P.C.

AGGARWALA VS PAYMENT OF
WAGES INSPECTOR, M.P.

NAME –SHUBHAM MISHRA

ROLL NO. – 1649

SEMESTER – 5th
SESSION – 2016-21

SUBMITTED TO – MS. PALLAVI SHANKAR

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

1
 ACKNOWLEDGEMENT

Any project completed or done in isolation is unthinkable. This project, although prepared by
me, is a culmination of efforts of a lot of people.

Firstly, I would like to thank our teacher MS. PALLAVI SHANKAR for her valuable
suggestions towards the making of this project.

Further to that, I would also like to express my gratitude towards my seniors who were a lot
of help for the completion of this project.

The contribution made by my classmates and friends are, definitely, worth mentioning. I
would like to express my gratitude towards my family members help also.

Last, but far from the least, I would express my gratitude towards the Almighty for obvious
reasons.

Thank You!

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 TABLE OF CONTENTS

ACKNOWLEDGEMENT..............................................................................2

RESEARCH DESIGN....................................................................................4

CHAPTER 1 – Introduction............................................................................5

CHAPTER 2 – Brief facts of the Case...........................................................7

CHAPTER 3 – Summary of the Judgment.....................................................9

CHAPTER 4 – Acts applied in the case in detail.........................................10

CHAPTER 5 – Related Judgments...............................................................20

CHAPTER 6 – Conclusion............................................................................22

BIBLIOGRAPHY

3
 RESEARCH DESIGN

• METHODOLOGY: The researcher has opted for doctrinal method of research. This
project has been done based on thorough research work based on intrinsic and
extrinsic aspects of the project.

• SOURCES OF DATA : The researcher has used both primary and secondary data,
primary being Acts, Statutes and Case Laws and secondary being Books, Journals an
Websites.

• SCOPE AND LIMITATIONS : Though in this topic there is a lot to research but
due to certain limitations like time limitation, source limitation and area limitation, the
researcher has not been able to deal with the topic in greater detail.

• MODE OF CITATION : The researcher has followed a uniform mode of citation

through the course of this project.

• HYPOTHESIS : The researcher has formed the following hypothesis, the validity for
which will be checked during the due course of this project –
The main purpose of the Payment of Wages Act is to ensure regular and prompt
payment of wages and to prevent the exploitation of wage earners by prohibiting
arbitrary fines and deductions from his wages.

• OBJECTIVES :

1. To analyze the facts and the judgment of the given case,

2. To analyze the applicability Payment of wages act in the present case and the point of
supreme court while passing the judgment,
3. To criticize the judgment of the case.

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 CHAPTER 1 : INTRODUCTION

With the growth of Industries in India, problems relating to payment of wages to persons
employed in industry took an ugly turn. The industrial units were not making payment of
wages to their workers at regular intervals and wages were not uniform. The industrial
workers were forced to raise their head against their exploitation. The Govt. of India
addressed the local government in 1926 to ascertain the position with regard to the delays
occurred in the payment of wages to persons employed in industry and practice of imposing
fines on them. The investigation reveals the existence of abuses in both directions and the
material collected was placed before the Royal Commission of Labour appointed in 1929. On
the basis of the report of the commission the Payment of Wages Bill, 1935 was introduced in
the legislative assembly in February, 1935 and received the approval in 1936. It came to be
known Payment of Wages Act, 1936.

The Payment of Wages Act, 1936 is beneficial legislation to regulate the payment of
wages to certain classes of persons employed in industries. The main purpose of the Act is to
ensure regular and prompt payment of wages and to prevent the exploitation of wage earners
by prohibiting arbitrary fines and deductions from his wages. It provides for responsibility of
employers of payment of wages, fixation of wage period, time and mode of payment,
deduction which may be made and other connected matters.

