Narottamdas vs State of Madhya Pradesh

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 221 of 1964

Decision Date: 21 April 1964

Coram: K.C. Das Gupta, P.B. Gajendragadkar, K.N. Wanchoo, M. Hidayatullah, N. Rajagopala Ayyangar

The case titled Narottamdas versus State of Madhya Pradesh was decided by the Supreme Court of India on 21 April 1964. The judgment was authored by Justice K.C. Das Gupta and the bench included Justices P.B. Gajendragadkar, K.N. Wanchoo, M. Hidayatullah, and N. Rajagopala Ayyangar. Narottamdas, the petitioner, was the manager of a bidi counting and labelling factory, while the respondent was the State of Madhya Pradesh. The case was reported in the 1964 All India Reporter at page 1667 and in the Supreme Court Reports (1964) volume 7, page 820. The matter concerned the validity of several statutes relating to the fixation of minimum wages in Madhya Pradesh, including the Minimum Wages Act, 1948 and its amendments. Specifically, the issues involved the Madhya Pradesh Amendment and Validation Act, 1961, the Madhya Pradesh Ordinance No. 4 of 1962, and the Madhya Pradesh Minimum Wages Fixation Act, 1962. The constitutional provisions examined were Article 19(1)(f) and (g) of the Constitution of India, dealing with protection of occupation and trade, and Article 2B(1) concerning the right to practice any profession. In 1951 the State of Madhya Pradesh fixed minimum‑wage rates for workers pursuant to the Minimum Wages Act, 1948, and these rates were subsequently revised in 1956. A notification dated 30 December 1958 announced that the revised rates would become effective on 1 January 1959, but the petitioner challenged the validity of that notification before the High Court. The High Court found in favour of the petitioner and held that the government could not give effect to the notification. To overcome the judicial setback, the Madhya Pradesh Legislature enacted the Minimum Wages Act, 1961, expressly giving effect to the contested notification. The petitioner, together with other bidi manufacturers, again challenged this Act, but the High Court allowed the applications and restrained the government from implementing the notification.

Subsequently, the state government issued Madhya Pradesh Ordinance No. 4 of 1962, which fixed minimum‑wage rates retrospectively. That ordinance was later replaced by the Madhya Pradesh Minimum Wages Fixation Act, 1962, which incorporated the same wage rates. When the petitioner again questioned the validity of the 1962 Act before the High Court, the court held the Act to be valid and dismissed the petition. Before the Supreme Court, the petitioner raised three principal grounds of attack on the 1962 Act. The first ground contended that the legislature had not exercised an independent law‑making power but merely validated the 30 December 1958 notification, a power it did not possess. The second ground argued that by giving retrospective effect to the wage rates, the State had imposed unreasonable restrictions on the petitioner’s fundamental right to practice his profession under Article 19(1)(f) and (g). The third ground asserted that by making sections 20 and 22 of the Central Minimum Wages Act, 1948 applicable to the newly fixed wages, the 1962 Act violated Article 2B(1) of the Constitution. The Supreme Court then addressed the first contention, observing that the argument alleging lack of independent legislation could not be sustained. Section 2 of the 1962 Act was examined, and the Court noted that it merely provided that terms used in that Act would have the same meaning as defined in the Minimum Wages Act, 1948. Thus, the definition of expressions in the 1962 Act was a legislative device intended solely for brevity and did not render the Act dependent on the earlier statute.

The Court observed that using definitions in one statute that refer to definitions contained in another statute is a familiar technique employed by legislatures to keep the language of the law concise. Such cross‑reference of terms continues to give effect to the definitions even after the statute that originally supplied those definitions has been repealed or is no longer in force. Consequently, the mere fact that an Act defines words by referring to another Act does not render the newer Act dependent upon the earlier one.

Turning to the provisions under consideration, Section 3 of the impugned Act makes it clear that the legislature itself was determining the minimum rates of wages for certain scheduled employments. The Court noted that the rates listed in the table annexed to the Act coincided with rates that had been fixed elsewhere, but this coincidence did not justify the inference that the Act was merely confirming earlier rates. The Court emphasized that a piece of legislation remains independent even if its practical effect is identical to what would have occurred had a validating Act been enacted.

Regarding the question of retrospectivity, the Court held that while the retrospective operation of a law is a factor to be considered when assessing its reasonableness, it is not a decisive factor in every case. The Court explained that Section 3 of the Act does not stipulate that the newly fixed rates of wages become payable as of 1 January 1959. Instead, the proviso to Section 4 contains an explicit declaration that the rates, which became enforceable under Section 3 with effect from 1 January 1959, would actually become payable on 21 June 1962. Accordingly, the appellant’s fear that the mere passage of the Act could expose him to liability for compensation under Section 20(3) of the Minimum Wages Act 1948 or to prosecution under Section 22 of the same Act was unfounded. The Court therefore rejected the contention that Sections 3 and 4 of the impugned Act imposed unreasonable restrictions on the appellant’s fundamental rights, citing the precedent set in Rai Ramkrishna v. State of Bihar, [1964] 1 S.C.R. 897.

