Karnataka High Court
Management Of Jyothi Home Industries ... vs State Of Karnataka And Others on 9 September, 1999
Equivalent citations: [2000(84)FLR391], 2001(2)KARLJ217, (2000)ILLJ596KANT
ORDER V.P. Mohan Kumar, J.
1. It has been recognised that the payment of the minimum wages to a worker by the employer has to be guaranteed by the State. Though, the Supreme Court of the United States as late as in 1936 i.e., in More Head v Tipaldo, regarded a Minimum Wages Act as an unconstitutional interference with the Freedom of Property, this has not been so with Indian Polity. A minimum wage was considered necessary catalyst to advance social status of the worker even according to our ancient law given and treated as an obligation of the State.
2. Mr. Justice Y. Bhaskar Rao (as he then was) pointed out thus in Secunderabad Club v State of Andhra Pradesh, adverting to the concept of minimum wages as laid down in Sukra Neeti, His Lordship quoted thus:
"It would be relevant to look at the conditions governing wage, life and other social aspects of workers, which are delineated in Sukra Neeti an ancient treatise. The English translation of which is:
"Wages to be considered as fair must be sufficient to procure the necessities of life from out of the wage. The wage of an employee should therefore be a fair wage, so as to enable him to procure all the necessary requirements of life". (Sukra Neeti II, 805-806).
"By payment of very low wages, employees (of the king) are likely to become his enemies and they are also likely to become plunderers of treasuries and cause harassment to the general public". (Sukra Neeti II, 807-808)".
Thus the concept of payment of minimum wages was in-built in our society even before the introduction of the Minimum Wages Act of 1948.
3. The principle that it is the duty of the State to ensure the payment of minimum wages has now been recognised by the framers of the Constitution by incorporating Article 43 in the Constitution of India. Though this Article is included in the Chapter of Directive Principles and in its sweep contemplates payment of 'living wages' to a worker, nevertheless, it is the duty of the State to ensure that the workers are paid the minimum wages. The exercise to fix the minimum wages being thus the responsibility of the State, it has enacted the Minimum Wages Act in 1948 itself, whereby the State has directly imposed statutory minimum standards on the scheduled employment. Referring to Kahn-Frend's Article on "Minimum Wages Legislation in Great Britain" Friedman, in his book "Law in a Changing Society" (2nd Edition) states thus in regard to the minimum wage fixation:
"In substance this is sometimes much like a process of collective bargaining, but in form it is a State Act which, by means of a statutory order, imposes terms on the parties themselves. In Britain, this machinery is used in a few industries where collective organisation is weak, notably in agriculture, catering and in the retail trade".
4. In India the fixation is intended to cover all industries scheduled to the Act and included in the Schedule by virtue of the exercise of power under Section 27 thereof irrespective of the fact whether there is collective bargaining or not. It further traverses and statutorily nullifies the results of any collective bargaining if it is demonstrated that the same is against the statutory fixation under the Minimum Wages Act, 1948.
5. The Act has set up certain mechanism to ascertain what would be the minimum wages payable to the worker. It defines 'wages' at Section 2(h) in the following manner:
"2(h) "Wages" means all remuneration, capable of being expressed in terms of money, which would, if the terms of the con-
tract 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;
(ii) any contribution paid by the employer to any Pension Fund or Provident Fund or under any scheme of social insurance;
(iii) any travelling allowance or the value of any travelling concession;
(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(v) any gratuity payable on discharge".
6. It means that the minimum wages being fixed to be paid under the Act does not include the value of house accommodation, supply of light, water, medical allowance, such other amenities to be provided by the employer by the orders of the appropriate Government, contribution paid to the provident fund etc., the travelling allowance or such other concession for travelling, special allowances paid to meet expenses in connection with the employment and gratuity payable. In other words, it may be reasonable to conclude that the expression "living wages" employed in Article 43 of the Constitution should be understood to mean the statutorily fixed minimum wages besides the above mentioned items in the pay packet.
7. If that be so, the inquiry then leads to the mode of fixation of the minimum wages, ingredients to make up the minimum wages and the relevant consideration that should be taken note of in the matter of fixation of the quantum of minimum wages for any scheduled industry. Whenever the State has issued orders fixing the minimum wages with respect to an industry the same has ended in a challenge before the Courts. A whole catena of judgments have grown around the subject and as such, the task of the authorities, to a great extent, rendered light. We are, in these writ petitions, concerned with the fixation of minimum wages for Beedi Industry.
8. The petitioners herein are manufacturers of Beedi. Though it is proclaimed all over, that smoking is injurious to the health, this industry thrives on producing a commodity causing injury to the health of the society! Nevertheless, it being an industry it is also covered by the Minimum Wages Act, for the fixation of minimum wages.