The Payment of Wages Act is applicable throughout India. It applies to the payment
of wages to persons employed in any factories, otherwise than in a factory, upon any railway
by a railway administration or either directly or through a sub-contractor, by a person
fulfilling a contract with a railway administration [and to persons employed in any industrial
or other establishment specified in sub-clauses (a) to (g) of clause (ii) of section 2]. Prior to
1st April 1958 employees earning less than Rs. 200 per month were only covered under the
Payment of Wages Act, 1936. With the enforcement of the payment of Wages (Amendment)
Act, 1957 w.e.f. 1st April, 1958, the scope of the Act was extended to cover persons earning
Rs. 200 or more but less than Rs. 400 p.m. The Payment of Wages (Amendment) Act, 1976
extended application of the Act to persons earning less than Rs. 1000 p.m. In 1982, the
application of the Act was further extended to cover persons earning less than Rs. 1600 p.m.
Further, it has been extended to Rs. 6500 w.e.f. 9.11.05 Further it has been extended to Rs.
10000/- p.m. w.e.f 8th August, 2007 and Rs. 18000/- w.e.f. 11th September,2012. Till 1963,
the Payment of wages Act was applicable to all the factories as defined under Section 2(m) of

5
the Factories Act, 1948 i.e. factories which employ 10 or more workers using power and 20
or more workers not using power. In 1964, the coverage of the Act was also extended to the
factories under Section 85 of the Factories Act, 1948. However, due to incomplete response,
data in respect of factories under Section 85 have not been included in the statistics of
earnings till 1982. The annual returns are being received as per National Industrial
Classification, 2008.

6
 CHAPTER 2 : BRIEF FACTS OF THE CASE

The facts of the case can be discussed briefly as-

In June 1991, the Company made an application to the State Government under Section 25-
O of the Industrial Disputes Act, 1947 as substituted by the Industrial Disputes Act, 1983
seeking permission for closure of cotton section of the Company.

The State Government by order dated 18.8.1991 rejected the application on the ground that
the same was pre-mature and the solution actually lay in re-deployment of the workforce and
technical up-gradation. An application for review was made on 4.9.1991. Between April 1992
and April 1997 according to the Company all the factories ceased production on account of
disconnection of electricity. One particular trade union filed an application before the Labour
Court in Gwalior under Sections 36, 61 and 64A of the Madhya Pradesh Industrial Relations
Act, 1960 (in short the `MPIR Act').

The Labour Court held that the lay off was illegal and directed the Company to withdraw the
same. On being moved under Section 67 read with Section 64A of the MPIR Act, the
Industrial Court by order dated 2.5.1992 modified the same. The order was challenged by a
writ petition before the High Court. An interim order was passed directing payment of 50%
of total back wages plus dearness allowance. Disputes of this nature continued and on
28.8.1992 the Company made a reference to the Board of Industrial and Financial Re-
construction (in short the `BIFR') under Section 15 of the Sick Industrial Companies (Special
Provisions) Act, 1985 (in short the `SICA'). Subsequently, application was filed by Mazdoor
Congress demanding payment of wages for certain periods.

In January 1993 BIFR declared the Company to be a sick industrial company under Section
3(1)(o) of SICA. Notices were issued by the functionaries under the Act calling upon the
Company through its Factory Manager to explain non payment of wages for certain periods
in violation of Section 5 of the Act. For subsequent periods also, similar notices were issued.
Copies of the notices were endorsed to the Directors of the Company.

Subsequently, the Payment of Wages Inspector filed application under Section 15 of the Act
before the concerned Magistrate against the Factory Manager, Shri K.B. Kaul and eight
others who were Directors of the Company including the present appellants praying for

7
directions to them for payment of wages for various periods. The Factory Manager submitted
his reply. In particular, it was submitted by him that the application was vague since details of
the workmen whose wages were allegedly not paid had not been given as required under the
law. It was also stated that notice could not be issued to the Directors as only the Company
and the Factory Manager were responsible for payment of wages under the Act. Pendency of
the proceedings under the BIFR was also referred to. However, the authorities under the Act
rejected the contention and held that the Directors were also personally liable to pay. Such
directions were questioned before the High Court and as noted above, impugned judgments
were passed.

