A.V. D'Costa vs B.C. Patel and Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 147 of 1953

Decision Date: 4 March 1955

Coram: Bhuvneshwar P. Sinha, Vivian Bose, B. Jagannadhadas, Venkatarama Ayyar

In the matter of A.V. D’Costa versus B. C. Patel and another, decided on 4 March 1955, the Supreme Court of India rendered its judgment. The opinion was authored by Justice Bhuvneshwar P. Sinha, with Justices Vivian Bose, B. Jagannadhadas, B. Aiyyar and T. L. Venkatarama forming the bench. The petitioner was A.V. D’Costa and the respondents were B. C. Patel and another. The citation for the decision is reported in 1955 AIR 412 and 1955 SCR (1) 1353. The case concerned the application of the Payment of Wages Act, 1936 (Act IV of 1936), specifically sections 5, 7 and 15(1)-(2). The issue presented was whether a claim for wages arising from an upgrading scheme, in which the claimant’s right to be placed on a monthly wage scale was ignored, could be decided by the authority created under the Act, given that no delay in payment or deduction of wages was alleged. The factual background recorded that the second respondent had been employed by the Central Railway as a daily-rated casual labourer on a fixed daily wage since 1941. He continued to receive that wage until October 1949. In that month he lodged an application through an official of the Registered Trade Union, a person authorised under sub-section (2) of section 15 of the Payment of Wages Act, seeking payment of wages for the six-month period from May to October 1949. The respondent did not claim that his wages had been delayed or that any deductions had been made in contravention of sections 5 or 7 of the Act. Instead, he asserted that while the railway administration had paid him the actual wages fixed for daily-rated workers, a scheme of upgrading had been introduced that placed junior employees on a monthly wage scale, whereas his own request to be similarly upgraded had been disregarded. Consequently, he contended that he had not received the higher scale wages to which he would have been entitled had he been transferred to the monthly wage system. Justice Sinha, speaking for the majority, held that the respondent’s grievance fell within the category of “potential wages” and that the authority appointed under the Payment of Wages Act possessed jurisdiction only to determine the actual terms of the contract between employer and employee, that is, the wages actually payable. The Court observed that the upgrade from a daily-wage employee to a higher cadre required orders from superior officers, and that the authority under section 15 was not empowered to direct such superior officers. Accordingly, the complaint could not be entertained by the tribunal constituted under the Act. Justice Jagannadhadas, delivering a dissenting opinion, emphasized that a claim for a higher prospective wage could not be framed as a claim arising out of deduction or delay in payment where the entitlement to the higher wage depended on a determination by a superior authority, an exercise of administrative judgment that fell outside the scope of the Act.

The Court explained that a higher wage may be contingent upon a decision by a departmental or other authority as to whether a particular employee is entitled to that wage. Such a decision required the exercise of administrative judgment, discretion, or certification, and in those circumstances the authority’s determination formed a condition of the wage’s payability. However, the Court observed that where the higher wage did not rely on such a discretionary determination but instead depended on the application of specific rules and orders that must be regarded as part of the employment contract, the wage could not be characterized as a prospective wage merely because the paying authority erred or defaulted in applying those rules. The Court further clarified that under the Payment of Wages Act the wage in question was not necessarily the wage that existed immediately before the dispute, but rather the wage that was presently payable. Whether an employee was entitled to a wage of a higher category than the one he was then receiving depended entirely on the scope of the rules that governed his entitlement to the higher category. Consequently, the Court held that it could not be assumed in advance that such a claim was a claim for “prospective wages”. Applying these principles to the facts found, the Court concluded that the dispute over the wage fell within the jurisdiction of the authority that was concerned with the matter.

The judgment was rendered in a civil appellate jurisdiction concerning Civil Appeal No. 147 of 1953, which was filed by special leave against the order dated 24 August 1951 of the High Court of Judicature at Bombay. That order had upheld a decision of a single High Court judge on the original side, which dismissed the appellant’s petition under article 226 of the Constitution seeking a writ of certiorari to set aside the order dated 23 January 1951 passed by the first respondent, the Authority under the Payment of Wages Act (referred to as “the Act”). The appellant was represented by counsel for the Attorney-General for India, while the second respondent was represented by three counsel. The judgment of Justices Vivian Bose, Venkatarama Ayyar and Sinha was delivered by Justice Sinha, with Justice Jagannadhadas delivering a separate judgment. The Court noted that the second respondent had been, at all material times, an employee of the Central Railway (formerly the Great Indian Peninsular Railway) and that the appellant had been nominated by the Railway Administration as the officer responsible for payment of wages under section 3 of the Act. Since 1941, the second respondent had been employed by the Railway Administration as a carpenter on daily wages and had been treated as a daily-rated worker.

