CHAPTER - H

FIXATION OF MINIMUM RATES

OF WAGES

CHAPTER II

FIXATION OF MINIMUM RATES OF WAGES

2.1. THE GENERAL SCHEME OF THE MINIMUM WAGES ACT, 1948

The Minimum Wages Ad, 1948 [herein after referred to as the Ad]

aims at making provision for the statutory fixation of minimum rates

wages in a number of industries wherein ‘sweated’* 1 labour is most

prevalent or where there is a big chance of exploitation of labour. The

Ad requires the Central and State Governments to fix within a specified

period the minimum rates of wages payable to employees in the

scheduled employments.2

The objed of the Ad was dealt with by the Supreme Court in Y.A.

Mamarde v Authority under the Minimum Wages Act.3 The Court

observed that the object of the Act as stated in the preamble is to

provide for fixation of minimum wages in certain employments to

1 ‘Sweating’ is a relative term and it is difficult to define it precisely. From its original meaning of sub- contrading, it came to imply wages “wary much lower than the normal rates prevailing through-out the country” (Evidence of Mr. Wolf before the Cave Committee in reply to Question No. 94;Cmd. 1645/1922 H.M.S.O England). The 5* Report of the Select Committee of the House of Lords on the Sweating System, stated “Although we cannot assign any exact meaning to ‘sweating’ the evils known by that name are shown in the foregoing pages cf the Report to be:

(1) A fitArfunflHi 1n th/» nyopggrtipg f>f the wnrirem nr diaperyortiMiate In the wntfedone.

(2) Excessive hours of wock.(3) The unsanitary state of the houses in which wotk is carried on. (5* Report, 1890. pp 1052-

1053.)

2 Sec. 5 of the Minimum Wages Act, 1948.3 (1972) 2 SCSI 108.

22

prevent exploitation of ignorant or less organized or less privileged

members of society by the capitalist class, The Directive Principles of

State Policy direct the State to endeavour to secure to all workers,

agricultural industrial or otherwise not only bare physical subsistence

but a living wage and conditions of work ensuring a decent way of life

and full enjoyment of leisure. The Directive Principles lay down the

foundation of appropriate social structure wherein the labour will have a

place of dignity legitimately due to it in view of its contribution to the

progress of the national economic prosperity.3®

There is a provision in the Act for addition of employments to the

schedule annexed to the Act.4 The Act also provides for the setting up

of machinery for the fixation, revision and co-ordination for the minimum

wages.5

The Act prescribes no principle for fixing the minimum rates of

wages. It only lays down the procedure, which is designed to lead to a

rate, which the scheduled employers must pay. The Act is not intended

to apply only to the industries in which labour is unorganized. There is

no reference in the Act to the organization of labour or to the stage such

organization has reached. The mere fact that the words “certain

* Id. atU2.4 Sec. 27 of the Minimum Wages Act, 1948.5 Provision has been made for appointment of Advisory Committees and Advisory Boards, the latter for co-ordination work of foe Advisory Committees. The Committees and Boards will have equal representation of employers and workmen. Except on initial fixation of minimum wages, consultation with the Advisory Board will be obligatory on all occasions of revision.

23

employments” are used in the heading and the preamble of the Ad

does not imply that the intention was to legislate only in resped of some

employments.6 The word “certain” in the preamble refers to the proviso

to Section 3 (1 A) of the Ad.68 From the proviso to Sedion 3 (1 A) it is

clear that the Ad cannot be extended to apply to any employment in

which there are in the whole State less than 1,000 employees. There is

no other indication as to the limit imposed on the operation of the Ad.

The legislature intended to apply the Act to all employments having

more than 1,000 employees in a particular State and that it, while

immediately applying the provisions of the Ad to the employments

mentioned in the Schedule, permitted future application of the Ad to

other employments satisfying the condition of the proviso to sedion

3(1 A) at the discretion of the appropriate Government.7 The proviso

speaks about the total number of persons employed in any schedule

employment in the whole State and in respect of individual schedule

6 The Preamble provides that “ An Act to provide for fixing minimum rotes of wages in certain Employments.”H Sec. 3 (1A) of the Minimum Wages Act provides that notwithstanding anything contained in sub­section (IX the appropriate Government may refrain from fixing minimum rates of wages in respect of any scheduled employment in which there are in the whole State less than one thousand employees engaged in such employment, but if at any time the app. Govt comes to a finding after such inquiry as it may make or cause to be made in fins behalf that the number of employees in any scheduled employment in respect of which it has refrained from fixing mwwnnwn rates of wages has risen to one thousand or more, it dull fix minmum rates of wages payable to eo^loyees in such employment as soon as after such finding.7 Edward Cotton Mills V State of Ajmer. AIR. 1953 Ajmer, 65.

24

employments; even if one person is employed the Act is made

applicable.8

Speaking on the Constitutional validity of the Act, the Supreme

Court held that the Act does not violate the fundamental rights

guaranteed under Art. 19 (1) (f) and (g) of the Constitution and on the

other hand, it fulfils in part at least the obligations of the State under the

Directive Principles of the State Policy.9 The Act ensures not only

physical subsistence but also the maintenance of health and decency

as is conducive to the general health of public. This is one of the

directive principles of State Policy embodied in Article, 43 of the

Constitution. In order to protect labourers against exploitation, it is

absolutely necessary to impose restrictions upon the freedom of

contract of employers. Individual employers might find it difficult to carry

on business on the basis of minimum wages fixed under the Act, but

this must be entirely due to economic condition of those employers.

