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SUPREME COURT OF INDIA
RAJESH BINDAL, MANMOHAN, JJ.
Union of India and Others – Appellants
Versus
Heavy Vehicles Factory Employees’ Union and Another – Respondents
Civil Appeal Nos. 5185-5192 of 2016
Decided On : 20-01-2026
The petitioner argues that the statutory provisions under Section 59(2) of the Factories Act, 1948, clearly define the "ordinary rate of wages" as including basic wages and such allowances to which the worker is entitled, explicitly excluding bonus and wages for overtime work. They contend that the legislative intent was to ensure that all wages, including allowances like HRA, TA, CWA, and SFA, should be included in the calculation of overtime wages, unless specifically excluded by the statute itself (!) (!) .
Furthermore, the petitioner emphasizes that the power to interpret and implement these provisions resides solely with the legislature and the relevant statutory authorities, and that executive directives or memorandums cannot alter or add to the exclusions contemplated by the law (!) (!) . They argue that the sudden exclusion of compensatory allowances through executive memorandums lacks legal authority and is contrary to the plain language and intent of the statute, which aims to protect workers from exploitation by ensuring they are fairly compensated for overtime work (!) (!) .
The petitioner also highlights that the law is beneficial in nature and should be construed liberally in favor of the workers, reinforcing that exclusions not explicitly provided for in the statute cannot be introduced through executive action (!) (!) . They contend that allowing such executive directives to override the statutory provisions would undermine the protective purpose of the Act and lead to an unjust financial burden on workers.
Finally, the petitioner points out that different ministries issuing conflicting instructions create ambiguity and undermine the rule of law, as no ministry has the statutory authority to interpret or modify the law through non-statutory directives. Therefore, the inclusion of allowances like HRA, TA, CWA, and SFA in the calculation of overtime wages should be upheld as per the clear language of the statute, and executive memorandums excluding them should be deemed invalid.
| Table of Content |
|---|
| 1. basis of wage determination under factories act (Para 1 , 2) |
| 2. arguments on wage calculation and allowances (Para 3 , 5 , 6) |
| 3. interpretation of section 59(2) of the 1948 act (Para 8 , 9 , 10) |
| 4. judicial interpretation of executive instructions (Para 11 , 12) |
| 5. judgment on inclusion of allowances in overtime wages (Para 15 , 17) |
| 6. order dismissing appeals (Para 18) |
JUDGMENT :
RAJESH BINDAL, J.
1. Aggrieved against the order passed by the Division Bench of the High Court 1 [High Court of Judicature at Madras] dated 30.11.2011, the present appeals have been filed by the Union of India. Vide the aforesaid judgment, the order passed by the Central Administrative Tribunal2 [Central Administrative Tribunal, Madras Bench (Hereinafter “CAT”)] dated 24.12.2010 passed in a bunch of applications filed by the respondents, was set aside.
2. Briefly, the issue is as to whether compensatory allowances, such as House Rent Allowance3 [Hereinafter “HRA”] Transport Allowance4 [Hereinafter “TA”] Clothing and Washing Allowance5 [Hereinafter, “CWA”] and Small Family Allowance6 [Hereinafter “SFA”] would fall within the term “ordinary rate of wages” for calculation of overtime wages in terms of Section 59(2) of the FACTORIES ACT , 1948.7 [Hereinafter “the 1948 Act”]
3. Learned counsel appearing for the appellants, taking us through the historical background, has drawn our attention to various letters issued by different Ministries, in terms of which the respondents will not be entitled to add various components of compensatory allowances for the purpose of calculation of overtime wages.
3.1 The learned counsel referred to a letter dated 01.09.1959 from the Government of India, Ministry of Defence, addressed to all the factories, clarifying that wages payable for overtime to the civilian employees for work in excess of normal working hours and up to 9 hours on any day or 48 hours in a week, overtime will be payable on basic pay and dearness allowance only. For any period in excess of that, the overtime shall be calculated on total wages including various allowances.
3.2 Further, reference was made to a letter dated 12.06.2000 issued by the Ministry of Labour, Government of India which provided that travelling allowance should be added in the basic rate of wage for calculation of overtime wages in terms of Section 59(2) of the 1948 Act.
3.3 Further, reference was made to an Office Memorandum dated 14.11.2002 issued by the Ministry of Finance, Government of India which provided that wages as provided under Section 59(2) of the 1948 Act for the purpose of calculation of overtime will only include basic pay and dearness allowance/additional dearness allowance and any other allowances, which are uniformly applicable to all the government employees. It was specifically mentioned therein that HRA, TA, and CWA are excluded therefrom.
3.4 Thereafter, reference was made to an Office Memorandum dated 19.11.2007 issued by the Ministry of Labour and Employment, Government of India. It referred to an earlier Office Memorandum dated 16.03.2007 issued by the Ministry of Defence, clarifying that the TA being compensatory in nature, may not be taken into consideration for calculating overtime wages under the 1948 Act. With reference to the aforesaid Office Memorandum, the Government of India, Ministry of Defence issued another Office Memorandum on 26.03.2008 taking the same position.
3.5 The aforesaid Office Memorandum was followed by another Office Memorandum dated 27.05.2009 issued by the Ministry of Labour and Employment, Government of India clarifying that allowances of compensatory nature including HRA, TA, SFA, etc., may be excluded for the purpose of computing overtime wages under the 1948 Act. The same was endorsed by the Government of India, Ministry of Defence vide Office Memorandum dated 26.06.2009.
4. Aggrieved against the aforesaid interpretation made by the appellants, multiple Original Applications8 [O.A. Nos. 1143, 1144, 1132, 1157, 1170, 1214 a
Compensatory allowances cannot be excluded from calculating overtime wages under section 59(2) of the Factories Act, as executive directives cannot alter statutory provisions.
Special Allowance cannot be a part of the component of “ordinary rate of wages”, as it is a separate allowance, which is not given to all workmen, but only given to a certain category of workmen, hav....
(1) No benefit can be claimed by anyone de hors statutory rules.(2) Persons employed as Supervisors are not entitled to Double Over Time Allowance in terms of Section 59(1) of the 1948 Act.
The court established that individuals classified as supervisors under the Factories Act are not entitled to overtime benefits as defined for workers, impacting their claims for such allowances.
The judgment established the pre-existing right of employees to overtime wages under statutory provisions and recognized the jurisdiction of the Labour Court to adjudicate disputes over such entitlem....
Employees of the Fire Brigade Department are not entitled to overtime wages under the Minimum Wages Act, 1948, as they receive higher wages and had opted for shifts with benefits.
Point of law : Daily wage employees employed by the State Government would be entitled to equal pay for equal work that they render under the State Government If a Government servant is entitled to 1....
The entitlement to overtime wages is established based on prior sanction and does not necessitate fresh adjudication under Section 33(C)(2) of the Industrial Disputes Act.
A railway employee is entitled to overtime only if actual hours worked exceed legal limits defined by statutory rules.
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