M/S. Bhikusa Yamasa Kahatriya vs Sangamner Akola Taluka Bidikamgar

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

Court: supreme-court

Case Number: Civil Appeal No. 546 of 1961

Decision Date: 10 October, 1962

Coram: J.C. Shah, Bhuvneshwar P. Sinha, P.B. Gajendragadkar, K.N. Wanchoo, K.C. Das Gupta

In this matter the Supreme Court of India recorded the case titled M/s. Bhikusa Yamasa Kahatriya versus Sangamner Akola Taluka Bidikamgar, with the judgment delivered on 10 October 1962. The opinion was authored by Justice J. C. Shah and the bench comprised Justices J. C. Shah, Bhuvneshwar P. Sinha, P. B. Gajendragadkar, K. N. Wanchoo and K. C. Das Gupta. The petitioner was M/s. Bhikusa Yamasa Kahatriya and the respondent was the Sangamner Akola Taluka Bidikamgar Union. The citation for this decision is reported as 1963 AIR 806 and 1963 S.C.R. Supplement (1) 524, with additional citator references listed as R 1963 SC 1591 (11), R 1964 SC 1260 (6), F 1970 SC 2042 (16), R 1973 SC 2634 (3,6) and R 1974 SC 1044 (6). The case concerned the Minimum Wages Act, 1948 (XI of 1948) and examined whether a statutory provision delegating power to the government to fix wages conferred arbitrary and uncontrolled authority, and whether a particular notification fixing minimum wages was valid.

The relevant provision of the Act was Section 3(1), which authorises the appropriate government to fix the rate of minimum wages payable to employees engaged in scheduled employments. Section 3(3)(iv) further empowers the government, in fixing or revising minimum wages, to prescribe different minimum rates for different localities. By a notification dated 19 April 1955, the Government of Bombay revised the minimum rates of wages applicable to workers employed in bidi manufactories and set, for the localities of Sangamner and Akola and for places within seven miles of their respective municipal limits, a minimum rate of rupees 2 and 2 annas for the production of one thousand bidis.

The appellant argued that Section 3(3)(iv) contravened Articles 14 and 19(1)(i) of the Constitution because it allegedly accorded the government uncontrolled discretion, enabling discrimination among employers situated in different localities, thereby affecting their businesses. The appellant further contended that the notification itself violated Article 14 and was not lawfully issued because the Advisory Board established under the Act did not include any representatives of the employers.

The Court held that Section 3(3)(iv) of the Minimum Wages Act was constitutionally valid and that the notification had been issued in compliance with the statutory requirements. The Court observed that Section 3(3)(iv) does not delegate any arbitrary or unchecked power to the government. Considering the diversity of conditions prevailing across the numerous industries covered by the Act, the legislature could not impose uniform rates for all industries and all localities. Accordingly, the detailed provisions relating to minimum rates necessarily had to be delegated to an appropriate authority.

The Court further explained that by entrusting the state government with the power to fix minimum wages for specific localities, the legislature did not relinquish its essential legislative authority; rather, it assigned an incidental function to the executive. The policy and guiding principles for exercising this power are inherent in the purpose and object of the Act, and the machinery created to assist the government is intended to achieve an equitable adjustment of the competing claims of labour and employers. The Court noted that a statute need not itself draw the classification but may delegate that task to a responsible body, provided it sets out the policy or principles for guidance, and therefore such a delegation does not infringe Article 14. The observation that the Advisory Board lacked employer representatives did not affect the validity of the notification, as no statutory provision required such representation.