That cannot be the reason for striking down the law as unreasonable

and repugnant to Article 19 (1) (g) of the Constitution. The restrictions

imposed by the Act are not unreasonable restrictions within the

meaning of Article 19(6) of the Constitution.10

* Ram Kumar Mi jra V State of Bihar. 1984 (2) SCC 451.9 T.O. Lakshmaiah Setty & Sons, Adorn VState afAJ1. & another. 1981 UC 690. (A.P.) (D.B.)10 Bijay Cotton Mills VState of Ajmer. A.IR. 1955 (S.C.) 33.

25

Clause (e) of Section 2 of the Act defines an employer to mean

any person who employees, whether directly or through another person,

or whether on behalf of himself or any other person, one or more

employees in any scheduled employment in respect of minimum rates

of wages have been fixed under this Act. According to the definition, it

also includes, among other cases, a person appointed by a local

authority for the supervision and control of employees in the case of any

schedule employment under such local authority.

A person employing persons in any scheduled employment is not

an employer within the meaning of the Act, unless, in respect of that

employment, minimum wages have been fixed under the Act.11

Under sec. 2 (i) of the Act ‘employee’ means any person who is

employed for hire or reward to do any work, skilled or unskilled, manual

or clerical, in a scheduled employment in respect of which minimum

rates of wages have been fixed; and includes an out-worker to whom

any articles or materials are given out by another person to be made up,

cleaned, washed, altered, ornamented, finished, repaired, adapted or

other wise processed for sale for the purposes of the trade or business

of that other person where the process is to be carried out either in the

home of the out-worker or in some other premises not being premises

under the control and management of that other person ; and also

11 Nathuram Shukkt V State ofMJ>. 19601 LL.J. 784. (M.P) S

26

includes an employee declared to be an employee by the appropriate

Government; but does not include any member of the Armed Forces of

the Union.

The definition includes an out-worker preparing goods at his own

house and supplying them to the employer. Added to this the

appropriate Government is vested with an important weapon, i.e. to

declare any person as an employee who may not strictly satisfy the

conditions laid down in the definition.

Whenever any question arises as to whether a person is an

employee or not under the Act, the judiciary must keep in mind the

purpose and object of the legislation, instead of strictly confining to the

tests laid down in the definition.12 The legislature undoubtedly intends to

apply the Act to those industries or employments in which, by reason

such as unorganized labour or absence of machinery for regulation of

wages, the wages are very low.13

Under Sec. 2 (h) “Wages” means all remuneration, capable of being

expressed in terms of money, which would, if the terms of the contract

of employment, express or implied, were fulfilled, be payable to a

person employed in respect of his employment or of work done in such

u In Haryana Unrocognued School! Association V State of Haryana (1996 4 SCC. 225), it was held that die teachers employed in Private Educational Institutions are not employees within the deftmtion of‘Employee’ under the Act13 Prabhat Enlarging Works VPA. Bagmare. 1985 L1C 1185 (Bom).

27

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;

This definition is similar to that of the term 'wages’ as defined in

the Payment of Wages Act, 1936. The definition under the Act

connotes only the wages payable under the terms of contract of

employment between the employer and employee. No reference is

made with regard to the definition of the term ‘minimum wages’ nor

one can find any reference to the criteria to determine the minimum

rates of wages under the Act. It is this area, which has created an

28

unending controversy all these decades. Some concrete efforts could

have been made at least subsequently to end the controversy by

introducing the suitable amendment to the definition of the term

‘wages’ under the Act.' But so far no such move was initiated in this

regard.

2.1.1. FIXATION OF MINIMUM RATES OF WAGES

Sec. 3 of the Act provides that the appropriate Government shall,

in the manner hereinafter provided -

(a) fix the minimum rates of wages payable to employees

employed in an employment specified in Part I or Part II of the

Schedule and in an employment added to either Part by

notification under Sec. 27;

Provided that the appropriate Government may, in respect of

employees employed in an employment specified in Part II of the

Schedule, instead of fixing minimum rates of wages under this clause

for the whole State, fix such rates for a part of the State or for any

specified class or classes of such employment in the whole State or

part thereof;

(b) review at such intervals as it may think fit, such intervals not

exceeding five years, the minimum rates of wages so fixed

and revise the minimum rates of wages, if necessary.

29

Provided that where for any reason the appropriate Government has

not reviewed the minimum rates of wages fixed by it in respect of any

scheduled employment within an interval of five years, nothing

contained in this clause shall be deemed to prevent it from reviewing

the minimum rates after the expiry of the said period of five years and

revising them, if necessary, and until they are so revised the minimum

rates in force immediately before the expiry of the said period of five

years shall continue in force.

Undoubtedly the appropriate Governments are given wide

discretionary powers under the provision. Often the majority of the

State Governments have failed miserably in revising the minimum

rates of wages within an interval of five years. Some kind of rigidity,

one can find in these provisions, which in turn may adversely affect

the interests of labour. For example, the appropriate Government

enjoys the power to fix and revise the minimum rates of wages for the

employees in respect of the employments specified in Part I and Part

II of the Schedule. The maximum time limit to revise the minimum

rates of wages fixed shall not exceed five years. For the reasons best

known to the appropriate Government the revision exercise has never

taken place within the interval of five years in majority of the cases.14

14 It is evident from the aotiflcgtioce faring the mitmnmn rate of wages Issued by the appropriateGovernments from time to tmw.

30

Hence it is relevant to quote the following observation made by the

Kerala High Court in Association of Planters of Kerala v State of

Kerala15 in this regard:

“ A failure to fix or revise minimum wages was not only a

statutory violation but is a breach of fundamental right enshrined in

Art. 23 of the Constitution. A duty is cast upon the State by provisions

of the Act and Article 23 to fix and revise the minimum rates of wages.

