http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: MD. QASIM LARRY, FACTORY MANAGER, SASAMUSA SUGAR WORKS

       Vs.

RESPONDENT: MUHAMMAD SAMSUDDIN AND ANOTHER

DATE OF JUDGMENT: 24/03/1964

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. WANCHOO, K.N. GUPTA, K.C. DAS

CITATION:  1964 AIR 1699            1964 SCR  (7) 419  CITATOR INFO :  RF         1980 SC2181  (76)  RF         1981 SC1829  (75)  RF         1988 SC2223  (20)

ACT: Wages-Industrial  Dispute-Wages fixed by the Award-If  wages as  defined  by the Act-Payment of Wages Act,  1936  (IV  of 1936), ss. 2(vi), 15.

HEADNOTE: In  pursuance  of an award made by  an  Industrial  Tribunal fixing  the pay of the employees at Rs. 2/2/- per  day,  the management  of the appellant had entered into  an  agreement with its workmen, that the effect would be given to the wage structure  prescribed  by the said award.  In spite  of  the award  and the agreement, the appellant paid  its  employees only  As. -/10/- per day and that led to the  present  claim made by the respondents under s. 15 of the Payment of  Wages Act.   They  asked for an order from the  payment  of  wages authority directing the appellant to pay the said prescribed wages.   Against the respondent’s claim it was urged by  the appellant  that s. 15 of the Act was  inapplicable,  because the  rates of wages fixed by the award did not  fall  within the  definition of wages prescribed by s. 2(vi) of the  Act. The  authority  rejected the  appellant’s  contention.   The appellant then challenged the correctness of the  conclusion of the authority before the High Court under Art. 226 of the Constitution.   The High Court dismissed the  writ  petition and affirmed the finding of the authority.  It held that  s. 15 was applicable to the case, because the wages  prescribed by  the award did amount to wages as defined by s. 2(vi)  of the Act.  On appeal by Special Leave the appellant contended that  before  it is held that the wages  prescribed  by  the award  fall  under  s. 2(vi), it must  be  shown  that  they constitute part of the terms of the contract of  employment, either express of implied. Held:     The  argument is not well-founded.  When an  award is  made and it prescribes a new wage structure, in law  the old  contractual wage structure becomes inoperative and  its place  is  taken  by the wage structure  prescribed  by  the award.  In a sense, the latter wage structure must be deemed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

to  be  the contract between the parties, because  that,  in substance,  is the effect of industrial  adjudication.   The true  legal  position is that when industrial  disputes  are decided by industrial adjudication and awards are made,  the said awards supplant contractual terms in respect of matters covered by them and are substituted by them.  That being so, it  is  difficult to hold that the wages prescribed  by  the award  cannot be treated as wages under s. 2(vi) of the  Act before  it was amended.  The amendment has merely  clarified what was included in the unamended definition itself. South  Indian  Bank Ltd. v. A. R. Chacko, A.I.R,  1964  S.C. 1522, referred to. Jogindra  Nath  Chatterjee and Sons, V.  Chandreswar  Singh, A.I.R., 1951 Cal. 29, inapplicable. Modern Mills Ltd. v. V. R. Mangalvedhikar, A.I.R., 1950 Bom. 342  and  V. B. Godse, Manager, Prabha Mills Ltd. v.  R.  M. Naick [1953] 1 L.L.J. 577, approved L/P(D)lSCI-14(a) 420

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 251 of  1963. Appeal  by special leave from the judgment and  order  dated March  20, 1957, of the Patna High Court in  Civil  Revision No. 40 of 1956. M. C. Setalvad, and R. C. Prasad, for the appellants. The respondent did not appear. March 24, 1964.  The Judgment of the Court was delivered by GAJENDRAGADKAR,   C.  j.The  short  question  which   arises in  this  appeal is whether the term "wages" as  defined  by section  2(vi) of the Payment of Wages Act, 1936 (No.  4  of 1936) (hereinafter called ’the Act’) includes wages fixed by an  award in an industrial dispute between the employer  and his  employees.   This question has to be  answered  in  the light of the definition prescribed by s. 2(vi) before it was amended   in  1958.   The  subsequent  amendment   expressly provides by s. 2(vi) (a) that any remuneration payable under any  award or settlement between the parties or order  of  a Court,  would  be included in the main definition  under  s. 2(vi).   The  point which we have to decide in  the  present appeal  is whether the remuneration payable under  an  award was  not already included in the definition of wages  before the  said definition was amended.  It is common ground  that between  the appellant, Sasamusa Sugar Works Ltd.,  and  its workmen,  the  respondents,  an award had been  made  by  an Industrial  Tribunal fixing the pay of the employees at  Rs. 2/2/-  per  day,  and in pursuance of the  said  award,  the management  of the appellant had entered into  an  agreement with the respondents that effect would be given to the  wage structure, prescribed by the said award.  This agreement was subsequently published in the Bihar Gazette as a part of the award.   In  spite  of  the award  and  the  agreement,  the appellant paid its employees only As. - / 10 / - per day and that led to the present claim made by the respondents  under s.  15  of the Act.  The respondents  contended  before  the payment of wages authority that the refusal of the appellant to  pay  to them wages at the rate  awarded,  in  substance, amounted  to  an illegal deduction from their wages  and  on that  basis,  they  asked for an order  from  the  authority directing  the appellant to pay to the respondents the  said prescribed wages. The  appellant  raised two pleas  against  the  respondents’ claim.   It  urged that s. 15 of the Act  was  inapplicable,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

