Case Law Details
Karnataka Employers’ Association Vs All India Trade Union Congress (R) Karnataka State Committee (Karnataka High Court)
Karnataka High Court held that in case of challenge against Notification dated 28th July 2022 issued by the Government under Section 3(1)(b) read with Section 5(1)(b) of the Minimum Wages Act, 1948 by employees unions without making employers party in the writ not tenable since employers are interested category of persons to be affected.
Facts- As per the impugned judgment and order which is a common challenge, learned Single Judge set aside Notification dated 28th July 2022 issued by the Government under Section 3(1)(b) read with Section 5(1)(b) of the Minimum Wages Act, 1948, whereby the minimum rates of wages for the employments in the Foundry-with or without machine shop, came to be revised.
Conclusion- Therefore, even if the Notification under Section 5(1) of the Minimum Wages Act, 1948 is perceived to be a subordinate legislative piece, there is no gainsaying that it preceded the statutory process. A flaw in the nature of unreasonableness on any count, in such process, has to be remedied. The statutory exercise has to be informed by tenets of fairness, reasonableness and for that purpose compliance of principles of natural justice by giving the party interested a hearing.
The appellant-employers were admittedly before the Advisory Committee. They raised their suggestions. When the Notification was challenged in the writ petition, the employees Unions-the petitioners did not make the employers party. As stated above, they are the interested category of persons to be affected. When they were before the Advisory Board in the proceedings before the Board, there are all good reasons that they ought to have been arraigned as party in the writ proceedings challenging the Notification. In the facts and circumstances of the case and perceiving the controversy and issues involved, it has to be held that the appellant-employers are required to be treated at least proper parties and that they ought to have been heard.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
In all the captioned appeals, 52 in numbers, not only common facts and identical issues are involved, also all the appellants have challenged the same judgment and order of learned Single Judge dated 26th September 2023 passed in writ petition No.3632 of 2023. Therefore, all the appeals which were heard together, are treated simultaneously by this common order for their disposal.
2. Similarly as in the case of first captioned writ appeal No.23 of 2024 where the appellant is an association of employers registered as Trade Union under the Trade Unions Act, 1926, in all other appeals also the appellants are employers or the association of employers representing the employers. All these appellants were not party to the main proceedings of writ petition decided by learned Single Judge. The respective applications filed by them for leave to appeal were granted by this Court as per order dated 2nd August 20024 and they were permitted to prosecute their appeals.
2.1 As per the impugned judgment and order which is a common challenge, learned Single Judge set aside Notification dated 28th July 2022 issued by the Government under Section 3(1)(b) read with Section 5(1)(b) of the Minimum Wages Act, 1948, whereby the minimum rates of wages for the employments in the Foundry-with or without machine shop, came to be revised.
2.2 After setting aside the said Notification, learned Single Judge directed thus,
“The respondent shall redo the Notification impugned in the writ petition following strictly the procedure and norms fixed by the Hon’ble Apex Court in the case of Reptakos Brett in determining the rates of wages. The redone Notification will be given effect from 28th July 2022.”
2.3 The Government was directed to complete the entire process within an outer limit of two months.
3. Before adverting to the controversy, the case in the original petition filed by two Trade Unions of the employees namely All India Trade Union Congress (R), Karnataka State Committee, and Engineering & General Works Union, Bengaluru, may be noticed in brief. The prayer was advanced by the said employees Unions to set aside the abovementioned Notification dated 28th July 2022 fixing the rates of minimum wages for the workers in accordance with guidelines prescribed by the Hon’ble Supreme Court in Workmen vs. Reptakos Brett & Co. Ltd. [(1992) 1 SCC 290].
3.1 It was contended inter alia that both the petitioner Unions were concerned in relation to the fixation of rates of minimum wages for their member workers in the scheduled employments, that the fixation of rates of minimum wages is of statutory character and that guidelines are prescribed by the Supreme Court in Reptakos Brett (supra). Section 3 of the Minimum Wages Act, 1948 (hereinafter ‘the Act’), deals with fixation of new rates of wages and Section 4 which is about minimum rate of wages, came to be relied on, to submit that the provisions thereof would cover fixation of minimum rates of wages for the first time as well as periodical review thereof.
