Bijay Cotton Mills Ltd vs The State of Ajmer

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petitions Nos. 188 and 189 of 1954

Decision Date: 14 October 1954

Coram: B.K. Mukherjea, Mehar Chand Mahajan, Vivian Bose, B. Jagannadhadas

In this case, the Supreme Court of India delivered its judgment on 14 October 1954 in the matter titled Bijay Cotton Mills Ltd versus the State of Ajmer. The judgment was authored by Justice B K Mukherjea, who was joined on the bench by Justices Mehar Chand Mahajan, Vivian Bose and B Jagannadhadas. The petitioner before the Court was Bijay Cotton Mills Ltd and the respondent was the State of Ajmer. The decision was reported in the 1955 All India Reporter at page 33 and also appears in the Supreme Court Reports (First Series) at volume 1, page 752. Numerous citator references record subsequent citations of this judgment, including reports in the Supreme Court at years 1958, 1960, 1961, 1962, 1963, 1967, 1969, 1970 and others. The legal issues concerned the Constitution of India, specifically Articles 19(1)(g) and 19(6), and the Minimum Wages Act of 1948, sections 3, 4 and 5, which empower the appropriate Government to fix a minimum rate of wages in an industrial dispute and prescribe a criminal penalty for failure to pay such wages.

The headnote of the reported judgment explains that the provisions of sections 3, 4 and 5 of the Minimum Wages Act enable the government to determine a minimum wage in the context of a dispute between employer and employee, and that non-payment of the wage fixed by the Act constitutes a criminal offence. The Court held that although the fixation of minimum wages interferes to some extent with the freedom of contract and the freedom of trade or business guaranteed by Article 19(1)(g), the restriction is not unreasonable. It is justified in the interest of the general public and in order to give effect to the Directive Principle of State Policy embodied in Article 43, and therefore it falls within the permissible limits of Article 19(6). The decision referred to the earlier case of S. 1 Est. etc. versus the State of Madras, reported in the 1954 volume of the Madras Law Journal at page 518.

The original jurisdiction of the Court arose from Petitions Nos. 188 and 189 of 1954, filed under Article 32 of the Constitution for the enforcement of fundamental rights. Counsel for the petitioners included H M Seervai, J B Dadgchanji and Rajinder Narain, while the Solicitor-General of India, C K Daphtary, assisted by M M Kaul and P G Gokhale, appeared for the respondent. On 14 October 1954, Justice Mukherjea delivered the judgment. The Court first addressed the two connected petitions filed under Article 32. Petition 188 was filed by Bijay Cotton Mills Ltd, hereinafter referred to as “the company,” which also appeared as the appellant in Civil Appeal No. 139 of 1954. Petition 189 was filed by a number of employees of the company. To understand the arguments presented by counsel Seervai, who represented both petitioners, the Court found it necessary to recount the antecedent facts. It was noted that in 1950 an industrial dispute had arisen between the company and its labourers concerning the enhancement of wages, and that dispute formed the factual backdrop of the proceedings now before the Court.

In 1950 the Government of Ajmer referred the industrial dispute to an Industrial Tribunal by issuing a notification dated 1 December 1950. The Tribunal rendered its award on 27 November 1951 and held that “the present earning capacity of the mill precludes the award of higher rates of wages and higher dearness allowance.” The employees filed an appeal against this award before the Appellate Tribunal. While the appeal was pending, the Chief Commissioner of Ajmer initiated steps for fixing minimum wages for labourers employed in the textile industry of the State under the Minimum Wages Act. A committee was constituted on 17 January 1952, submitted its report on 4 October 1952, and on 7 October 1952 a notification was issued fixing the minimum rates of wages. The notification gave rise to writ petitions filed by several textile companies, including the petitioner company. In the meantime the appeal by the company’s labourers continued before the Appellate Tribunal, which remitted the matter back to the Industrial Tribunal for further investigation. The Industrial Tribunal then issued its final award on 8 September 1953, rejecting the basis on which the Chief Commissioner had fixed minimum wages of Rs 56 and instead fixing minimum wages, including dearness allowance, at Rs 35 only.

The company stated in its petition that the minimum wages fixed by the State Government of Ajmer were altogether prohibitory and that it was impossible for the company to continue its business while paying such wages. Consequently, the company closed its mills from 1 April 1953. About 1,500 labourers were employed in the mills, and since January 1954 several hundred of them approached the management requesting the reopening of the mills and indicating their willingness to work for the Rs 35 wages fixed by the Industrial Tribunal. Although the majority of the workers were ready to accept the Tribunal-determined wage, the company could not reopen because the Minimum Wages Act makes it a criminal offence to pay less than the wages fixed under the Act. On that basis, the company filed Petition No. 188 of 1954 challenging the constitutional validity of the material provisions of the Minimum Wages Act. The workmen who were prepared to work at a rate lower than the State-fixed minimum also filed the other petition, supporting all the company’s allegations. Counsel appearing for both petitions invited the Court to hold that the material provisions of the Minimum Wages Act are illegal.