The second respondent had been employed as a casual labourer and received wages at the rate of Rs. 3-4-0 per day. He continued to be paid at that daily rate until October 1949 without raising any objection and he provided receipts for the wages he had received. On 2 December 1949 an application was filed by K. N. Pitkar, an official of a registered trade union and a person permitted by the Authority, under sub-section (2) of section 15 of the Payment of Wages Act, 1936, against the General Indian Peninsula Railway administration through its Divisional Engineer at Parel, Bombay. The application alleged on behalf of the second respondent that wages due for the six-month period from May to October 1949, totaling Rs. 245, had either not been paid or had been subjected to illegal deductions, as detailed in a schedule that would be set out later. The claim sought the recovery of the Rs. 245 together with an additional Rs. 15 as compensation. The appellant, who was the opposite party before the Authority, contested the claim on several grounds. First, it argued that the Rs. 245 had not been illegally deducted from the respondent’s wages. Second, it maintained that the respondent’s demand to be placed on a permanent cadre and to receive a monthly scale of pay was unfounded, since the respondent was employed as a daily-rated casual labourer on a specified daily wage. The appellant further asserted that the respondent did not fall within the scope of the Railway Services (Revision of Pay) Rules because he was a daily-rated casual labourer assigned to works, and that no rules existed governing the rates of pay or conditions of service for such workers. Consequently, the appellant contended that the respondent’s terms of service had always been the daily wages he received and that no deduction from those wages had occurred. In support of its position, the appellant referred to the award of the Railway Workers Classification Tribunal dated 28 May 1948. The Authority, however, by orders dated 23 January 1951, concluded that the respondent was not a casual labourer but a “temporary employee” and therefore entitled to the scale of Rs. 55-150 plus the admissible allowances. In reaching this conclusion, the Authority observed that the work performed by the respondent was of the same nature as that performed by members of the permanent staff, and thus the respondent could not be described as a casual labourer. The Authority also invoked article 39(d) of the Constitution, which directs that equal pay be given for equal work, and rejected the appellant’s contention that the classification of an employee lay outside its jurisdiction. Pursuant to those orders, the Authority granted the respondent’s application by further orders dated 2 March 1951. The appellant subsequently challenged those orders of the Authority.

The appellant filed an application under article 226 of the Constitution before the High Court of Judicature at Bombay, seeking to set aside the orders that had been issued. A single learned judge of that court heard the matter initially and, by his order dated 19 June 1951, dismissed the appellant’s application. Undeterred, the appellant then pursued an appeal under the Letters Patent, which was heard by a Division Bench of the same High Court. The Division Bench, by its order dated 24 August 1951, rejected the appeal and concurred with the conclusions of the original judge that the Authority had neither acted without jurisdiction nor exceeded its jurisdiction in entertaining the second respondent’s application. After the High Court also refused the appellant’s request for leave to appeal to this Court, the appellant approached this Court and obtained special leave to appeal on 2 February 1953. The principal issue before this Court was whether, in view of the relevant provisions of the Act, the first respondent possessed the authority to make the orders that had been upheld by the Bombay High Court. The Authority in question had been created under section 15 of the statute and was unquestionably a tribunal of limited jurisdiction; its power to hear and determine disputes was derived strictly from the provisions of the Act. Such a tribunal could not entertain any controversy that fell outside the scope of those statutory provisions. An examination of the Act revealed that its purpose was to regulate the payment of wages to certain categories of persons employed in industry. Initially the Act applied to the payment of wages to persons employed in any factory or by a railway administration, but the State Government was empowered, after giving three months’ notice, to extend the Act or any of its provisions to cover the payment of wages to any class of persons employed in any class or group of industrial establishments. For the purpose of the Act, “wages” were defined as all remuneration capable of being expressed in monetary terms which, if the terms of the contract of employment—express or implied—were fulfilled, would be payable to a person employed in respect of his employment or of work done in such employment. Section 3 required every employer, or the employer’s representative or nominee, to be responsible for paying all wages to persons employed by him. The Act also provided for the fixation of wage-periods, which could not exceed one month in any case. Section 5 specified the latest date by which wages for a particular wage-period must be paid. Section 7 mandated that the wages of an employed person be paid without any deductions except those authorized by or under the Act, and Section 7(2) enumerated, in clauses (a) to (k), the specific heads under which deductions from wages could be made.