The Court observed that when a statute entrusts a responsible body with the power to act and also sets out the policy or principles to guide that body, the statute cannot be declared invalid for violating Article 14. In support of this view, the Court relied upon the decision in Kathi Raning Rawat v. State of Saurashtra [1952] S.C.R. 435. The Court noted that the notification under question had been issued only after a complete enquiry had been carried out under the Minimum Wages Act. The determination of the rates of wages and their subsequent revision had taken place after the Court had examined the reports submitted by the committees and sub‑committees appointed for that purpose, as well as the reports of the Advisory Committee and the Board. Further, the Court stated that the representations made by the employers who were likely to be affected had been given full and proper consideration. Although the Advisory Board did not include a representative of the employers, the Court held that this omission did not affect the validity of the notification because the statute did not impose any requirement that such a representative be present. The Court explained that the Board’s role was essentially to coordinate the work of the various committees and sub‑committees and to advise the Government generally on matters relating to the fixing and revision of minimum rates. The Board was not tasked with conducting detailed investigations into any particular industry.

The appeal concerned Civil Appeal No. 546 of 1961, which was filed against the judgment and decree dated 27 June, 30 June and 28 November 1958 of the Bombay High Court in Special Civil Application No. 67 of 1958. The appellants, namely M/s Bhikusa Yamasa Kahatriya and M/s Bastiram Narayandas, who owned bidi factories in Sangamner, District of Ahmednagar, had approached the High Court under Article 226 of the Constitution. They sought a writ or direction declaring Section 3(3)(iv) of the Minimum Wages Act, 1948 (XI of 1948) and the Notification dated 19 April 1955 issued by the Government of Bombay to be ultra vires, void and illegal, on the ground that the provisions and the notification infringed the guarantee of equal protection of the laws and interfered with the appellants’ right to carry on their lawful business. They also prayed for a declaration that they were not bound by the notification and were not liable to pay the rates of wages prescribed therein, together with consequential relief. Counsel for the appellants included G.S. Pathak, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, while the respondents were represented by D.S. Nargolkar, K.R. Chaudhuri, S.B. Naik and others. The High Court dismissed the petition, holding that Section 3(3)(iv) of the Minimum Wages Act and the April 1955 notification fixing minimum wages for bidi workers in Sangamner and Akola did not contravene the fundamental rights guaranteed by the Constitution. The Court further observed that the State of Bombay had followed the procedure prescribed by the Act in issuing the notification and revising the minimum wages.

In the present case the appellants filed this appeal against the order that had been confirmed by a certificate of fitness issued by the High Court under Article 133(1)(c) of the Constitution. The appeal challenges the validity of the Minimum Wages Act, 1948, as it existed in the year 1956. The Court clarified that for the purpose of this appeal it would consider the Act as it stood in 1956 and would disregard any amendments that were made to the statute after that year.

The Minimum Wages Act, 1948 was enacted by Parliament with the purpose of fixing minimum rates of wages in certain employments. Section 3(1) empowers the appropriate Government, in the manner prescribed, to fix the minimum wages payable to employees engaged in employments that are listed in Parts I and II of the Schedule. The Government may fix such rates for the entire State, for a part of the State, or for any specified class or classes of employment throughout the State or in particular parts thereof. The provision also authorises the Government to review the fixed rates at intervals that it deems appropriate and to revise the rates when necessary.

Section 3(3) further allows the State, while fixing or revising minimum rates of wages, to prescribe different rates for (i) different scheduled employments, (ii) different classes of work within the same scheduled employment, (iii) adults, adolescents, children and apprentices, and (iv) different localities. Thus the Act provides a flexible framework for accommodating variations in the nature of work, the age of workers and the geographic circumstances.

Section 5(1) outlines the procedure for fixing and revising minimum wages. It states that, in fixing minimum rates of wages for any scheduled employment or in revising such rates, the appropriate Government shall either (a) appoint as many committees and sub‑committees as it considers necessary to conduct enquiries and advise it on the fixation or revision, or (b) publish its proposals in the Official Gazette, thereby informing persons who are likely to be affected and specifying a date on which the proposals will be taken into consideration. Sub‑section (2) authorises the Government, after having considered the advice of the committees or sub‑committees or the representations received from interested persons, to fix the minimum rates of wages for each scheduled employment.