3.2 With regard to the challenge to the Notification dated 28th July 2022, it was the case sought to be elaborated by the petitioners that the rates of minimum wages proposed in the draft Notification did not have scientific or realistic basis and that no data was collected from the market survey in respect of food items essential for calorie requirements. It was contended that the revision of rates of minimum wages by adding 5% to 10% over the rates fixed in the earlier Notification of 2015-16 was unacceptable and was arbitrary, contending further that the principles stated in Reptakos Brett (supra) were not followed while issuing Notification.
3.3 At this stage, the decision in Reptakos Brett (supra) of the Supreme Court may be noticed. The said decision arose from the decision of the Industrial Tribunal. The Reptakos Brett & Company Limited was engaged in the manufacture of pharmaceutical and dietetic speciality products and it had provided the slab system for dearness allowance, meaning thereby that the dearness allowance paid to the employees was linked to the cost of living index as well as the basic wages. The scheme was included in the settlement arrived between the Company and the workmen.
3.3.1 The dispute arose between the employer and the workmen in relation to the said subject matter and one of the issue addressed by the Tribunal was whether the demand of the management for restructuring of the dearness allowance was justified, if so, to frame a scheme. The Tribunal decided the issue in favour of the Company, and abolished the slab system of dearness allowance and directed that the future dearness allowance in the Company be linked only to the cost of living index.
3.3.2 The Supreme Court held that the Tribunal was not justified in abolishing the slab system for D.A. which had operated in the Company for long 30 years and that there was no material on record to show that what was paid by the Company was higher than what would be required in view of the concept of need based minimum wage. It was held that the scheme cannot be allowed to be devised to the prejudice of the workmen on mere ground that the scheme resulted in over-neutralisation placing the workmen Union at higher wage level.
3.3.3 It was held that an employer is obliged to pay minimum wages to the employees and that the wage structure should approximately answer to six components, which was laid by the Supreme Court to be as under,
“(i) In calculating the minimum wage, the standard working class family should be taken to consist of 3 consumption units for one earner; the earnings of women, children and adolescents should be disregarded.
(ii) Minimum food requirement should be calculated on the basis of a net intake of calories, as recommended by Dr Aykroyd for an average Indian adult of moderate activity.
(iii) Clothing requirements should be estimated at per capita consumption of 18 yards per annum which would give for the average workers’ family of four, a total of 72 yards.
(iv) In respect of housing, the rent corresponding to the minimum area provided for under Government’s Industrial Housing Scheme should be taken into consideration in fixing the minimum wage.
(v) Fuel, lighting and other ‘miscellaneous’ items of expenditure should constitute 20 per cent of the total minimum wage.
(vi) Children’s education, medical requirement minimum recreation including festivals/ ceremonies and provision for old age marriages etc. should further constitute 25 per cent of the total minimum wage.”
