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Administrative Law (Panjab University)

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PROJECT REPORT ON

“WAGES UNDER
PAYMENT OF WAGES
ACT,1936”

SUBMITTED TO: SUBMITTED BY:

Dr. Virender Negi Ravleen Kaur

University Institute of 72/16

Legal Studies, Section B

Panjab University, 14373

Chandigarh

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INDEX
SR.NO PARTICULARS PAGE NO.
1. Acknowledgement 3
2. Table of Cases 4
3. Payment of Wages 5
4. Object and Scope 6
5. Application 7
6. Wages 10
7. Payment of Wages and 12
Authorised Deduction
8. Conclusion 18
9. Bibliography Webliography 19

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ACKNOWLEDGMENT

I would like to acknowledge everyone who played a role in my academic

accomplishments.

First of all my parents who supported me with love and understanding. Without them I
would have never reached the current level of success.

Second I would like to thank advocate manpreet singh sidhu for helping me in
completion of the project.

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TABLE OF CASES

(1) Arvind Mills Ltd v. K.R. Gadgil AIR 1941 Bom. 26

(2) Kumar Verma v. State of Jharkhand
(3) Binani Zinc Ltd. v. Pappachan 1985 LLJ 452
(4) FCI v. Special Judge Evam Disctrict and Sessions Judge 1998 Lab IC 1697
(ALL.)
(5) Gurbax Singh v. Executive Engineer, Ropar Division Sirhind Canal
1999(II) LLJ 1329 (P&H)
(6) .C. Mills Ltd., Gwalior v. Payment of Wages Inspector 2000 (I) LLJ 47
(MP)
(7) Krishna Prasad Gupta v. Controller, Printing and Stationery 1996 Lab IC 90
(SC)
(8) S.R.T. Corporation v. Industrial Court AIR 1971 M.P. 54

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PAYMENT OF WAGES ACT, 1936

INTRODUCTION1:
With the development of ventures in India, issues identifying with payment of wages to
people employed in the industry took a bad turn. The mechanical units were revolt
making, payment of wages to their workers at ordinary interims and wages were not
uniform. The mechanical workers had to raise their heads against their misuse. In 1926,
the Government of India kept in touch with nearby governments to find out the position
with respect to the delays which happened in the payment of wages to the people
employed in Industry.

The Payment of Wages Act, 1936 regulates the payment of wages to certain classes of
employed individuals. The Payment of Wages Act, 1936 (Act) is essentially meant to benefit
industrial employees who do not have very high salaries. It applies to all
employees working in a factory or working through a sub-contractor or directly with the
railway administration or those employed in the industrial sector as the Act specifies.In
2017, the Government of India increased the ceiling limit to Rs. 24,000 per month. This
means that employees with wages u to the ceiling limit are covered under the Act.

The Bombay High Court in Arvind Mills Ltd v. K.R. Gadgil2, held that the general purpose
of the Payment of Wages act, 1936 is to provide that employed persons shall be paid their
wages in a particular form and at regular intervals and without any unauthorised deductions.

1 https://www.toppr.com/guides/fundamentals-of-laws-and-ethics/payment-of-wages-act/definition-of-wages-and-
other-important-terms/
2 AIR 1941 Bom. 26

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OBJECT AND SCOPE3 :

The Payment of Wages Act regulates the payment of wages to certain classes of persons
employed in industry and its importance cannot be under-estimated. The Act guarantees
payment of wages on time and without any deductions except those authorised under the
Act. The Act provides for the responsibility for payment of wages, fixation of wage
period, time and mode of payment of wages, permissible deduction as also casts upon the
employer a duty to seek the approval of the Government for the acts and permission for
which fines may be imposed by him and also sealing of the fines, and also for a
machinery to hear and decide complaints regarding the deduction from wages or in delay
in payment of wages, penalty for malicious and vexatious claims. The Act does not apply
to persons whose wage is Rs. 24,000/- or more per month. The Act also provides to the
effect that a worker cannot contract out of any right conferred upon him under the Act.

The Supreme Court in Krishna Prasad Gupta v. Controller, Printing and Stationery4, held
that the Payment of Wages Act,1936 aims at immediate amelioration of workmen’s plight
resulting from non-payment, or delayed payment, or for that matter, short payment of
their wages.

Regular payment of wages without unauthorized deductions to the employees create

harmonious and cordial relations between the employer and employees. As the Allahabad
High Court in FCI v. Special Judge Evam Disctrict and Sessions Judge5 held that
Payment of Wages Act is enacted to ensure justice to both, the employers and employees
so as to advance the progress of the undertakings and to keep harmony and create cordial
relations between employer and employees.

