PAYMENT OF WAGES

HISTORICAL PERSPECTIVE
(A COMPREHENSIVE PERSPECTIVE FOR ANSWER WRITING PURPOSES AND THE SAME IS NOT RESTRICTIVE TO THIS ACT)

 The period of early 1700s saw the invention of steam engine by Thomas
Newcomen which led to the first industrial revolution in Britain which
lasted till 1830s, this led to increase in demand of coal in Britain,
expansion in iron and steel industry and transformation of British
cottage industry into factories among other innovations.
 India was an officially a colony of the British Crown from the period of
1858 to August 1947, and the industrial revolution in Britain had a
reverse impact on Indian economy.
 Britain forced India to accept the British goods which destroyed the
Indian cottage and handicraft industry and since India was forced to
produce the cash crops which Britain required for trade with the other
countries. (* Have provided a comprehensive perspective for answer
writing purposes and the same is not restrictive *)
 These factors gave the rise of British capitalist industry in India, as the
vacuum created by the destruction of Indian industries was filled by it.
Industrial development in India until the beginning of the 20th century was
mainly confined to four industries namely, cotton and jute industries, coal
mining and tea plantation. A few other minor industries such as cotton
presses, rice, flour and timber mills, leather tanneries, woollen textiles, paper,
sugar, salt, mica, petroleum and iron mines were developed.
 With the growth of modern industries a new social class was born i.e. the
working class. Due to emergence of zamindari and ryotwari system because
of which agriculture sector was destroyed, further lack of choice with the
farmers to grow crops, destruction of cottage industry, illiteracy, general
poverty leading to starvation, poor living conditions and rural backwardness
the Indian household did not had any option and were forced to migrate to
cities and work for English factories or industries.
 The founder of the organised labour movement in India may be said to be N.M. Lokhande,
who was himself a factory worker. In 1884, he organised an agitation and called for a
conference of workers in Bombay to make representation to the factory Commission just
then appointed.
 During the period 1904-1911 there was a remarkable advance in the organisation of labour
movement. A strike in the Bombay Mills in protest of the extension of working hours, a
series of strikes in the railways, in the Government Press in Calcutta and the Swadeshi
Movement launched in Bengal in 1905 gave tremendous impetus to the trade union
movement.
 The non-cooperation movement launched by Gandhiji during 1919-21 and the formation
of the Ahmedabad Textile Labour Association under the leadership of Mahatma Gandhi
gave trade union movement a new dimension.

 Establishment of International Labour Organisation (ILO) in 1919 of which India is a

founder member and the Russian Revolution to establish a Socialist State in 1917
contributed significantly to transform the consciousness of the working class.
 the Indian modern factories were not much, that is, the factors of production were in
the hands of very few Indian people and they were too under the supervision and
control of the Crown by way of tariffs, policies and regulations. They tried to rejuvenate
the cottage industry but failed to do so.
 there was abundant labour availability in India ready to work in hazardous industries
with no or little safety measures, poor living conditions, longer working hours and no
nourishment that too at meagre or starvation wages (as the Minimum Wages Act did
not come until 1948 i.e. around the independence).
 To further contribute to the misery of labourers, there existed a variety of wage period
and even then the wages were not paid on time, that is, wages were delayed for months
and the working class which hardly was acquainted with the concept of savings,
required the timely payment to support their families by providing food, giving clothes
and maintaining shelter above their heads. These basic requirements are necessary for
any human to survive, and denial of the same to the workers, though indirectly, led to a
major crisis for labours.
KEY FACTORS FOR IMPLEMENTATION OF
THE ACT
 in 1925 a Private Bill was introduced in the Legislative Assembly by the name of Weekly Payment Bill
which addressed these issue, but at the time the government declined the Bill by citing that the issue is
already under consideration.

 In 1926, the Government of India kept in touch with the state or provincial governments and asked them
to investigate and collect the requisite information, material etc. regarding the said issues. The material
collected clearly showed that the issues very much existed, that is, the high amount of wages were being
deducted arbitrarily by the employers and payment of wages to the workers were not prompt and
uniform

 The Royal Commission on Labour's report covered vast issues faced by the workers in the different
factories and submitted its findings.