In support of the appeals, filed by the erstwhile Directors, learned counsel submitted that the
High Court has failed to maintain the distinction between the liability of the company and its
Directors. The provisions of the Act and the amendments brought in by the Madhya Pradesh
Act of 1964 have not been kept in view. The High Court erroneously proceeded on the basis
as if the Directors were occupiers to hold that the decision of this Court in J.K. Industries and
Ors. v. Chief Inspector of Factories and Boilers and Ors., [1996] 6 SCC 665 applied to the
facts of the case. In that case the provisions were entirely different and the ratio of that
decision has no application to the facts of the present case. The stand of the authorities under
the Act and the Labour Unions on the other hand is that looking at the beneficial nature of the
statute, the High Court was justified in its conclusion. In any event, by application of the
principles of legislation by incorporation or by reference the view taken by the High Court
cannot be faulted.

The appeals filed by the Directors are allowed and the appeals filed by the functionaries
under the Act and the State are dismissed. There shall be no order as to costs.

8
 CHAPTER 3 : SUMMARY OF THE JUDGEMENT

The case was heard by the bench comprising of J. Arijit Pasayat and J. H.K. Sema. Judgment
given by the bench after hearing both sides of the case was authored by J. Arijit Pasayat,
which is given as under:

All these appeals involve identical issues. By judgments rendered by Division Bench of the
Madhya Pradesh High Court, impugned in the appeals held that Directors of Jiyajirao Cotton
Mills Ltd. (hereinafter referred to as the `Company') to be personally liable for the payment
of wages to the workmen of the company under the Payment of Wages Act, 1936 (in short
the `Act'). However, the authorities under the Act could proceed against the assets of the
company in the hands of the Directors or the assets acquired from income of the company by
the Directors. The personal property of the Directors, however, could not be proceeded
against if it acquired from the sources other than the income of the company. The Letters
Patent Appeals filed against the judgments of the learned Single Judge were dismissed. It is
to be noted that learned Single Judge had held that writ petitions were not maintainable as the
writ petitioners had an alternative remedy under Section 17 of the Act. However, the Letters
Patent Court considered the case on merits and as noted above came to the conclusion about
liability of the Directors.

While the directors who were the writ petitioners, had questioned correctness of the
judgments rendered by the division bench, the functionaries under the Act have questioned
the correctness of that part of High Court’s judgment which restricted recovery from the
assets acquired out of company’s income.

9
 CHAPTER 3 : ACTS APPLIED IN THE CASE IN DETAIL

The Acts made applicable in the case of P.C. Aggarwala v. Payment of Wages Inspector
M.P., and others are –

• Payment of Wages Act, 1936 - Sections 2, 3, 5, 7, 7A, 15, 15(1), 15(3), 15(4) and 17

• Industrial Disputes Act, 1947 - Sections 25O

• Madhya Pradesh Industrial Disputes (Amendment) Act, 1983

• Madhya Pradesh Industrial Relations Act, 1960 - Sections 9, 36, 61, 64A and 67

• Sick Industrial Companies (Special Provisions) Act, 1985 - Sections 3(1) and 15

• Madhya Pradesh Payment of Wages (Amendment) Act, 1964 - Sections 2 and 3

• Factories Act, 1948 - Sections 2, 7(1) and 85(1)

• Factories (Amendment) Act, 1987; Mines Act, 1952 - Sections 2(1)

• Plantations Labour Act, 1951 - Sections 2

• Indian Railways Act, 1890 - Sections 3

• Indian Penal Code (IPC), 1860 - Sections 193, 219, 228 and 405

• Employees State Insurance Act, 1948 - Sections 2(17), 40, 85B and 85C

• Companies Act, 1956 - Sections 5 and 2

Of all these Acts, the most important Act, which the case follows for the judicial

interpretation of the case is the Payment of Wages Act, and the judgment was given on the

basis of relevant provisions of the Payment of Wages Act. The important Acts relevant to the

case are being discussed below in detail.