The continuance of rates of wages since seven years, which would be

less than the minimum payable is illegal and workers are entitled to

retrospective fixation or revision from the date it is due for revision.”

Under Sub Sec. (2) of Sec. 3 of the Act, the appropriate

Government may fix—

(a) a minimum rate of wages for time work;

(b) a minimum rate of wages for piece work;

(c) a minimum rate of remuneration to apply in the case of

employees employed on piece work for the purpose of

securing to such employees a minimum rate of wages on a

time work basis;

(d) a minimum rate to apply in substitution for the minimum

rate which would otherwise be applicable, in respect of

overtime work done by employees.

iS 1996 UC 2091 (Ker).

31

Sub Sec. (2A) of Sec. 3 of the Act provides that, where in respect of

an industrial dispute relating to the rates of wages payable to any of the

employees employed in a schedule employment, any proceeding is

pending before a Tribunal or National Tribunal under the Industrial

Disputes Act, 1947 or before any like authority under any other law for

the time being in force or an award made by any Tribunal, National

Tribunal or such authority is in operation, and a notification fixing or

revising the minimum rates of wages in respect of the scheduled

employment is issued during the pendency of such proceedings or the

operation of the award, then, notwithstanding anything contained in the

Act, the minimum rates of wages so fixed or so revised shall not apply

to those employees during the period in which the proceedings is

pending and the award made therein is in operation or, as the case may

be, where the notification is issued during the period of operation of an

award, during that period; and where such proceeding or award relates

to the rates of wages payable to ail the employees in the scheduled

employment, no minimum rates of wages shall be fixed or revised in

respect of that employment during the said period.16

In other words the proviso provides that if the notification fixing or

revising the minimum rates of wages is issued during the pendency of

18 Sec. 3 (2A) was subetituted by tht Minimum Wages (Amendment) Act of 1967.

32

any proceeding before the said authorities, such notification shall not

come into operation. However in either cases the powers of the

Government to fix or revise the minimum rates of wages comes to stand

still. The super session of the pendency of proceedings and award

relating to the rates of wages for employees in respect of a schedule

employment over the statutory powers of the appropriate Government

may not sound valid, in the event if the authorities under the Industrial

Disputes Act, 1947 passes an award fixing the rates of wages below the

statutory minimum wages. Holding that Section 3 (2A) of the Act is

violative of Article 14 of the Constitution, the Bombay High Court in

Engineering Workers Union V Union of India17 observed that the

question here is what should the labour do, when merely because of the

pendency of an industrial dispute relating to rates of wages or the

operation of an award, it has to undergo the hardship of not getting the

statutorily notified benefit of a minimum wage and this for the mere

reason that an industrial dispute is pending or it is subject to the

operation of an award, the termination of which is some distance away.

Having regard to the fact that the concept of minimum wage is a well-

established concept, there seems to be no option but to quash the

impugned provision. It is not proper that any class of workmen taken by

the sweep of the impugned provision should be deprived of the benefit

1991 LIC 455 (Bom).

33

of a statutorily notified minimum wage. The device of severability

cannot be applied to this case for the impugned sub-section is so

inextricably beyond redemption that the said doctrine is of no assistance

to redeem anything from out of the debris. Section 3 (2A) of the Act is

violative of the equality clause of the Constitution viz Article 14 and is,

therefore, void. It shall not be applied to the detriment of workmen.18

Under Cl. (a) of sub sec. 3 of Sec.3, the appropriate Government

may fix different minimum rates of wages for-

(i) different scheduled employments;

(ii) different classes of work in the same scheduled employment;

(iii) adults, adolescents, children and apprentices;

(iv) different localities;

Under Cl. (b) of sub sec. 3 of Sec. 3 the appropriate Government

may also fix the minimum rates of wages by any one or more of the

following wage-periods, namely

(i) by the hour,

(ii) by the day,

(iii) by the month, or

ii Id at 458-459.

34

(iv) by such other large wage - period as may be prescribed;

and where such rates are fixed by the day or by the month, the manner

of calculating wages for a month or for a day, as the case may be, may

be indicated.

2.1.2. MINIMUM RATES OF WAGES

Sec. 4 of the Act provides that any minimum rates of wages fixed or

revised by the appropriate Government shall consists of-

(i) a basic rate of wages and a special allowance at a rate to

be adjusted, at such intervals and in such manner as the

appropriate Government may direct, to accord as nearly as

practicable with the variation in the cost of living index

number applicable to such workers (herein after referred to

as the ‘cost of living allowance’); or

(ii) a basic rate of wages with or without the cost of living

allowance, and the cash value of the concessions in respect

of supplies of essential commodities at concession rates,

where so authorized, or

(iii) an all inclusive rate allowing for the basic rate, the cost of

living allowance and the cash value of the concessions, if

any.

35

The Bombay High Court in Sri Champawate Yantramg Audogik

Sahakari Samstha Maryadit Bead v State of Maharastra19 observed that

the concept of minimum wages in terms of Sec. 4 of the Act consists of

two components. The first one is the basic rate of wages and the

second one is the special allowance at a rate to be adjusted at certain

intervals. The Legislature has evolved a mechanism under which

certain procedure was prescribed for fixing the basic rate of minimum

wages and addition of that wage by Special Allowance linked with the

cost of living was left to be determined by the authorities under the Act

and this procedure was accorded judicial approval by the Supreme

Court in Hydro Engineers (P) Ltd. V Workmen.20

V

2.1. 3. PROCEDURE FOR FIXING AND REVISING THE MINIMUM RATES

OF WAGES

The Act under Sec. 5 provides two methods for fixing the minimum

rates of wages in respect of any scheduled employment for the first time

under the Act or revising the minimum rates of wages so fixed.

