(3) this Court held that the Labour Court could in an application under
sec. 33C(2) go even into the question whether the award under which the workman
had made a claim was a nullity. Being in the nature of an executing court it
could interpret the award and also consider the plea that the award sought to
be enforced was a nullity. It is thus clear that a workman whose claim,
monetary or otherwise, is disputed by his employer can lodge such a claim
before a specified Labour Court under sec. 33C and obtain an inexpensive and
expeditious remedy. The (1)  Supp. 2 S.C.R. 977. (2)  3 S.C.R. 140.
(3)  3 S.C.R. 709.
1057 question then is whether for such a
claim the legislature intended to provide alternative remedies both under the Industrial
Disputes Act and the Payment of Wages Act. For deciding this question it is
necessary to refer to some of the provisions of and the scheme of the Payment
of Wages Act.
The Act was passed to regulate the payment of
wages to certain classes of persons employed in any factory or by a railway
administration or by a person fulfilling a contract with a railway
administration or in any industrial establishment to which a State Government
by notification has extended the Act. Section 3 lays down as to who shall be
responsible for payment of wages. Section 4 provides for the fixation of wage
periods and sec. 5 lays down the time within which payment of wages has to be
made. Sec. 7 provides that wages shall be paid without any deductions except
those authorised by the Act and sec. 8 provides that no fine shall be imposed
on any employed person save in respect of such acts or omissions on his part as
the employer with the previous approval of the State Government or the
prescribed authority may have specified by notice.
Sections 9 to 13 lay down the deductions
which an employer is authorised to make and the conditions under which such
deduction can be made. Section 13A provides for the maintenance of certain
registers and records by the employer and ss. 14 and 14A provide for appointment
of inspectors under the Act, their powers and the facilities to be afforded by
the employer to such inspectors. Section 15 (1 ) provides for the appointment
of a person to be the Authority under the Act to hear and decide for any
specified area claims arising out of (a) deduction from wages or (b) delay in
payment of wages of persons employed or paid in that area including all matters
incidental to such claims.
Sub-sec. 2 provides that "Where contrary
to the provisions of this Act any deduction has been made from the wages of an
employed person, or any payment of wages has been delayed, such person himself,
or any legal practitioner or any official of a registered trade union or any
inspector under this Act, or any other person acting with the permission of the
authority ..... may apply to such authority for a direction under sub-sec.
3." The first proviso to sub- sec. 2 lays down a period of limitation of
12 months from the date of deduction or the due date of payment and the second
proviso empowers the Authority to admit applications beyond the period of
limitation on sufficient cause being shown. Sub-sec. 3 empowers the Authority
to direct refund to the employed person of the amount deducted, or the payment
of the delayed wages and also empowers it to award compensation specified
therein without prejudice to any other penalty to which the employer guilty of
unauthorised deduction or delay in payment is liable under the Act.
Under sub-sec. 5 of sec. 15 the amount 1058
awarded by the authority can be recovered as if it were a fine imposed by a
magistrate. Section 20 provides for penalty for offences under certain
provisions of ss. 5, 7, 8, 9, 10 and 11 to 13 extending upto Rs. 500/-.
It is explicit from the terms of sec. 15(2)
that the Authority appointed under sub-sec. 1 has jurisdiction to entertain
applications only in two classes of cases, namely, of deductions and fines not
authorised under ss. 7 to 13 and of delay in payment of wages beyond the wage
periods fixed under sec. 4 and the time of payment laid down in sec. 5.
This is clear from the opening words of
sub-sec. 2 of sec.
15, namely, "where contrary to the
provisions of this Act" any deduction has been made or any payment of
wages has been delayed. These being the governing words in the sub-sec.
the only applications which the Authority can
entertain are those where deductions unauthorised under the Act are made from
wages or there has been delay in payment beyond the wage period and the time of
payment of wages fixed or prescribed under ss. 4 and 5 of the Act. Section
15(2) postulates that the wages payable by the person responsible for payment
under sec. 3 are certain and such that they cannot be disputed.
