Apr 16,2020 | 1 min read

Minimum Wages Act: Karnataka HC upholds Wage Revision by Government

Author - Dr Gubbi. S. Subba Rao, Counselor & Advocate

Vide judgment dated 13.04.2020 the Division Bench of Karnataka High Court upheld the validity of Minimum Wages Notifications by confirming the order of Single Judge on major issues with very little exceptions.  

OPERATIVE PORTION OF THE JUDGEMENT:

  1. State Government has no power to withdraw Minimum Wages Notification once it is duly notified, and therefore, all the three notifications relating to textile and related employments which are withdrawn are revived. Further, Draft Notification on Tailoring which was withdrawn is also revived and the State Government is at liberty to take further action to issue final notification. The three final notifications were officially gazetted on 30-12-2017 and the draft notification was gazetted on  22-02-2018 and all four of these notifications were withdrawn on 22-03-2018. The three final notifications belonged to Textile ( Silk) industry, Spinning Mills industry AND Cloth Dyeing and Printing industry. The said draft notification belonged to Tailoring industry. ( Writ Appeal No.1520/2019 filed by Union arises out of the Order passed by the Lower Bench on the Writ Petition No. 18621/2018 challenging the withdrawal of the four notifications-- challenged by the Union).

The Order of the Single Judge ( Lower Bench) dated 29-03-2019 had not disturbed the rates of minimum wages fixed. The learned Single Judge did not interfere with the withdrawal. However, a direction was issued by the Single Judge to the Government to accomplish the fixation/revision of Minimum Wages in respect of these four Sectors within six months.

NOTE: By way of Writ Appeal No.1681 to 1682/2019 a Memo was filed before the Divisional Bench of the High Court along with copies of Notifications issued by the Karnataka Government dated 31-10-2019 the latter Notifications of which were issued in respect of the four industry Sectors ( Spinning Mills etc including Tailoring). An IA No. 2 of 2020 was also filed by the Appellants in Writ Appeal No. 1681/2019 to permit to produce the said fresh Notifications dated 31-10-2019. The matter was fixed for further hearing on 23-01-2020.

The Divisional Bench held that all the three final Notifications dated 30th December 2017 will stand revived; the corresponding new Notifications dated 31st October 2019 issued by the Government will be rendered inoperative, inasmuch, as, there cannot be two sets of Notifications in respect of the same industries fixing the different rates from 30th December 2017.  Primarily, the withdrawal of these notifications are illegal and the issuance of fresh Notifications dated 31-10-2019 when the case on all these is pending before the Divisional Bench will have no effect. Withdrawal is ultra vires the Minimum Wages Act. The Government should have complied with the procedures prescribed under Section 5 of the Act. 


  1.  All the appeals filed by the Employers are dismissed. These are related to other 37 Sectors of employment. The Divisional Bench has held that fixation of Minimum Wages is a legislative function. Hence, it follows that the requirement of giving reasons and giving hearing are ruled out.

  2. Employers are liable to pay 4 paise per day on every one-point increase in the State CPI over 5780 if there is increase in CPI after the date of Notification.  However, clause which mandates payment of DA on wages which are higher than the minimum wage is set aside. This is to some extent is a relief to the Employers. To quote the specific clause 84 of the Order of the Divisional Bench, it states:

“In the impugned final notifications, there is a direction in clause (3) that in the event the rate of wage paid now is higher, the payment at the said rate shall be continued and increase in dearness allowance from time to time shall also be remitted. The first part of the said direction has already been set aside by the learned Single Judge by the impugned judgment and order. The second part of clause (3) is a direction which is applicable only to the payment of higher wages in terms of the first part of clause (3). As the first part is set aside, the second part must go. To that extent, the appeals by the employers will have to be allowed”.


  1. Note: The Division Bench has said that Considering the present situation (Covid 19- lockdown), to enable the aggrieved parties to approach the higher court, this judgment will not be implemented for 12 weeks from today, i.e., from the date of this Order.


IN VIEW OF THE ABOVE views and Judgment,

  1. Employers are liable to pay Minimum Wages as prescribed under the various Notifications which are officially notified by way of gazette in the year 2016-2017—( 37 Sectors)

  2. Wages notified under the three notifications relating to textile etc., (which were withdrawn and now revived) are payable w.e.f 30th December 2017.