The provision enumerated the only permissible categories of deductions from wages. These categories included deductions in the form of fines; deductions for absence from duty; deductions for damage to or loss of the employer’s goods; deductions for house accommodation that the employer supplied; deductions for any amenities and services provided by the employer; deductions for the recovery of advances or for the adjustment of any over-payment of wages; deductions of income-tax that the employee was liable to pay; deductions that were required under an order of a court or any other competent authority; deductions for subscriptions to a provident fund and for the repayment of any advances taken from such a fund; deductions for payments made to cooperative societies and similar organisations; and, finally, deductions that were made with the employee’s consent in order to further certain schemes that had been approved by the Government. The statute expressly prohibited any deduction that did not fall within one of these listed heads.

Furthermore, the Act stipulated that every payment made by an employee to the employer or to the employer’s agent would be treated as a deduction from wages. Each of the heads of deduction just described was dealt with in detail in sections 8 through 13 of the Act. Section 8 prescribed the conditions and limits within which fines could be imposed, set out the procedure for imposing such fines, and required the person responsible for paying wages to keep a register of the fines imposed. Section 9 dealt with deductions for absence from duty, and it specified the maximum proportion of wages that could be deducted for such absence. Section 10 dealt with deductions for damage to or loss of the employer’s property; it defined the procedure for determining the amount of such deductions and, like section 8, required the wage-payer to maintain a register of these deductions and any amounts realised. Section 11 laid down the limits on deductions for house accommodation and for other amenities or services that the employee might have accepted, subject to conditions that could be imposed by the State Government. Section 12 set out the conditions under which deductions for the recovery of advances could be made from wages. Section 13 provided that deductions for payments to cooperative societies and to insurance schemes were subject to conditions prescribed by the State Government.

Section 14 authorised the appointment of Inspectors to give effect to the purposes of the Act. These Inspectors were given the power to enter any premises, to examine any registers or documents relating to the calculation or payment of wages, and to take evidence on the spot. Their function was to ensure that the registers or documents required by the Act, which contained the necessary entries concerning deductions and other matters, were properly kept by employers or their agents, so that it could be ascertained whether any deduction from wages had been made in excess of the provisions of sections 7 to 13. Finally, section 15 provided for the appointment of an Authority empowered to hear and decide, for any specified area, all claims arising out of deductions from wages or the delay in payment of wages of persons employed in that area.

In this case the Court explained that under section fifteen the Authority, upon finding that a deduction has been made from an employee’s wages or that wages have been delayed, may act either on the employee’s own request or on a request made by a legal practitioner, an official of a registered trade union who has been given written authority to represent the employee, an Inspector appointed under the Act, or any other person who has obtained the Authority’s permission. After conducting such inquiry as the Authority deems appropriate and after giving the person responsible for wage payment under section three a reasonable opportunity to show cause, the Authority is empowered to order the employer to refund the deducted amount or to pay the delayed wages, and may also award such compensation as it considers proper. The provision further specifies the limits and conditions on the Authority’s power to direct compensation to the employee or to impose a penalty on the employer, particularly where the Authority is satisfied that an application made on the employee’s behalf is malicious or vexatious. The Authority’s decision is conclusive, subject only to the narrow right of appeal provided in section seventeen.

