INDIAN RAILWAYS AND THE PAYMENT OF WAGES ACT, 1936

SUBJECT: LABOUR LAW - II

SUBMITTED TO: PROF VASANTHI

SUBMITTED BY: KRISHNA VISVANATHAN
IV YEAR 7TH SEMESTER
2007 | 34

NALSAR University of Law

Hyderabad

1
 TABLE OF CONTENTS

Table of
Cases……………………………………………………………………………..i
List of Statutes……………………………………………………………………………i

1. Introduction……………………………………………………………………1-3

1.1. Research Methodology……………………………………………………...4

1.2. Research Plan………………..…………………………………………….4-
5

2. Legal Framework………………………………………………………..…….6-8

2.1. Relating to fines under the Act…………………………………………...7-

8

3. Judicial Trend………………………………………………………………...9-20

3.1. Union of India (UOI) through South Eastern Railway,

Chakradharpur Division v. Ram Prasad Sahu @ Ram Pd. Shaw……...…9-
11
3.2. Union of India (UOI) v. L.M. Pinto…….………………………….
…..12-13
3.3. Union of India v. Babu Ram………….………………………………..14-17
3.4. The Divisional Engineer, G.I.P. Railways v. Mahadeo Raghoo..
…….18-20

4. Conclusion………………..………………………………………………………21

Bibliography…………………………………………………………………………...…
ii

2
 TABLE OF CASES

Arvind Mills Ltd. v. K.R.Gadgil..........................................................................................1

Balmer Lawrie Workers Union, Bombay v. Balmer Lawrie and Company Ltd.................2
D.P. Kelkar v. Ambadas......................................................................................................3
FCI v. Special Judge Evam District and Sessions Judge....................................................1
Gopalan v. Augmati Chit Fund...........................................................................................3
Krishna Prasad Gupta v. Controller, Printing and Stationery...........................................2
Ram Prasad Sahu @ Ram Pd. Sahu v. Union of India (UOI) through the Chairman,
Railway Board, Ministry of Railways...........................................................................10
Surendranath Nair v. Senior Divisional Personal Officer............................................8, 21
The Divisional Engineer, G.I.P. Railways v. Mahadeo Raghoo.......................................19
Union of India (UOI) through South Eastern Railway, Chakradharpur Division v. Ram
Prasad Sahu @ Ram Pd. Shaw.....................................................................................10
Union of India (UOI) v. L.M. Pinto..................................................................................13
Union of India v. Babu Ram..............................................................................................15

LIST OF STATUTES
• Payment of Wages Act, 1936.
• Railways Act, 1989.
• Payment of Bonus Act.

3
 INTRODUCTION

As the name suggests, the primary objective of the Payment of Wages Act, 1936 is to
regulate the payment of wages to certain classes of employed persons.1 The Act aims at
the payment of wages:
• without delay; and
• without unauthorised deductions.
The Bombay High Court has held that:
“the general purpose of the Payment of Wages Act is to provide that employed
persons shall be paid their wages in a particular form and at regular intervals and
without any unauthorised deductions”2
The Allahabad High Court has held that:
“the Payment of Wages Act is enacted to ensure justice to both, the employers
and the employees so as to advance the progress of the undertakings and to keep
harmony and create cordial relations between employer and employees.”3
More importantly, in a subsequent decision, the Supreme Court has held that:
“the Payment of Wages Act aims at immediate amelioration of workmen’s plight
resulting from non payment, or delayed payment, or for that matter, short payment of
their wages.”4
The use of the words “certain classes of persons” in the Preamble is important, for
the Act applies to persons drawing on an average wages less than one thousand six
hundred rupees a month.5 Any deduction from the wages or salaries of the workmen
governed by the Payment of Wages Act, unless authorised by the Act shall be deemed to
1
Preamble, Payment of Wages Act, 1936.
2
Arvind Mills Ltd. v. K.R.Gadgil, AIR 1941 Bom. 26.
3
FCI v. Special Judge Evam District and Sessions Judge, 1998 Lab. IC 1697 (All).
4
Krishna Prasad Gupta v. Controller, Printing and Stationery, 1996 Lab. IC 90 (SC).
5
Payment of Wages Act, 1936, Section 1(6).