4. Heard learned Senior Advocate Mr. S. S. NAGANAND for learned advocate Mr. B. C. Prabhakar for the appellants in Writ Appeal Nos.23 of 2024, 78 of 2024, 87 of 2024, 88 of 2024, 148 of 2024, 165 of 2024, 177 of 2024, 216 of 2024, 316 of 2024, 413 of 2024, 438 of 2024, 502 of 2024, 511 of 2024, 533 of 2024, 542 of 2024, 543 of 2024, 545 of 2024, 553 of 2024, 565 of 2024, 567 of 2024, 570 of 2024, 572 of 2024, 573 of 2024, 574 of 2024, 575 of 2024, 576 of 2024, 577 of 2024, 578 of 2024, 579 of 2024, 580 of 2024, 581 of 2024, 583 of 2024, learned Senior Advocate Mr. K. Kasturi, for learned advocate Smt. Subha Ananthi K. for appellant in Writ Appeal No.161 of 2024, learned advocate Mr. G.S. Subba Rao, for appellant in Writ Appeal Nos.53 of 2024, 54 of 2024, 82 of 2024, 90 of 2024, 92 of 2024, 93 of 2024, 94 of 2024, 107 of 2024, 113 of 2024, 139 of 2024, 141 of 2024, 142 of 2024, 156 of 2024, 159 of 2024, 160 of 2024, 162 of 2024, 166 of 2024, 170 of 2024, 644 of 2024, learned advocate Mr. Hiremath Praveen Kumar Appayya, for appellant in Writ Appeal No.905 of 2024, learned Senior Advocate Mr. V. Prakash for learned advocate Mr. K. B. Narayanaswamy, for respondent Nos.1 and 2 in Writ Appeal Nos.23 of 2024, 53 of 2024, 54 of 2024, 87 of 2024, 93 of 2024, 107 of 2024, 142 of 2024, 162 of 2024, 216 of 2024, 413 of 2024, 905 of 2024 and for respondent No.1 in Writ Appeal Nos.78 of 2024, 82 of 2024, 88 of 2024, 90 of 2024, 92 of 2024, 113 of 2024, 139 of 2024, 141 of 2024, 148 of 2024, 156 of 2024, 159 of 2024, 160 of 2024, 161 of 2024, 165 of 2024, 166 of 2024, 170 of 2024, 177 of 2024, 316 of 2024, 438 of 2024, 502 of 2024, 511 of 2024, 533 of 2024, 542 of 2024, 543 of 2024, 545 of 2024, 553 of 2024, 565 of 2024, 567 of 2024, 570 of 2024, 572 of 2024, 573 of 2024, 574 of 2024, 575 of 2024, 576 of 2024, 577 of 2024, 578 of 2024, 579 of 2024, 580 of 2024, 581 of 2024, 583 of 2024, 644 of 2024, learned advocate Mr. V. R. Datar for respondent No.2 in Writ Appeal Nos.78 of 2024, 82 of 2024, 88 of 2024, 90 of 2024, 92 of 2024, 113 of 2024, 139 of 2024, 141 of 2024, 148 of 2024, 156 of 2024, 159 of 2024, 160 of 2024, 161 of 2024, 165 of 2024, 166 of 2024, 170 of 2024, 177 of 2024, 316 of 2024, 438 of 2024, 502 of 2024, 511 of 2024, 533 of 2024, 542 of 2024, 543 of 2024, 545 of 2024, 553 of 2024, 565 of 2024, 567 of 2024, 570 of 2024, 572 of 2024, 573 of 2024, 574 of 2024, 575 of 2024, 576 of 2024, 577 of 2024, 578 of 2024, 579 of 2024, 580 of 2024, 581 of 2024, 583 of 2024, 644 of 2024 and learned Additional Government Advocate Smt. Niloufer Akbar for respondent No.3 in all Writ Appeals, at length.
4.1 Following main submissions were raised by learned Senior Advocate for the appellants,
(i) When the State Government published the Notification dated 28th July 2022 in terms of Section 5(1)(b) of the Act, under said provision the appropriate Government had discretion to follow the procedure of Committee method contemplated in Section 5(1)(a) or Advisory Board method under Section 5(1)(b). While fixing the minimum wages for the first time, procedure under Section 5(1)(a) for data collection is followed, whereas for revision of minimum wages, Advisory Board method under Section 5(1)(b) came to be followed.
(ii) It was demonstrated from the record that the appellant-employers Union had made representations and they submitted their suggestions and objections before the Advisory Board at its different meetings. However, in the writ petition, they are not made parties by the employees Union who got set aside the Notification in absence of the appellants and without the version of the employers appreciated by learned Single Judge.
(iii) In the entire exercise, the employers Association are a necessary stakeholders. They had no opportunity to put forward their case in the writ petition which resulted into setting aside of the Notification dated 28th July 2022.
(iv) It is the practice to allow the participation of all stakeholders such as employees, employers Association and the Government who have interest in the subject, while undertaking process of fixation of minimum wages and consequential issuance of Notification.
(v) The decision of the Delhi High Court in Federation of Okhla Industries Association vs. Lt. Governor of Delhi [(2018) III LLJ 622 Delhi], in which in respect of adopting the procedure under either Section 5(1)(a) or Section 5(1)(b) of the Act was highlighted.