9. The pleadings in this case is that the Government by notification dated February 24, 1994 constituted a Tripartite Committee whose one among other objects was to recommend the minimum wages for the Beedi Industry. In exercise of its powers vested in it under Section 5(l)(b) read with Section 3(l)(b) of the Minimum Wages Act (Act 10 of 1948) (hereinafter referred to as the 'Act'), the Government of Karnataka issued Notification No. Ka.e. 249 LMW 93, Bangalore, dated May 9, 1995 proposing to review the existing minimum wages being paid to the workers employed in the Beedi Industry, To the proposals made, both the employers as well as the workers set forth their objections/suggestions. Thereafter these objections and suggestions were placed before Tripartite Committee who after their deliberations submitted their recommendations to the Government. The Government examined the same and in exercise of the powers conferred under Section 3(l) read with Section 5(1) and (2) of the Act issued the Notification No. Ka.e. 249 LMW 93, Bangalore, dated October 24, 1996 fixing the minimum wages for the Beedi Industry. The validity thereof is challenged in these proceedings.
10. I have heard K. Kasturi and A.G. Holla, the learned Counsels appearing for the petitioners, Mr. R.I. D'Sa, learned Government Advocate, Mr. M.C. Narasimhan, Mr. Anantharaman and Mr. K.S. Subrama-niam appearing for the various trade unions of workers. Both sides highlighted various aspects of the issues involved. In a nutshell, shorn of the details, the minimum wages fixed for the workers as per the impugned notification is as under:
"The pre-existing wages of Rs. 19.65/- per 1,000 Beedis rolled and VDA at 2 paise over the above 976 points has been enhanced to Rs. 36.85/- per 1,000 Beedis rolled besides VDA at the rate 3 paise per point in excess of 1,513".
When the writ petitions were admitted interim stay of the implementation of the notification was granted. Subsequently, the said order was modified in the following manner by order dated April 16, 1997:
"Interim stay granted by this Court on January 29, 1997 is modified to the effect the minimum wages as notified by Annexure-A shall be fixed at 2.5 paise per point in excess of 1,513 points and this order shall be deemed to have been made with effect from January 29, 1997".
(Annexure-A is the impugned notification dated October 24, 1996) This has been the state of affairs in the matter of payment of minimum wages pending the writ petitions, and since January 29,1997.
11. Several contentions have been urged assailing the fixation of the minimum wages and upholding the same. Beedi Industry in Karnataka, it is claimed is employing around 8 lakhs of workers. It is alleged that, of them, more than 60% are confined to the erstwhile South Canara District. A guarantee to pay reasonable wages for these workers is therefore an essential requirement for the existence of a contended workforce and peaceful industrial relations. It has to be borne in mind that in the light of the hazards caused by the Tobacco, the industry has gained an unenviable status of being involved in an activity which produces a commodity which injures the health of the consumers. Impliedly, the worker engaged in the work is also exposed to serious threat to his health, Tuberculosis being the commonly afflicted disease, and it being highly contagious. In principle, therefore, the wage structure to such a worker should cover such monetary benefits with which he can provide additional protection for himself as also to his family. There are, no doubt, several legislations enacted by the State in this behalf which statutorily take care of the health of workers. But as these protect only the workers by the large and the need to protect his dependents is still with him, fixation of the minimum wages to the industry should keep this aspect also in mind.
12. While adverting to the contentions of the learned Counsel for employer, the basic factor to be borne in mind is that as stated supra the Minimum Wages Act has been enacted to secure the minimum wages to the worker employed in the scheduled industry. In that scenario the role of the employer is to appear only at the defined scenes; but be that as it may, we have to remember that the worker is neither the hero nor the employer the villain. While exercising its power under the Act, on the course of fixation of minimum wages the appropriate Government has to create an atmosphere in the industry to achieve a harmonious co-existence between the two. The various statutory provisions have to be utilised for this purpose and in such a manner keeping this in mind. To put it briefly in the words of Mr. Justice K.T. Thomas in State of Gujarat and Another v Hon'ble High Court of Gujarat, "Minimum wages law has now come to stay. This Court has held that minimum wage which is sufficient to meet the bare physical needs of a workman and his family irrespective of the paying capacity of the industry must be something more than subsistence wage which may be sufficient to cover the bare physical needs of the worker and his family including education, medical needs, amenities adequate for preservation of his efficiency".
This is the need of the hour while fixing the minimum wages under the Act.