Linder the first method, the appropriate Government may appoint

as many committees and subcommittees as it considers necessary to

hold enquiries and to advise it in respect of such fixation or revision, as

191993 n LL.J. 843 (Bom). 20 AIR 1969 SC 182.

36

the case may be.21 In the later case, the appropriate Government may

publish its proposals by notification in the Official Gazette for the

information of persons likely to be affected thereby to enable them to

make representations, within two months from the date of the

notification, after which the proposals will be taken into consideration.22

If the appropriate Government proposes to revise the minimum rates of

wages by the notification method, it shall consult the Advisory Board

constituted under Section 7 of the Act.

The appropriate Government shall fix or revise the minimum rates of

wages in respect of each schedule employment after considering the

advice of the committee or all the representations received by it before

the date specified. Minimum rates of wages so fixed or revised should

be notified in the official Gazette. The minimum rates of wages so fixed

or revised shall come into force after the expiry of three months unless

the notification provides otherwise.23

The appropriate Government need not follow the procedure

prescribed in Sec. 5 in case of fixation of the cost of living allowance. It

can fix the cost of living allowance on the basis of data available with it

without resorting to the procedure prescribed under the said Section.

n CL (a) Sub Sec. (1) of Sec. 5 of the Minimum Wages Act, 1948. 23 Id. at CL (b) Sub Sec. (1) of Sec. 5. n Id. at Sec. 5 (2).

37

2,2. PRINCIPLES OR CRITERIA APPLIED IN MINIMUM WAGE FIXATION

The Minimum Wages Act does not contain any clue as to the

principles, criteria or norms to be followed in the fixation of minimum

rates of wages. Each enquiry committee appointed under the Act is

thus left free to choose for itself, what principles or standards it will

follow. The ILO Convention on the Minimum Wage-Fixing Machinery,

1928, does not indicate the level at which minimum wages should be

fixed or the criteria that should govern such fixation. Since, however the

very purpose of creating a minimum wage-fixing machinery is to ensure

the fixation of minimum rates of wages in trades or part of trades in

which wages are “exceptionally low,” the inference would be logical that

minimum wages should be fixed at a level well above that which is

sought to be done away with and that it should not be below the

average prevailing level of wages.

The I.L.O. Recommendation No. 30 (1928) concerning the

Application of Minimum Wage-Fixing Machinery throws, some direct

light on the problem. It provides that the wage-fixing authority should

“take account of the necessity of enabling the workers concerned to

maintain a suitable standard of living” and that for that purpose regard

should “primarily” be had “to the rates of wages being paid for similar

work in trades where the workers are adequately organized and have

concluded effective collective agreements” or, if no such standard of

38

reference is available, to the general level of wages prevailing in the

country or in the particular locality.”24 Thus these recommendations lay

special emphasis on enabling workers to maintain a suitable standard of

living, the criterion employed for the purpose being comparison with

wages paid for comparable work under effectively negotiated collective

agreements, since the very preamble to the Constitution of I.L.O.,

declares that, “the provision of an adequate living wage” is an important

requirement for improvement of the conditions of labour so urgently

needed, it would appear that the object of minimum wage fixation

should be to ensure such a living wage to the workers concerned.

The ILO Convention No. 131 of 1970 concerning minimum wage

fixing with special reference to developing countries provide elements

that are to be taken into consideration in determining the level of

minimum wages. They are (a) the needs of workers and their families,

taking into account the general level of wages in the country, the cost of

living, social security benefits, and the relative living standards of other

social groups and (b) economic factors, including the requirements of

economic development, levels of productivity and the desirability of

attaining and maintaining a high level of employment.25

24 Article m of ILO Recommendation No. 30 of 1928. B Article 3 ofILO Convention No. 131 of 1970.

39

However, the practice followed by the enquiry committees

appointed under the Act was not a consistent approach with regard to

the application of any criteria or norms pertaining to the quantification of

minimum rates of wages. This is evident from the information available

through the reports of the high power committees and Commissions

appointed by Government of India from time to time and also from the

decided cases. The first Committee to go into the aspect of

investigation of the norms or criteria followed by the enquiry committees

appointed under the Act in fixing the minimum rates of wages was the

One Man Committee appointed by Government of India to study the

working of the Minimum Wages Act in 1966. The One-Man Committee

in its report has drawn pointed attention to the extremely low rates of

minimum wages fixed in some employments in certain States, and

observed: "These rates cannot be considered by any standards to be

just and fair.”26

Hence it is relevant to have a look at comparable wage rates fixed

under the Act and the money earnings of workers in manufacturing

industries in 1967 as shown in the Table I below, since the same trend

of distinction is continued even today.

24 One Man Committee Report on the Working of the Minimum Wages Act, 1948, New Delhi: Government of India, Ministry of Labour (1966) at 266.

40

Table I: Lowest daily rates of wages fixed under the Minimum Wages Act and the Daily

earnings in Manufacturing Industries in some States as on 1967.

Lowest daily rates wider the Minimum Wages Act as on 30.9.1968. Per Capita Earnings inManufacturing

Industries as on 1967.