4
be illegal. Any deduction from the wages of the workmen under a settlement between a
representative Union and employer can, however, permit a deduction, as it is the outcome
of an understanding between the parties even though such deduction may not be
authorised or legally permissible under the Act.6 Regular payment of wages without
unauthorised deductions creates harmonious and cordial relations between the employers
and employees.
The Payment of Wages Act also aims at recovery of unpaid wages by the employed
persons by simple and speedy procedure. For this, the Act provides for the appointment
of an authority under Section 15 of the Act. The authority hears and decides the claims
pertaining to wages payable to the employees. The Payment of Wages Act came into
force with effect from 28.03.1937 vide notification published in the Gazette of India by
the Central Government.
The applicability of the Payment of Wages Act is extended in the first instance to
persons employed upon any railway, by railway administration. The persons employed
upon railway may be appointed directly by the railway administration or through a sub-
contractor by a person fulfilling a contract with the railway administration. The definition
of Railway Administration under the Payment of Wages Act has the same meaning
assigned to it in under Section 3(6) of the Railways Act, 1989.7

6
Balmer Lawrie Workers Union, Bombay v. Balmer Lawrie and Company Ltd., (1985) 1 LLJ 314 (SC).
7
Railways Act, 1989, Section 2(32):
“Railway administration”, in relation to-
(a) A Government railway, means the General Manager of a Zonal Railway; and
(b) A non-Government railway, means the person who is the owner or lessee of the railway or the person
working the railway under an agreement.

5
 Wages is defined under Section 2(vi) of the Payment of Wages Act.8 The definition of
wages is not limited to remuneration payable under an agreement or contract. 9 After the
coming into force of the Payment of Bonus Act, bonus became an implied term of
employment not dependant upon the profits and therefore comes under the category of
remuneration. Viewed in this light, wages as a general term would include bonus.10
Section 3 (c) of the Payment of Wages Act states that the responsibility for payment
of wages is on the employer, and in the case of persons employed upon railways, if the
employer is the railway administration and the railway administration has nominated a
person in this behalf for the local area concerned is the person so named, the person
responsible to the employer, or the person so nominated or designated.

8
“Wages” means all remunerations (whether by way of salary, allowances or otherwise) expressed in
terms of money or capable of being so expressed which would, if the terms 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-
(a) Any remuneration payable under any award or settlement between the parties or order of a court;
((b) Any remuneration to which the person employed is entitled in respect of overtime work or holidays or
any leave period;
(c) Any additional remuneration payable under the terms of employment (whether called a bonus or by any
other name);
(d) Any sum which by reason of the termination of employment of the person employed is payable under
any law, contract or insurement which provides for the payment of such sum, whether with or without
deductions, but does not provide for the time within which the payment is to be made;
(e) Any sum to which the person employed is entitled under any scheme framed under any law for the time
being in force; but does not include-
(1) Any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the
remuneration payable under the ten-ns of employment or which is not payable under any award or
settlement between the parties or order of Court;
(2) The value of any house accommodation, or of the supply of light, water, medical attendance or other
amenity or of any service excluded from the computation of wages by general or special order of the State
Government;
(3) Any contribution paid by the employer to any pension or provident fund, and the interest which may
have accrued therein,
(4) Any traveling allowance or the value of any traveling concession;
(5) Any sum paid to the employed person to defray special expenses entailed on him by nature of this
employment; or
(6) Any gratuity payable on the termination of employment in cases other than those specified in sub-
clause (d).
9
D.P. Kelkar v. Ambadas, AIR 1971 Bom. 124.
10
Gopalan v. Augmati Chit Fund, AIR 1977 Ker. 120.

6
1.1 RESEARCH METHODOLOGY

The research for this project was carried using the doctrinal method of research. Books
available in the NALSAR University of Law, Hyderabad were used extensively along
with available internet sources.

7
2. LEGAL FRAMEWORK

The Central Government is responsible for enforcement of the Act in railways, mines,
oilfields and air transport services, while the State Governments are responsible for it in
factories and other industrial establishments.