13. Spearheading the challenge to the notification Mr. Kasturi, learned Counsel for the petitioner contended that relevant factors were not borne in mind by the appropriate Government while fixing the minimum wages to the industry in question. In that, he points out that the fixation ought to have commenced first, fixing the minimum wages for the industry producing the raw materials which are the constituent in the manufacture of Beedi. He points out that the cardinal rule to be observed is that such fixation should not destroy the industry and that the survival of the industry is also a paramount consideration. To do justice in this behalf, the appropriate Government should have analysed the cost of the raw materials, overheads to procure the same, the protection of the marketing, profitability etc. He points out that the increase now effected by the fixation virtually amounts to a 100% rise which the industry may not be able to bear. He points out that the fixation now made borders on arbitrariness and may even induce the industry to migrate. The minimum wages fixed as per the impugned notification is far higher compared to the fixation made with respect to the very same industry in Madhya Pradesh, Maharashtra, Andhra Pradesh, Tamil Nadu etc., which contribute to an extent of 60% of the total production of beedies. He demonstrates that the neutralization now effected amounts to 124.04% which is contrary to the dictum of this Court in the case of M/s. Aspinwal and Company Limited and Others v State of Karnataka and Others. According to him the reasonable minimum wages would be Rs. 34.23. He submits that the appropriate Government has not kept in mind the circumstance as to whether the industry would be in a position to pay the minimum wages fixed. Further the notification fixing the minimum wages itself appeared in January 1997 making it retrospective from November 1, 1996; this is per se illegal. He also points out that the preliminary notification indicated VDA at 2 paise per point over and above 1,513 points whereas the final notification enhanced it to 3 paise without any reason. He also points out that in the Advisory Committee constituted under the Act there was no representative of the Industry from Dakshina Kannada District who is a major producer. He further submits that the workers had signed a settlement regarding the minimum wages payable which is far less that the present fixation.
14. Mr. A.G. Holla appearing for some of the petitioners further contended that the requirement of Section 5(l)(b) of the Act has not been complied with while fixing the minimum wages and that the industry has not been effectively consulted by the authorities while fixing the same.
15. Mr. M.C. Narasimhan appearing for the workers, rebutted the arguMents of the petitioners. He contended that the employer had not placed any materials before the Committee to quantify the correct minimum wages payable, that the wages fixed is the need based fixation and the allegation that the same is fair wages and not minimum wages is incorrect. He submits that in the area of fixation of minimum wages the capacity of the industry to pay the wages thus fixed or its economic or financial capacity do not provide any criteria for the fixation of such minimum wages. The object of fixation of the minimum wages to the worker is to uplift him from the poverty line. In the instant case the employer has been effectively consulted before the fixation and the scope of consultation is not to be understood as securing his concurrence. When the Committee constituted reports after its deliberations regarding the minimum wages payable, by virtue of statutory requirements, the Government is bound to accept the same. He submits that in the settlement entered under the Industrial law fixing the wages payable is not binding on the workers and is invalid. There is basic difference between fair wages and minimum wages and what is notified is the minimum wages.
16. Mr. Subramanian, learned Counsel appearing for a set of workers points out that the minimum wages now fixed is below poverty line. He submits that such wages should provide for subsistence of the workers as well as for preservation of efficiency of the workers. He further submits that the Courts should not lightly interfere with such fixation and only in rare cases that can be attempted.
17. Mr. Anantharaman appearing for yet another group of workers submitted that in the draft notification itself it was indicated that the VDA would be 2.5 paise per point above 1,513 which now has been fixed at 3 paise. According to him in the basic pay there is a revision of 25% and in the fringe benefits it is at 5%. The alleged industrial settlement is against the provisions of the Minimum Wages Act and is hence invalid.
18. The learned Government Advocate Mr. D'Sa made available the files for perusal and submitted that correct parameters were kept in mind while fixing the minimum wages by the appropriate Government and it was so fixed after due consultation and deliberations. He cited the judgment of the Supreme Court which in unambiguous terms declared that any industry that cannot pay the minimum wages has no right to exist.
19. One has to concede that there does not exist any sure methodology to be adopted whereby a precise fixation of the minimum wages to any industry can be effected. Such fixation as always, would be in the realms of surmises and assessments. This is what is voiced by Mr. Justice Gajendragadkar (as he then was) in Standard Vacuum Refining Company of India, Limited v Its Workmen (Including Clerical Staff) and Another (Petroleum Refineries Employees' Sabha), wherein he stated thus:
"It is well-known that the problem of wage structure with which industrial adjudication is concerned in a modern democratic State involves on the ultimate analysis to some extent ethical and social considerations. The advent of the doctrine of a welfare State is based on notions of progressive social philosophy which have rendered the old doctrine of laissez faire obsolete. In the nineteenth century the relation between employers and employees were usually governed by the economic principle of supply and demand, and the employers thought that they were entitled to hire labour on their terms and to dismiss the same at their choice subject to the specific terms of contract between them, if any. The theory of "hire and fire" as well as the theory of "supply and demand" which were allowed free scope under the doctrine of laissez faire no longer hold the field. In constructing a wage structure in a given case industrial adjudication does take into account to some extent considerations of right and wrong, propriety and impropriety, fairness and unfairness. As the social conscience of the general community becomes more alive and active, as the welfare policy of the State takes a more dynamic form, as the national economy pro-
gresses from stage to stage, and as under the growing strength of the trade union movement collective bargaining enters the field, wage structure ceases to be a purely arithmetical problem. Considerations of the financial position of the employer and the state of national economy have their say, and the requirements of a workman living in a civilised and progressive society also come to be recognised. It is in that sense, and no doubt to a limited extent, that the social philosophy of the age supplies the background for the decision of industrial disputes as to wage structure. As Mrs. Barbara Wootton has pointed out, the social and ethical implications of the arithmetic and the economics of wages cannot be ignored in the present age ("The Social Foundations of Wage Policy" by Barbara Wootton -- Allen and Unwin, 1955).