Employment Rate State Annual DailyEarnings Earnings

1 2 3 4 5

1. Wooten Carpet making 0.62 Madras 2244 7.48

2. Tobacco Manufactories 0.87 West Bengal 2176 725

3. Rice, Flour and Dal Mills 1.12 Orissa 2001 6.67

4. Stone Breaking and Stone Crushing 0.75 - Do - 2001 6.67

5. Plantations 1.00 Uttar Pradesh 1922 6.41

6. Oil Mills 1.12 Kerala 1700 5.67

7. Road Construction 0.81 Mysore 1760 5.87

8. Agriculture 0.75 Mysore 1760 5.87

9. Lac Manufactories 0.97 MadhyaPradesh

2363 7.88

10. Agriculture 0.90 -do- 2363 7.88

Source: For Col. 2: Indian Labour Statistics, 1968, pp. 80-87 For Col.4: Indan Labour Statistics, 1968, p. 56.

It goes without saying that the very low wage rates in the

unorganized sector as shown in above Table, could not have been fixed

on the basis of any calculation of needs, however moderately these

might have been assessed.

41

The One-Man Committee examined the criteria and factors taken

into account by enquiry committees and State Governments in the

various States in fixing the minimum rates of wages under the Act. In

some States the factors that have been taken into account by the

enquiry committees were27:

(i) the normal needs of the worker and his dependants,

(ii) the capacity of the industry to pay,

(iii) the existing wages reckoned on an employment-cum-area

basis,

(iv) the minimum wages fixed by neighbouring States in like

employments,

(v) the place of the industry in the economy of the region or State,

(vi) the needs of the developing economy, and

(vii) the national income

The One-Man Committee, after examining the replies of State

Governments and the reports of enquiry committees, concluded as

follows: “When confronted with the question of capacity of the industry

to pay they have invariably watered down their standard and their

17 Id. at 222.

42

recommendations represent a compromise between conflicting interests

rather than a scientific attempt to determine a minimum standard.”28

It is obvious that though some of the enquiry committees

pretended to pay lip service to high-sounding principles and criteria in

fixing the minimum rates of wages under the Act, all that they did in

practice was to examine the prevailing rates of wages in the

employment itself and sometimes also in similar employments in the

unorganized sector.28® The suggestion in the I.L.O. Recommendation

No. 30, that regard should primarily be had to the rates of wages being

paid for similar work in trades “where the workers are adequately

organized and have concluded effective collective agreements" is not

one that can be followed in the unorganized sector in India as workers

in this sector are practically nowhere organized and collective

agreements are wholly non-existent and till today the situation is similar

and remains unchanged.

The National Commission on Labour, dealing with the criticism

that the Act does not define the term “minimum wage”, reported that

“our examination has revealed that neither the advisory committees set

up under the Act nor the State authorities in charge of minimum wage

fixation have followed a uniform set of principles while fudng or revising

2828a

Id. at 233. Ibid

43

wage rates. They have mostly been going by their own assessment

over which the prevailing rates of wages have a firm hold.”29

Comparison with the prevailing rates of wages in the scheduled

employments may be said to fulfill (even that only to a limited extent)

the third of the four criterion enunciated by the I.L.O. Recommendation

for guidance in the fixation of minimum wage rates. The second,

namely capacity to pay, is given some perfunctory consideration, but

though the level of minimum wages is not consciously set by any

positive findings regarding capacity, it is obvious that it is the criterion of

capacity to pay, that stands in the way of the enquiry committees’

raising wage levels to those corresponding to needs.

However, a change in the attitude of the enquiry committees

appointed under the Act, with regard to fixation of minimum wages can

be found in later 1980s.30 The Sub-Committee of the Parliamentary

Consultative Committee for the Ministry of Labour (Gurudas Das Gupta

Committee) in its Report (1988) on the problems of unorganized

workers in agriculture sector noted that the West Bengal Government

fixed minimum wages on the assumptions of (a) consumption of food

equivalent of 2200 calories per unit per day (b) 3 adult consumption

units in a family (c) consumption of 72 yards of clothing a year per

29 Report of the National Commission on Labour, New Delhi: Government of India, Ministry of Labour (1969) at 233.30 This is evident from the enquiries revealed before the National Commission on Rural Labour

(1991).

44

family and (d) an amount equivalent to 25 per cent to cover housing,

fuel, light, medical and educational expenses. The Sub-Committee felt

that minimum wages should be linked to the movement in Consumer

Price Index Number for cost of living element and also revised every

two years or on a rise of 50 points in the Consumer Price Index.31

The National Commission on Rural Labour, (1991) in order to

ascertain the factors that are taken into consideration for determination

of minimum rates of wages by the appropriate Governments under the

Act, set up a Study Group on Wages. The enquiries revealed that the

Government of India (Ministry of Labour) in fixing the minimum rates of

wages for the employments falling in its purview has taken the following

namely, (a) the family consisting of 3 adult consumption units (b) the

food requirement of 2400 calories in rural areas and 2100 calories in

urban areas per day per unit (c) clothing, shelter, fuel and light,

education etc. Thus the minimum wage as notified by the Ministry of

Labour, Government of India for unskilled employments in 1990 was

Rs. 15 per day. Accordingly the Ministry has advocated to all States

that the minimum wage should not be less than Rs. 15 per day in

199032

31 The Report of the National Commission on Rural Labour, New Delhi: Government of India, Ministry of Labour (1991) at 180.32 Ibid