The basic provisions of the Act are as follows:-

 The person responsible for payment of wages shall fix the wage period upto
which wage payment is to be made. No wage-period shall exceed one month.11

 All wages shall be paid in current legal tender, that is, in current coin or currency
notes or both. However, the employer may, after obtaining written authorisation
of workers, pay wages either by cheque or by crediting the wages in their bank
accounts. 12

 All payment of wages shall be made on a working day. In railways, factories or

industrial establishments employing less than 1000 persons, wages must be paid
before the expiry of the seventh day after the last date of the wage period. In all
other cases, wages must be paid before the expiry of the tenth day after the last
day of the wage period. However, the wages of a worker whose services have
been terminated shall be paid on the next day after such termination.13

 Although the wages of an employed person shall be paid to him without

deductions of any kind, the Act allows deductions from the wages of an employee
on the account of the following:- (i) fines; (ii) absence from duty; (iii) damage to
or loss of goods expressly entrusted to the employee; (iv) housing
accommodation and amenities provided by the employer; (v) recovery of
advances or adjustment of over-payments of wages; (vi) recovery of loans made
from any fund constituted for the welfare of labour in accordance with the rules

11
Section 4, Payment of Wages Act, 1936.
12
Section 6, Payment of Wages Act, 1936.
13
Section 5, Payment of Wages Act, 1936.

8
 approved by the State Government, and the interest due in respect thereof; (vii)
subscriptions to and for repayment of advances from any provident fund;(viii)
income-tax; (ix) payments to co-operative societies approved by the State
Government or to a scheme of insurance maintained by the Indian Post Office; (x)
deductions made with the written authorisation of the employee for payment of
any premium on his life insurance policy or purchase of securities.14

In the case of Surendranath Nair v. Senior Divisional Personal Officer15, some railway
employees had applied for casual leave for participating in an agitation against the
railways administration. The leave was refused but the employees still participated in the
agitation. The administration deducted wages, treating the period of leave applied for as
absence from duty. It was held that the leave rules for the railways are contained in the
Railway Establishment Code and the rules made thereunder and these rules have general
application to all non-gazetted railway servants. Rejection of leave under such
circumstances was proper and legal. Absence from duty, especially for the purpose of
participation in an agitation against the management, is unauthorised. An unauthorised
absentee has no right to compel payment of wages for the period of unauthorised
absence.16

2.1. Relating to fines under the Act17

The Act prescribes following rules for fines:-

• Fines shall be imposed for approved list of acts and omissions.

• A notice specifying such list shall be exhibited in the prescribed manner on the
premises in which the employment is carried on or at the prescribed places in case
a person is employed in railways.
• No fine shall be imposed on any employed person until he has been given an
opportunity of showing cause against the fine, or other-wise, than in accordance
with such procedure as may be prescribed for the imposition of fines.

14
Section 7, Payment of Wages Act, 1936
15
(1988) 1 LLJ 227 (Kerala).
16
Misra, S.N., LABOUR AND IDUSTRIAL LAWS, 24th ed. 2008, pp. 615-616.
17
Section 8, Payment of Wages Act, 1936

9
 • The total amount of fine which may be imposed in any one wage period on any
employed person shall not exceed an amount equal to three per cent of the wages
payable to him in respect of that wage-period.
• No fine shall be imposed on any employed person who is under the age of fifteen
years.
• No fine imposed on any employed person shall be recovered from him by
installments or after the expiry of sixty days from the day on which it was
imposed.
• All fines and all realisations thereof shall be recorded in a register to be kept by
the person responsible for the payment of wages.

The Act was amended in 2005 in order to enlarge its scope and provide for more
effective enforcement. The main amended provision is the enhancement of wage ceiling
from Rs. 1600/-per month to Rs. 6500/-per month for the applicability of the Act as well
as empowering the Government to enhance the ceiling by notification in future.18

18
http://www.business.gov.in

10
3. JUDICIAL TREND

3.1

Union of India (UOI) through South Eastern Railway, Chakradharpur Division v.