10
 PAYMENT OF WAGES ACT, 1936

OBJECTIVE OF THE ACT

The Payment of Wages Act, 1936 was enacted with a view to ensuring that wages payable to
employed persons covered by the Act were disbursed by the employers within the prescribed
time limit and that no deductions other than those authorised by law were made by them. The
last amendment was made in 1982 and several provisions of the Act have become obsolete
over the years. Many proposals have been received by the Government for amending various
provisions which are creating practical difficulties in enforcement of this Act. In order to
bring this law in uniformity with other labour laws as also to make it more effective and
practicable, it is proposed to make, inter alia, the following changes:—

(i) Enhancing the wage ceiling of Rs. 1600 per month to Rs. 6500 per month: The
then existing ceiling of Rs. 1000 per month was last revised to Rs, 1600 per month
in 1982. Since then a large number of employed persons have gone out of the
purview of the Act due to successive rise in wages levels resulting from rise in the
cost of living. Thus, with a view to covering more employed persons, it is
proposed to enhance the wage ceiling from Rs. 1600 per month to Rs. 6500 per
month.
(ii) To substitute the expressions “the Central Government” or “a State Government”
by the expression “appropriate Government”: In Parliamentary enactments
relating to labour, other than the Payment of Wages Act, 1936, the enforcing
authorities are either the Central Government or the State Governments depending
upon the nature of industry. However, for implementing the Payment of Wages
Act, 1936, matters are referred to the State Governments and quite often action
required to be taken by them is delayed. In order that this law is in conformity
with the other labour laws, it is proposed to introduce the concept of “appropriate
Government”.1
(iii) Removing the ambiguities/weakness from the extant provisions of the Act and
prescribing more effective grievance redressal: Over the years, it has been noticed
that certain provisions of the Act have been differently interpreted thus leading fo

1
The Payment of Wages Act, 1936,
https://labour.gov.in/sites/default/files/ThePaymentofWagesAct1936_0.pdf

11
 administrative difficulties in implementing the same. In order to remove
ambiguities, appropriate changes are being proposed in sections 3, 7, 8 and 15 of
the Act which respectively deal with responsibility for payment of wages,
deductions from wages fines and claims in certain cases.2
(iv) Strengthening compensation and penal provisions of the Act: The penal provisions
of the Act have become almost insignificant due to passage of time as well as
decrease in money value since these provisions were last amended in 1982. It is,
therefore, proposed to make the penal provisions more stringent by enhancing the
quantum of penalties by amending section 20 of the Act.3

DEFINITIONS UNDER THE ACT-

For the purpose of this Act the ‘wages’ means all emoluments expressible in terms of money
and payable to the employee including any sum payable for termination of service, wages in
lieu of holidays or leave, overtime wages and bonus payable under the Bonus Act or under
the terms of employment. However, ‘wages’ does not include value of any house
accommodation, supply of light, water, medical attendance or any other amenity, contribution
to any pension or provident fund, travelling allowance, reimbursement of any special expense
and gratuity. Nor does it include suspension/Subsistence allowance given during suspension
period of an employee.4

RESPONSIBILITY FOR PAYMENT OF WAGES-

(1) Every employer shall be responsible for the payment of all wages required to be paid
under this Act to persons employed by him and in case of persons employed,—

(a) in factories, if a person has been named as the manager of the factory under clause
(f) of sub-section (1) of section 7 of the Factories Act, 1948 (63 of 1948);

(b) in industrial or other establishments, if there is a person responsible to the employer

for the supervision and control of the industrial or other establishment;

2
Ibid
3
Ibid
4
Section 2 (iv) of the Payment of Wages Act, 1936

12
 (c) upon railways (other than in factories), if the employer is the railway administration
and the railway administration has nominated a person in this behalf for the local area
concerned;

(d) in the case of contractor, a person designated by such contractor who is directly
under his charge; and

(e) in any other case, a person designated by the employer as a person responsible for
complying with the provisions of the Act; the person so named, the person responsible to the
employer, the person so nominated or the person so designated, as the case may be, shall be
responsible for such payment.5

(2) Notwithstanding anything contained in sub-section (1), it shall be the responsibility of the
employer to, make payment of all wages required to be made under this Act in case the
contractor or the person designated by the employer fails to make such payment.]6

TIME OF PAYMENT OF WAGES –

Every employer/manager should make timely payment of wages. If the number of persons
employed in an establishment is less than 1000, then wages must be paid within 7 days of the
expiry of the wage period, and in other cases within 10 days of the expiry of the wage period
and is other cases within 10 days of the expiry of the wage period.7 Where the employment of
any person is being terminated, his wages should be paid within 2 days of the date of
termination. Besides, all payments of wages should be made only on a working day.