It is because of this socio-economic aspect of the wage structure that industrial adjudication postulates that no employer can engage industrial labour unless he pays it what may be regarded as the minimum basic wage. If he cannot pay such a wage he has no right to engage labour, and no justification for carrying on his industry; in other words, the employment of sweated labour which would be easily available to the employer in all undeveloped and even under-developed countries is ruled out on the ground that the principle of supply and demand has lost its validity in the matter of employment of human labour, and that it is the duty of the society and the welfare State to assure to every workman engaged in industrial operations the payment of what in the context of the times appears to be the basic minimum wage. This position is now universally recognised".
20. A perusal of the decisions on this subject will show the measure of uncertainty that dogged every fixation of minimum wages. Now, several theories in Economics exist which can be fruitfully employed in such fixations. If the competent authorities have borne in mind the relevant considerations and has eschewed irrelevant circumstances, and there was an effective and meaningful consultation process as envisaged under Section 5 of the Act, then the result arrived at by them may have to be accepted as a fire fixation of minimum wages. The scope of judicial review in such events is restricted to examine only whether the competent authority was aware of the material paradigms and kept itself bound within the scope of inquiry. If there be a positive answer to this query, perhaps the judicial review ends.
21. We will now take up this issue for consideration. As we noticed earlier, minimum wages is not synonym of living wages nor is it the fair wages. It may be understood, as an intermediary wages above the living wages and below fair wages. Now hypothetical cases apart, has the Government kept this aspect in mind while fixing the impugned minimum wages? We will briefly deal with the question in the following manner applying the factual materials available here. The variable D.A. hitherto had been 0.02 paise per point excess of 976. Now by the impugned notification it has been revised to 0.03 paise per point above 1,513. In other words, 537 points which would have earned a sum equal to Rs. 10.74 in the absence of wage revision has been taken away as far as the worker is concerned. If this is worked out under pre-revision fixation a worker would have earned Rs. 19.65 + Rs. 10.74 (Rs. 30.39) as against Rs. 36.87 now fixed. To put it differently the hike is Rs. 6.48 that is the percentage of hike is 20% in aggregate. Now thereafter 0.02 paise has been increased to 0.03 paise on one count and the basic salary of Rs. 19.65 enhanced to Rs. 36.85. When the above said 537 points absorbed in the basic salary it will work out at Rs. 30.39. The index point as on April 1, 1976 was 1,700 (vide statement made at the Bar). Therefore the difference from the earlier index is 1,700 - 976 = 724. But if 0.03 paise is reckoned taking into account for the 724 points it would be Rs. 19.65 + 21.72 = Rs. 41.37. Now the minimum wages as per the impugned notification as on November 1, 1996 would be Rs. 36.85 + 5.61 = Rs. 42.46. In other words the increase of VDA at 3 paise has been given effect to from the date of earlier fixation of VDA i.e., from the date of Index point was 976.
22. Now we turn to the consideration of the various questions of law argued by the respective Counsels. It has to be borne in mind that irrespective of the claim for the revision of wages the appropriate Government could effect a revision once in five years. How does it go about with this exercise to begin with, the appropriate Government should be satisfied with the need of a fixation/revision of minimum wages in a scheduled industry. As Section 3 indicates a quinquennial revision of the wages shall be undertaken once in five years. The statute calls upon the fixation of the minimum wages that should be paid to the worker. The attempt of the appropriate Government would be to ascertain and fix as minimum wages that wage which would be neither just sufficient wage nor would it be a fair wage.
23. There are several judgments rendered by the Courts to guide the appropriate Government in this task. In Chandra Bhawan Boarding and Lodging, Bangalore v State of Mysore and Another, the Supreme Court stated as under:
"From this analysis of the basis of fixing of the minimum wage, it will be seen that, as a rule, though the living wage is the target, it has to be tempered, even in advanced countries, by other considerations, particularly the general level of wages in other industries and the capacity of industry to pay. This view has been accepted by the Bombay Textiles Labour Inquiry Committee which says that "the living wage basis affords an absolute external standard for the determination of the minimum" and that "where a living wage criterion has been used in the giving of an award or the fixing of a wage, the decision has always been tempered by other considerations of a practical character".