45

The Commission’s further enquiries revealed that the State of

Punjab, which has the highest per capita national income, has

determined the minimum wage basing on political considerations. The

State of Tamil Nadu has taken into consideration the prevailing wage

rate in the same or similar employments. There is however, no exact

explanation as to how the minimum wage for unskilled labour in

Maharashtra is determined. The Government of Karnataka has taken

the basic needs of an individual workman into consideration. The

Government of Bihar has taken the prevailing wage rate and other

conditions of service, the minimum rates of wages fixed in other States

for such employments and the minimum rates of wages fixed for similar

categories of employees in other employments. The Government of

Orissa has followed the practice of fixing the minimum wages basing on

poverty line criteria.33

Finally, the Commission observed that it becomes clear that the

Government of India and the State Governments, who must determine

minimum wages under the Act, are generally not clear in their own

minds on what it is that they must do. In fact, in some States the

position could be more confusing.34

3334

Ibid.Ibid

46

It is axiomatic to note that the enquiry committees and State

Governments in various States have taken some set of factors into

account in fixing the minimum rates of wages under the Act, which in

fact are the factors that were exactly prescribed by the Committee on

Fair Wages in order to arrive at the Fair Wage.35 Further the Supreme

Court in number of cases categorically held that the capacity of the

employer to pay the minimum wages fixed under the Act is not a

relevant factor.36

The only relevant consideration for fixing the minimum rates of

wages is the minimal requirements of the workers concerned, i.e. the

minimum needs of the worker and his family. Since the Act aims at

making provision for the statutory fixation of minimum rates of wages in

employments wherein ‘sweated’ labour is most prevalent or where there

is a big chance of exploitation of labour. Accordingly the main thrust of

the Act must be aimed at securing a sustenance wage, which keeps the

exploited labour above the starvation level.

55 Report of the Committee on Fair Wages, New Delhi: Government of India, Ministry of Labour (1949) pare 15.34 See Bijay Cotton Mills v State of Ajmir, AIR 1955 SC 33: Unichoy v State of Kerala, AIR 1962 SC 12. Chandra Bhavan Boarding & Lodging v State of Mysore, AIR 1970 SC 2042.

47

2. 3. NEEDS CRITERIAN AND THE JUDICIAL RESPONSE

Only very few cases came before the High Courts and the

Supreme Court, wherein the judiciary had an occasion to touch upon

the aspect of the norms or criteria followed with regard to fixation of

minimum rates of wages by the appropriate Governments under the

Act. The first and perhaps the only case that stood before the Supreme

Court in this context was from the State of Kerala and that decision has

remained as the ‘law of the land.’37 The facts of the case are as follows:

The Government of Kerala appointed a Committee in exercise of its

powers conferred by cl. (a) of sub-sec. (1) of S. 5 of the Act to hold

enquiries and advise the Government in fixing minimum rates of wages

in respect of tile industry. The committee was constituted under S. 9 of

the Act, and the said Committee has submitted its report on March 30,

1958.

The Committee in its Report has accepted the observation of the

Fair Wages Committee that the minimum wage “must provide not

merely for the bare subsistence of life but for the preservation of the

efficiency of the workers." Then it examined the food requirements of

the employee on the basis of three consumption units recognized in Dr.

Aykroyd’s formula. It then adopted the assessment made by the

Planning Commission in regard to the requirements of the employees in

17 Unichoy, Supra.

48

cotton textiles and placed the employee’s requirement at a per capita

consumption of 18 yards per unit, then it took into account the

requirement of housing and it held that the additional requirements for

workers for fuel, lighting and additional miscellaneous items of

expenditure should generally be fixed at 20 percent of total wage.38 The

Committee was conscious that it had to approach the problem from the

point of view of the minimum needs of workers in order to maintain a

subsistence standard, and so it enumerated the requirements of

workers in that behalf as food, clothing, fuel, lighting and other

miscellaneous items.

The Kerala Government considered the report and issued a

notification on May 12, 1958, prescribing the minimum rates of wages.

This was challenged by the employer directly under Article 32 of the

Constitution before the Supreme Court. Rejecting the contention of the

employer, it was held that, it is already seen what the Act purports to

achieve is to prevent exploitation of labour and for that purpose

authorizes the appropriate Government to take steps to prescribe

minimum rates of wages in the scheduled industries. “In an under­

developed country, which faces the problem of unemployment on a very

38 The IS*1 Session oflndian Labour Conference, (1957) ha* approved the same noma to be followed as guiding principles for the Committees under the Minimum Wages Act, 1948. (The function of Indian Labour Conference is to “advice the Government of India on ray matter referred to it for advice, taking into account suggestions made by the provincial government, the States and representatives of the organizations of workers and employers”).

49

large scale, it is likely that labour may offer to work even on starvation

wages. The policy of the Act is to prevent the employment of such

sweated labour in the interest of general public and so in prescribing the

minimum wage rates the capacity of the employer need not be

considered. What is being prescribed are only the minimum wage

rates, which a welfare State assumes every employer must pay before

he employs labour”.39

Further the Court examined the components of a minimum wage in

the context of the Act by making a reference to the Report of the

Committee on Fair Wages. In this regard the Court reproduced the

following from the Report of the Committee on Fair Wages: “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 Fair Wage 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

39 Vide: Crown Aluminium Works v Their Workmen. 1958 SCR 651 relied on.

50

amenities.” The concept about the components of the minimum wage

thus enunciated by the Committee Fair Wages has 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

maintenance 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 to the 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 rates should be fixed in the scheduled industries with dual object

of providing sustenance of the worker and his family and preserving his

efficiency as a worker. It is impossible to accept the argument that the

wage structure ultimately recommended by the Enquiry Committee is

anything higher than what the Enquiry Committee thought to be the

minimum wage-structure. Therefore we are not prepared to hold that

51

the notification, which is in conformity with recommendations of the

Enquiry Committee, has prescribed wage rates, which are higher than

the minimum wage structure, if that be so, failure to take into account

the capacity of the industry to bear the burden can introduce no infirmity

either in the recommendations of the Committee or in the notification

following upon them.40

Indeed this was the beginning wherein the enquiry committee

appointed under the Act, has adopted the approved nones for the

purpose of fixation of minimum rates of wages and more interestingly,

the same were categorically approved by the apex Court.

