Important points
1. The concept of minimum wages does take in the factor of prevailing cost of essential commodities whenever such minimum wage is to be fixed. Once rates of minimum wages are prescribed under the Act, whether as all inclusive under Section 4(1)(iii) by combining basic plus dearness allowance under Section 4(1)(i), are not amenable to split up.
2. Payment of more than prescribed minimum rates of wages would be ground to exclude an establishment from the applicability of Minimum Wages Act.
3. Where employer is paying total sum which is higher than minimum rates of wages fixed under the Act including the cost of living index (VDA), he is not required to pay VDA separately. However, that higher wages should be calculated as defined in Section 2(h) of the Act.

Headnote:(i) Minimum Wages Act-Sections 3 and 5 r/w 27-Notification dated 19-8-1987 of State Government of Karnataka-Extention of Act to shops and Commercial establishment-Appellant engaged in import and export, clearing and forwarding of cargo, travel and tourism, import, consolidate and courier services-Plea that appellant establishment is not shops and commercial establishment-Not tenable-What the establishment is doing is purely commercial activity of profit motive and hence covered by the expression shops and commercial establishment. (Paras 6, 7 & 8)
       (ii) Minimum Wages Act-Sections 3 and 5-Notification dated 19-8-1987 extending Act to shops and commercial establishments in Karnataka State by Karnataka Govt.-Payment of pay more than minimum wages would not exclude an establishment from purview of Act.
       Held : The process of making the Act applicable to certain industries or establishments situated in particular localities does not require that the State Government should make distinction with each and every shop and establishment by actual verification whether they were paying minimum wages or not. The Notification is made applicable to all shops and commercial establishments in the State of Karnataka where the State has found that the labour was unorganised or that wages paid to the workers were below minimum wages. Hence the plea that the Company is paying more than minimum wages (as alleged), the Notification under the Act would not be applicable to it has no force. (Para 9)
       The Notification issued under the Act prescribing minimum wages applies to all kinds of shops and commercial establishments - big or small - and that payment of more than prescribed minimum rates of wages is not relevant for deciding its applicability. It cannot be stated that as they are paying more than the prescribed minimum wages, the Act or the Notification would not be applicable. For determining whether they are paying minimum rates of wages or not, the amount paid for the value of items which are excluded under Section 2(h) of the Act is not to be taken into consideration. (Para 15)
       (iii) Minimum Wages Act-Sections 3 and 4-Concept of minimum wages does take in the factor of prevailing cost of essential commodities whenever such minimum wage is to be fixed-Once rates of minimum wages are prescribed, whether as all inclusive u/s 4(1)(iii) or by combining basic plus dearness allowance u/s 4(1)(i), are not amenable to split up-Where employer is paying total sum which is higher than minimum rates fixed including cost of living index (VDA) he is not required to pay VDA separately.
       Held : Minimum wage must provide not merely for the bare subsistence of life but for the preservation of the efficiency of the worker and so it must also provide for some measure of education, medical requirements and amenities of himself and his family. While fixing the minimum wages, the capacity of the employer to pay is treated as irrelevant and the Act contemplates that rates of minimum wage should be fixed in schedule industries with a dual object of providing sustenance and maintenance of the worker and his family and preserving his efficiency as a worker. So it is required to take into consideration cost of bare subsistence of life and preservation of efficiency of the workers and for some measure of education, medical requirements and amenities. This cost is likely to vary depending upon the cost prevailing in the market of various items. If there are inflationary conditions prevailing in the country, then minimum wages fixed at a particular point of time would not serve the purpose. Therefore, Section 4 contemplates that minimum wages fixed at a particular point of time should be revised from time to time. Section 4 postulates that minimum wage fixed or revised by the appropriate Government under Section 3 may consist of basic rates of wages and special allowance at a rate to be adjusted at such intervals in such manner as the appropriate Government may direct to accord as nearly as practicable with a variation in the cost of living index number applicable to such workers; alternatively, it permits the fixation of basic rate of wages with or without cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities at concessional rates where so authorised; or in the alternative, it permits an all inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of concessions, if any. The purpose of Section 4 is to see that minimum wage can be linked with increase in cost of living so that increases in cost of living can be neutralised or all inclusive rates of minimum wages can be fixed. But, from the aforesaid Sections 3 and 4, it is apparent that what is fixed is total remuneration which should be paid to the employees covered by the schedule and not for payment of costs of different components which are taken into consideration for fixation of minimum rates of wages. It is thus clear that the concept of minimum wages does take in the factor of prevailing cost of essential commodities whenever such minimum wage is to be fixed. The idea of fixing such wage in the light of cost of living at a particular juncture of time and of neutralising the rising prices of essential commodities by linking up scales of minimum wages with the cost of living index is provided for in Section 4 but V.D.A. is part and parcel of wages. Once rates of minimum wages are prescribed under the Act, whether as all inclusive under Section 4(1)(iii) of by combining basic plus dearness allowance under Section 4(1)(i), are not amenable to split up. It is one pay package. Neither the scheme nor any provision of the Act provides that the rates of minimum wages are to be split up on the basis of the cost of each necessities taken into consideration for fixing the same. Hence, in cases where employer is paying total sum which is higher than minimum rates of wages fixed under the Act including the cost of living index (VDA), he is not required to pay VDA separately. However, that higher wages should be calculated as defined in Section 2(h) of the Act. (Para 15)
       While deciding the question of payment of minimum wages, the competent authority is not required to bifurcate each component of the costs of each item taken into consideration for fixing minimum wages, as lump sum amount is determined for providing adequate remuneration to the workman so that he can sustain and maintain himself and his family and also preserve his efficiency as a worker. Dearness Allowance is part and parcel or cost of necessities. In cases where the minimum rates of wages is linked up with V.D.A., it would not mean that it is a separate component which is required to be paid separately where the employer pays a total pay package which is more than the prescribed minimum rate of wages. Minimum rate of wages fixed under the Act is remuneration payable to the worker as one package of fixed amount. In cases where minimum wage is linked with the cost of living index, the amount paid on the basis of dearness allowance is not to be taken as an independent component of the minimum wages but as part and parcel of the process of computing the rates of minimum wages which is to be determined after taking into consideration the cost of various necessities. (Para 15)