 In 1935 the Payment of Wages Bill, in light of indistinguishable standards from the prior Bill of 1933 yet
altogether overhauled was presented in the Legislative Assembly on 15th February 1935. The Bill was
referred to the Select Committee. The Select Committee displayed its report on 2nd September 1935.
Consolidating the proposals of the Select Board of trustees, the Payment of Wages Bill, 1935 was again
presented in the Legislative Assembly and finally the Payment of Wages Act was passed in 1936 and
came into further on 21st March, 1937.
DEFINITIONS

 Section 2 (a) "accounting year" means the year commencing on the 1st day of April
 Section 2 (d) "appropriate Government" means,–– (i) in relation to, an establishment carried
on by or under the authority of the Central Government or the establishment of railways,
mines, oil field, major ports, air transport service, telecommunication, banking and insurance
company or a corporation or other authority established by a Central Act or a central public
sector undertaking or subsidiary companies set up by central public sector undertakings or
autonomous bodies owned or controlled by the Central Government, including establishment
of contractors for the purposes of such establishment, corporation or other authority, central
public sector undertakings, subsidiary companies or autonomous bodies, as the case may be,
the Central Government; (ii) in relation to any other establishment, the State Government;
 Section 2(f) "contractor", in relation to an establishment, means a person, who — (i)
undertakes to produce a given result for the establishment, other than a mere supply of
goods or articles of manufacture to such establishment, through contract labour; or (ii)
supplies contract labour for any work of the establishment as mere human resource and
includes a sub-contractor;
 Section 2 (k) "employee" means, any person (other than an apprentice engaged
under the Apprentices Act, 1961), employed on wages by an establishment to do
any skilled, semi-skilled or unskilled, manual, operational, supervisory,
managerial, administrative, technical or clerical work for hire or reward, whether
the terms of employment be express or implied, and also includes a person
declared to be an employee by the appropriate Government, but does not include
any member of the Armed Forces of the Union
 Other definitions to be referred: wages (y), employer (l) and others as discussed
in class
CHAPTER III PAYMENT OF WAGES

 Section 15 . Mode of payment of wages : All wages shall be paid in current coin or
currency notes or by cheque or by crediting the wages in the bank account of the
employee or by the electronic mode. the industrial or other establishment, to which
employer shall pay to every person employed the wages only by cheque or by crediting
the wages in his bank account may be specified by app govt.
 Section 16 Fixation of wage period.: The employer shall fix the wage period for
employees either as daily or weekly or fortnightly or monthly subject to the condition
that no wage period in respect of any employee shall be more than a month
 Section 17: Time limit for payment of wages
 (i) daily basis, at the end of the shift; (ii) weekly basis, on the last working day of the
week, that is to say, before the weekly holiday; (iii) fortnightly basis, before the end of
the second day after the end of the fortnight; (iv) monthly basis, before the expiry of the
seventh day of the succeeding month.
 Section 17 (2) Where an employee has been— (i) removed or dismissed from
service; or (ii) retrenched or has resigned from service, or became unemployed
due to closure of the establishment the wages payable to him shall be paid within
two working days of his removal, dismissal, retrenchment or, as the case may be,
his resignation.
DEDUCTIONS WHICH MAY BE MADE FROM
WAGES
 SECTION 18: No deductions from the wages of the employee, except those as are
authorised under this Code.
 any payment made by an employee to the employer or his agent shall be deemed
to be a deduction from his wages
 ( NOT DEDUCTION) any loss of wages to an employee, for a good and sufficient
cause, resulting from— (i) the withholding of increment or promotion, including
the stoppage of an increment; or (ii) the reduction to a lower post or time-scale; or
(iii) the suspension, shall not be deemed to be a deduction from wages in a case
where the provisions made by the employer for such purposes are satisfying the
requirements specified in the notification issued by the appropriate Government
in this behalf
SECTION 18 (CONT.)

 2. Deductions from the wages of an employee shall be made in accordance with the provisions of
this Code, and may be made only for the following purposes
 (a) fines imposed on him; (Section 19)
 (b) deductions for his absence from duty; (Section 20)
 (c) deductions for damage to or loss of goods expressly entrusted to the employee for custody; or
for loss of money for which he is required to account, where such damage or loss is directly
attributable to his neglect or default (Section 21)
 (d) deductions for house-accommodation supplied by the employer or by appropriate Government
or any housing board set up under any law for the time being in force, whether the Government or
such board is the employer or not, or any other authority engaged in the business of subsidising
house-accommodation which may be specified in this behalf by the appropriate Government by
notification;
*KINDLY REFER TO THE SECTIONS MENTIONED IN BLACK FOR A DETAILED UNDERSTADNING
OF THE SPECIFIC DEDUCTION
 (e) deductions for such amenities and services supplied by the employer as the appropriate
Government or any officer specified by it in this behalf may, by general or special order,
authorise and such deduction shall not exceed an amount equivalent to the value of such
amenities and services (Section 22)
 (f) deductions for recovery of— (i) advances of whatever nature (including advances for
travelling allowance or conveyance allowance), and the interest due in respect thereof, or for
adjustment of overpayment of wages; (ii) loans made from any fund constituted for the
welfare of labour, as may be prescribed by the appropriate Government, and the interest due
in respect thereof; (Section 23)
 (g) deductions for recovery of loans granted for house-building or other purposes approved by
the appropriate Government and the interest due in respect thereof; (Section 24)
 (h) deductions of income-tax or any other statutory levy levied by the Central Government or
State Government and payable by the employee or deductions required to be made by order
of a court or other authority competent to make such order;
 (i) deductions for subscription to, and for repayment of advances from any social security fund
or scheme constituted by law including provident fund or pension fund or health insurance
scheme or fund known by any other name;
 (j) deductions for payment of co-operative society subject to such conditions as the
appropriate Government may impose;
 (k) deductions made, with the written authorisation of the employee, for payment of the fees
and contribution payable by him for the membership of any Trade Union registered under the
Trade Unions Act, 1926;
 (l) deductions for recovery of losses sustained by the railway administration on account of
acceptance by the employee of counterfeit or base coins or mutilated or forged currency notes
 (m) deductions for recovery of losses sustained by the railway administration on account of the
failure of the employee to invoice, to bill, to collect or to account for the appropriate charges
due to the railway administration
 (n) deductions for recovery of losses sustained by the railway administration on
account of any rebates or refunds incorrectly granted by the employee where
such loss is directly attributable to his neglect or default;
 (o) deductions, made with the written authorisation of the employee, for
contribution to the Prime Minister’s National Relief Fund or to such other fund as
the Central Government may, by notification, specify.
SECTION 18(3) ONWARDS