Finally, the Court concluded that a proper construction of Sections 3 and 4 shows that the challenge to their validity on the ground that they violate Article 20(1) of the Constitution cannot succeed. The judgment proceeded to note the civil appellate jurisdiction of the case, citing the appeal number, the originating order of the High Court, and the counsel appearing for both parties, and then set out the facts of the appeal. The appellant was identified as the manager of a bidi counting and labeling factory belonging to M/s Mohanlal Har‑govindas of Jabalpur, a business engaged in the purchase and sale of bidi across Madhya Pradesh and other Indian states. The record further mentioned that in 1951 the State of Madhya Pradesh had taken certain actions related to minimum wages, leading up to the present dispute.

In the State of Madhya Pradesh, the government set rates of minimum wages for workmen employed in bidi‑making factories in accordance with the provisions of the Minimum Wages Act, 1948 (Central Act 11 of 1948). The initial rates that had been fixed under that central legislation were subsequently revised in the year 1956 by a notification issued by the Madhya Pradesh Government on 23 February 1956. After that revision, the State Government issued a further notification on 30 December 1958 which introduced new rates of minimum wages specifically for workmen engaged in bidi‑making manufactories. The 1958 notification expressly provided that the newly prescribed rates would become effective from 1 January 1959. The appellant, who was the manager of a bidi‑counting and labelling factory, challenged the validity of the 30 December 1958 notification before the Madhya Pradesh High Court, contending that the notification was not lawfully made.

In response to the challenge, the Madhya Pradesh Legislature enacted the Minimum Wages (Madhya Pradesh Amendment and Validation) Act, 1961 (Madhya Pradesh Act No. 23 of 1961). That amendment introduced a new provision, designated as Section 31A, into the Central Minimum Wages Act. Section 31A declared that the rates of minimum wages fixed or revised under the 30 December 1958 notification “shall be and shall always be deemed to have been validly fixed and revised and shall be deemed to have come into force on the date mentioned in the said notification,” and it stipulated that this deemed validity would apply “notwithstanding any judicial decision to the contrary or any defect or irregularity in the constitution of the Advisory Board under section 7 of the principal Act read with section 9 thereof or publication of the notification in the Gazette or non‑compliance with any other requirement of law.” The provision further stated that the rates “shall not be called in question in any court merely on the ground that there was failure to comply with the provisions of the principal Act.” The appellant, together with several other bidi manufacturers in Madhya Pradesh, filed petitions under Article 226 of the Constitution challenging the constitutionality of the 1961 Act and, in particular, the validity of Section 31A. The High Court allowed those petitions, struck down Section 31A as invalid, and restrained the State Government from enforcing both the section and the 30 December 1958 notification. The Court delivered its decision on 2 May 1962. Subsequently, on 21 June 1962, the State issued Ordinance No. 4 of 1962, which fixed minimum‑wage rates retrospectively; that Ordinance was later replaced by the Madhya Pradesh Minimum Wages Fixation Act, 1962. On 5 October 1962, the appellant filed another application before the Madhya Pradesh High Court, invoking Articles 226 and 227 of the Constitution, seeking a declaration that the 1962 Act was ultra vires, void and inoperative, and requesting a writ of mandamus to restrain the State and the other respondents from giving effect to or enforcing any provision of that Act. The High Court rejected the appellant’s contentions, held the 1962 Act to be valid, and dismissed the application. The appellant consequently appealed that decision, which is the subject of the present appeal.

In this case the Court observed that the challenge to the validity of the Act rested on three principal grounds. The first ground asserted that when the Madhya Pradesh Legislature enacted Act No. 16 of 1962 it was not exercising an independent legislative authority; rather it was merely giving legislative sanction to a notification dated 30 December 1958, a step that the Legislature was not competent to perform. The second ground contended that by making the wage rates fixed under the Act operate retrospectively, the State had imposed unreasonable restrictions on the appellant’s fundamental rights prescribed under Article 19(1)(f) and Article 19(1)(g) of the Constitution. The third ground alleged that by extending the provisions of sections 20 and 22 of the Central Minimum Wages Act No. 11 of 1948 to the wages now fixed, the Act contravened the prohibition of deprivation of property without law contained in Article 20(1) of the Constitution. The Court noted that the impugned legislation was a succinct statute comprising only five sections. The first section provided the short title of the Act, while the fifth section expressly repealed the Ordinance that the Act was intended to replace. The remaining three sections formed the substantive core of the legislation and were reproduced in full in the judgment.