In India, however, the level of the national income is so low at present that it is generally accepted that the country cannot afford to prescribe by law a minimum wage which would correspond to the concept of the living wage as described in the preceding paragraphs. What then should be the level of minimum wages which can be sustained by the present stage of the country's economy? Most employers and some Provincial Governments consider that the minimum wage can at present be only a bare subsistence wage. In fact, even one important All-India Organization of employees has suggested that "a minimum wage is that wage which is sufficient to cover the bare physical needs of a worker and his family". Many others, however, who have replied to our questionnaire, consider that a minimum wage should also provide for some other essential requirements such as a minimum of education, medical facilities and other amenities. We consider that a minimum wage must provide not merely for the bare sustenance of life but for the preservation of the efficiency of the worker. For this purpose, the minimum wage must also provide for some measure of education, medical requirements and amenities.
xxx xxx xxx
13. Our attention was not drawn to any material on record to show that the minimum wages fixed are basically wrong. Prima facie they appear to be reasonable. We are not convinced that the rates prescribed would adversely affect the industry or even a small unit therein. If they do, then the industry or the unit as the case may be has no right to exist. Freedom of trade does not mean freedom to exploit. The provisions of the Constitution are not erected as the barriers to progress. They provide a plan for orderly progress towards the social order contemplated by the preamble to the Constitution. They do not permit any kind of slavery, social, economic or political. It is a fallacy to think that under our Constitution there are only rights and no duties. While rights conferred under Part III are fundamental, the directives given under Part IV are fundamental in the governance of the country".
In U. Unichoyi v State of Kerala, the Supreme Court explained what arc the components that would make up the minimum wages and stated thus:
"It is, therefore, necessary to consider what are the components of a minimum wage in the context of the Act. The evidence led before the committee on fair wages showed that some witnesses were inclined to take the view that the minimum wage is that wage which is essential to cover the bare physical needs of a worker and his family, whereas the overwhelming majority of witnesses agreed that a minimum wage should also provide for some other essential requirements such as a minimum of education, medical facilities and other amenities. The committee came to the conclusion that a minimum wage must provide not merely for the bare subsistence of life but for the preservation of the efficiency of the worker, and so it must also provide for some measure of education, medical requirements and amenities. The concept about the components of the minimum wage thus enunciated by the committee have been generally accepted by industrial adjudication in this country. Sometimes the minimum wage is described as a bare minimum wage in order to distinguish it from the wage structure which is "subsistence plus" or fair wage, but too much emphasis on the adjective "bare" in relation to the minimum wage is apt to lead to the erroneous assumption that the minimum wage is a wage which enables the worker to cover his bare physical needs and keep himself just above starvation. That clearly is not intended by the concept of minimum wage. On the other hand, since the capacity of the employer to pay is treated as irrelevant it is but right that no addition should be made to the components of the minimum wage which would take the minimum wage near the lower level of the fair wage, but the contents of this concept must ensure for the employee not only his sustenance and that of his family but must also preserve his efficiency as a worker. The Act contemplates that minimum wage relation should be fixed in the schedule industries with the dual object of providing sustenance and maintenance of the worker and his family and preserving his efficiency as a worker".
There is an elaborate discussion in this behalf again in Workmen represented by Secretary v The Management of M/s. Reptakos Brett and Company Limited and Another, where it concluded as under:
"10. The Tripartite Committee of the Indian Labour Conference held in New Delhi in 1957 declared the wage policy which was to be followed during the Second Five Year Plan. The Committee accepted the following five norms for the fixation of minimum wage:
(i) In calculating the minimum wage, the standard working class family should be taken to consist of 3 consumption units for one earner; the earnings of women, children and adolescents should be disregarded.
(ii) Minimum food requirement should be calculated on the basis of a net intake of calories, as recommended by Dr. Ayk-royd for an average Indian adult of moderate activity.
(iii) Clothing requirements should be estimated as per capita consumption of 18 yards per annum which would give for the average workers' family of four, a total of 72 yards.
(iv) In respect of housing, the rent corresponding to the minimum area provided for under Government's Industrial Housing Scheme should be taken into consideration in fixing the minimum wage.
(v) Fuel, lighting and other 'miscellaneous' items of expenditure should constitute 20% of the total minimum wage".
In fact these were the norms that was considered and approved by the Supreme Court in Standard Vacuum Refining Company of India, Lim-ited's, case, supra, wherein they catalogued the same as under:
"(i) In calculating the minimum wage, the standard working class family should be taken to consist of three consumption units for one earner; the earnings of women, children and adolescents should be disregarded.
(ii) Minimum food requirement should be calculated on the basis of a net intake of calories, as recommended by Dr. Aykroyd for an average Indian adult of moderate activity.
(iii) Clothing requirements should be estimated, at a per capita consumption of 18 yards per annum which would give for the average worker's family of four, a total of 72 yards.
(iv) In respect of housing, the rent corresponding to the minimum area provided for under Government's Industrial Housing Scheme should be taken into consideration in fixing the minimum wage.
(v) Fuel, lighting and other 'miscellaneous items of expenditure should constitute 20 per cent of the total minimum wage'".