 3. the total amount of deductions which may be made under sub-section (2) in any
wage period from the wages of an employee shall not exceed fifty per cent. of
such wages
 4. Where the total deductions authorised under sub-section (2) exceed fifty per
cent. of the wages, the excess may be recovered in such manner, as may be
prescribed
 5. (RESPONSIBILITY OF EMPLOYER) Where any deduction is made by the
employer from the wages of an employee under this section but not deposited in
the account of the trust or Government fund or any other account, as required
under the provisions of the law for the time being in force, such employee shall
not be held responsible for such default of the employer
OTHER IMPORTANT PROVISIONS

 S. 43 Responsibility for payment of various dues: Every employer shall pay all amounts
required to be paid under this Code to every employee employed by him: Provided that
where such employer fails to make such payment in accordance with this Code, then, the
company or firm or association or any other person who is the proprietor of the
establishment, in which the employee is employed, shall be responsible for such payment.
 S. 50. (1) Records: Every employer of an establishment to which this Code applies shall
maintain a register containing the details with regard to persons employed, muster roll,
wages and such other details in such manner as may be prescribed.
 Section 2(r) "Inspector-cum-Facilitator" means a person appointed by the appropriate
Government under sub-section (1) of section 51 (please refer to this section for detailed
understanding)
 Provisions of claims under chapter VI. and other relevant provisions which are applicable
for all the chapters of the act.
CASE LAWS

The Divisional Engineer, G.I.P. Railway v. Mahadeo Raghoo and Anothers

 In case of The Divisional Engineer, G.I.P. Railway v. Mahadeo Raghoo and Anothers, respondent was a
gangman in the employ of the Central Railway Act 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. This scheme was modified by the
Railway Board's letter.
 As a result of this scheme certain railway employees stationed at specified headquarters were eligible for
the allowance aforesaid at certain specified rates. The 1st respondent thus became entitled to the
allowance of Rs. 10 per month. Therefore he was offered a rent allowance by the government which he
refused. The question came up for consideration that whether deduction could be made regarding the
house allowance.
 The Court held that, Section 7 of the Act deals with such deductions as may be made from the wages as
defined in the Act, of an employee. Sub-section (2) of section 7 categorically specifies the heads under
which deductions may lawfully be made from wages.
 such a deduction shall not be made unless the house accommodation has been accepted by the
employee and shall not exceed the amount equivalent to the value of such accommodation. That being
so, there is no validity in the argument advanced on behalf of the 1st respondent that rule 3(i) aforesaid is
BANK OF INDIA V. T.S. KELAWALA AND ORS.