In W.C.F. Federation v State of Kerala41, while dealing with the

question of fixation of minimum rates of wages under the Act, the Kerala

High Court held that, the only relevant consideration for the fixing of

minimum wages under the Act, is the minimal requirements of the

workers concerned. A fair wage is the demand and the destination. Its

upper limit is the “living wage”. The minimum wage is the lower limit of

the fair wage. It represents the limit below which the wages shall not be

allowed to drop. In other words the prescription of minimum wages puts

a floor under wages as the prescription of maximum hours puts a ceiling

on the hours of work. The capacity to pay does not enter into the

40 Supra n. 37at 1641 AIR 1968 (Ker) 19.

52

picture. It is not a relevant factor for fixation of minimum wage under

the Minimum Wages Act.42

Further the Court reiterated the apex Court observation in Crown

Aluminium v Their Workmen43 that, “there is one principle which admits

of no exceptions. No industry has a right to exist unless it is able to pay

its workmen at least a bare minimum wage. It is quite likely that in

under-developed countries, where un-employment prevails on a very

large scale, unorganized labour may be available on starvation wages.

But the employment of labour on starvation wages cannot be

encouraged or favoured in modem democratic welfare state. If an

employer cannot maintain his enterprise without cutting down the wages

of his employees below even a bare subsistence or minimum wage, he

would have no right to conduct his enterprise on such terms.” Under

Sec.3 different minimum rates of wages may be fixed for different

localities. Such minimum wages represent payments below which the

wages shall not fall. The only rational basis for a variation therefore, will

be the difference in the needs of the workers in the localities concerned.

The minimum needs of workers depend not merely on nutritional

*l Id. at 20.45 Supra n. 39 at 652.

53

necessities but also on the standard of life to which they have been

accustomed.44

Speaking on the powers of the appropriate Government with

regard to fixation of minimum wages under Sec. 5 of the Act, the

Supreme Court in Chandra Bhawan Boarding & Lodging v Sfafe of

Mysore46 held that, “Minimum wage does not mean a wage just

sufficient for bare sustenance. At present the conception of a minimum

wage is a wage, which is somewhat intermediate to a wage, which is

just sufficient for bare sustenance and a fair wage. That concept

includes not only the wage sufficient to meet the bare sustenance of an

employee and his family, it also includes expenses necessary for his

other primary needs such as medical expenses, expenses to meet

some education for his children, and in some cases transport charges

etc.”

The issue of fixation and quantification of minimum rates of wages

under the Act once again came up before the Kerala High Court in

Kerala Hotel & Restaurant Association v State of Kerala.46 The

Appellants contended that the enquiry committee appointed under

Section 9 of the Act, exceeded its jurisdiction when it fixed, not the

minimum, but if at all, only 'fair1 wages.

44 Supra n. 41 at 20.45 Supra n. 36.46 UC 1989 Ker. 1065.

54

The Committee collected materials through questionnaires,

visited several places and inspected several establishments, collected

evidence from employers, employees and trade unions, and held

discussions on the subject and prepared its report. The report shows

that after considering the service conditions and the nature of the

employment, the employees were divided into seven categories and

further sub-divided into 4 to 6 grades and different posts are included

under different grades. The Committee referred to the concept of

minimum wage as explained in several decisions of the Supreme Court,

in the report of the Fair Wage Committee and then fixed the wages with

reference to the materials collected and the evidence available. In

calculating the family budget, the earlier method of calculation based on

the food needs as recommended by Dr. Aukroyd was followed. A

catalogue of the balance diet of ordinary food used for labourers

submitted by the State Nutrition office was also considered. The

expenses of 2900 calories of balanced diet were calculated; and the

price of wearing apparel and the house rent calculated at Rs. 25/- per

month were also taken note of. Accordingly fixed the minimum rates of

wages amounting to Rs. 989/- per month.47

The Court held that it is too late in the day to enter into a long

discussion on the concept of minimum wages or fair wages as these are

47 Ibid.

55

no longer res Integra, concluded as we are by the decisions of the

Supreme Court in Unichoy V State of Kerala48 and in Chandra Bhawan

Boarding and Lodging V State of Mysore49 and other decisions.

Further it was observed that the Committee has given good

reasons for arriving at the figure of 2900 calories. Dr. Aykroyd

recommended 2700 caloric food for an ordinary worker. The Labour

Secretaries Committee on the basis of the recommendation of the

Nutrition Advisory Committee in the year 1967, recommended that an

ordinary labour requires 2800 calories of food, 3000 calories required

for an employee doing heavy work. After considering all these facts the

Committee recommended that an employee in this industry require a

diet of 2900 calories and 5600 calories for 2 consumption units, which

include wife and two children. It is thus clear that the Committee can fix

minimum wages not only for bare sustenance but also taking into

account the expenses necessary for other primary needs as well.50

Finally the Court held that the minimum wage is not mere

“maintenance wage” enabling the worker to cover his bare physical

needs and keep himself just above starvation. It should ensure not only

his sustenance and that of his family but also to preserve his efficiency

as a worker. It has, therefore, to provide for some measure of

Supra.50 Supra n. 46 at 1072.