(vi) The minimum wages in Karnataka is highest compared to the neighbouring States and that the minimum wage is applicable to both small and big industries uniformaly, therefore, care should be taken to ensure that the viability of small industries is not affected while fixing the minimum wages.
(vii) It was elaborated that the decision of the Hon’ble Supreme Court Reptakos Brett (supra), was not strictly on the subject matter dispute in as much as it related to the linkage of D.A. with minimum wages fixation adopted as slab system by the employer company. In the present case, the petitioners-Trade Unions have been asking for livin wage. The living wage or fair wage is distinct concept and have different connotation than minimum wage.
4.2 On the other hand, learned Senior Advocates for the respondents-original petitioners submitted that the guidelines laid down by the Apex Court in the decision in Reptakos Brett (supra), are required to be followed and that the learned Single Judge was entire justified in remitting the matter back for redoing the Notification. It was further submitted that, Section 3 and Section 5 of the Act do not make distinction between fixing and revising the wages which are defined in Section 2(h) of the Act. It was submitted that issuance of Notification was a legislative function.
4.2.1 Reliance was placed on the decision of the Supreme Court in English Newspaper (Private) Ltd. vs. Union of India [AIR 1958 SC 578]. From the said decision, learned Senior Advocate referred to the observations in paragraph 67 to highlight that the ‘fair wage’ was a mean between the living wage and the minimum wage and even the minimum wage is something more than the bare minimum or subsistence wage. He next highlighted from paragraph 73 of the judgment the principles which may govern the fixation of rates of wages.
4.2.2 It was vehemently contended that Notification under Section 5(1) of the Act is a function in legislative nature, therefore giving hearing was not necessary. It was sought to be submitted that natural justice have no room in the process and therefore learned Single Judge could well consider the challenge to the Notification even in absence of the side of employers.
4.2.3 Learned Senior Advocates finally submitted that the employers have no say in the process. Therefore, they were neither the proper or necessary parties in the proceedings of the writ petition before the learned Single Judge, it was submitted.
5. One of the contentions sought to be raised on behalf of the original petitioners-respondents was that Notification dated 28th July 2022 issued under Section 5(1)(b) of the Act was a legislative act and that since it was a legislative act, principles of natural justice would not apply. Examining the above contention and disposing of the same at the outset, it has to be observed that even as the Notification under Section 5(1)(b) could be viewed as a piece of subordinate legislation as an ultimate product, the process leading to issuance thereof is a blend of statutory exercise leading to the Notification. The exercise of statutory powers is under Section 5(1)(b) and that has to be in reasonable manner.
5.1 In the above context, when the exercise is under Section 5 of the Act which deals with the procedure for fixing and revising the minimum wages, the said provision may be looked at closely. It would be immediately clear that the class of employers are interested parties. Section 5 of the Act reads as under,
“5. Procedure for fixing and revising minimum wages.—
(1) In fixing minimum rates of wages in respect of any scheduled employment for the first time under this Act or in revising minimum rates of wages so fixed, the appropriate Government shall either—
a. appoint as many committees and sub-committees as it considers necessary to hold enquiries and advise it in respect of such fixation or revision, as the case may be, or
b. by notification in the Official Gazette, publish its proposals for the information of persons likely to be affected thereby and specify a date, not less than two months from the date of the notification, on which the proposals will be taken into consideration.
(2) After considering the advice of the committee or committees appointed under clause (a) of sub-section (1), or as the case may be, all representations received by it before the date specified in the notification under clause (b) of that sub-section, the appropriate Government shall, by notification in the Official Gazette, fix, or, as the case may be, revise the minimum rates of wages in respect of each scheduled employment, and unless such notification otherwise provides, it shall come into force on the expiry of three months from the date of its issue:
Provided that where the appropriate Government proposes to revise the minimum rates of wages by the mode specified in clause (b) of sub-section (1), the appropriate Government shall consult the Advisory Board also.”
5.1.1 The present exercise leading to the Notification fixing the wages came to be issued pursuant to exercise under Section 5(1)(b) of the Act as above. The said provision inter alia requires the approval of the Government to publish proposals for the information of persons likely to be affected thereby. The class of the employers indeed is a class who would be the stakeholders, interested party and affected group.