The learned counsel argued that the Minimum Wages Act was ultra vires because it conflicted with the fundamental rights of employers and employees guaranteed under article 19 (1) (g) of the Constitution and that those rights were not protected by clause (6) of that article. It was contended that the Act imposed unreasonable restrictions on the employer’s freedom by preventing him from carrying on trade or business unless he paid the prescribed minimum wages. Likewise, the counsel submitted that the rights of the workmen were curtailed because they were barred from working in any trade or industry on terms that they might have voluntarily agreed upon with their employers. The counsel pointed out that the provisions relating to the fixation of minimum wages were unreasonable and arbitrary, noting that the entire process was left to the unfettered discretion of the “appropriate Government.” Even when a committee was appointed to advise, the report or advice of such a committee was not binding on the Government, and the committee’s decision was final and not subject to further review or challenge in any court of law. The counsel further maintained that the restrictions imposed by the Act were altogether unreasonable and even oppressive with respect to a class of employers who, for purely economic reasons, were unable to pay the minimum wages despite having no intention of exploiting labour. In such circumstances, the counsel argued, the provisions of the Act bore no reasonable relation to the object it purported to achieve. The Court indicated that it would examine these contentions in their proper order. It observed that it could scarcely be disputed that securing living wages for labourers, which ensured not only bare physical subsistence but also the maintenance of health and decency, served the general interest of the public. This objective was recognised as one of the Directive Principles of State Policy embodied in article 43 of the Constitution. The Court noted that in 1928 a Minimum Wages Fixing Machinery Convention had been held at Geneva and that the resolutions passed at that convention were incorporated into the International Labour Code. It was further observed that the Minimum Wages Act had been enacted with a view to give effect to those resolutions, as reflected in the cited case. The Court held that if labourers were to be secured the enjoyment of minimum wages and protected against exploitation by their employers, it was absolutely necessary to impose restraints upon the freedom of contract, and such restrictions could not be described as unreasonable. Conversely, the Court rejected the notion that employers could complain when they were compelled to pay minimum wages to labourers even though, because of poverty and helplessness, the labourers might be willing to work for lower wages. The Court could not appreciate the argument that the provisions of the Act would harshly and oppressively affect a particular class of employers who were unable, for purely economic reasons, to pay the prescribed minimum wages.

The Court observed that employers are required to pay the minimum wages that have been fixed by the competent authorities, and that such employers do not possess any dishonest intention to exploit their labourers. The Court further stated that when the welfare of the general public demands that labourers receive adequate living wages, the personal motives of the employers—whether benevolent or otherwise—become immaterial. The Court acknowledged that certain individual employers might encounter difficulties in maintaining their business operations if they are compelled to pay the wages prescribed under the Act. However, the Court explained that any such difficulty is attributable solely to the particular economic circumstances confronting those employers, and that such economic hardship cannot serve as a basis for declaring the legislation itself to be unreasonable or for striking it down.

Regarding the procedure for fixing minimum wages, the Court noted that the “appropriate Government” has been vested with extensive powers. Nevertheless, the Court emphasized that before fixing any wage rate, the Government must take into account the advice of a committee, if a committee has been appointed, or the representations made by persons who are likely to be affected by the proposed rate. The Court pointed out that the law makes consultation with advisory bodies mandatory whenever the minimum wages are to be revised. Section 8 of the Act provides for the establishment of a Central Advisory Board, whose function is to advise both the Central Government and the State Governments on matters of fixing and revising minimum wages. The Court added that this Central Advisory Board also serves as a coordinating agency to harmonise the work of the various advisory bodies that may be constituted at the state level.

The Court observed that in the committees or advisory bodies the representation of employers and employees is equal, and that the composition also includes certain independent members who are expected to render a fair and impartial view on the matter. In the Court’s opinion, these procedural safeguards constitute an adequate protection against any hasty or capricious decision by the “appropriate Government.” The Court further recognised that, in appropriate cases, the “appropriate Government” is empowered to grant exemptions from the operation of the provisions of the Act. Although the statute does not provide for a further review of the decision taken by the “appropriate Government,” the Court held that the absence of such a review mechanism, by itself, does not render the provisions of the Act unreasonable.

Finally, the Court stated that although the restrictions imposed by the Act interfere to some extent with the freedom of trade or business guaranteed under article 19(1)(g) of the Constitution, those restrictions are reasonable because they are imposed in the interest of the general public. Consequently, the restrictions are protected by clause 6 of article 19. On this basis, the Court concluded that the petitions challenging the validity of the Act must be dismissed. No order as to costs was made, and the petitions were dismissed.