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PETITIONER: THE DIVISIONAL ENGINEER, G.I.P.  RAILWAY

       Vs.

RESPONDENT: MAHADEO RAGHOO AND ANOTHER.

DATE OF JUDGMENT: 02/03/1955

BENCH: SINHA, BHUVNESHWAR P. BENCH: SINHA, BHUVNESHWAR P. BOSE, VIVIAN JAGANNADHADAS, B. AIYYAR, T.L. VENKATARAMA

CITATION:  1955 AIR  295            1955 SCR  (1)1345

ACT: Payment of Wages Act, 1936 (IV of 1936), s. 2 (vi)WagesHouse rent allowance-Whether falls within the definition of  wages under the Act-Rule 3(i) of the statutory Rules framed by the Government-Legal effect thereof.

HEADNOTE: The Railway Board under the Ministry of Railways of the Gov- ernment  of India introduced a scheme with effect  from  the 1st 1346 November  1947  granting compensatory (city)  allowance  and house  rent allowances at certain rates to  certain  Railway employees  (including the 1st respondent who was  a  railway employee  since 1945) stationed at specified  head-quarters. The  first  respondent drew this’ allowance along  with  his salary  up to the 18th August 1948, when he was  offered  by the  Government,  quarters  ’suitable to his  post,  but  he refused to occupy the same and the house rent allowance  was stopped  from the date of his refusal to occupy the  quarter offered to him. Rule  3(i) of the Statutory Rules framed by  the  Government and put into effect on 1st November 1947 runs as follows: "The  house rent allowance will not be admissible  to  those who occupy accommodation provided by Government or those  to whom  accommodation has been offered by Government  but  who have refused". Held,  that the house rent allowance is admissible  only  so long  as  an employee is stationed at one of  the  specified places  and has not been offered Government  quarters.   The rules  distinctly  provide that the allowance  will  not  be admissible to those who occupy Government quarters or  those to whom such quarters have been offered but who have refused to  take  advantage of the offer.  Once an employee  of  the description  given  above has been  offered  suitable  house accommodation  and  he  has  refused it,  he  ceases  to  be entitled  to  the house rent allowance  and  that  allowance ceases to be "wages" within the meaning of the definition in s. 2(vi) of the Act because it is no more payable under  the terms of the contract.

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The  grant  of  house  rent allowance  does  not  create  an indefeasible right in the employee at all places wherever he may  be  posted and in all  circumstances,  irrespective  of whether or not he has been offered Government quarters.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 208 of 1952. Appeal  by Special Leave from the Judgment and  Order  dated the  28th day of September 1951 of the Authority  under  the Payment of Wages Act, Bombay in Application No. 500 of 1951. M.   C. Setalvad, Attorney-General for India (G.  N.  Joshi, PorUs  A.  Mehta  and  P. G. Gokhale,  with  him),  for  the appellant. J.   B.  Dadachanji, M. V. Jayakar and Rajinder Narain,  for respondent No. 1. 1955.  March 2. The Judgment of the Court was delivered by 1347 SINHA J.-This is an appeal by special leave from the  orders dated the 28th September 1951 passed by the 2nd  respondent, the  Authority appointed under section 15(1) of the  Payment of  Wages  Act  (IV of 1936),  (which  hereinafter  will  be referred to as the Act) allowing the 1st respondent’s  claim for house rent allowance as part of his wages. In this case the facts are not in dispute and may shortly be stated  as follows: The 1st respondent is a gangman  in  the employ  of the Central Railway (which previously used to  be known  as the G.I.P. Rly.), since April 1945.  At that  time his  wages  were Rs. 18 per month plus  dearness  allowance. With  effect  from the 1st November 1947 the  Railway  Board under  the Ministry of Railways of the Government  of  India introduced   a  scheme  of  grant  of  compensatory   (city) allowance  and  house rent allowance at rates  specified  in their  memorandum No. E47 CPC/14.  This scheme was  modified by  the  Railway  Board’s letter No. E47  CPC/14  dated  1st December  1947.  As a result of this scheme certain  railway employees stationed at specified headquarters were  eligible for the allowance aforesaid at certain specified rates.  The 1st respondent thus became entitled to the allowance of  Rs. 10 per month.  This allowance the 1st respondent drew  along with  his  salary  until the 18th August 1948  when  he  was offered  by the Government, quarters suitable to  his  post, but he refused to occupy the same.  On his refusal to occupy the  quarters  offered  by the Government,  the  house  rent allowance was stopped with effect from the 19th August 1948. On  the  8th June 1951 the 1st respondent put in  his  claim before  the  Authority for Rs. 290 on the  ground  that  the appellant, the Divisional Engineer, G.I.P. Ry., who was  the authority responsible under section 4 of the Act for payment of wages, had stopped payment of house rent allowance to him from the 19th August 1948.  The claim covered the period the 19th August 1948 to the 18th January 1951 at the rate of Rs. 10  per month.  The appellant appeared before the  Authority and  by  his written statement contested the  claim  on  the ground that the house rent allowance which was 1348 the  subject matter of the claim was not "wages" within  the meaning  of  section 2(vi) of the Act.  It  was,  therefore, submitted by the appellant who was the opposite party before the  Authority that it had no jurisdiction to entertain  the claim  which should be dismissed in limine.  It was  further pleaded  that the claim was inadmissible on the ground  that there  had been no illegal deduction from  the  respondent’s wages  inasmuch as the respondent had been allotted  railway