3 https://www.srdlawnotes.com/2017/11/authorized-deductions-under-payment-of.html#:~:text=Introduction%20-
%20The%20Payment%20of%20Wages%20Act%201936,made%20from%20the%20wages%20payable%20to%20a
%20worker.
4 1996 Lab IC 90 (SC)
5 1998 Lab IC 1697 (ALL.)

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APPLICATION 6–

The Payment of Wages Act, 1936 provides for its application:

(1) in the first instance [Sec. 1(4)]; and
(2) by the notification by the Government [Sec. 1(5)].

(i) Application in the first instance Sec. 1(4)-

According to sub-section (4) of Sec. 1, the Payment of Wages Act, 1936 applies in the
first instance to the persons employed:
(i) in factories;
(ii) upon railways by railway administration; and
(iii) in industrial or other establishments specified in sub-clause (a) to (g) of clause
(ii) of Sec. 2.

(i) Factories:
According to sub-sec (4) of Sec. 1, Payment of Wages Act, 1936 applies to persons
employed in the factories in the first instance. Whereas Sec. 2(ib) of the Payment of
Wages Act defines Factory as follows:
Factory means factory as defined in Clause (m) of Section 2 of the Factories Act, 1948
and includes any place to which the provisions of that Act have been applied under sub-
section (1) of Sec. 85 thereof.

(ii)Railways:
According to sub-section (4) of Sec. 1 of the Payment of Wages Act, 1936 applies 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

6 Meenu Paul, Labour and Industrial Laws, Allahabad Law Agency, 10th Edition,2017,p672

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or through a sub-contractor by a person fulfilling a contract with the railway

administration.

(iii) Industrial or other establishment:

According to sub-section (4) of Sec. 1, the Payment of Wages Act, 1936 applies in the
first instance to the persons employed in industrial or other establishments specified in
Sub-clauses (a) to (g) of Clause (ii) of Sec. 2 Whereas according to Sub-clauses (a) to (g)
of Clause (ii) of Sec. 2, "Industrial or other establishment" means any :
(a) tramway service, or motor transport service engaged in carrying passengers or goods
or both by road for hire or reward;
(aa) air transport service other than such service belonging to, or exclusively employed
in the military, naval or air forces of the Union or the Civil Aviation Department of the
Government of India;
(b) dock, wharf or jetty;
(c) inland vessel, mechanically propelled;
(d) mine, quarry or oilfield;
(e) plantation;
(f) workshop or other establishment in which articles are produced, adapted or
manufactured, with a view to their use, transport or sale;
(g) establishment in which any work relating to the construction, development or
maintenance of buildings, roads, bridges or canals, relating to operations connected with
navigation, irrigation, or to the supply of water or relating to the generation, transmission
and distribution of electricity or any other form of power is being carried.

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An educational institution or a school does not come under the purview of the
Payment of Wages Act, 1936:
In Bijay Kumar Verma v. State of Jharkhand7, the Court held that an application filed by
the teacher of the school under the Payment of Wages Act, 1938 claiming her due salary
was itself not maintainable.

In Bijay Kumar Verma v. State of Jharkhand, an application for the payment of wages
was filed by a teacher before the Sub-Divisional Officer under Section 15 of Payment of
Wages Act, 1936. The Sub-Divisional Officer allowed this application and directed the
Managing Committee of the School to pay a sum of Rs. 2,93,130/- towards her wages
and a sum of Rs. 25/- towards compensation. One of the objections raised by the
Managing Committee of the School was that the Sub-Divisional Officer, had no
jurisdiction at all to entertain, the application as he was not an authority under Section 15
of Payment of Wages Act, 1936. In this case it was held that according to Section 15(1) of
the Payment of Wages Act, 1936, the Sub-Divisional Officer is not a competent authority
to decide disputes falling under the Payment of Wages Act, 1936. The disputes under the
Payment of Wages Act, 1936 are to be decided by the Presiding Officers of Labour Court.
Thus, the order passed by the Sub-Divisional Officer in this case was held to be wholly
without jurisdiction.

7 2004 Lab IC 3979

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WAGES [SECTION 2(vi)]:

Sec. 2(vi) of the Payment of Wages Act, 1936 defines "Wages" as follows:

(vi) "wages" means all remuneration (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 instrument 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 terms of employment or which is not
payable under any award or settlement between the parties or order of a 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
a general or special order of the State Government;

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(3) any contribution paid by the employer to any pension or provident fund, and the
interest which may have accrued thereon;
(4) any travelling allowance or the value of any travelling concession;
(5) any sum paid to the employed person to defray special expenses entailed on him by
the nature of his employment; or
(6) any gratuity payable on the termination of employment in cases other than those
specified in sub-clause (d).