AUTHORISED DEDUCTIONS UNDER PAYMENT OF WAGES-

(i) No deductions are to be made from the wages except those authorized under the
Act.
(ii) Deductions are to be made in accordance with provision of the Act and may be of
following kinds, namely.
(a) fines
(b) deduction for absence from duty
(c) deduction for damage to or loss of goods entrusted to the employed persons
(d) deduction for such amenities and services supplied by employer

5
Section 3 (1) of the Payment of Wages Act, 1936
6
Section 3 (2) of the Payment of Wages Act, 1936
7
Section 5 of the Act

13
 (e) deduction of recovery of advances of whatever nature including advances for
travelling allowance of conveyance allowance or for adjustment of overpayment
of wages
(f) deduction of income tax payable by the employed person
(g) deduction required to be made by order of a court or other authority competent
to make such order.8

Moreover, section 9, 10, 11, 12, 12A, and 13 deal with the other deductions, like Deductions
for absence from duty, deductions for damage or loss, deductions for services rendered,
deductions for recovery of advances, deduction for recovery of loans and deduction for
payment to co-operative societies and insurance schemes respectively.9

INSPECTION –

The appropriate Government may, by notification in the Official Gazette, appoint inspectors
for this purpose under the Act and define the local limits for their functions.10

CLAIMS –

The appropriate Government may, by notification in the Official Gazette, appoint (a) any
Commissioner for Workmen's Compensation; or (b) any officer of the Central Government
exercising functions as,- i. Regional Labour Commissioner; or ii. Assistant Labour
Commissioner with at least two years' experience; or (c) any officer of the State Government
not below the rank of Assistant Labour Commissioner with at least two years' experience; or
(d) a presiding officer of any Labour Court or Industrial Tribunal, constituted under the
Industrial Disputes Act, 1947 (14 of 1947), or under any corresponding law relating to the
investigation and settlement of industrial disputes in force in the State; or (e) any other officer
with experience as a Judge of a Civil Court or a Judicial Magistrate, as the authority to hear
and decide for any specified area all claims arising out of deductions from the wages, or
delay in payment of the wages, of persons employed or paid in that area, including all matters
incidental to such claims. Provided that where the appropriate Government considers it
necessary to do so, it may appoint more than one authority for any specified area and may, by

8
Section 7 of the Payment of Wages Act, 1936
9
The Payment of Wages Act, 1936
10
Section 14 of the Payment of Wages Act, 1936

14
general or special order, provide for the distribution or allocation of work to be performed by
them under this Act.11

APPEAL12 –

(1) 2 [An appeal against an order dismissing either wholly or in part an application made
under sub-section (2) of section 15, or against a direction made under sub-section (3) or sub-
section (4) of that section] may be preferred, within thirty days of the date on which 3 [the
order or direction] was made, in a Presidency-town [***] before the Court of Small Causes
and elsewhere before the District Court—

(a) by the employer or other person responsible for the payment of wages under section 3, if
the total sum directed to be paid by way of wages and compensation exceeds three hundred
rupees [or such direction has the effect of imposing on the employer or the other person a
financial liability exceeding one thousand rupees], or

[(b) by an employed person or any legal practitioner or any official of a registered trade union
authorised in writing to act on his behalf or any Inspector under this Act, or any other person
permitted by the authority to make an application under sub-section (2) of section 15, if the
total amount of wages claimed to have been withheld from the employed person exceeds
twenty rupees or from the unpaid group to which the employed person belongs or belonged
exceeds fifty rupees, or]

(c) by any person directed to pay a penalty under 1 [sub-section (4)] of section 15.

(2) Save as provided in sub-section (1), any order dismissing either wholly or in part an
application made under sub-section (2) of section 15, or a direction made under sub-section
(3) or sub-section (4) of that section shall be final.]

(3) Where an employer prefers an appeal under this section, the authority against whose
decision the appeal has been preferred may, and if so directed by the court referred to in sub-
section (1) shall, pending the decision of the appeal, withhold payment of any sum in deposit
with it.