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quarters of a suitable type and as he had refused to  occupy those  quarters he was not entitled under the rules  to  any house rent allowance.  Alternatively, it was further pleaded by the appellant that so much of the claim as, related to  a period  preceding six months immediately before the date  of the  application was time-barred under the first proviso  to section 15(2) of the Act.’ The Authority condoned the  delay and  that  part of the order condoning the delay is  not  in controversy before us. On the issues thus joined between the parties the  Authority came  to  the conclusion that the house rent  allowance  was "wages"  as  defined in the Act that as a  matter  of  fact, accommodation  was  offered  to the 1st  respondent  and  he refused it; but that even so, the appellant was not entitled to withhold the house rent allowance.  Accordingly the claim for Rs. 290 was allowed by the Authority. The  short point to be decided in this case is  whether  the house  rent  allowance claimed by the  1st  respondent  came within the purview of the definition of "wages" contained in the  Act.   There being no difference on questions  of  fact between the parties, the answer to the question raised  must depend upon the construction to be placed upon the following material  portion  of the definition of "wages"  in  section 2(vi) of the Act:- ’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, whether conditionally upon the regular  attendance, good  work  or  conduct or other  behaviour  of  the  person employed or other-                             1349 wise,  to a person employed in respect of his employment  or of  work done in such employment, and includes any bonus  or other additional remuneration of the nature aforesaid  which would  be so payable and any sum payable to such  person  by reason  of the termination of his employment, but  does  not include- (a)the  value of any house-accommodation, supply  of  light, water,  medical  Attendance  or other  amenity,  or  of  any service  excluded by general or special order of  the  State Government............. Shorn  of all verbiage, "wages" are remuneration payable  by an employer to his employee for services rendered  according to  the  terms of the contract between them.   The  question then arises, what are the terms of the contract between  the parties.   When  the 1st respondent’s employment  under  the railway  administration represented by the appellant  began, admittedly  be  was  not entitled to  any  such  house  rent allowance.  As already indicated, the scheme for payment  of house rent allowance was introduced with effect from the 1st November  1947 when the rules were framed, admittedly  under sub-section  (2) of section 241 of the Government  of  India Act,  1935,  by  the  Governor-General.   Those  rules  were amended  subsequently.   We  are  here  concerned  with  the amendment  made  by  the Railway Board  by  its  letter  No. E47CPC/  14 dated the 1st December 1947,  particularly  rule 3(i) which is in these terms:- "The  house rent allowance will not be admissible  to  those who occupy accommodation provided by Government or those  to whom  accommodation has been offered by Government  but  who have refused it". It has been argued on behalf of the appellant that the terms of the contract between the parties include the rule  quoted above  and that therefore the position in law is that  there is  no  absolute right in the 1st respondent  to  claim  the

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house  rent allowance; in other words, it is contended  that there  is a condition precedent to the claim for house  rent allowance being admissible, namely, that the employee should be posted at one of those places, like Bombay, Calcutta, 1350 Madras’  etc.,  before the claim for  house  rent  allowance could  arise  and  that there  is  a  condition  subsequent, namely, that the employee posted at any one of those  places will  cease to be entitled to the - allowance if either  the Government   provides  accommodation  to  the  employee   in question or the employee-refuses to occupy the accommodation so offered to him.  On the other hand, it has been argued on behalf  of the 1st respondent that the employee’s  right  to the allowance accrues as soon as he has fulfilled the  terms of the contract of employment including regular  attendance, good work or conduct and his other behaviour in terms of the definition of "wages" as contained in the Act.  It was  also argued on behalf of the 1st respondent that the terms of the definition  have  to  be  construed  consistently  with  the provisions  of sections 7 and 11 of the Act; that rule  3(i) quoted  above is inconsistent with some of the terms of  the definition  of "wages" and the provisions of sections 7  and 11 and that in any event, if rule 3(i) aforesaid were to  be considered  as a part of the terms of the  contract  between the  parties,  section 23 of the Act prohibits  an  employee from  entering  into such a contract as has  the  effect  of depriving him of his vested rights. It should be noted at the outset that the learned  Attorney- General appearing on behalf of the appellant has not pressed the  argument  which  appears to have  been  raised  in  the written  statement  of  the appellant and  also  before  the Authority  as  would appear from the orders passed  by  him, that   clause  (a)  excluding  "the  value  of   any   house accommodation" clearly showed that house rent allowance  was not  included in "wages" as defined in section 2(vi) of  the Act.   As will presently appear, this argument  proceeds  on the  unwarranted  assumption that house  rent  allowance  is synonymous  with  the  value  of  any  house   accommodation referred  to  in -the definition of "wages" and  in  section 7(2)(b) and section 11 of the Act. The  answer to the question whether house rent allowance  is "wages" may be in the affirmative if the rules framed by the department  relating  to the grant of house  rent  allowance make it compulsory for the                             1351 employer  to  grant house rent  allowance  without  anything more:  in  other words, if the house rent allowed  had  been granted  without any conditions or with conditions, if  any, which  were unenforceable in law.  But the  statutory  rules framed  by the Government governing the grant of house  rent allowance  do  not  make it unconditional  and  absolute  in terms.   The house rent allowance in the first  instance  is not  admissible to all the employees of a particular  class. It  is  admissible  only to such railway  employees  as  are posted  at specified places in order "to compensate  railway servants in certain costlier cities for excessive rents paid by them over and above what they might normally be  expected to  pay"; nor is such an allowance "intended to be a  source of profit" or to be "an allowance in lieu of free quarters", as  specifically  stated in the preamble to the  letter  No. E47CPC/14,  dated 1st December 1947, issued by  the  Railway Board.   The argument on behalf of the 1st respondent  would have been valid if the rules in terms contemplated the grant of  house rent allowance to every employee of  a  particular category  but  the  rules  do not make  the  grant  in  such