Ram Prasad Sahu @ Ram Pd. Shaw19

FACTS:

The petitioners were engaged by the South Eastern Railway as Commission

Vendors/Bearers and were selling foods to the railway passengers and others on behalf of
the railways on commission basis. The Commission Vendors/Bearers were being paid
commission @ 15 % of the sale proceeds at the end of every month. Some of the
Commission Vendors/Bearers were also taken in the permanent services of the Railways,
getting about Rs. 2,450/- per month and other allowances.

A case was preferred by Commission Vendors/Bearers before the Supreme Court for
their absorption in the services of the Railways and for payment of wages on the
principle of ‘equal pay for equal work'. The Supreme Court by interim orders ordered
that the Commission Vendors/Bearers of South Eastern Railway be given at least a sum
of Rs. 1500/- per month on ad hoc basis or the commission, whichever is higher. The
Supreme Court finally disposed of the writ petition.

19
2006(3)JCR412(Jhr)

11
ISSUES:

The petitioners presented the following details:

SI Name of the Date of Date of Date of attaining

No. Petitioner. Birth Engagement age of 60 years
1. Ram Pd. Sahu. 26,04.1939 09.08.1956 26.04.1999.
Chandrama Pd.
2. 03.03.1939 20.02.1956 03.03.1999
Mishra.
Saraswati
3. 05.12.1941 29.01.1956 05.02.2001
Mishra
Chandrika
4. 11.06.1940 26.06.1956 11.06.2000
Singh.
5. Ambika Shukla.20.06.1941 11.01.1956 20.06.2001
Rameshwar
6. 16.01.1941 20.12.1956 16.01.2001
Singh.
Ram Naresh
7. 20.06.1940 17.05.1956 20.06.2000
Shukla.
Ram Chandra
8. 27.07.1939 25.06.1956 27.07.1999
Bhagat.

According to the counsel for the Union of India, the applicants- Ram Prasad Sahu and
others having not absorbed in the services of the South Eastern Railway, are not entitled
for Pension and as such, the Tribunal should not have ordered to consider their cases for
Pensionary benefits.

On the other hand, according to the counsel for the applicants - Ram Prasad Sahu and
others, for the purpose of absorption, 60 years of age is to be calculated on the date, the
Supreme Court passed order in the Writ Petition (C) No. 196 of 1995 i.e. 3rd December,
1997; due to lapses on the part of the Railways; the applicants - Ram Prasad Sahu and
others cannot suffer and they should be deemed to have been absorbed in the services of
the Railways from the date the Supreme Court's order was to be given effect.

12
DECISION:

The Court held against the petitioners. It held that there cannot be a 'deemed absorption'
or 'automatic absorption' in the services of a State until law permits such deemed
absorption. In absence of any statutory rule, guidelines, circulars, or instructions, it
cannot be presumed that a person stands automatically ' absorbed in the services of a
State. Further, the applicants having crossed more than 60 years of age in between
March, 1999 and June, 2001, there was no occasion for the Tribunal to direct the
Railways to absorb them in the services of the Railways.

Moreover, since the applicants were admittedly not employees of the Railways and in
absence of any guidelines to pay Pensionary benefit to them, neither they can claim for
Pensionary benefit nor the Court can give such direction to pay Pensionary benefit.

3.2. Union of India (UOI) v. L.M. Pinto20

FACTS:
In July, 1960 a general strike of railway workers took place. The strike was an illegal
strike. L. M. Pinto and D. S. Korgaonkar, being respectively respondents 2 and 3 to this
petition and the original applicants before the authority under the Payment of Wages Act
were alleged to have taken part in this strike on July 16, 1960. They were arrested by the
police and subsequently prosecuted under Ss. 4 and 5 of the Essential Services
Maintenance ordinance No. 1 of 1960 and S. 506 of the Indian Penal Code. By an order
of suspension dated July, 1960 they were suspended from service. On August 24, 1960 in
connection with the offence under the above said ordinance L. M. Pinto was discharged.
The prosecution against both the above applicants for the above two offences failed and
they were ordered to be acquitted by the Magistrate's Court on January 17, 1961. They
began to attend duty from January 20, 1961. An order dated January 23, 1961 was passed
20
(1973) I LLJ 6 Bom.