 In the case of Bank of India v. T.S. Kelawala and Ors. , the question which came for consideration
was that whether an employer has a right to deduct wages unilaterally and without holding an
enquiry for the period the employees go on strike or resort to go-slow.
 The appellant-Bank issued a circular to all its managers and agents to deduct wages of the
employees who would participate in the strike for the days they go on strike. the Bank issued an
Administrative Circular warning the employee that they would be committing a breach of their
contract of service if they participated in the strike and that they would not be entitled to draw the
salary for the full day if they did so, and consequently, they need not report for work for the rest of
the working hours on that day. The court held that, Section 7 (2) read with Section 9 of the
Payment of Wages Act provides the circumstances under which and the extent to which deduction
can be made. It is only when the employer has right to make deduction, resort should be had to
the act to ascertain the extent to which the deduction can be made. No deduction exceeding the
limit provided by the act is permissible even if the contract so provides. There cannot be contract
contrary to or in terms wider than the input of sections 7 and 9 of the act. Therefore wage
deduction cannot be made under section 7(2) of the payment of wages act if there is no such
power to the employer under the terms of contract.
P.C. AGARWALA V. PAYMENT OF WAGES
INSPECTOR, M.P. AND ORS.
 In case of P.C. Agarwala v. Payment of Wages Inspector, M.P. and Ors. , in the
present case the Company n enable to pay the wages to its workers. The question
which came up for consideration was that whether the Director can be held
personally liable for not paying the wages? The court held that, the Director
cannot be held liable as there was no evidence to show that the Director should be
both employer and the manager of the Factory and in the present case, there was
no such evidence or allegation. It also further held that the assets lying with the
Official Liquidator be sold soon so as to make the payments
G.Y.N. CHAINULU AND OTHERS V. THE DEPOT
MANAGER, A.P.S.R.T.C. AMALPURAM AND
ANOTHER’S
 In G.Y.N. Chainulu and others v. The Depot Manager, A.P.S.R.T.C. Amalpuram and
another’s , it was held that once the strike is declared as illegal u/s 3 of Essential
Services Maintenance Act, a notice of strike u/s 22 of Industrial Dispute Act is not a
due notice. The employer has the right to deduct the wages in case of absence
from duty without dur notice and without a reasonable cause. But such an
absence is made an offence u/s 4 Essential Services Maintenance Act. The right
given u/s 9 (2) of Payment of Wages Act is inconsistent of Section 4 of Essential
Services Maintenance Act. Therefore deduction of wages is without authority of
law and without jurisdiction.
KOTHARI (MADRAS) LTD. V. SECOND A.J CUM
APPELLATE AUTHORITIES AND OTHER’S
 In Kothari (madras) Ltd. v. Second A.J cum Appellate Authorities and Others, the
question for consideration was regarding the validity of deduction of wage of
employees who were prevented from attending the duty on account of Andhra
Bandh. It was held that if the tribunal finds that an employee was not responsible
for the absence from duty or he was prevented from attending the duty, the
management is not entitled to deduct the wages. The tribunal has the power to
look for the reasons and record a finding in that regard. In this case the workmen
were prevented from attending the duty by the organizers of the Bandh.
Therefore, the tribunal has the jurisdiction to look into sch a matter and resolve
accordingly.
MANAGER, RAJAPALAYAM MILLS LTD. V.
LABOUR COURT, MADURAI AND ANOTHER
 In the case of Manager, Rajapalayam Mills Ltd. v. Labour Court, Madurai and
another , the employee resigned from the services. While he was in service he took
some loan for house building. The employer adjusted the salary which was due to
him with the amount to be paid for the house building. In the claim by the
employee regarding the salary was rejected as he ceased to be an emplyoyee due
to his resignation. The court held that in such a case it is open to the employer to
adjust the entire amount due on account of wage under Section 7(4) of the
Payment of Wages Act.
FRENCH MOTOR CAR O. LTD., WORKERS
UNION V. FRENCH MOTOR CAR CO. LTD
 In the case of French Motor Car o. Ltd., workers Union v. French Motor Car Co.
Ltd, three questions were decided. Some employees of the company indulge in go
slow and resorted to strike for 3 days and 29 employees were not allowed by the
employer to resume work unless they sign a guarantee bond. It has been held that
on the principle of no work no pay, the management was justified in deducting
the wages of three days that is, the strike period. Further the authority under the
payment of wages act is not competent to examine whether the strike was legal
or not. The wages of the workmen could be deducted under section 7(2)(b) for
absence from duty. However, the absence from the duty by an employee must be
voluntary and it cannot cover his absence when he is forced by circumstances
created by employer from carrying out his duty. Therefore no deduction can be
made from wages of 29 employees whose absence was not voluntary , in as much
as they were not allowed to resume their work without singing the guarantee
bond.
SURENDRANATHAN NAIR AND OTHERS V.
SENIOR DIVISIONAL PERSONAL OFFICER
(RLYS.)
 In Surendranathan Nair and others v. Senior divisional personal officer (Rlys.),
some of the railway employees applied for casual leave to participate in an
agitation against 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 from duty. It was held that the
leave rules to the railway are contained in the railway established code and the
rule made thereunder. The code derives its authority from Article 309 of the
constitution and the rules are made under the delegated power. These rules have
general application to all non-gazatted railway servants. Rejection of leave under
such circumstances was legal and proper. Absence from duty, especially for the
purpose pf participation in an agitation against his management is unauthorized.
An unauthorized absentee has no right to compel payment of wages for the
period of unauthorized absence