Section eighteen endows the Authority with all the powers of a civil court as defined in the Code of Civil Procedure. Those powers include the ability to take evidence, to compel the attendance of witnesses, and to require the production of documents. Section twenty-two provides that no civil court shall entertain any suit concerning wages or deductions from wages if the claim is already the subject of a pending proceeding under the Act, if a direction under section fifteen has been issued in favour of or against the plaintiff, or if the claim could have been recovered by invoking section fifteen. Section twenty-six authorises the State Government to formulate rules governing the procedure to be followed by the authorities and the courts mentioned in sections fifteen and seventeen. Those rules may require the maintenance of records, registers, returns and notices prescribed by the Act, the conspicuous display of notices indicating the rates of wages payable to workers on the premises, and the specification of the authority responsible for preparing a list of acts and omissions for which fines may be imposed, together with the procedure for imposing such fines.

The Court observed that the provisions recited above have been outlined in detail to demonstrate that they do not apply to the grievance presented in the present proceedings. Consequently, the Court set out in full the “particulars of claim” recorded in the schedule appended to the applicant’s application. The claim states that the applicant is employed as a carpenter-mason by the opposite party at the I.O.W. premises in Byculla. According to orders issued upon the introduction of the prescribed wage scales, the Railway Administration is required to place all staff working under I.O.W. on a permanent monthly wage scheme in accordance with those scales. The applicant thus seeks redress based on this statutory framework.

In the present case the applicant, who worked as a carpenter-mason for the opposite party at the I.O.W. in Byculla, contended that he had been employed under a daily-wages scheme while his colleagues in approximately twenty similar posts had been placed on a permanent monthly-wages scheme. The applicant alleged that the opposite party, in order to supersede his claim, had confirmed the junior workers as skilled workmen on the permanent scale identified as 55-3-85-4-125-5-130. By contrast, the opposite party continued to pay the applicant according to the daily-wages arrangement, thereby depriving him of the wages to which he would have been entitled under the prescribed permanent scale. The applicant claimed that this disparity caused a monthly monetary loss of Rs 40-13-4. He further stated that a notice had been served on the opposite party on this point, but that the notice had produced no result, prompting him to file the present application. According to the applicant’s schedule, the junior workers had been receiving the prescribed scale wages since April 1949, and he asserted that from that date he too was entitled to the skilled-workman scale 55-130.

The court observed that there was no allegation of any delay in the payment of wages, nor was there any suggestion that the appellant’s wages had been withheld beyond the time limit prescribed in section 5 of the Act. The applicant also did not allege any deductions from his wages that would fall within the categories listed in section 7. Consequently, the appellant’s submission did not contend that a specific sum had been deducted under any of the headings enumerated in section 7(2). The respondent’s case was limited to the assertion that he had received his actual wages as fixed by the railway administration, but that after the introduction of the scheme for upgrading persons employed under the daily-wages system, junior employees had been shifted to the monthly-wages scheme while his own request for similar treatment had been ignored. In effect, the respondent’s primary grievance was that he had not been paid on the scale to which he would have been entitled had he been placed on the monthly-wages scheme. The court further noted that, under the provisions of the Act, a claim that an employee’s monthly wage of, for example, Rs 100 had been reduced by an unlawful deduction of Rs 10—where such deduction did not fall within any category of section 7(2)—would fall squarely within the jurisdiction of the authority appointed under section 15, which could entertain the dispute and order restitution.

In this case the Court observed that the authority appointed under section 15 may examine the actual terms of the contract of service in order to determine the wage that the employee is contractually entitled to receive. The Court said there is no difficulty in accepting that proposition. When the parties have entered into a contract of service, for example through correspondence, and the contract is to be ascertained by reference to the letters exchanged between them, the authority may be called upon to resolve the dispute and to discover what the contractual terms were based on those letters. However, the Court held that if an employee asserts that his present wage of Rs 100 per month, which he actually receives when due, is less than the wage he would be entitled to should his claim to be placed on a higher-wage scheme be recognised, such a claim does not fall within the jurisdiction of the authority. The authority may determine the actual contractual terms and consequently the actual wages, but it lacks jurisdiction to decide a question of prospective or potential wages. The Court noted that the respondent’s grievance in the present matter falls within this latter category. The Court observed that, had the appellant possessed the power to overlook the respondent’s request to be placed on the higher-wage scheme, the proper remedy for the respondent would have been to approach the higher echelons of the railway administration through a departmental appeal or revision. Instead of pursuing that avenue, the respondent sought relief by presenting his claim before the authority created by the Act. The Court then considered whether the authority possessed the power to direct the appellant or his superior officers, who might be responsible for classification, to revise the classification so as to upgrade the respondent from a daily-wage earner to an employee under the monthly-wages scheme. The Court explained that if the respondent had already been within the monthly-wage cadre and the appellant had withheld the wage increase to which the respondent was automatically entitled without any order from a superior officer, the authority could justly entertain a grievance of underpayment. In the present case, however, the respondent’s request required an order from a superior officer to change his status from a daily-wage earner to a higher cadre. The Court emphasized that section 15 does not empower the authority to issue such a direction to the superior officers. Consequently, the appellant is obliged to pay the respondent only the wages that are recorded in the appropriate wage register maintained by the department under the Act, and the authority cannot compel the appellant to pay a higher amount on the basis that the respondent should have been placed on the monthly-wages scheme. In view of these considerations the Court concluded that the authority lacks jurisdiction to grant the relief sought.

