Union of India & Ors. v. Heavy Vehicles Factory Employees' Union & Anr.

1. Aggrieved against the order passed by the Division Bench of the High Court of Judicature at Madras dated 30.11.2011, the present appeals have been filed by the Union of India. Vide the aforesaid judgment, the order passed by the Central Administrative Tribunal (CAT), Madras Bench, dated 24.12.2010 passed in a bunch of applications filed by the respondents, was set aside.

2. Briefly, the issue is as to whether compensatory allowances, such as House Rent Allowance (HRA), Transport Allowance (TA), Clothing and Washing Allowance (CWA) and Small Family Allowance (SFA), would fall within the term "ordinary rate of wages" for calculation of overtime wages in terms of Section 59(2) of the Factories Act, 1948 (the 1948 Act).

3. Learned counsel appearing for the appellants, taking us through the historical background, has drawn our attention to various letters issued by different Ministries, in terms of which the respondents will not be entitled to add various components of compensatory allowances for the purpose of calculation of overtime wages. A letter dated 01.09.1959 (Ministry of Defence) provided that overtime up to 9 hours a day or 48 hours a week is payable on basic pay and dearness allowance only, and beyond that on total wages including various allowances. A letter dated 12.06.2000 (Ministry of Labour) provided that travelling allowance should be added in the basic rate for calculation of overtime under Section 59(2). An Office Memorandum dated 14.11.2002 (Ministry of Finance) provided that wages under Section 59(2) include only basic pay and dearness allowance and allowances uniformly applicable to all government employees, expressly excluding HRA, TA and CWA. Office Memoranda dated 19.11.2007, 16.03.2007, 26.03.2008, 27.05.2009 and 26.06.2009 took the position that compensatory allowances including HRA, TA, SFA may be excluded for computing overtime wages under the 1948 Act.

4. Aggrieved against the aforesaid interpretation, multiple Original Applications were filed before the Tribunal by employee unions of various factories engaged in production of defence equipment controlled by the Ministry of Defence. The CAT dismissed the applications vide order dated 24.12.2010. The respondents challenged the same before the High Court by filing Writ Petitions. According to the appellants, the High Court misdirected itself and wrongly interpreted the 1948 Act by not giving weightage to the clarifications issued by the Ministries of Finance, Labour and Defence, putting an exorbitant financial burden on the factories.

5. The appellants argued that different allowances are paid to different kinds of employees and in different quantum, so including them would create disparity in the calculation of overtime wages — some workmen travel by factory buses while others get travelling allowance; some are provided accommodation while others get HRA; similarly for CWA and SFA. Reliance was placed on Bridge and Roofs Co. Ltd. v. Union of India, Govind Bapu Salvi v. Vishwanath Janardhan Joshi and Union of India v. Suresh C. Baskey.

6. In response, learned counsel for the respondents took us through the scheme of the 1948 Act. Referring to Section 59, he submitted that whatever wages, in any form, a workman is getting, overtime is to be paid at double that rate, and the exclusions sought by the appellants are impermissible; a law framed by Parliament cannot have different application in different establishments. He referred to a letter dated 22.05.2011 of the Ministry of Railways showing that HRA, TA, etc. are taken into account for overtime there. He submitted that the various letters/Office Memoranda relied on by the appellants are merely the views of different Ministries which have no power to issue clarifications under Section 59(2); the 1948 Act, being beneficial legislation, should be liberally construed in favour of employees. He referred to the definition of "wages" in Section 2(vi) of the Payment of Wages Act, 1936 and Section 2(rr) of the Industrial Disputes Act, 1947, and relied on Rajasthan State Industrial Development & Investment Corpn. v. Subhash Sindhi Coop. Housing Society and Gujarat Mazdoor Sabha v. State of Gujarat.

7. Heard the learned counsel for the parties and perused the relevant material on record.

8. In the case in hand, we are concerned with the interpretation of Section 59(2), which forms part of Chapter VI of the 1948 Act, titled 'Working Hours of Adults'. Sections 64 and 65 thereof deal with power to make exempting rules and orders, and such powers have been vested with the State Government. The relevant provision of Section 59(2) is reproduced herein below: "59. Extra wages for overtime.- … (2) For the purpose of sub-section (1), 'ordinary rate of wages' means the basic wages plus such allowances, including the cash equivalent of the advantage accruing through the concessional sale to workers of foodgrains and other articles, as the worker is for the time being entitled to, but does not include a bonus and wages for overtime work."