13
by the Chief Personnel Officer whereby the order of suspension dated July 16, 1960 was
revoked with effect from January 21, 1961 being the date on which they reported to the
office for duty. They were further informed that they were liable to disciplinary action as
may be ultimately decided upon.

ISSUE:

Pinto and Korgaonkar filed separate applications before the Payment of Wages Authority
claiming full wages in respect of the period of their suspension mentioned in the above
order, i.e., form July 18, 1960 to January 20, 1961. Their case was that unauthorised and
illegal deductions were made in respect of the wages due to them for the above periods
and these wages claimed by them were payable to them. Thus the case was that the full
wages were payable for the period of suspension.

The submission on behalf of the Union of India is that the above provision under the
order has the effect of a specific order having been made under sub-clause (c) of clause 1
of Rule 2044 regarding the pay and allowance to be paid to these respondents in respect
of the period during which they were suspended.

DECISION: The High Court in this case upheld the decision of the Appellate Authority,
which held that the respondents were entitled to full wages for the period of suspension
and saw no reason to interfere with the decision of the appellate authority.

3.3. Union of India v. Babu Ram21

FACTS:
Babu Ram was in the employee of the Northern Railway which is run by the Union of
India. On 18th April 1946 he was served with an order removing him from service. He
preferred appeals to the competent authorities, which were rejected. Finally, on 20th
August 1951 he filed a suit for declaration that the order removing him from service was

21
AIR 1962 All 52.

14
illegal. This suit was decreed on 20th August 1952 and an appeal by the Railway
dismissed on 5th of August 1953. A second appeal was filed in this Court, but while it
was pending, Babu Ram applied under Section 15(1) of the Payment of Wages Act
claiming wages for the entire period after his removal, alleging that the Railway had been
holding his dues in abeyance and had unnecessarily delayed payment. He prayed for a
direction to the Railway to make the payment. The Railway contested this claim on the
ground, inter alia, that the application was timer-barred. The Commissioner framed an
issue on the question of limitation but without giving any finding on it, he allowed Babu
Ram's application and held that he was entitled to a total sum of Rs. 14,678/6/-. He
directed the Railway to pay this amount "subject to the decision of the Hon'ble High
Court in the second appeal pending before that court." the second appeal of the Railway
was dismissed by this Court on 11th of January 1955 and a special appeal was also
rejected.) On appeal by the Railway under Section 17, the Additional District Judge,
Moradabad held that Babu Ram had sufficient cause for not making his application
within the prescribed period of six months and condoned the delay. On merits he upheld
the decision of the Commissioner but slightly reduced the claim from Rs. 14,678/6/- to
Rs. 13,626/-.

ISSUES AND CONTENTIONS:

It was held that the Commissioner had the power under Section 15(1) to condone the
delay but he relied on the proviso which enjoins that the delay should be condoned only
if the application "satisfies the Authority that he had sufficient Cause for not making the
application within such period". He pointed out that the applicant had filed no affidavit
before the commissioner nor placed any material before him to enable that Officer to
judge whether the applicant had sufficient Cause for the delay.

JUDGMENT:

15
The Court held that the combined effect of the two sub-sections is this. Any employee
can go to the Commissioner for Compensation with claim that the payment of wages due
to him has been delayed and ask him to direct the employer to pay. It was contended that
the Commissioner for Compensation has no jurisdiction to direct payment of wages
where the employee has been dismissed or removed from service by a competent
authority.

The court disagreed with this contention and held that the definition of ‘wages’ under
Section 2 of the Act shows that an employee may claim, under this Act, not only wages
for work actually done but also wages which he would have earned if he had not been
illegally prevented by the employer from working in accordance with the terms of his
contract.

Moreover, regarding the scope of power of the Commissioner, the Court held that Act
ensures that the dispute shall be decided by a Judicial Officer. Thus the legislature has
ensured that the Authority must either be a judicial officer or a stipendiary magistrate and
that the dispute cannot be entrusted to any executive officer with no legal training.