because  the rates of wages fixed by the award did not  fall within the definition of wages prescribed by s. 2(vi) and it also argue,, that the claim of the respondents was barred by limitation. 421 The  authority  has  found  that  s.  2(vi)  includes  wages prescribed  by  the  Industrial Tribunal,  and  so,  it  has rejected  the appellants’ contention that  the  applications made by the respondents were incompetent under s. 15 of  the Act.   In  regard  to  the  question  of  ’limitation,   the authority did not decide the said question as a  preliminary question,  because  it held, and, in our  opinion,  rightly, that it was a mixed question of fact and law, and so, it had to be tried after recording evidence. The  appellant challenged the correctness of the  conclusion of  the  authority that the applications made  by  the  res- pondents  were competent under s. 15 of the Act  before  the Patna High Court by filing a petition under Art. 226 of  the Constitution.   The High Court has affirmed the  finding  of the  authority  and held that s. 15 was  applicable  to  the case,  because the wages prescribed by the award did  amount to  wages as defined by s. 2(vi) of the Act.  On that  view, the writ petition filed by the appellant was dismissed.   It is this order which the appellant seeks to challenge  before us by its present appeal by special leave. Section  2(vi) as it stood at the relevant  time,  provides, inter  alia, that wages means all remuneration,  capable  of being expressed in terms of money, which would, if the terms of  the  ,contract of employment, express or  implied,  were fulfilled,  be  payable.   Mr. Setalvad  for  the  appellant contends that before it is held that the wages prescribed by the  award fall under s. 2(vi), it must be shown  that  they constitute part of the terms -of the contract of employment, either express or implied.  The -terms in question need  not be express and can be implied; but they must be terms  which arise out of the contract of employment, and since an  award made by an Industrial Tribunal cannot be said to amount to a contract of employment, the wage structure prescribed by the award  cannot  fall within the definition prescribed  by  s. 2(vi).   That,  in brief, is the substance of  the  argument raised by the appellant. We  are not inclined to hold that even under  the  unamended definition of wages, rates of remuneration prescribed by  an award  could not be included.  In dealing with the  question of construing the unamended definition of the term  "wages", it  is essential to bear in mind the scope and character  of the powers conferred on Industrial ’Tribunals when they deal with industrial disputes under the provisions of the  Indus- trial  Disputes  Act.  It is now  well-settled  that  unlike ordinary  civil  courts  which are bound  by  the  terms  of contract  between the parties when they deal  with  disputes arising   between  them  in  respect  of  the  said   terms, Industrial adjudication is not bound to uphold the terms  of contract  between the employer and the employees.  If it  is shown  to the satisfaction of Industrial  adjudication  that the terms of contract of employment, 422 for instance, need to be revised in the interests of  social justice.. it is at liberty to consider the matter, take into account all relevant factors and if a change or revision  of the terms appears to be justified, it can, and often  enough it  does,  radically  change the terms of  the  contract  of employment.   The development of industrial law  during  the last  decade bears testimony to the fact that on  references made under s. 10(1) of the Industrial Disputes Act, terms of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

employment  have  constantly  been  examined  by  industrial adjudication  and wherever it appeared appropriate  to  make changes in them, they have been made in accordance with  the well-recognised principles of fair play and justice to  both the  parties.   Therefore the basic assumption made  by  Mr. Setalvad  in  contending that s. 2(vi) cannot  take  in  the wages prescribed by the award, is not well founded.  When an award is made and it prescribes a new wage structure, in law the  old contractual wage structure becomes inoperative  and its  place is taken by the wage structure prescribed by  the award.  In a sense, the latter wage structure must be deemed to  be  a  contract between the parties,  because  that,  in substance,  is the effect of industrial  adjudication.   The true  legal  position is that when industrial  disputes  are decided by industrial adjudication and awards are made,  the said awards supplant contractual terms in respect of matters covered  by them and are substituted for them.   That  being so, it is difficult to accede to the argument that the wages prescribed by the award cannot be treated as wages under  s. 2(vi)  of the Act before it was amended.  The amendment  has merely  clarified what, in our opinion, was included in  the unamended definition itself. In this connection,we may incidentally refer to the decision of  this  Court  in  the South Indian Bank  Ltd.  v.  A.  R. Chacko(1), where it has been observed by this Court that the very  purpose  for which industrial  adjudication  has  been given  the  peculiar  authority  and  right  of  making  new contracts between employers and workmen makes it  reasonable to  think  that even though the period of operation  of  the award  and  the period for which it remains binding  on  the parties  may  elapse -in respect of both  of  which  special provisions   have  been  made  under  sections  23  and   29 respectively-the  new contract would continue to govern  the relations between the parties till it is replaced by another contract.   This observation clearly and emphatically  bring out  that the terms prescribed by an award, in law,  and  in substance, constitute a fresh contract between the parties. This question appears to have been considered by the  Bombay and the Calcutta High Courts.  In Jogendra Nath (1)  A.I.R. 1964 S.C. 15. 423 Chatterjee  and Sons v. Chandreswar, Singh(1), the  Calcutta High Court appears to have taken the view which supports Mr. Setalvad’s argument, whereas in the Modern Mills Ltd. v.  V. R.  Mangalvedhkar(2),  and in V. B. Godse,  Manager,  Prabha Mills Ltd., v. R. M. Naick, Inspector, under the Payment  of Wages Act(3), the Bombay High Court has interpreted s. 2(vi) to   include  wages  directed  to  be  paid  by   industrial adjudication.   In  our opinion, the Bombay  view  correctly represents the true legal position in the matter. The  result  is,  the appeal fails and  is  dismissed.   The matter  will now go back to the authority under the Act  for disposal in accordance with law.  There would be no order as to costs. Appeal dismissed (1) A.I.R. 1951 Cal. 29.           (2) A.I.R. 1930 Bom. 342. (3)  [1953] 1 L.L.J. 577, 424