9. It is pertinent to throw some light on the definition of 'State Government'. Although no definition is found under the 1948 Act, Clause 60 of Section 3 of the General Clauses Act, 1897 clarifies that, after the commencement of the Constitution (Seventh Amendment) Act, 1956, "State Government" means the Governor in a State and the Central Government in a Union Territory. Section 64 empowers a State Government to make rules on various matters; rules made under it remain in force for not more than 5 years. Section 65 confers power to issue exempting orders on the State Government (or the Chief Inspector subject to the control of the State Government). Meaning thereby, as far as Chapter VI is concerned, there is no power vested with different Ministries of the Government of India to issue any clarification with reference to Section 59(2) of the 1948 Act, especially with respect to what is to be included or excluded for the purpose of calculation of 'ordinary rate of wages', in order to determine the wages payable for overtime to an employee.

10. Now coming to Chapter XI of the 1948 Act, titled 'Supplemental', Section 112 empowers the State Government to make rules to give effect to the purposes of the Act, and Section 113 empowers the Central Government to give directions to the State Governments for carrying out execution of the provisions of the Act. These sections again do not empower the Central Government to issue any clarification or direction with reference to any provision of the 1948 Act, nor to frame rules. The entire power is vested with the State Governments; all that the Central Government can do is issue directions to the State Governments.

11. The judgment in Bridge and Roofs Co. Ltd. does not support the appellants, as the issue there was whether production bonus is included in 'basic wages' under Section 2-B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The judgment in Suresh C. Baskey is distinguishable: the issue there was whether employees occupying government accommodation (and thus not paid HRA) are entitled to notionally add HRA to compute the 'ordinary rate of wages', which was answered in the negative. Govind Bapu Salvi also does not assist the appellants, since the employees there were allotted official quarters and HRA was therefore not included for overtime under Section 59(2).

12. Coming to the judgments cited by the respondents, in Rajasthan State Industrial Development & Investment Corpn. this Court held that executive instructions which have no statutory force cannot override the law, and any notice, circular or guideline running contrary to statutory provisions cannot be enforced. In Gujarat Mazdoor Sabha, this Court explained the scheme and objects of the Factories Act, 1948 and the social and economic value of overtime, observing that the Factories Act was enacted to guarantee occupational health and safety as a bulwark against harsh working conditions; that Sections 64(2) and 65(2) permit limited exemptions from working-hour provisions in Chapter VI but do not enable an exemption from Section 59, which mandates payment of overtime at double the ordinary rate; and that an interpretation curtailing benefits to workers must be avoided.

13. It was opined in the aforesaid judgment that the 1948 Act was enacted to guarantee occupational health, safety and physical well-being of the workers. The exemptions under Sections 64 and 65 were discussed, and the concessions provided therein were held not applicable to Section 59 which prescribes payment of overtime wages. An interpretation which restricts or curtails benefits available to workers under the 1948 Act must be avoided; Chapter VI intends to protect the workmen against exploitation.

14. Further, there was no answer to the argument that the same provision is being interpreted differently by the Ministry of Railways, where all the allowances are being included within 'ordinary rate of wages' for computing overtime, as is evident from the letter dated 20.05.2011 of the Ministry of Railways. Different Ministries of the Government of India cannot assign different meaning to a provision in the Act of Parliament, which otherwise is clearly evident from the plain reading of Section 59 (2) of the 1948 Act.

15. As observed by the High Court, the core of the controversy rested upon the interpretation of Section 59(2) of the Factories Act, 1948, which defined the "ordinary rate of wages" as basic wages plus "such allowances" as the worker for the time being is entitled to. The High Court has rightly opined that it is well-settled principle of statutory construction that the Legislature never wastes its words. Notably, when the statute provides for only two specific exclusions: bonus and wages for overtime work, in the absence of any formal rules governing the exclusion of other entitlements, the Executive cannot, through a mere Office Memorandum, read additional exclusions into the Act that the Legislature did not contemplate. The High Court further noted that the employees had been in receipt of overtime allowances calculated by including HRA, TA, SFA, etc., for a considerable duration; the sudden exclusion of these allowances via the Office Memorandum dated 26.06.2009 lacks legal authority and is contrary to the literal mandate of Section 59 of the 1948 Act.

16. We also came across a judgment of the Kerala High Court in V.E. Jossie v. The Flag Officers Commanding in Chief Headquarters, which has taken a view contrary to the view being expressed by us in the present judgment. The Kerala High Court upheld the order of the Central Administrative Tribunal, Ernakulam Bench discontinuing overtime allowance on HRA, City Compensatory Allowance, TA, SFA, etc. The same being contrary to the view expressed by this Court, we hold that the aforesaid judgment does not lay down the correct law.

17. For the reasons mentioned above, we do not find any case is made out for interference with the impugned judgment of the High Court. The appeals are, accordingly, dismissed.

18. Pending applications, if any, shall also stand disposed of, with no order as to costs.