 

  1. State Government shall take legal steps to finalise the draft notification dated 22-02-2018 (which is now revived). 

  2. Employers are liable to pay such revised Minimum Wages retrospectively since Division Bench has not interfered with such retrospective operation. 

  3. Revised Minimum Wages are payable with 6% interest from the date on which such wages were otherwise payable.  

  4. It is pertinent to mention that there was no stay on Minimum Wages Notifications granted by the Divisional Bench.  


Paragraph wise remarks of Divisional Bench on its judgement :



SL No.

Subject and Paragraphs

Remarks

  1.  

Power to withdraw Notification relating to Textile Industry - Para 50 to 61

  1. Power to revise or review Minimum Wages does not include power to withdraw Notifications, which only empowers government to enhance or reduce the rate.

  2. Power under Section 21 of the General Clauses Act (GC Act) can be used subject to following procedure under Section 5 (1) (a) or (b) of the MW Act, therefore, withdrawing notification based on the request of Employer and also Report of the Labour Commissioner cannot be done.  

  3. Power under Section 21 of GC Act cannot be exercised when the order or notifications are acted upon. As the notifications were passed on 30.12.2017, from that that the labour had vested right to revised minimum wages which could not have been disturbed by resorting to Section 21, 

  4. Withdrawal of Draft Notification is also illegal. Draft notification was subject to final words of the Government which had power to increase or reduce the wage, however, they chose to withdraw the same by exercising power under Section 21. When equally efficacious provisions are available under the statute, recourse to Section 21 is not permitted. 

  5. All the three withdrawn notifications stand revived, all notifications passed pursuant to the order in Writ Petition by single judge in the month of October 2019 have no leg to stand and government will have to take appropriate steps about notifying wage relating to withdrawn draft notification( Three plus one draft-  notifications which were withdrawn). 

  1.  

Nature of Power exercised by Government – Para 62 

  1. Process of Fixing Minimum Wage is  not a quasi-judicial function. It is a Legislative Function. Hence there is no compulsion to give reasons in the notification and also it is not mandatory to give opportunity of hearing. 

  1.  

Adopting procedure under Section 5(1)(a) over Section 5(1)(b) for some industries is arbitrary - Para 63 to 66

  1. Power is vested with the Government to adopt either the procedure under Section 5 (1) (a) OR Section 5(1)(b) and where the Government in its discretion has adopted the prior, such a fact itself cannot be called as arbitrary action. 

  2. In Chandra Bhavan’s case Apex Court has held that the procedure under Section 5 (1) (a) OR under Section 5(1)(b) are mere ways of collecting data, therefore, that itself cannot be a ground for challenge. 

  1.  

Illegality in Constitution of Board and Illegality in Proceedings - Para 67 to 80 

  1. Allegations of unequal numbers of employers and employees, qualification of a neutral member, appointment of chairman was never questioned by FKCCI, KEA and KASSIA which participated in the proceedings and at this later stage cannot be heard to object for the same. Note: However, the fact is that we have questioned this at the minimum wage advisory board meetings.

  2. No party has shown any prejudice caused by such irregularity which is purely technical in nature. 

  3. Illegality, irregularity or technical lapse in constitution cannot be a ground for challenge and courts under Article 226 cannot interfere in such matters as held in the cases of Ministry of Labour and Rehabilitation and also in the case of Edward Mills.

  4. With respect to lapses in proceedings:

  1. All the objections were considered, discussed and majority opinion was obtained. 

  2. Rule 16 and 17 with respect to voting proceedings are directory in nature. 

  3. Court can only interfere with the rate and manner of fixation of Minimum Wages on Substantial Ground and not otherwise as held in Ganesh Beedi case. 

  1.  

Consumer Price Index – Para 81 

  1. Court cannot act as an Appellate Body to scrutinize the facts and it also lacks expertise to consider CPI in determining Wage.  

  1.  

Cost of Housing – Para 82

  1. Since Industrial Housing Scheme is not in existence, the Govt has taken into consideration Scheme of Housing for Urban Poor while determine Cost of Housing. 

  2. Rate Fixed by the Govt cannot be termed as excessive and unreasonable. 

  1.  

Dearness Allowance as per Clause (3) of Wage Notification – Para 83 to 84.

  1. Since first part of Clause (3) is already set aside, second part which mandates payment of DA on the wage which are higher than Minimum Wage also should go. 