AMENITY IS NOT PART OF WAGES:

According to Section2(vi)(2), the amenity excluded from the computation of wages by
general or special order of the State Government does not form part of the wages.
Amenity is provided at the discretion of the employer. In Gurbax Singh v. Executive
Engineer, Ropar Division Sirhind Canal8, the petitioners were class III employees of the
Irrigation Department and were working under the Executive engineer, Sirhind Canal.
There was no provision in the rules for supply of uniforms, shoes, etc. for class III
employees. However, uniform and shoes could be supplied as an amenity at the discretion
of the employer. Because the uniform and shoes in this case were amenities, therefore,
the employees could not make a claim for them as part of their wages before the authority
under Section 15(2) of the Payment of Wages Act, 1936.

BONUS:
Bonus payable under the Payment of Wages Act,1965 amounts to additional remuneration
under the terms of employment under the sub-clause (c) of clause (vi) of section 2 of
Payment of Wages Act,1936. Therefore, bonus payable to the employee under the
Payment of Bonus Act,1965 is within the definition of “wages” under
Section 2 (vi) (c) of the Payment of Wages Act,1936.

SUM PAYABLE ON TERMINATION OF EMPLOYMENT:

8 1999(II) LLJ 1329 (P&H)

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Compenstion payable to the employees in case of his retrenchment under Section 25 FFF
of the Industrial Disputes Act,1947 is the sum payable to the employee by reason of the
termination of his employment within the meaning of sub-clause (d) of clause (vi) of
section 2 of the Payment of Wages Act, 1936. Therefore, compensation payable to
employee on his retrenchment falls within the definition of “wages” under Section 2 (vi)
(d) of the Payment of Wages Act, 1936(S.R.T. Corporation v. Industrial Court)9.

PAYMENT OF WAGES AND AUTHORISED

DEDUCTION-
Who is responsible to pay (Sec. 3):
Every employer is responsible for the payment to the person employed by him all wages
required to be paid under the Payment of Wages Act, 1936.
According to Sec. 3 with respect to the employees employed directly (otherwise than by a
contractor) in
(i) factories. (ii) industrial or other establishment; and (HD) railway administration,
following persons are responsible for the payment of wages to the employed person :
(i) Manager of the factory.
(ii) Person supervising and controlling industrial or other establishment.
(iii) Person nominated by railway administration.

Manager of the factory [Sec. 3(a)]:

9 AIR 1971 M.P. 54

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In the factories the employees are employed either directly or through contractor. If the
factory employs the employees directly, then the person named as the manager of the
factory under Clause () of Sub-section (1) of Sec. 7 of the Factories Act, 1936 is
responsible for the payment of wages.
If no one has been named as the manager with respect to a factory, then the occupier of
the factory can be made responsible for the payment of wages under Sec. 3. Because
occupier is defined under Section 2(n) of the Factories Act, 1948, which means a person
who has ultimate control over the affairs of the factory. Where the factory is owned by
the company, the directors of the company are the occupiers of the factory. Because
company is a legal abstraction, these are the directors who in fact control and manage the
company. Therefore, in J.C. Mills Ltd., Gwalior v. Payment of Wages Inspector10, the
Madhya Pradesh High Court held that, the Payment of Wages Authority could, under Sec.
15 of the Act, call upon any Director or occupier of the factory to make the payment of
wages to the employees under Sec. 3 of the Act.

However, according to Sec. 3(a), "Manager" of a "factory" is not responsible to pay

wages to the employees employed through the contractor. As in Cominco Binani Zinc
Ltd. v. Pappachan11, the management was held not responsible for the payment of wages
to the employees of canteen. Because the employees of the canteen were employed by the
contractor and not directly by the management.

Person supervising and controlling industrial or other establishment [Sec 3(b)]:

10 2000 (I) LLJ 47 (MP)

11 1985 LLJ 452

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In the industrial or other establishments also the employees are employed either directly
or through contractor. If the employees are employed directly, then the person responsible
to the employer for the supervision and control of the industrial or other establishment is
responsible for the payment of wages.

Person nominated by railway administration (Sec. 3(c)]:

Upon railway if the employer is the railway administration, then the railway
administration may nominate a person to pay wages for the local area concerned.
Therefore, according to Sec. 3 (c) , the person nominated by the railway administration is
responsible for the payment of wages.