In this case the Court noted that it was unnecessary to examine the substance of the dispute concerning the classification that the Railway Workers’ Classification Tribunal had outlined and that the Railway administration had subsequently applied to the second respondent. The Court explained that, had that issue been within the authority of the Tribunal, the matter would have required remitting the case back to the Tribunal so that both parties could present any additional evidence that had not been before it, thereby allowing the Tribunal to reach a final determination. However, the Court observed that the question of classification lay beyond the limited jurisdiction of the Tribunal, and therefore no such remittance was required. Accordingly, the Court allowed the appeal, set aside the orders passed by the Tribunal and also annuls the decision of the High Court. In view of the special circumstances of the case, the Court declined to make any order as to costs.

The Court further recorded that the second respondent, who had been employed by the Railway as a carpenter since 1941, had been working under a daily-rated casual-labour arrangement. He asserted that he should have been regularised as a monthly-rated permanent employee and that he had been wrongly superseded. The Tribunal, which functions as the authority under section 15 of the Payment of Wages Act for Bombay, did not accept his claim to be treated as a permanent employee. Nevertheless, the Tribunal concluded that the respondent’s position was that of a monthly-rated temporary employee rather than a daily-rated casual labourer. The Tribunal based this conclusion on the award of the Railway Workers’ Classification Tribunal, which incorporated the recommendations of the Central Pay Commission, had been approved by the Railway Board and was directed to be implemented. By virtue of that award, the Tribunal held that the respondent was no longer a mere casual labourer but was entitled to higher wages on a monthly-rated basis. The Court observed that the Tribunal’s order was defective because the relief granted differed from the claim made. The High Court had held that pleadings in such matters must be construed liberally, and the Court found that the Railway authorities themselves had indicated, in their answer to the employee’s claim, that the claim was based on the award of the Railway Workers’ Classification Tribunal. Apart from the jurisdictional issue, the defence advanced by the Railway was two-fold: first, that the respondent, being a daily-rated casual labourer assigned to works, was not covered by the Railway Board directive; and second, that even if the directive applied, the respondent could not be placed on the monthly-rated skilled-grade pay scale without having passed the requisite trade test to establish his skill, which he had not done.

The material referred to by the Tribunal in its order reached three findings. First, it held that the applicant did not belong to the category of work-charged staff. Second, it concluded that, under the Award of the Railway Workers’ Classification Tribunal, a carpenter such as the applicant was not required to pass a trade test. Third, it accepted that certain instructions of the concerned authority limited the period of casual labour to six months, and therefore, because the applicant had been employed by the Railway as a casual labourer since 1941, he became entitled to be treated as a temporary employee rather than a casual labourer and to receive the wages applicable to a temporary employee. Whether these conclusions were correct was not the question before this Court. The sole issue for determination was whether the Tribunal possessed the authority to decide that the applicant was entitled to the emoluments of a monthly-rated temporary employee instead of those of a daily-rated casual labourer, based on the Railway Board’s order implementing the Award of the Classification Tribunal. The Tribunal derived its jurisdiction from section 15 of the Payment of Wages Act, 1936 (Act IV of 1936). Under that provision the Tribunal was created to adjudicate all claims arising out of deductions from wages or delays in the payment of wages. The relief available to it was limited to directing the refund of any amount deducted or the payment of wages that had been delayed. A direction issued by the Tribunal was final under section 17 of the Act, subject only to the limited right of appeal provided in that section. Section 22 further provided that no suit could be filed in any court for the recovery of wages or any deduction therefrom when such recovery could be obtained by an application under section 15. Although the Tribunal’s jurisdiction was confined, the Act also contained detailed provisions requiring employers to prepare and display tables of wages payable and to allow inspection of those tables by Factory Inspectors. Nevertheless, it could not be presumed that the Tribunal’s jurisdiction was restricted solely to enforcing the wages that were displayed or otherwise admitted. Interpreting the jurisdiction in such a narrow way would deprive the Act’s machinery of much of its usefulness and would limit its operation to situations that are unlikely to arise in a well-ordered railway administration. The parties did not argue for such a narrow construction before this Court. Even a Tribunal of limited jurisdiction must be able to determine, for itself, the preliminary facts upon which any claim or dispute depends. In the present case, the Tribunal therefore needed authority to decide what wages were payable and, for that purpose, to ascertain the terms of the applicant’s contract of employment and any conditions attached thereto. The judgment of the other judges in this matter apparently recognized the