Section 6 empowers the appropriate Government to appoint Advisory Committees and sub‑committees to investigate the conditions prevailing in any scheduled employment and to advise the Government in making revisions of the minimum rates for that employment. Section 7 authorises the Government to appoint Advisory Boards for the purpose of coordinating the work of the committees and Advisory Committees and for giving general advice to the Government on matters relating to the fixation and revision of minimum rates of wages. Section 9 prescribes the composition of the committees and Advisory Boards, and it provides that the committees, Advisory Committees and Advisory Boards shall be nominated by the appropriate Government.

In this provision the appropriate Government was required to nominate committees, advisory committees and advisory boards that would be composed of persons representing both employers and employees in the scheduled employments, with equal numbers of each, and also independent persons who could not exceed one‑third of the total membership. Section ten laid down the procedure to be followed when revising the minimum rates of wages. Section twenty gave the appropriate Government the power to appoint regional authorities to hear and decide claims arising from the payment of less than the minimum rates of wages to employees working in the specified localities. Section twenty‑six empowered the appropriate Government to direct that the provisions of the Act, or any part thereof, would not apply to all or any class of employees employed in any scheduled employment or to any locality where a scheduled employment was carried on. Section twenty‑seven authorized the appropriate Government to add any employment to either part of the schedule when it thought that minimum rates of wages should be fixed under the Act. One of the items listed in Part I of the schedule was “employment in any tobacco (including bidi‑making) manufactory.” Exercising the powers conferred by section five, the Government of Bombay passed a resolution on February 27, 1951 appointing a committee to hold an enquiry and to advise the Government on fixing minimum rates of wages for employment in any tobacco (including bidi‑making) manufactory. The committee was composed of three representatives of employers, an equal number of representatives of employees, and an independent chairman. On July 3, 1952 the Government of Bombay, exercising powers under section six, appointed another committee to assist it in considering the question of “revision of zoning” and, if necessary, rates of wages for employment in any tobacco manufactory. An advisory board was also constituted by a resolution dated October 3, 1953. The committee invited suggestions from the labour unions of employees in the tobacco industry as well as from the employers, and it submitted its report to the Government of Bombay. After considering the advice of the committee, the Government of Bombay issued a notification, effective from March 31, 1952, under section three (1)(a) of the Minimum Wages Act, fixing minimum rates of wages payable to workers employed in different industries in Zones I to IV as specified in the schedule annexed to the notification. Zone III included the districts of Thana, Ahmednagar, East Khandesh, West Khandesh, Nasik, Poona, Satara North, Kolaba and Dangs in the State of Bombay. In Zone III, for the bidi‑making industry, a minimum rate of rupees 2 per thousand bidis (without leaves) was prescribed. By a notification dated June 30, 1955, issued under section twenty‑six (2), the Government of Bombay directed that for a period of three months, beginning on July 1, 1955, the provisions of the Act would not apply to bidi makers employed in the bidi‑making industry in the localities of Sangamner and Akola.

In the earlier period, an exemption from the provisions of the Minimum Wages Act had been granted to workers employed in the bidi‑making industry in Sangamner and Akola and in areas extending seven miles from the municipal boundaries of those towns. This exemption was periodically renewed and remained in force until the end of December 1956. However, by a notification dated 22 August 1956, the Government of Bombay withdrew the exemption, stipulating that it would take effect on 1 September 1956 for Sangamner, Akola and the surrounding seven‑mile zones.

During the interval when the exemption was still operative, the Government of Bombay issued another notification on 19 April 1955. After examining the report of the Advisory Committee and consulting the Advisory Board, the government revised the minimum rates of wages for workers employed in bidi factories. For the localities of Sangamner and Akola and the areas within seven miles of their municipal limits, the revised notification fixed a minimum rate of Rs 2 2/‑ for the manufacture of one thousand bidis.

When the exemption authorised by section 26(2) was cancelled, the bidi workers in Sangamner, Akola and the adjoining seven‑mile zones demanded that they be paid wages according to the revised rates of April 1955. The employers, however, refused to meet those demands. Consequently, the workers filed applications under section 20 of the Minimum Wages Act before the Regional Authority constituted for that purpose. By an order dated 6 November 1957, the Authority rejected the employers’ arguments and held that the workers were entitled to receive the wages fixed by the April 19 1955 notification, but that the entitlement would commence only from 1 January 1957 and not earlier.