11
Section 15 of the P.WA, 1936
12
Section 17 of the Act

15
(4)The court referred to in sub-section (1) may, if it thinks fit, submit any question of law for
the decision of the High Court and, if it so does, shall decide the question in conformity with
such decision.

COMPANIES ACT, 1956

With the enactment of the Companies Act, 2013 (“CA 2013”) in India, the duties of a
director have been codified. The CA 2013 introduces terms such as, 'reasonable care',
‘independent judgment’ and ‘reasonable and due care’. The CA 2013 also fastens liability
for acts committed by the company on an 'officer who is in default' by virtue of them
occupying key positions in the company such as being a managing director or a whole-time
director.

A constitution bench of five Judges in Standard Chartered Bank v. Directorate

of Enforcement13 had held that a company can be prosecuted and convicted for an offence
which requires a minimum sentence of imprisonment. However, the constitution bench
categorically clarified that it is not expressing any opinion on the question whether a
corporation could be attributed with requisite mens rea to prove the guilt. Thereafter, a
division bench of the Supreme Court in Iridium India Telecom v. Motorola Incorporated
and Others14 had laid down that the criminal intent of the "alter ego" of the company, that is
the personal group of persons that guide the business of the company, would be imputed to
the company. The Supreme Court in Sunil Bharti Mittal v. Central Bureau of
Investigation and Others15 was faced with the issue as to when can a director/person in
charge of the affairs of the company be prosecuted for an offence committed by the company.
The Court relying upon Iridium stated that the principal of attribution is applied to impute
criminal intention to the company on account of criminal intention of its alter ego and cannot
be applied in a reverse scenario to make the directors liable for offences committed by the
company. The three Judge bench laid down that a director can only be prosecuted if there is
sufficient evidence of his active role coupled with criminal intent or where the statutory
regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a

13
(2005) 4 SCC 530
14
(2011) 1 SCC 74
15
Criminal Appeal No. 35 of 2015 (arising out of Special Leave Petition (Crl.) No. 3161 of 2013)

16
provision. The Supreme Court categorically laid down that, "When the company is the
offendor, vicarious liability of the directors cannot be imputed automatically, in the absence
of any statutory provision to that effect." It was surmised that it is a cardinal principle of
criminal jurisprudence that there is no vicarious liability unless the statute specifically
provides for it.

Furthermore, earlier division bench decisions of the Supreme Court in J.K Industries
Limited and Others v. Chief Inspector of Factories and Boilers and Others16 and P.C
Agarwala v. Payment of Wages Inspector, M.P and Others17 have held that for vicarious
liability under strict liability statutes, a person in charge would be deemed to be responsible
for the acts of the company.

Where the company owns a factory it is the company which is the occupier, but since
company is a legal abstraction without a real mind of its own, it is those who in fact control
and determine the management of the company, who are held vicariously liable for
commission of statutory offences. The directors of the company are, therefore, rightly called
upon to answer the charge, being the directing mind of the company. Dealing with the
question of vicarious liability of the directors for offences committed by a company, the
following observations of Lord Diplock in Tesco Supermarkets Ltd. v. Nattrass18 are
useful: “In my view, therefore, the question: what natural persons are to be treated in law as
being the company for the purpose of acts done in the course of its business, including the
taking of precautions and the exercise of due diligence to avoid the commission of a criminal
offence, is to be found by identifying those natural persons who by the memorandum and
articles of association or as a result of action taken by the directors, or by the company in
general meeting pursuant to the articles, are entrusted with the exercise of the powers of the
company. This test is in conformity with the classic statement of Viscount Haldane, Lord
Chancellor, in Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co.”

16
(1996) 6 SCC 665
17
(2005) 8 SCC 104
18
(1972) AC 153
17
 INDUSTRIAL DISPUTES ACT, 1947

PROCEDURE FOR CLOSING DOWN AN UNDERTAKING –

(1) An employer who intends to close down an undertaking of an industrial establishment to

which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least
ninety days before the date on which the intended closure is to become effective, to the
appropriate government, stating clearly the reasons for the intended closure of the
undertaking and a copy of such application shall also be served simultaneously on the
representatives of the workmen in the prescribed manner:

PROVIDED that nothing in this sub-section shall apply to an undertaking set up for the
construction of buildings, bridges, roads, canals, dams or for other construction work.