In D'Costa v.B.C. Patel(1) this Court held
after considering the scheme of the Act that the jurisdiction of the Authority
under sec. 15 was confined to deductions and delay in payment of the actual
wages to which the workman was entitled and that the Authority under the Act
had no jurisdiction to enter into a question of potential wages, i.e., where
the workman pleads that he ought to have been up-graded as persons junior to
him were upgraded and that he ought to have been paid wages on a scale paid to
those so up-graded. This Court held that the Authority had jurisdiction to
interpret the terms of a contract of employment to find out the actual wages
payable to the workman where deduction from or delay in payment of such wages
is alleged, but not to enter into the question whether the workman should have
been up-graded from being a daily rated worker to a monthly rated workman. In
Shri Ambica Mills Co. Ltd. v.S.B. Bhatt(2) this Court again examined the scheme
of the Act and held that the only claims which could be entertained by the
Authority were claims arising out of deductions or delay made in the payment of
wages. The Court, however, observed that in dealing with claims arising out of
deductions or delay made in payment of wages the Authority inevitably would
have to consider questions incidental to these matters, but in determining the
scope of these incidental matters care must be taken to see that under the
guise of deciding incidental matters the limited jurisdiction was not
unreasonably or unduly expanded.
Equally, care must also be taken (1)  1
S.C.R. 1353. (2)  3 S.C.R.
1059 to see that the scope of these
incidental matters was not unduly curtailed so as to affect or impair the
limited jurisdiction conferred on the Authority. The Court declined to lay down
any hard and fast rule which would afford a determining test to demarcate the
field of incidental facts which could be legitimately considered by the
Authority and those which could not be so considered.
It is true, as stated above, that the
Authority has the jurisdiction to try matters which are incidental to the claim
in question. Indeed, sec. 15(1) itself provides that the Authority has the
power to determine all matters incidental to the claim arising from deduction
from or delay in payment of wages. It is also true that while deciding whether
a particular matter is incidental to the claim or not care should be taken
neither to unduly expand nor curtail the jurisdiction of the Authority. But it
has at the same time to be kept in mind that the jurisdiction under sec. 15 is
a special jurisdiction. The Authority is conferred with the power to award
compensation over and above the liability for penalty of fine which an employer
is liable to incur under sec. 20.
The question, therefore, is whether on the
footing that compensation payable under ss. 25FF and 25FFF of the Industrial
Disputes Act being wages within the meaning of sec. 2(vi)(d) of the Act, a
claim for it on the ground that its payment was delayed by an employer could be
entertained under sec. 15(2) of the Act. In our view it could not be so
entertained. In the first place, the claim made in the instant case is not a
simple case of deductions having been unauthorisedly made or payment having
been delayed beyond the wage-periods and the time of payment fixed under ss. 4
and 5 of the Act. In the second place, in view of the defence taken by
Respondent 1, the Authority would inevitably have to enter into questions
arising under the proviso to sec. 25FF, viz., whether there was any interruption
in the employment of the workmen, whether the conditions of-service under the
Board were any the less favourable than those under the company and whether the
Board, as the new employer, had become liable to pay compensation to the
workmen if there was retrenchment in the future. Such an inquiry. would
necessarily be a prolonged inquiry involving questions of fact and of law.
Besides, the failure to pay compensation on the ground of such a plea cannot be
said to be either a deduction which is unauthorised under the Act, nor can it
fall under the class of delayed wages as envisaged by ss. 4 and 5 of the Act.
It may be that there may conceivably be cases
of claims of compensation which are either admitted or which cannot be disputed
which by reason of its falling under the definition of wages the Authority may
have jurisdiction to try and determine. But we do not think that a claim for
compensation under sec. 25FF which is denied by the employer on the ground that
it 1060 was defeated by the proviso to that section, of which all the
conditions were fulfilled, is one such claim which can fall within the ambit of
sec. 15(2). When the definition of wages was expanded to include cases of sums
payable under a contract, instrument or a law it could not have been intended
that such a claim for compensation which is denied on grounds which inevitably
would have to be inquired into and which might entail prolonged inquiry into
questions of fact as well as law was one which should be summarily determined
by the Authority under sec. 15. Nor could the Authority have been intended to
try as matters incidental to such a claim questions arising under the proviso
25FF. In our view it would be the Labour
Court in such cases which would be the proper forum which can determine such
questions under sec. 33C(2) of the Industrial Disputes Act which also
possesses power to appoint a commissioner to take evidence where question of
facts require detailed evidence. Mr. Shroff, however, drew our attention to the
decision in Uttam Chand v. Kartar Singh(1) a decision of a learned Single Judge
of the High Court of Punjab, taking a view contrary to the one which we are
inclined to take. But that decision contains no reasons and is, therefore,
hardly of any assistance.
In the result we agree with the High Court
that the Authority had no jurisdiction under sec. 15(2) of the Act to try these
applications. The appeal consequently must fail and is dismissed. But we make
no order as to costs.
y.p. Appeal dismissed.
(1) 1 LL.J. 232.