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absolute terms.  The house rent allowance is admissible only so long as an employee is stationed at one of the  specified places  and has not been offered Government  quarters.   The rules distinctly provide that the allowance will not be  ad- raissible  to  those who occupy Government  quarters  or  to those  to whom such quarters have been offered but who  have refused to take advantage of the offer.  Once an employee of the description given above has been offered suitable  house accommodation  and  he  has  refused it,  he  ceases  to  be entitled to the house rent allowance and that allowance thus ceases to be "wages" within the meaning of the definition in the  Act, because it is no more payable under the  terms  of the contract. In our opinion, it is clear beyond all reasonable doubt that the  rules which must be included in the terms  of  contract between  the employer and the employee contemplate  that  an employee posted at one 173 1352 of  the  specified places would be entitled  to  house  rent allowance;  but  that as soon as he  is  offered  Government quarters  for  his  accommodation,  he  ceases’  to  be   so entitled.,  whether he actually occupies or does not  occupy the quarters offered to him.  Hence the grant of house  rent allowance  does  not  create an indefeasible  right  in  the employee at all places wherever he may be posted and in  all circumstances,  irrespective of whether or not he  has  been offered Government quarters. But it has been argued on behalf of the respondent that such a  conclusion would be inconsistent with the  provisions  of sections  7  and  1 1 of the Act.  We do not  see  any  such inconsistency.   Section  7  of  the  Act  deals  with  such deductions  as may be made from the wages as defined in  the Act,   of  an  employee.   Subsection  (2)  of   section   7 categorically specifies the heads under which deductions may lawfully be made from wages.  Clause (d) of this sub-section has  reference to "deductions for house  accommodation  sup- plied by the employer", and section 11 provides that such  a deduction  shall not be made unless the house  accommodation has  been accepted by the employee and shall not exceed  the amount  equivalent to the value of such accommodation.   The definition  of  "wages" in the Act also  excludes  from  its operation  the value of house accommodation referred  to  in sections  7 and II as aforesaid.  The legislature  has  used the  expression  "value of any house accommodation"  in  the definition  of  "wages" as denoting something which  can  be deducted  from "wages".  The one excludes the other.  It  is thus  clear  that the definition of "wages"  under  the  Act cannot include the value of any house accommodation supplied by the employer to the employee; otherwise it would not be a legally  permissible  deduction from wages.  It  Is  equally clear  that  house  rent  allowance  which  may  in  certain circumstances as aforesaid be included in "wages" is not the same thing as the value of any house accommodation  referred to  in the Act.  That being so, there is no validity in  the argument advanced on behalf of the 1st respondent that  rule 3(i) aforesaid is 1353 inconsistent with the provisions of sections 7 and 11 of the Act. It remains to consider the last argument advanced on  behalf of  the 1st respondent that section 23 of the Act  prohibits an  employee  from  relinquishing such a  right  as  is  the subject  matter  of rule 3(i) quoted above.   This  argument proceeds  on the assumption that house rent allowance  which

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is  a right conferred on the employee is an absolute  right. It has already been held above that the Act read along  with the rules which constitute the terms of the contract between the  employer and the employee does not create any  absolute right  in  the employee to the house  rent  allowance.  That being so, there is no question of the employee relinquishing any such right as is contemplated by section 23. For the reasons aforesaid, the appeal succeeds.  The  orders passed  by  the  Authority are set aside.   In  the  special circumstances  of  this case there will be no  order  as  to costs. Appeal allowed.