(2) Where an application for permission has been made under sub-section(l),the appropriate
government, after making such enquiry as it thinks fit and after giving a reasonable
opportunity of being heard to the employer, the workmen and the persons interested in such
closure may, having regards to the, genuineness and adequacy of the reasons stated by the
employer, the interests of the general public and all other relevant factors, by order. and for
reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such
order shall be communicated to the employer and the workmen.

(3) Where an application has been made under sub-section (1) and the appropriate
government does not communicate the order granting or refusing to grant permission to the
employer within a period of sixty days from the date on which such application is made, the
permission applied for shall be deemed to have been granted on the expiration of the said
period of sixty days.

(4) An order of the appropriate government granting or refusing to grant permission shall,
subject to the provisions of sub-section (5), be final and binding on all the parties and shall
remain in force for one year from the date of such order.

(5) The appropriate government may, either on its own motion or on the application made by
the employer or any workman, review its order granting or refusing to grant permission under
sub-section (2) or refer the matter to a Tribunal for adjudication:

18
PROVIDED that where a reference has been made to a Tribunal under this sub-section, it
shall pass an award within a period of thirty days from the date of such reference.

(6) Where no application for permission under sub-section (l) is made within the period
specified therein, or where the permission for closure has been refused, the closure of the
undertaking shall be deemed to be illegal from the date of closure and the workmen shall be
entitled to all the benefits under any law for the time being in force as if the undertaking had
not been closed down.

(7) Notwithstanding anything contained in the foregoing provisions of this section, the
appropriate government may, if it is satisfied that owing to such exceptional circumstances as
accident in the undertaking or death of the employer or the like it is necessary so to do, by
order, direct that the provisions of sub-section (1) shall not apply in relation to such
undertaking for such period as may be specified in the order.

(8) Where an undertaking is permitted to be closed down under sub-section (2) or where
permission for closure is deemed to be granted under sub-section (3), every workman who is
employed in that undertaking immediately before the date of application for permission under
this section, shall be entitled to receive compensation which shall be equivalent to fifteen
days’ average pay for every completed year of continuous service or any part thereof in
excess of six months.19

19
Section 25-O of the Industrial Disputes Act, 1947

19
 CHAPTER 5 : RELATED JUDGMENTS

According to J.K. Industries Limited v. The Chief Inspector of Factories20, only a

Director can be nominated as occupier and not simply an officer or employee. This Court
observed this to be the result of the 1987 amendment of the Factories Act. The discretion of
inspector of factories as to occupier can be exercised only where no director is identified or
nominated as an occupier. The decision of this Court to the effect that only a director of the
Company can be appointed as an occupier of the factory, has been, on the facts of the
particular case distinguished by this Court in Indian Oil Corpn. Ltd. v. Chief Inspector of
Factories21. The fundamental question involved in this is whether the IOC Ltd. is a company
like any other, or whether it is “owned or controlled by the Central Government”. The dispute
arose because the Inspector of Factories declined to renew the license of an existing storage
unit and to issue a license and occupancy certificate in the name of the Depot Manager in
charge of IOC's new (additional) storage facility ("factory") at Ranchi, on the ground that in
terms of proviso (ii) to S. 2(n) of the Factories Act, only a director on the Board of Directors
of IOC could be deemed to be the "occupier" and therefore the Depot Manager was not the
"occupier" of the factory and could not apply for the licenses. The appellants contend that
IOC Ltd. is owned and controlled by the Central Government, which holds 91.5% of its
shares, and, therefore, under proviso {iii) to S. 2(n), it is the person appointed by the
government to run the affairs of the factory, i.e., the Depot Manager in the present case, who
should be deemed to be the “occupier”. This Court held that in the case of the appellant-
corporation it will have to be held that the ultimate control over the affairs of all the factories
of the Corporation is really of the Central Government and, therefore, all the factories of the
Corporation should be regarded as factories owned and controlled by the Central
Government. As there is a special provision governing factories owned and controlled by the
Central Government, the general principle applicable to non-Government companies was
held to be not applicable.