Guidelines apart, in Express Newspaper Limited and Another v Union of India and Others, the Supreme Court had cautioned the appropriate Government that while fixing the minimum wages, the wages should be such that the industry should be able to pay. Yet it was indicated therein that undue weight should not be given to the financial capacity of the industry. Their Lordships after discussion summed up thus:
"The principles which emerge from the above discussion are:
(1) that in the fixation of rates of wages which include within its compass the fixation of scales of wages also, the capacity of the industry to pay is one of the essential circumstances to be taken into consideration except in cases of bare subsistence or minimum wage where the employer is bound to pay the same irrespective of such capacity;
(2) that the capacity of the industry to pay is to be considered on an industry-cum-region basis after taking a fair cross-section of the industry; and (3) that the proper measure for causing the capacity of the industry to pay should take into account the elasticity of demand for the product, the possibility of tightening up the organisation so that the industry could pay higher wages without difficulty and the possibility of increase in the efficiency of the lowest paid workers resulting in increase in production considered in conjunction with the elasticity of demand for the product - no doubt against the ultimate background that the burden of the increased rate should not be such as to drive the employer out of business.
These are the principles of fixation of rates of wages and it falls now to be considered what is the machinery employed for such fixation".
In other words the stress was, if it could be made out, that without incurring loss, if the minimum wages can be paid by the industry, the fact that it would erode into the profit margin of the employer may not be a consideration while fixing the minimum wages. This aspect has been further clarified in Sangam Press Limited v The Workmen, in the following manner:
"The Tribunal seems to have computed the profits of the appellant for each year on the assumption that the capital expenditure incurred in a particular year must have come out of the profits of that year and, therefore, to arrive at the correct trading result, the amount of the capital expenditure must be added back. This assumption, with great respect, betrays ignorance of the true function of the Profit and Loss Account and fails to take note of the basic principle of accountancy that capital expenditure does not go into the Profit and Loss Account, There can, therefore, be no question of adding back the amount of the capital expenditure to the Profit and Loss Account for the purpose of arriving at the correct trading result. Equally patent is another error committed by the Tribunal, namely of adding back the carried forward loss of the previous years on the footing that it is not genuine to the profit or loss appearing at the foot of the Profit and Loss Account in order to determine the true profit or loss of the particular accounting year. This exercise on the part of the Tribunal is based on the assumption that the carried forward loss of the previous years is taken into account in arriving at the profit or loss appearing in the Profit and Loss Account of the particular accounting year, and therefore, if such carried forward loss is not genuine, it must be excluded in computing the profit or loss of a particular accounting year and to that extent, the real profit or loss would stand enhanced. But this assumption is clearly wrong. The Profit and Loss Account of a particular accounting year never includes the particular accounting year never includes the carried forward loss of the previous years. It merely reflects the trading result of the year in question. If any particular item debited in the Profit and Loss Account is wrong, it may be added back but the carried forward loss of the previous year not being an item of debit in the Profit and Loss Account, it is impossible to see how it can be added back to arrive at the true profit or loss".
We find the same principle reiterated in 1992-I-LLJ-807 (Bom.) as well. It has to be stated at once, that the impugned fixation does not demonstrate whether the appropriate Government has kept in mind these aspects, As noticed, the total workforce in the industry is said to be 8 lakhs. If a disproportionate hike of Rs. 1.08 is given per worker per day it would mean, roughly excess payment of Rs. 9 lakhs a day and the annual result would be staggering. It is not shown whether, the committee has considered, whether the industry would be in a position to bear this enhancement and what would be its effect on the consumer etc. The person who has to bear the brunt, ultimately is the consumer. That may also be a factor, the committee has to remember. It is not demonstrated that the committee has kept this aspect in its mind.
24. There is yet another aspect which was strongly put across by Mr. Holla. The grievance is that there has not been an effective consideration of the objections of the employer and there was no consultation as contemplated under the Statute. This is clearly demonstrated from the files made available to the Court. The Labour Department has offered, the comments to the objection of the employer. Certain comments offered indicating that the Government has not taken into account the correct yardsticks in the matter of fixation. The noting states, that the State Government can revise the minimum wages at any time it suits, the minimum wages being paid in other States are irrelevant consideration, as and when there is increase in CPI, the wages should be revised, there is no need to wait the outcome of the Tripartite Committee report, the Government has discretionary power either to consider the report of the Advisory Board or reject it, that it is only necessary to consider the suggestion of the trade union, that the VDA may be fixed at 3 paise per point above 1,513 in the final notification etc. The recommendation of the Advisory Committee was made on March 27, 1995 and the above comments are before the said Act. Clearly, the Government have decided what should be the VDA even before it received the Report of the Committee. This also demonstrates that the Government did not kept an open mind on issue.
25. The process of consultation cannot be equated or understood to mean concurrence. But if it is demonstrated that there was never any meaningful consideration of the representation of the aggrieved and it is demonstrated so, then certainly the Court cannot take refuge under the theory that there need be only consultation and no concurrence. Such an interpretation would be an apology for the requirement of law. A consultation, in order to be a valid consultation under Section 5 of the Act has to be meaningful and effective and not rendering lip service to the requirement of the law.