In the present case, the Court observed that the Tribunal’s jurisdiction encompassed the authority to ascertain the terms of the contract in order to determine the wages owed to the employee, as reflected in the Tribunal’s own statement that it possessed the power “to find out what the terms of the contract were to determine what the wages of the employed person were.” The Court noted that it was unnecessary to decide whether the Tribunal’s finding on that point was conclusive. The Court further held that the Tribunal had no power to decide the question of “potential wages.” Undoubtedly, a claim for a higher potential wage could not be brought under the category of a claim arising out of deduction from wages or delay in payment when that wage depended on a determination by a superior departmental or other authority as to the employee’s entitlement, because such a determination involved the exercise of administrative judgment, discretion or certification and would thus constitute a condition of the wage’s payability. However, where the higher wage did not depend on such a determination but arose from the application of certain rules and orders that must be regarded as incorporated in the contract of employment, such a wage should not be treated as a prospective wage merely because the paying authority made an error or default in applying those rules. In this context, the Court pointed out that the Act defines “wages” as “all remuneration which would if the terms of the contract, express or implied, were fulfilled, be payable.” The presence of the word “were” in that definition indicates that even a prospective wage that becomes payable upon proper application of the rules may fall within the definition. Accordingly, the wage under the Act is not necessarily the immediately existing wage but the wage presently payable. The Tribunal, in the case before us, proceeded on the view that the applicant was presently entitled to be classified as a monthly-rated temporary employee rather than as a daily-rated casual labourer, by virtue of Railway Board directions implementing the classification scheme, and therefore was entitled to the higher wage. No material was shown to demonstrate that the applicant’s higher classification depended on a determination by a higher departmental authority rather than on the mere application of the classification scheme and its rules. If the latter were true, the Tribunal could not sit in judgment over that determination, whether correct or not; any error in such a determination could be remedied only by a further departmental appeal, if any existed. Nevertheless, the Tribunal was authorized to decide whether the applicant’s case fell within the scope of a departmental determination or involved merely the application of the rules to the facts of the case.

The Court observed that the Tribunal’s proper role was confined to the simple application of the governing rules to the particular facts of the case. It further held that, if the Tribunal’s decision on that point proved to be erroneous, the correct remedy for the Railway Authority lay in filing an appeal under section 17 of the Act. The Court noted that the Tribunal’s finding in the present matter concerned as many as six individuals and that the additional sum ordered by the Tribunal amounted to a total of Rs 1,341; consequently, the Tribunal’s determination fell within the category of matters that were appealable under section 17 of the Act. The Court explained that an employee’s entitlement to a wage belonging to a higher category, as opposed to the wage previously drawn, depended entirely on the scope of the rules that defined the conditions for attaining that higher category. The Court cautioned that it could not be presumed in advance that such a claim automatically constituted a claim for “prospective wages.” After considering these principles, the Court concluded that there was no sufficient basis to overturn the judgment rendered by the learned judges of the Bombay High Court, and accordingly, it opined that the appeal should be dismissed with costs. However, the Court went on to state that, in accordance with the decision of the majority, the appeal was in fact allowed, the orders of the Railway Authority and the High Court were set aside, and no order as to costs was made. The final disposition was that the appeal was allowed.