Displeased with that decision, the appellants approached the High Court under article 226 of the Constitution, seeking writs that would declare section 3(3)(iv) of the Minimum Wages Act— which authorised the fixation of varying minimum‑wage rates for different localities— and the April 19 1955 notification to be discriminatory and void. They contended that these provisions infringed the equal‑protection guarantee of the Constitution. The High Court rejected the petition.

At the appellate stage, counsel for the appellants advanced three principal arguments. First, they asserted that section 3(3)(iv) conferred an arbitrary and unchecked power on the State Government to determine minimum‑wage rates for particular localities, thereby enabling discrimination against employers operating in those areas and amounting to an unreasonable restriction on the right to carry on business guaranteed by article 19(1)(f) of the Constitution. Second, they argued that the April 19 1955 notification itself was discriminatory and violated the constitutional guarantee of equality before the law. Third, they claimed that sections 5, 6, 7 and 9 of the Act had been contravened because the committees responsible for fixing the rates were not validly constituted; specifically, the Advisory Board lacked representation of employers in the bidi industry, rendering the revision of minimum wages under the April 1955 notification unlawful. On these grounds, the appellants impugned the operation of section 3 of the Minimum Wages Act.

In this case, the Court examined the contention that the fixation of minimum wages by notification under section 3 of the Minimum Wages Act infringed the fundamental right guaranteed by article 19(1)(f) of the Constitution. The Court referred to the earlier decision in Bijay Cotton Mills Ltd. v. State of Ajmer, where Justice Mukherjea, speaking for the Bench, observed that, given the scheme and purpose of the Act—to secure a minimum wage for workmen and protect them from exploitation—it was necessary to impose restraints on the freedom of contract, and such restraints could not be characterised as unreasonable. The Court also cited a more recent decision, U. Unichoyi v. State of Kerala, which explained that the object of the Minimum Wages Act was to prevent the exploitation of labour, authorising the appropriate Government to prescribe minimum wage rates in scheduled industries. The judgment explained that in a developing country plagued by widespread unemployment, labour might be willing to work for starvation wages, and the policy of the Act aimed to prevent such sweated labour for the public interest. Consequently, when prescribing minimum rates, the employer’s capacity need not be considered; the rates represent the minimum that every employer in a welfare State must pay before employing labour. On the basis of these precedents, the Court held that the plea that the notification fixing minimum rates under section 3 violated the freedom of contract under article 19(1)(f) could not be entertained by the appellants.

Nevertheless, the appellants argued that section 3(3)(iv), which conferred on the State the authority to fix varying minimum rates for different localities, failed to specify the criteria to be considered, thereby granting the State arbitrary and uncontrolled power that could lead to discriminatory treatment among employers operating in contiguous localities. The Court acknowledged that the Act indeed empowered the appropriate Government to issue notifications fixing and revising minimum wage rates for diverse industries across the whole or part of a State. Considering the variety of conditions prevailing and the large number of industries covered, the Legislature could not have fixed uniform rates for all scheduled industries or for every locality. Detailed provisions relating to the determination of rates, the advisability of fixing rates for different industries, the identification of localities where they would apply, the time of their effect, and the choice between time rate, piece rate, or guaranteed time rate necessarily had to be delegated to an authority. In assessing minimum rates for a locality, the legislation required consideration of diverse factors, and the Court recognised that the Legislature could not have foreseen every circumstance, thus justifying the delegation of such powers under the Act.