26. The requirement of consultation engrafted in the Statute is Intended to provide the decision making authority to acquire an insight into the problems he deals with and to supervise and guide his exercise of the statutory powers. The records should disclose that the consultation held is intelligible, rational and candid. It should also disclose that the authority held un open mind and was disinterested to the issue. The requirement of existence of these ingredients are very necessary because once the Court exercises its judicial review of the powers exercised by the authority, it legitimizes the decision taken by it as well. The Court by conducting the review of the action of the authority and when it upholds the same, it in fact endorses that the statutory requirements have been complied with meaningfully by the authority. In the instant case one should confess that there is absence of any material made available to disclose the satisfaction of the Government was arrived at by an intelligible, rational and candid consideration of the Report of the Committee and the representation of the employer by a disinterested and open minded authority. The deliberation of the Government, does not show that, the representation of the employer was meaningfully examined and considered. There was no discussion on the same, before it was held not acceptable. It is not shown that the Government kept an open mind; while discussing the objection and suggestion made by the employer.
27. Mr. Holla, learned Counsel in this behalf submits that the factum of fixation of an arbitrary amount as minimum wages for 1,000 beedies rolled and VDA at 3 paise makes it further clear that the authority concerned has not kept in mind the various criteria to be followed while considering the representation of the employer in the matter of fixing the minimum wages. He submits that it is essential that the authority conforms to the requirement of Section 5 while fixing the minimum wages. It is seen that, the Government relied on the advice of the Labour Department, to go ahead and fix the VDA at 3 paise over the above 1,513 even before it received the report of the Tripartite Committee. It had kept a closed mind in this behalf. On the merits it is pointed out by him that the minimum wages fixed for the Tobacco Industry is a relevant circumstance to be borne in mind before the authority undertakes fixation of minimum wages for the Beedi Industry. Secondly, VDA paid in other industries ought to have also been adverted and compared. The prevalent wage structure in the adjoining State where the same commodities are manufactured and marketed have to be taken note of and compared. It is further submitted that the raw material is imported from other States. A rigid application of the rule of fixation of minimum wages may even encourage migratory tendency with the industry.
28. Though, I am of the view that the materials placed on record do not indicate that the correct parameters have been adopted by the authorities in fixing the minimum wages one should hasten to add that a mere threat of migration by the industry to outside the State is no ground for refraining from fixing the legitimate minimum wages. Nevertheless, it is not demonstrated, how, the minimum wages can be fixed without adverting to the wages fixed for the industry producing the raw materials. A fixation thus made, will adversely affect the wage structure in the raw material industry. That may either fall or rise. It means, it will produce a cyclic reaction to other industries as well. Likewise, the prevailing VDA for other industries have also to be considered. An unreasonable fixation here, may lead industrial unrest in other sectors whose ultimate sufferer would be the common man. A reasonable comparison with the neighbouring industry is also called for, as otherwise, the market of the domestic product will be affected. It is not shown that the committee has adverted to these circumstances at all.
29. Mr. Justice Rama Jois (as he then was) in M/s. Aspinwal and Company Limited's case, supra, has narrated as hereunder, the method of fixation of minimum wage:
"(1) Appointment of persons representing employers and employees by designation, i.e., by appointing office bearers of the associations of the employers and employees, as members of the Advisory Board under Section 9 of the Act is valid.
(2) Rule 5 of the Rules which authorises a member nominated on the Advisory Board constituted under Section 9 of the Act to nominate a substitute to attend a meeting in the place of a member unable to attend the meeting is valid.
(3) The nomination of substitute in the place of a member of the Advisory Board constituted under Section 9 of the Act, in view of the wording of Rule 5, has to be made both by the Government which nominated the member and the member concerned. The authorisation by the member alone was not in accordance with Rule 5 of the Rules. But this defect is no ground to set aside the final decision of the Government.
(4) Sri H.S. Rudrappa, President of the Farmers Forum who was nominated as a member of the Advisory Board constituted under Section 9 of the Act ceased to be a member of the Board after he failed to attend three consecutive meetings of the Board. But as a result of the vacancy, so caused it could not be said that on and after that date the Board was not validly constituted. The existence of a vacancy in the membership of the Board which tendered the advice is no ground to declare that the final decision of the Government is invalid.
(5) There has been proper consultation as required under the proviso to sub-section (2) of Section 5 of the Act before issuing the impugned notification as the Government had expressed its views on the representations made and had sought the advice of the Board.
(6) The manner of hearing the persons to be affected by the revision of minimum wages prescribed by the Statute is the giving of opportunity to all the persons likely to be affected by the revision of wages, to make written representation by giving not less than two months time from the date of publication of the proposals of State Government to revise the wages. Hence oral hearing is by necessary implication excluded, though nothing prevents the Board or the Government to give oral hearing to all or any of the representations. Therefore, the impugned notifications are not invalid on the ground of not giving oral hearing to the petitioners.
(7) The nomination of retired officers of the Government to be independent members of the Board even assuming they had participated in the drafting of the proposal to revise the wages, is not invalid. The plea that because they were officers of the State Government and had drafted the proposals, they suffered from bias is untenable.