5.1.2 Furthermore, when Section 7 of the Act which deals with Advisory Board and Section 8 is about Central Advisory Board, as well as Section 9 providing for composition of the Committees, etc. contemplates that the Advisory Board would consist of persons nominated would be representing the employers also, and not only the employees. This is for the obvious reason that the class of the employers is a stakeholder and a party who would be affected as their obligations would arise as an end result of the exercise of fixing and revising the minimum wages. When it is a question of revising the minimum wages, variety of factors would govern the ultimate act of issuance of Notification and incorporating the conditions and stipulations therein, in which, it is legitimate to conclude, that the employers should have their say and the stand.
5.1.3 The Notification in question precedes a statutory process in terms of Section 5(1)(b) of the Act. The principles of natural justice cannot be viewed to be foreign to such statutory exercise. The answer is available from the nature of provision and the stipulations contained therein, making the employers part of the exercise as stakeholders.
5.2 Not giving hearing to the appellants who are the employers and the stakeholders who would suffer the impact of the Notification, will render the exercise and the ultimate result to be unjust and in that sense arbitrary.
5.3 In Indian Express Newspaper (Bombay) Pvt. Ltd. vs. Bennett Coleman and Co. Ltd. [AIR 1986 SC 515], the Supreme Court had an occasion to observe that although the power to grant exemption under Section 25 of the Customs Act, 1962, is a legislative power and a Notification issued by the Government thereunder amounts to a piece of subordinate legislation, even then, the Notification is liable to be questioned on the ground that it is unreasonable one.
5.3.1 On the basis of the observations in Indian Express Newspaper (Bombay) Pvt. Ltd. (supra), it is possible to observe that the legislative action can be called in question on the ground that it is unreasonable or arbitrary. Following observations of the Supreme Court are to be highlighted,
“A piece of subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent Legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned. In addition it may also be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is contrary to some other statute. That is because subordinate legislation must yield to plenary legislation. It may also be questioned on the ground that it is unreasonable, unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary.” (para 73)
5.3.2 The Supreme Court in Indian Express Newspaper (Bombay) Pvt. Ltd. (supra), also highlighted with approval the observations from an English decision in Mixnam Properties Ltd. vs. Chertsey U.D.C. [(1964 (1) QB 214],
“The various special grounds on which subordinate legislation has sometimes been said to be void … can, I think, today be properly regarded as being particular applications of the general rule that subordinate legislation, to be valid, must be shown to be within the powers conferred by the statute. Thus, the kind of unreasonableness which invalidates a bye-law is not the antonym of ‘reasonableness’ in the sense in which that expression is used in the common law, but such manifest arbitrariness, injustice or partiality that a court would say: ‘Parliament never intended to give authority to make such rules; they are unreasonable and ultra vires’…if the courts can declare subordinate legislation to be invalid for ‘uncertainty’ as distinct from unenforceable… this must be because Parliament is to be presumed not to have intended to authorise the subordinate legislative authority to make changes in the existing law which are uncertain.” (para 73)
5.4 In Vishakapatnam Port Trust and another vs. Ram Bahadur Takur Pvt. Ltd. [(1997) 4 SCC 582], the Supreme Court in the context of the provisions of Sections 52, 53, 42(1) and 48(1) of the Major Port Trusts Act, 1963, dealing with the aspect of framing of scale of rights for trans-shipment and shipping of goods by Board, observed that though audi alteram partem was not to be observed as a rule for the parties affected by legislative action or action of a delegated legislative authority imposing any tax, fee or charges, however when the statute obliges the government to consider modification in or cancellation of the existing rate of charges, court would be justified in directing the government to consider their representation and it would be appropriate in such cases to give personal hearing to the parties.
5.5 The unreasonableness may unfold itself in more than one ways including on account of non observance of principles of natural justice when party affected is sidelined in the process.
5.6 A kind of exception could be said to have been carved out by the Apex Court to provide hearing to the party affected by the exercise which is statutory in nature in its essence, but has a legislative shade in form of subordinate legislation as its end product. At the cost of repetition, it is to be stated that the Notification under Section 5 of the Minimum Wages Act, 1948 takes its shape only after a statutory exercise in terms of Section 5(1)(b) is undergone.