In determining the appropriate minimum wage, the authorities must consider a variety of elements. These include the basic rate of wages, any special allowance, and the economic climate prevailing in the locality. They must also weigh the necessity of preventing exploitation, especially where workers lack any organised representation. The general economic condition of industrial development in the area, the adequacy of wages already paid, and the earnings that workers receive in other comparable employments are likewise relevant factors. The legislature recognised that it could not decide, in advance, whether it would be advisable to fix a single minimum wage for each scheduled industry across the entire territory, or whether different rates should apply to different parts of the territory, depending on local conditions. Moreover, it was clear that separate rates were required for work performed by adults, adolescents, children and apprentices, reflecting the differing capacities and needs of these groups. The purpose and policy of the legislation, as expressed in the Act, are plainly to prevent the exploitation of workers. To achieve that purpose, the Act mandates the fixation of a minimum wage that every employer must pay.

The legislature intended the Act to operate in those industries and localities where, because of unorganized labour or the absence of mechanisms for wage regulation, the wages paid to workers were inadequate in relation to the general level of wages and the basic subsistence needs of the population. Labour conditions differ from one industry to another and from one locality to another, and the decision whether to fix a minimum wage, and at what rate, depends on many diverse and variable factors that can only be properly assessed by the government responsible for state administration. Accordingly, the Act confers on the appropriate government the power to decide, after examining local circumstances, whether it is desirable to fix a minimum wage for any scheduled trade or industry in any locality, and, if so, what the specific rate should be. By delegating to the appropriate government the authority to determine minimum wages for a particular industry in a particular locality, the legislature has not relinquished its own authority nor handed over unchecked power. The delegated power is subordinate and accessory, intended solely to give effect to the purpose and policy of the Act. In entrusting the state government with this function, the legislature has retained its essential legislative power, assigning only an incidental function of differentiating rates in accordance with the special circumstances that exist in different localities. The authority to fix minimum rates of wages does not, by itself, empower the appropriate government to discriminate unlawfully between employers in different industries. Selective application of the law, when guided by legitimate exigencies, is therefore permissible.

In the judgment the Court observed that when a classification is sanctioned it normally leads to a permissible distinction. Article fourteen of the Constitution forbids legislation that creates arbitrary classes, but it does not bar a reasonable classification that serves a legislative purpose. The Court explained that if the basis of the classification is either expressly stated or clearly implied, and the statute delegates the task of working out the detailed scheme to a body that possesses the necessary expertise and resources, the legislation will not be vulnerable to a charge of unconstitutionality. In other words, even where the statute itself does not lay down a specific classification for the application of its provisions, the law may empower a responsible authority to select and categorize persons, objects, transactions, localities or things for special treatment, provided that the statute also sets out the policy or principles that must guide the authority in exercising that power. Under such circumstances the statute would not be struck down as violative of article fourteen. The Court noted that this principle was well‑recognised, citing the decision in Kathi Raning Rawat v. State of Saurashtra. The Court then examined whether the legislature had given the Government an uncontrolled or arbitrary power by failing to lay down any guiding principles for selecting different wage rates for different localities in the fixation or revision of minimum wages. The Court found that the legislature, by section 4, defined the components of the minimum rate of wage, and by section 5 prescribed the procedure for fixing that rate. An alternative procedure was also provided for conducting an inquiry before fixing or revising the minimum wage. According to the statute, the State Government could either appoint a Committee or a sub‑Committee to hold an inquiry and advise it on the fixation or revision, or it could publish its proposals in the Official Gazette for the information of persons likely to be affected. After receiving the Committee’s report or the representations made in response to the published proposals, the State Government was empowered to fix the minimum rate of wage. The Court further outlined that the Act required the constitution of advisory committees to inquire into conditions prevailing in any scheduled employment and to advise the Government on revisions, as well as an advisory board to coordinate the work of the committees appointed under sections 5 and 6 and to advise the Government generally on fixing and revising minimum rates of wage. Sections 5, 6 and 7 thus created an elaborate machinery for collecting and analysing material in order to ascertain the conditions prevailing in an industry for the purpose of fixing or revising minimum wages. By establishing this machinery, the statute contemplated a full investigation conducted in the presence of interested persons, with the Committee and the advisory board presided over by independent members, before any decision on fixation or revision of rates was taken. Consequently, the Court held that the allegation that the legislature had entrusted an arbitrary and uncontrolled power to the Government could not be sustained.