  2. Direction to pay 4 paise per day on every one point increase in the State CPI over 5780 is valid and applicable if there is increase in CPI after the date of Notification.   

  1.  

Discrimination between different employments and different rates in other States – Para 86. 

  1. Section 3(3)(iv) empowers Govt to prescribe different rates of wages for different industries and also wage for different geographies – reliance is placed on Bhikusa Yamas Khatria and Chnadra Bhavan cases. 

  1.  

Discrimination in determining Zones – Para 87. 

  1. Govt is the best judge to decide it and the Court under Article 226 cannot enter this space. 

  1. Writ Appeals of certain Sectors who claimed that they do not fall under and are not covered under the Schedules to the Minimum Wages Act has not been considered by the Court. They do come under the purview of the Act.

The Divisional Bench has upheld the Order of the Single Judge ( Lower Bench) which set aside the following including it’s interim orders:

  1. Service Seniority Allowance of 1%

  2. That part of the Notifications which directs the employers to pay and continue to pay the current wages that are above the notified minimum wages subject to the rider that the downward revision, if any, shall not be below the minimum wages prescribed under these notifications.

  3. Payment of minimum wages to the supervisory staff who do not come under the definition of ‘employee’ under Section 2 ( i ) of the Minimum Wages Act subject to the condition that the individual claim, if any, of such employees may be processed under Section 20 of the Minimum Wages Act, regardless of their designation.

  4. That part which directs the employer to constitute and appoint the Competent Officer and the Appellate Authority for adjudication of claims /disputes relating to payment of minimum wages.

  5. The interim orders granted earlier stand dissolved. The amount of wages that remain unpaid because of the interim orders shall be paid by the Petitioners/employers within a period of eight weeks with interest at 6% per annum from the date from which the same was otherwise payable.

However, the following Order of the Lower Bench as viewed by the Divisional Bench has been explained by me elsewhere in this views and expressions of mine: 

The Writ Petitions filed by the employers/trade unions challenging withdrawal of three minimum wage notifications and one draft notification are disposed off without interference; However, a Writ of Mandamus issues to the official Respondents to accomplish the fixation/revision of minimum wages in respect of the subject sectors of employment within an outer limit of six months by issuing the Minimum Wages Notifications with retrospective effect from the respective dates from which the minimum wages would have become payable, had the impugned withdrawal notifications were not issued”.

IMMEDIATE RELIEF MEASURES:

The Employers can approach the Honourable Supreme Court to seek relief on the following grounds, to mention a few:

  1.  The Division Bench has not considered any of the grounds raised by the employers. 

  2.   The possibilities of  prosecution for non-payment of minimum wages, the employers can seek stay of notifications before Supreme Court, and  

  3. The employers can request the Supreme Court to pass order for prospective payment of Minimum Wages 

  4. Employers can request the Supreme Court to waive off the 6% interest on the wages payable.

  5. The Employers can submit to the Apex Court about the present economic crash and the bleak economic future of the Nation and the practical difficulties of the employers in running the establishments after the lockdown is lifted. This is a period in the history of the country which most of the citizens and for this matter even the judiciary have not experienced earlier and therefore the Court has to view the present situation from a different lens altogether in deciding the matters before it. 

NOTE: EMPLOYERS WHO WISH TO CHALLENGE THE ORDER OF THE DIVISIONAL BENCH BEFORE THE SUPREME COURT ARE GIVEN 12 WEEKS TIME FROM THE DATE OF THIS ORDER ( i.e., Order dated 13-04-2020)

Since our Office persons may not be physically present at this juncture of Coved period to answer your queries, till such time the lockdown is lifted, should you require any further clarifications you may contact Dr Gubbi, on 8105671578. You can also reach us by e-mail: attorney@drgubbishouseofjustice.com; drgubbilegal@gmail.com 

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ABOUT THE AUTHOR


Dr Gubbi Subba Rao

We assist individuals, family and corporates in International commercial disputes in conciliation, mediation, international arbitration and litigation before appropriate courts globally. We handle disputes under different jurisdiction courts globally : BAR ASSOCIATIONS IN EUROPEAN COUNTRIES , BAR ASSOCIATIONS IN UAE, BAR ASSOCIATIONS IN FAE EAST, etc. Appearances: INDIA, ASIA, UK, UAE, EUROPE, FAR EAST, Others.

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