(8) The absence of Chairman and members of the Board themselves at most of the meetings of the Board does not constitute a defect in the proceedings of the Board as, Rule 14 of the Rules provided for electing an independent member to be the Chairman for a meeting of the Board at which the Chairman was not present and Rule 15 of the Rules prescribed the quorum of 1/3rd of the membership of the Board.
(9)(a) The rate of dearness allowance prescribed at 0.05 paise per day per point increase above 600 C.P.I. is bad for the reasons set out in paragraph 16 and therefore requires reconsideration.
(b) The maximum amount of dearness allowance fixed in respect of all the employments is invalid as it contravenes Section 4(1)(i) of the Act".
There is no material to show that these principles have been kept in mind by the appropriate Government while fixing the minimum wages in the instant case. It was submitted by Mr. Anantharaman relying on Karnataka Planters' Association v State of Karnataka, that 100% neutralisation while fixing the wages permissible. But the question is not regarding the permissibility of such neutralisation but the modus oper-andi to be adopted for doing so, and assessing at the justiciability of the award. It is this exercise that is being challenged in the present proceedings. Mr. Subramanian also cited M/s. Jaydip Paper Industries v The Workmen , to stress that the fixation of minimum wages should be to increase the efficiency. No one has any quarrel with that proposition and the allegation is that the authorities did not discharge the function of their responsibility of balancing both the capacity of the industry, efficiency of the worker, and the interest of the common man.
30. Now the plea raised by Mr. Kasturi, learned Counsel for the petitioners on the basis of settlement has to be rejected. I do not think that the same is sustainable in law. The settlement in question, if accepted, would in fact amount to contracting out of the benefits of the Minimum Wages.Act. As such, Section 26 of the Act would squarely apply and invalidate any such settlement. Section reads as under:
"25. Contracting out.-Any contract or agreement, whether made before or after the commencement of this Act, whereby an employee either relinquishes or reduces his right to a minimum rate of wages or any privilege or concession accruing to him under this Act shall be null and void insofar as it purports to reduce the minimum rate of wages fixed under this Act".
No further answer need be furnished to this contention.
31. Mr. Narasimhan submitted that the appropriate Government is bound to accept the report of the Committee and act as the same (vide observation of the Supreme Court in the case of Chandra Bhawan Boarding and Lodging, supra). But this consequence will arise only if it is shown that the report was prepared keeping in mind the statutory modalities imposed. If as indicated above, the Committee has not adverted to the correct paradigms while finalising the report, it is as if there is no valid report prepared by the Committee in accordance with law. The mandate of the law cannot be crowned on such a report making it supreme. Besides the endorsements, the file discloses that the appropriate Government did not even wait for the report of the Committee.
32. Mr. Anantharaman appearing for certain groups of workmen relying on Secunderabad Club's case, supra, pointed out that since the prices increase by geometric progression there can be similar increase in the wages as well. That certainly is no justification to adopt arbitrary figures on the basis of illusory premises. Besides this answer is begging the question. What is the root cause of the geometrical progression of the price? The Government while fixing the wages has a responsibility to bear in mind to make an attempt to arrest such inflationary tendencies. The Committee has failed in this behalf as well.
33. In this travails to secure fair justice by the contending parties all are forgetting an important factor the mute and helpless common man. None is bestowing any attention or concern to his interest who is admittedly, to open up his coffer to keep both sections contended. If economic structure is the backbone of any social formation, the labour, the motive force behind such economic structure, then one cannot forget that only the common man furnishes the edifice for the said economic structure, His interest, is not subsidiary but should be treated as equal if not paramount in all these exercises. The contrasting interests of the employer and employee, the gladiators vying to annex supremacy, is not the only brooding omnipresence in the scenario of fixation of minimum wages but the articulate voice of the common man should also be heard in the decision making process. It is not as if the common man whom a learned author described as a person "who lacks the courage of Achilles, Wisdom of Ulysses, the strength of Hercules" is thus treated totally handicapped to battle with the warring gladiator, when he is being saddled with duties sans any right.
34. On the final review of the respective cases I am of the view that the impugned fixation of the minimum wages as per Gazette Notification No. Ka.e. 249 LMW 93, Bangalore, dated October 24, 1996 has not been issued in compliance with the requirement of Sections 3 and 5 of the Minimum Wages Act, 1948. I therefore, quash the same.
35. The question that survives now is the direction to be issued consequent on the quashing. In view of the quashing of the fixation the consequence should be to issue directions to the appropriate Government to exercise fresh the fixation of the minimum wages for the Beedi Industry. The present fixation is a revision exercised by the appropriate Government under Section 3(l)(b) of the Act commenced in 1994/1995 and five years would elapse soon. As such, pushing back the time to that date and making a fresh exercise at this stage may not be in the interest of all concerned. A state of affairs is prevailing by virtue of the interim order made by this Court. Treating the same as the basis, the appropriate Government may exercise the powers vested in it under Section 3(l)(b) read with Section 5 of the Minimum Wages Act, 1948 and revise and refix the minimum wages for the Beedi Industry.
36. The writ petitions are disposed of as above.