56

education, medical requirements and other necessary amenities. The

capacity of the employer to pay has no relevance in the concept of

minimum wages. The contention that minimum wage has to be co­

related to bare sustenance cannot be accepted. Minimum wage is bare

wage with a plus element. In this case we are satisfied, that the

Committee has fixed only minimum wages and not fair wages and have

not exceeded their jurisdiction.51

On the whole it is interesting to note that the Kerala Government

has followed the well-recognized norms in the area of quantification of

minimum rates of wages under the Act and the judiciary with out any

exceptions approved the same.

Further it is interesting to observe the next set of decisions

rendered by the Bombay High Court with regard to quantification and

fixation of minimum rates of wages by the appropriate Government

under the Act.

In Mumbai Kamagar Sabha v State of Maharashtra52 the

Petitioners contended that the report of the enquiry committee fixing the

minimum rates of wages for the Printing Industry is an unreasoned

document and that many factors taken into consideration by the

committee were extraneous to the object of fixation of a minimum wage.

51 Ibid.51 1991 LIC 1150 (Bom).

57

After perusing the report of the committee, the Court observed that, the

concept of minimum wage as recorded in the report was with full of

contradictions since the same is described as if it were a bare

subsistence wage. Accordingly the Court struck down the notification,

on the ground that the minimum requirement of food, clothing, medicine

and housing of a press worker has not taken into consideration by the

enquiry committee appointed under the Act. In the absence of such a

consideration of the requirements, which go into the making of a

minimum wage, it cannot be said that the committee has formulated

what can be under stood as a ‘minimum wage’ as contemplated by the

Act and directed that the revision exercise has to be carried out by the

State in the light of the observations made and also to issue a fresh

notification.53

Similarly in Mumbai Kamgar Sabha v State of Maharashtra54, the

petitioners challenging the notification revising the minimum rates of

wages for the persons employed in Shops and Commercial

establishments, contended that the concept of minimum wage is a well

defined one and this has been brought out in several decisions of the

Supreme Court and the enquiry committee had made basic errors while

trying to comprehend what a minimum wage amounted to, without

s Id. at 1151.54 1991 11C 1147 (Bom).

58

giving reasons as to why particular figures were accepted as the

minimum wage for different classes of employees working in different

regions.55 The Court held that there is no doubt that the enquiry

committee being cognizant of different factors, went into the formulation

of a minimum wage for workmen in different classes and regions but

awareness of the factors, which goes to the moulding of a minimum

wage is only one part of the task. The other, and more important, is as

to how the said factors are to operate in a given set of conditions. The

Committee has shown an awareness of the features to be taken into

consideration while devising a minimum wage. These are in the nature

of assumptions such as the size of a standard family of a workman, the

caloric requirement of workman, requirement for the purposes of

clothing, house rent, fuel, lighting and the like items. But the Committee

has not worked out these items into monetary terms for the different

regions. In relation to food, what it had to do was to find out what

materials were consumed by workmen employed in shops and

commercial establishments in different regions. Next, it had to find out

what the cost of the cereals, pulses and other items of food worked out

to. After this, a figure in terms of money should have been worked out

to fit minimum stipulated by Dr. Aukroyd. The clothing requirement per

family consisting of four individuals has been taken at 72 yards. But the

35 Id. at 1148.

59

quality of cloth and the price thereof has not been stated. In relation to

rent, the figures given by the State from its Housing Department have

been accepted. But how these figures apply in different regions

remains unexplained. The last item allegedly taken into consideration is

the price of fuel and lighting etc. For this purpose a flat rate of 20 per

cent of the wages has been assumed. But how such items, like fuel

and lighting would cost in different regions is not explained. The task

entrusted was not to arrive at mutually acceptable figure, but to give a

report which would be a reasoned one and therefore acceptable and fit

for being notified as the minimum wage for the employees engaged in

shops and commercial establishments.56

Further it was observed that, it is coming across second time a

notification of the State Government accepting the minimum wage

proposed by a Committee presided over by a layman assisted by

representatives of the employer and the employees. With respect to

this practice, they seem to do little more than to take a trip around the

State, collect memoranda from different organizations and produce an

unreasoned document, which is easily acceptable by the Government.

The better alternative would be to appoint an expert to work out a

minimum wage for an industry, the workmen of which the State

Government believes, deserve protection in the matter of a minimum

56 Ibid

60

wage. Accordingly the notification was struck down with a direction to

issue a fresh notification in the light of the directions made there

under.57

The interesting aspect from all these decisions, is that the judiciary

have given due regard and recognition to the question of definition of

the term ‘minimum wages’ and the ‘criteria’ for determining the minimum

rates of wages under the Act by insisting, the “needs” criterion.

Though there are no set of norms prescribed by the Act with regard

to quantification of minimum rates of wages that are to be fixed, yet the

judiciary has given paramount importance to the ‘needs’ criterion,

particularly the food requirement. Invariably, it has relied on the

definition of term ‘minimum wages’ as defined by the Committee on Fair

Wages, 1949.

Coming back to the preliminary question i.e. why the majority of

States have not followed the exact and uniform criteria in their approach

in fixing the minimum rates of wages under the Act, though the ‘needs’

criterion did exist in their agenda, they have totally failed to adhere to

any set of standards in aniving at the quantum of ‘needs’ criterion.

Even the organized trade unions either in respective States or at the

Central have failed to take up the cause in this regard baring a few

exceptions. How far the Governmental pronouncements have

Ibid57

61

influenced in tackling this fundamental problem is discussed in the next

chapter.