As the High Court has proceeded to hold the Directors liable by introducing the expression
"occupier", which expression is used in the Factories Act and not in the Act, the basic
premises on which the High Court proceeded are clearly untenable. Therefore, on a plain
reading of the language of the governing statute, it cannot be held that the Directors had any

20
MANU / SC / 1293 / 1996
21
AIR (1998) SC 2456
20
personal liability. The judgments of the High Court are therefore not sustainable and are set
aside. In view of the aforesaid conclusion, the appeals filed by the functionaries under the Act
lack merits. However, it shall be in the interest of employees if the properties of the Company
which are stated to be under the control of Official Liquidator are disposed of early so that
the employees can be paid whatever is legally payable to them. Similarly, the other creditors
can be paid and the liability can be discharged.

The appeals filed by the Directors are allowed and the appeals filed by the functionaries
under the Act and the State are dismissed. There shall be no order as to costs.

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 CHAPTER 6 : CONCLUSION

The Company made an application to the State Government under Industrial Disputes Act,
1947 seeking permission for closure of cotton section of the Company.

The State Government rejected the application on the ground that the same was pre-mature
and the solution actually lay in re-deployment of the workforce and technical up-
gradation.Between April 1992 and April 1997 according to the Company all the factories
ceased production on account of disconnection of electricity. One particular trade union filed
an application before the Labour Court in Gwalior. The Labour Court held that the lay off
was illegal and directed the Company to withdraw the same.

Industrial Court by order dated 2.5.1992 modified the same. The order was challenged by a
writ petition before the High Court. An interim order was passed directing payment of 50%
of total back wages plus dearness allowance. The Company made a reference to the Board of
Industrial and Financial Re-construction under sick industrial companies act.

BIFR declared the Company to be a sick industrial company under Section 3(1)(o) of SICA.
Notices were issued under the Act calling upon the Company through its Factory Manager to
explain non payment of wages for certain periods in violation of Section 5 of the Act.

the Payment of Wages Inspector filed application under Section 15 of the Act before the
concerned Magistrate against the Factory Manager, Shri K.B. Kaul and eight others who were
Directors of the Company including the present appellants praying for directions to them for
payment of wages for various periods.The Factory Manager submitted his reply.It was
submitted by him that the application was vague since details of the workmen whose wages
were allegedly not paid had not been given as required under the law. It was also stated that
notice could not be issued to the Directors as only the Company and the Factory Manager
were responsible for payment of wages under the Act. learned counsel submitted that the
High Court has failed to maintain the distinction between the liability of the company and its
Directors. The appeals filed by the Directors are allowed and the appeals filed by the
functionaries under the Act and the State are dismissed. There shall be no order as to costs.

The case was heard by the bench comprising of J. Arijit Pasayat and J. H.K. Sema. It was
held that Directors of Jiyajirao Cotton Mills Ltd. to be personally liable for the payment of
wages to the workmen of the company under the Payment of Wages Act, 1936. The personal

22
property of the Directors, however, could not be proceeded against if it acquired from the
sources other than the income of the company. It is to be noted that learned Single Judge had
held that writ petitions were not maintainable as the writ petitioners had an alternative
remedy under Section 17 of the Act.

My hypothesis for this project was that the main purpose of the Payment of Wages Act is to
ensure regular and prompt payment of wages and to prevent the exploitation of wage earners
by prohibiting arbitrary fines and deductions from his wages and if we put it in the present
case which i am dealing with then my hypothesis is partially proved and partially disproved
as in this case payment of wages act served its purpose but we cannot ignore the delay in
justice and therefore payment of wages act and other acts which are discussed in the case
need to be regulated in more efficient manner.

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 BIBLIOGRAPHY

ACTS-

The Payment of Wages Act, 1936

Industrial Disputes Act, 1947

Company’s Act, 1956

Factories Act, 1948

BOOKS-

Labour and Industrial Laws Manual, Universal Law Publishing, 2017

S.N. Mishra, Labour and Industrial Laws, Central Law Publications, 28th edn., 2016

P.K. Padhi, Labour and Industrial Laws, PHI Publications, 3rd edn., 2017

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