Judgment

Shah, J.-Leave granted.

2. This appeal by special leave is filed against the judgment and order dated 16th October, 1998 passed by the Division Bench of the High Court of Karnataka at Bangalore in Appeal No. 2502 of 1998 dismissing the appeals filed by the appellant-company and confirming the order passed by the learned Single Judge in Writ Petition No. 23096 of 1997.

3. Writ Petition was filed in the High Court of Karnataka for a declaration that the Notification dated 19th August, 1987 issued by the State Government in exercise of the power under Section 27 of the Minimum Wages Act (hereinafter referred to as “the Act”) fixing the minimum rates of wages payable to the categories of employees as specified in the said Notification for Item No. 28, namely, “shops and commercial establishments” under the Act, was not applicable to the appellant-industry and also for setting aside the order dated 31st July, 1997 passed by the Labour Officer (the Competent Authority) under the Minimum Wages Act.

4. Respondent - employees contended that appellant was required to pay variable dearness allowance on the basis of the Notification issued under Section 3 read with Section 5 of the Act. Applications under Section 20(2) of the Act were filed as the employer failed to pay the said amount. The Labour Officer directed that each employee was entitled to the difference of minimum wages to the extent of Rs. 8,740/- by way of variable dearness allowance in terms of the Notification. The competent authority also directed the employer to pay compensation under Section 20(3) of the Act. However, that part of the order directing employer to pay compensation is set aside by the High Court.

5. At the time of hearing of this appeal, Mr. Cama, learned Counsel for the appellant, submitted that :-

(a) the appellant company does not come under the categories of “shops and commercial establishments” as defined under the provisions of the Karnataka Shops and Commercial Establishments Act, 1961, and, therefore, the Notification under the Minimum Wages Act which applies to shops and commercial establishments would not be applicable to the appellant-company.

(b) the learned counsel contended that the appellant-company is paying total pay packet which is more than minimum wages prescribed under the Notification and, therefore, (i) the Notification is not applicable and (ii) in any case, there is no violation of the said Notification. He clarified that appellant-company is paying more than the minimum wages, but the Company is not bifurcating the basic wages and dearness allowance. He submitted that under the Act it is not required to divide minimum wages into two parts, one as basic wages and other as dearness allowance.

6. In our view the contention that the appellant-Company is not covered by the expression “shops and commercial establishments” has no merit. It is admitted by the appellant-Company before the competent authority (Labour Officer) that the appellant-company is engaged in import and export-clearance and forwarding of cargo, travel and tourism, import, consolidate and courier services and is having several offices situated at various places including New Delhi, Bombay, Calcutta, Madras, Ahmedabad, Bangalore, etc. It is also admitted that it is registered as a commercial establishment which is engaged in courier, cargo, travel and related services. In the petition filed before the High Court, it was submitted by the appellant that the main activity of cargo division is handling incoming and outgoing shipment by air concerning clearing and forwarding; the type of services rendered are processing of custom clearance and export formalities; booking of space of air shipment; consolidation of inward air cargo, international/domestic door to door express delivery of documents, parcels and packages; clearing and forwarding of goods entrusted to it for safe delivery by way of personal services and such other ac

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1999 Supreme(SC) 805

Cases Referred (7)