Section 3-After the Payment of Wages (Amendment) Act, 2005:

Section 3 of the Payment of Wages Act, 1936 has been substituted by new why the
Payment of Wages (Amendment) Act, 2005, which after the amendment reads as
follows:-
Responsibility for payment of wages. —
1. Every employer shall be responsible for the payment of all wages required to be
paid under this Act to persons employed by him and in case of persons employed,

(a) in factories, if a person has been named as the manager of the factory under clause
(f) of sub-section (1) of Section 7 of the Factories Act, 1948 (63 of 1948);

(b) in industrial or other establishments, if there is a person responsible to the

employer for the supervision and control of the industrial or other establishments;

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(c) upon railways (other than in factories), if the employer is the railway
administration and the railway administration has nominated a person in this
behalf for the local area concerned;

(d) in the case of contractor, a person designated by such contractor who is directly
under his charge; and

(e) in any other case, a person designated by the employer as a person responsible for
complying with the provisions of the Act, the person so named, the person
responsible to the employer, the persons so nominated or the person so designated,
as the case may be, shall be responsible for such payment.

(2) Notwithstanding anything contained in sub-section (1), it shall be the responsibility

of the employer to make payment of all wages required to be made under this Act in case
the contractor or the person designated by the employer fails to make such payment."

Fixation of wage periods (Sec. 4):

According to Sec. 4, every person responsible for the payment of wages must fix periods
in respect of which wages shall be payable by the employer to the employed persons.
Sec. 4 further provides that wage period fixed by the employer must not exceed one
month. Sec. 4 reads as follows :

(1) Every person responsible for the payment of wages under section 3 shall fix
periods (in this Act referred to as wage-periods) in respect of which such wages
shall be payable.
(2) No wage period shall exceed one month.

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Time of payment of wages (Sec. 5):

Sec 5 provides for the time of payment of wages as follows:

(i) Before the expiry of seventh day [Sec. 5(1)(a)]: According to Clause (a) of sub-
section (1) of Sec. 5, the wages are to be paid before the expiry of the seventh
day after the last day of the wage period in respect of which the wages are
payable. But clause (a) of sub-section (1) of Sec. 5 apply to such railway.
factory or industrial or other establishment in which number of persons
employed is less than one thousand.
(ii) Before the expiry of tenth day [Sec. 5(1)(b)]: According to Clause (b) of sub-
section (1) of Sec. 5 in the railway, factory or industrial or other industrial
establishment, if the number of persons employed is more than one thousand,
then the wages are to be paid before the expiry of tenth day after the last day of
the wage period in respect of which the wages are payable.
(iii) Persons employed on a dock, wharf. jetty or mine ISec. 5(1)(b)]: In case of
persons employed on a dock, wharf, jetty or mine, balance of wages may be
found due on completion of the final tonnage account of the ship or wagon
loaded or unloaded. In such case the wages are paid before the expiry of the
seventh day from the day of such completion.
(iv) Payment on termination of employment (Sec. 5(2)]:The employment of a
person may be terminated by or on behalf of the employer. In such case the
wages earned by the employee is paid before the expiry of the second working
day from the day on which his employment is terminated.

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Exemption for daily-rated workers (Sec. 5(3)]:

According to sub-section (3) of Sec. 5, the operation of Sec. 5 may be exempted with
respect to persons :

(i) employed upon any railways otherwise than in a factory; or

(ii) to persons employed as daily-rated workers in the Public Works Department of
the Central Government.

Wages to be paid on working day [Sec. 5(4)]:

Save as otherwise provided in subsection (2) of Sec. 5, all payment of wages shall be
made on a working day.

Wages to be paid in current coin or currency notes (Sec. 6):

According to Sec. 6, all wages are to be paid in current coin or currency notes or in
both:
Provided that the employer may, after obtaining the written authorization employed
person, pay him either by cheque or by crediting the wages in his bank account.

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CONCLUSION
The Code endeavours to bind together the meaning of ‘wages’, which is a stage towards
giving better clarity. Nonetheless, the arrangement of independent definitions for
’employee’ and ‘worker’ and their use inside the Code leaves space for confusion.
Further, the Code looks to change the ‘Inspector Raj’ perception in connection to the
Government’s guideline of work by presenting monitors cum-facilitators rather than
simply examiners.

The Code has made a crucial change regarding offences and punishments. Significant
justification and proportionality, with a purpose to help instead of hampering the lead of
business, is clear from the reformatory arrangements.

The Code energizes innovation selection in issues, for example, method of payment of
wages, assessment strategies, which are planned for accomplishing its digitalisation
objectives in administration. The Code is a good-intentioned bit of enactment which
means to adjust the interests of the employer and the worker. In spite of the fact that the
Code contains significant sections of the revoked enactments, it makes a not too bad
attempt to replace theirs out of date provisions.

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BIBLIOGRAPHY

(1) Meenu Paul, Labour and Industrial Laws, Allahabad Law Agency, 10th
Edition,2017

WEBLIOGRAPHY

(1) www.toppr.com
visited at:12:00pm visited on:15-12-2020

(2) www.srdlawnotes.com
visited at:12:00pm visited on:15-12-2020

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