The Court upheld the power of the Commissioner to adjudicate upon whether there
existed an employer-employee relationship or not.

16
3.4. The Divisional Engineer, G.I.P. Railways v. Mahadeo Raghoo22

FACTS:

The 1st respondent is a gang man in the employ of the Central Railway (which
previously used to be known as the G.I.P. Rly.), since April 1945. At that time his wages
were Rs. 18 per month plus dearness allowance. With effect from the 1st November 1947
the Railway Board under Ministry of Railways of the Government of Indian introduced a
scheme of grant of compensatory (city) allowance and house rent allowance at rates
specified in their memorandum. The scheme was modified resulting in certain railway
employees stationed at specified headquarters becoming eligible for the allowance. The
1st respondent thus became entitled to the allowance of Rs. 10 per month. This allowance
the 1st respondent drew along with his salary until the 18th August 1948 when he was
offered by the Government, quarters suitable to his post, but he refused to occupy the
same. On his refusal to occupy the quarters offered by the Government, the house rent
allowance was stopped with effect from the 19th August 1948.

In respect of house rent, the Government had framed the following the rule:

"The house rent allowance will not be admissible to those who occupy
accommodation provided by Government or those to whom accommodation has been
offered by Government but who have refused it".

ISSUE: The main issue in question was whether house rent, which was the subject
matter of the claim, could be included in the definition of ‘wages’ under Section 2 of the
Act.

JUDGMENT: The court held that the argument on behalf of the 1st respondent would
have been valid if the rules in terms contemplated the grant of house rent allowance to
every employee of a particular category but the rules do not make the grant in such
absolute terms. The house rent allowance is admissible only so long as an employee is

22
AIR 1955 SC 295.

17
stationed at one of the specified places and has not been offered Government quarters.
Therefore, house rent is not to be included within wages.

In the case of Surendranath Nair v. Senior Divisional Personal Officer (Rlys.)23, some of
the railway employees had applied for casual leave for participating in an agitation
against the Railway Administration. The leave was refused but the employees
participated in the agitation. The management deducted the wages treating the period of
leave applied for as absence form duty. It was held that the leave rules to the railway
employees are contained in the Railway Establishment Code and the rules made
thereunder. The Code derived its authority form Article 309 of the Constitution and the
rules are made under the delegated power.

Therefore, an unauthorised absentee has no right to compel payment of wages for the
period of unauthorised absence.

23
(1988) 1 LLJ 227 (Kerala).

18
 CONCLUSION

As is evident from the above case discussions, the Courts have been strict in interpreting
the Payment of Wages Act. It is to borne in mind that the Payment of Wages Act is a
beneficial legislation meant to provide for the security of workers against the employers.
However, this does not mean that it constantly be used against the employers. Despite it
being a social welfare legislation, it has to be used judiciously.

One of the most important developments that has taken place is the increase of the wage
ceiling from Rs. 1,600/- to Rs. 6,500/-. It is important because it widens the scope of the
legislation to give more protection to the employees.

The only point the researcher would like to make is that the setting up of more Labour
Courts is not an issue that can be ignored and needs to be addressed immediately.

19
 BIBLIOGRAPHY

• Avtar Singh, INTRODUCTION TO LABOUR AND INDUSTRIAL

LAW, 1st ed. 2002, Wadhwa & Co., Nagpur.
• G.B. Pai, LABOUR LAW IN INDIA, vol.-I, Butterworths, New Delhi.
• Justice D.D. Seth, COMMENTARIES ON THE INDUSTRIAL ACT,
1947, vol.-I, 8th ed. (rev.) 2001, Law Publishing House, Allahabad.
• O.P. Malhotra, THE LAW OF INDUSTRIAL DISPUTES, vol.-II, 5th ed.
1998, (rep.) 2000, Universal Law Publishing Pvt. Ltd., New Delhi.
• S.N. Misra, AN INTRODUCTION TO LABOUR AND INDUSTRIAL
LAWS, 14th ed. 1995, Central Law Publications, Allahabad.
• S.N. Misra, LABOUR AND INDUSTRIAL LAWS, 23rd ed. 2007, Central
Law Publications, Allahabad.

20