The Court observed that although the statute empowers the Government to determine appropriate minimum wage rates for industries generally or for particular localities, the policy and guiding principles for exercising that power are embedded in the purpose and objectives of the Act and in the institutional framework established to assist the Government in making a fair balance between the competing claims of labour and employers. Consequently, there is no delegation of an arbitrary or unchecked authority to the Government. The impugned Notification was issued only after a comprehensive inquiry mandated by the Act had been completed. After giving due consideration to the Committee’s report, the rates were revised. The Court noted that the Bidi manufacturers of Nasik, grouped with those of Sangamner and Akola in Zone III, had submitted representations requesting that the revised minimum wage fixed by the Notification dated 19 April 1955 be cancelled and the earlier rate restored. While these representations were being examined, the Government, which had originally ordered that the revised rates should become effective on 1 July 1955, deferred the implementation and permitted an additional three‑month exemption from the Act. The manufacturers’ submissions dated 17 June 1955 and 9 September 1955 referenced a general economic depression, a decline in consumer purchasing power, a fall in the cost‑of‑living index, market competition, an organized labour environment, the industry’s inability to pay higher wages, and the added financial burden of increased taxation. They also invoked the economic benefits conferred under the Factories Act, bonus provisions, and facilities under the Industrial Disputes Act in an effort to persuade the Government not to enforce the revised minimum wages. The Court emphasized that the fixation and revision of wage rates were clearly preceded by a detailed survey and inquiry, and that the rates were implemented only after full consideration of the representations filed by a segment of the affected employers. In the circumstances, the Court found it difficult to conclude that the Notification of 19 April 1955, which established different minimum wages for various localities, lacked a rational basis linked to the Act’s objective and therefore violated Article 14. It was evident that no uncontrolled or arbitrary power was exercised; the Government fixed the wage rates after consulting the reports of the Committees and sub‑committees appointed for that purpose, the Advisory Committees, and the Advisory Board responsible for coordinating the Committees’ work, and it revised the rates after thoroughly considering the employers’ representations. Regarding the argument that the Notification of 19 April 1955 was invalid because the formation of the Committees under section 5 and the Advisory Committees under section 6 and the Advisory Board under section 7 contravened the Act, the Court found no such contention advanced and therefore could not entertain it.

The Court observed that no argument had been made, nor could any be made, that the Advisory Committees created under section 6 and the Advisory Board created under section 7 of the Act violated the statutory provisions. It found that the Committees had been constituted in accordance with the requirements of section 9, being chaired by a retired officer who possessed extensive judicial experience. Likewise, the Advisory Committee appointed pursuant to section 6 comprised three representatives of employers and three representatives of employees, and it was presided over by a chairman who had considerable experience in industrial disputes. An objection was raised that the Advisory Board did not include a representative of employers from the Bidi industry. The Court explained that the role of the Advisory Board under section 7 is to coordinate the work of the Committees and sub‑committees created under sections 5 and 6 and to advise the Government generally on the fixing and revision of minimum rates of wages. The Board is not tasked with conducting a detailed investigation of any particular industry; such investigations are the responsibility of the Committee and the Advisory Committee. The statute does not require the Board to contain representatives of any specific scheduled industry. Rather, the Board must consist of representatives of employers and employees in the scheduled employments, and the Board that had been formed satisfied this requirement. The Board examined the reports submitted by the Committee and the Advisory Committee and even invited the employers in the Bidi industry to present their representations. After considering these representations, the Advisory Board made a unanimous recommendation, upon which the Notification dated 19 April 1955 was issued. After a careful examination of the various provisions of the Act and the machinery it established, the Court held that section 3(3)(iv) does not contravene article 19(1)(f) of the Constitution nor does it infringe the equal‑protection clause. The Court also held that the Notification of 19 April 1955 did not violate article 14 of the Constitution. Furthermore, the Court was of the view that the constitution of the Committees and the Advisory Board did not breach any statutory provisions prescribed by the Legislature. Consequently, the appeal was dismissed with costs, and the appeal was dismissed.