5.6.1 As noted above, the class of the employers could not be excluded from the zone, by any stretch of logic to treat them outsiders. The employers have definite interest in the exercise and giving hearing to them would not only be just and proper, but would also make the statutory exercise just, fair and reasonable. In this view, it has to be observed that the appellants were the necessary parties in the writ petition before the learned Single Judge.
5.7 The principles of natural justice and the rule of compliance thereof have been evolved to emerge as integral and fundamental part of process of decision making. These inherently embodied principles in the statutory or judicial sphere pervade to be applied where the decision is to ultimately affect rights, interest and obligations of any party, and when the decision may lead to any kind of civil consequences. In such cases and circumstances, whether this exercise is administrative, quasi-judicial, judicial or even has a trait of legislative exercise, a decision affecting a party has to precede right to hearing such party. All statutory exercises have to be reasonable leading to outcome fair and objective in law. This may be possible only if it has an intake of natural justice.
5.7.1 In Swadeshi Cotton Mills vs. Union of India [(1981) 1 SCC 664], the Supreme Court observed that, the principles of natural justice are now considered so fundamental as to be ‘implicit in the concept of ordered liberty’ and, therefore, implicit in every decision making statutory function. It was observed that, the rule of fair play must not be jettisoned except in very exceptional circumstances where compulsive necessity so demands. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relation exercise.
5.8 While applying any law or in operation of law or statutory provision, when civil consequences entail on a party or the final decision that comes out to operate adverse or it concerns a stakeholder or where stakeholding party has interest in it, right to be heard become implicit to lend the process and the decision a reasonability and legal legitimacy. In that way, natural justice and principles conceptualizing natural justice have brooding omnipresence. Non-compliance of this facet of obligation of law would render the exercise, the process and the resultant decision to be unreasonable and arbitrary in that sense. A proposition may not be incorrect if it is observed that even in respect of statutory exercise leading to legislative piece or product, the right to hearing to the interested or affected person or party should be availed, and for that matter observance the principles of natural justice may not be always alien, in the statutory exercise while preceded.
5.8.1 Therefore, even if the Notification under Section 5(1) of the Minimum Wages Act, 1948 is perceived to be a subordinate legislative piece, there is no gainsaying that it preceded the statutory process. A flaw in the nature of unreasonableness on any count, in such process, has to be remedied. The statutory exercise has to be informed by tenets of fairness, reasonableness and for that purpose compliance of principles of natural justice by giving the party interested a hearing.
5.9 The appellant-employers were admittedly before the Advisory Committee. They raised their suggestions. When the Notification was challenged in the writ petition, the employees Unions-the petitioners did not make the employers party. As stated above, they are the interested category of persons to be affected. When they were before the Advisory Board in the proceedings before the Board, there are all good reasons that they ought to have been arraigned as party in the writ proceedings challenging the Notification. In the facts and circumstances of the case and perceiving the controversy and issues involved, it has to be held that the appellant-employers are required to be treated at least proper parties and that they ought to have been heard.
6. As a result of the foregoing reasons and discussions, following order is passed,
i. The proceedings of writ petition are remitted back to the learned Single Judge for his decision afresh in accordance with law.
ii. While undertaking the exercise of deciding afresh, the appellants herein shall be permitted to put forward their case by filing reply.
iii. The appellants shall be given opportunity of hearing before final decision is rendered in the petition.
iv. The aforesaid exercise shall be completed by the learned Single Judge expeditiously and preferably within ten weeks, looking to the nature of the issue involved and its consequences.
v. The parties shall cooperate in early disposal of the petition.
vi. This Court has not gone into merits nor expressed anything on merits of the case of the either side which is to be reconsidered by learned Single Judge. Any observation in this order shall not be construed as of expression of opinion on merits.
vii. In order to enable learned Single Judge to undertake the aforesaid exercise of deciding the petition afresh, the judgment and order dated 26th September 2023 in writ petition No.3632 of 2023 is set aside.
7. All the appeals are partly allowed in the aforesaid terms and stand disposed of.
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