High Court Mandates Hearing for Employers in Minimum Wage Notification Challenge, Remits Case Back

Bengaluru: In a significant ruling affecting the minimum wage fixation process, the High Court, in a batch of 52 appeals, has set aside a Single Judge's order that had quashed a state government notification revising minimum wages for the foundry industry. The appellate court directed that the writ petition challenging the notification be heard afresh by the Single Judge, specifically mandating that the employers, who were not parties to the original petition, must be allowed to present their case and be heard.

The judgment, delivered by Chief Justice N.V. Anjaria and Justice K.V. Aravind , underscores the importance of hearing affected stakeholders, even in statutory processes that culminate in subordinate legislation.

Case Background

The original writ petition was filed by two employee Trade Unions, All India Trade Union Congress (R), Karnataka State Committee, and Engineering & General Works Union, Bengaluru. They challenged a 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, which revised minimum wage rates for employments in the foundry sector.

The unions contended that the revised rates lacked a scientific or realistic basis, arguing that principles laid down by the Supreme Court in Workmen vs. Reptakos Brett & Co. Ltd. [(1992) 1 SCC 290] for determining minimum wages were not followed. They alleged that the revision was arbitrarily done by merely adding a small percentage to previous rates without collecting necessary data.

The Single Judge had accepted the unions' plea, setting aside the notification and directing the government to issue a redone notification strictly following the Reptakos Brett norms within two months, with retrospective effect from 28th July 2022.

Employers' Exclusion and Appeal

The appellants in the 52 writ appeals are employers or associations representing employers in the affected industry. Notably, they were not originally arrayed as parties in the writ petition filed by the employee unions. They were granted leave by the High Court to file appeals against the Single Judge's order as they were directly affected by the outcome.

Senior Advocates representing the appellants argued that the government had discretion under Section 5(1)(b) of the Act to use the notification method for wage revision (as opposed to the committee method under Section 5(1)(a)). They contended that employers are essential stakeholders and had participated in the Advisory Board process leading to the notification. They vehemently submitted that setting aside the notification without hearing the employers' perspective in the writ petition was unjust and violated principles of natural justice. They also highlighted concerns about the viability of small industries and compared Karnataka's minimum wages to neighbouring states.

Employee Unions' Counter-Arguments

Learned Senior Advocates for the original petitioners (employee unions) defended the Single Judge's decision, asserting that the Reptakos Brett guidelines for minimum wage fixation were mandatory and correctly applied by the Single Judge. They argued that the notification under Section 5(1) of the Act was a legislative function, and therefore, principles of natural justice (like giving a hearing) were not applicable. According to them, employers were neither proper nor necessary parties to the writ petition challenging such a legislative act.

Court's Analysis: Natural Justice in Statutory Processes

The High Court carefully examined the nature of the minimum wage fixation process under Section 5 of the Minimum Wages Act, 1948. While acknowledging that the final notification could be viewed as subordinate legislation, the court held that the process leading to it is a blend of statutory exercises, particularly under Section 5(1)(b).

The bench emphasized that Section 5(1)(b) requires the government to publish proposals for the information of "persons likely to be affected thereby." The court unequivocally stated that employers are a class of persons who are undoubtedly stakeholders, interested parties, and an affected group. Furthermore, the composition of the Advisory Board under Section 7 and 9 of the Act includes representatives of employers, reinforcing their statutory role in the process.

The Court reasoned that excluding employers from having a say when the notification is challenged in court, particularly when the outcome directly impacts their obligations, would render the exercise unjust and arbitrary.

Referring to the Supreme Court's observations in Indian Express Newspaper (Bombay) Pvt. Ltd. vs. Bennett Coleman and Co. Ltd. , the High Court noted that subordinate legislation, while legislative in form, does not possess the same immunity as plenary legislation and can be challenged on grounds of unreasonableness or manifest arbitrariness. The court cited Vishakapatnam Port Trust and another vs. Ram Bahadur Takur Pvt. Ltd. to support the view that even where legislative action is involved, giving hearing to affected parties might be appropriate, especially when the statute contemplates their input in the underlying process.

The judgment highlights that natural justice principles are fundamental to decision-making processes affecting rights, interests, or obligations, or leading to civil consequences. Citing Swadeshi Cotton Mills vs. Union of India , the court reiterated that the rule of fair play is implicit in every decision-making statutory function, and the person affected must have a reasonable opportunity of being heard.

Decision and Directions

Based on this reasoning, the High Court concluded that the appellant-employers were necessary, or at least proper, parties in the writ petition and ought to have been heard by the Single Judge.

Consequently, the High Court set aside the judgment and order of the Single Judge dated 26th September 2023. The writ petition was remitted back to the Single Judge for a fresh decision in accordance with law. The court explicitly directed that the appellants (employers) be permitted to put forward their case by filing a reply and be given an opportunity of hearing before a final decision is rendered.

The Single Judge was directed to complete this exercise expeditiously, preferably within ten weeks, given the nature and consequences of the issue. The court clarified that it had not expressed any opinion on the merits of the case, which are to be reconsidered by the Single Judge.

The appeals were partly allowed in these terms, disposing of all 52 matters through this common order. The ruling reinforces the procedural fairness requirements inherent in statutory processes, even those perceived to have a legislative character, particularly when significant stakeholders are directly affected.