The Court then set out the wording of the three operative sections. Section 2 declared that any expression used in this Act and defined in the Minimum Wages Act, 1948 (Eleventh Act) would, for the purpose of this Act as applied to the State of Madhya Pradesh, bear the same meaning as assigned to it in the 1948 Act. Section 3, notwithstanding any provision of section 5 of the 1948 Minimum Wages Act as it applied to Madhya Pradesh, or any other provision relating to the fixation or revision of minimum wages in scheduled employments, and notwithstanding any judgment, decree or order of any court to the contrary, stipulated that the minimum rates of wages for employments enumerated in items 2, 3, 5, 6, 7, 8 and 11 of Part I and for employments listed in Part II of the Schedule to the said Act would, for each employment, be deemed to be those specified in the Table appended to the Act. The section further enacted that those wage rates would be payable by the employer in the scheduled employments and enforceable against him from 1 January 1959, as if the provisions contained therein had been in force at all relevant times. Section 4 provided that the provisions of section 4‑A, section 5A, insofar as they dealt with the revision of minimum wages, together with sections 12 to 30‑A of the Act and the rules made thereunder, would apply to the minimum rates of wages specified in section 3 in the same manner as they applied to minimum wages fixed under the 1948 Act for scheduled employments, subject to a proviso that for claims relating to payment of the minimum rates specified in section 3 for a period preceding the publication of the Madhya Pradesh Minimum Wages Fixation Ordinance, 1962 (Ordinance 4 of 1962) in the Gazette, the one‑year period mentioned in the first proviso to subsection (2) of section 20 of the Act would be counted from 21 June 1962, the date of such publication.

In this case, the Court observed that the first proviso to sub‑section (2) of section 20 of the Act was to be taken to have effect from 21 June 1962, the date on which the Ordinance was published in the Gazette. The Court noted that there was no dispute that the Madhya Pradesh legislature possessed the constitutional authority to enact a law concerning minimum wages under Entry 24 of List III of the Seventh Schedule. Counsel for the petitioner, Mr Setalvad, contended that the legislature had not truly exercised its power of independent legislation. He argued that, instead of exercising that power, the legislature had in substance passed a validating Act after an earlier attempt to validate the notification dated 30 December 1958 had failed. To support his claim that the legislation was not independent, Mr Setalvad emphasized the wording of section 2, which states that the expressions used in this Act shall have the same meaning for the purpose of the Act as defined in the Minimum Wages Act of 1948. According to the learned counsel, this reference indicated that the legislation was dependent rather than independent. The Court found no merit in that argument, observing that defining expressions in one Act by reference to another is a well‑known legislative practice adopted for brevity, and such a definition remains effective even if the referenced Act ceases to exist. Consequently, the reference does not render the present Act dependent on the other legislation. Mr Setalvad further urged that the clear object of section 3 was to validate the minimum rates of wages fixed by the 30 December 1958 notification and nothing beyond that purpose. Upon reading the provision, the Court saw that section 3 merely fixed wages for certain employments at the rates listed in the Table appended to the Act. It was placed on record that the rates in this Table were identical to those mentioned in the 1958 notification. The Court acknowledged that the effect of enacting section 3 would therefore be the same as if the 1958 notification had been validated. However, the Court clarified that this similarity of effect does not imply that the Act itself validates, or intends to validate, the 1958 notification. On its face, the legislature was fixing, for itself, the minimum rates of wages applicable to specified scheduled employments, a purpose evident from the preamble and from the language of section 3. The coincidence of the rates in the Table with rates fixed elsewhere cannot reasonably support a conclusion that the old rates were being validated. The Court stressed that independent legislation does not cease to be independent merely because its practical effect mirrors what would have occurred had a validating Act been passed. Accordingly, the contention that this Act...

In this case the Court observed that the contention that the Act was not independent legislation could not be accepted. The Court also rejected the argument that the Act imposed an unreasonable restriction on the appellant’s fundamental rights under Article 19 (1) (f) and (g) of the Constitution. While acknowledging that a restriction did exist, the Court was not persuaded that the restriction was unreasonable. Section 3 of the Act fixed new rates of wages to become effective from 1 January 1959. Section 4 incorporated the provisions of the Central Act No 11 of 1948, making them available for revision and for the enforcement of the rates specified in Section 3. Consequently, if an employer failed to pay the rates prescribed, an application could be filed under Section 20 of the 1948 Act to enforce payment, and the employer could also face prosecution and penalties under Section 22 of the same Act. The learned counsel argued that the Act was unreasonable because the provision for application, prosecution, and penalties could be invoked for the period from 1 January 1959 up to the date of the Act, thereby imposing a retrospective liability. It was further contended that an employer would find it difficult to pay such arrears, which could be substantial, because the accounts for earlier years would already have been closed, profits distributed, and any surplus either spent or invested elsewhere. The Court agreed that the retrospective operation of legislation was a relevant factor in assessing reasonableness, but it also noted that a long series of decisions of this Court had held that retrospective effect was not necessarily a decisive test for invalidity. The Court referred to the earlier decision in Rai Ramkrishna v. State of Bihar, where the question was whether the retrospective operation of the Bihar Taxation of Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961, imposed an unreasonable restriction on the fundamental rights guaranteed by Article 19 (1) (f) and (g). The Bihar Finance Act, 1950 had imposed a tax on passengers and goods carried by public service motor vehicles, and a later suit led the Court to strike down Part III of that Act as unconstitutional on 12 December 1960. Subsequently, Bihar Ordinance No 11 of 1961 was issued on 1 August 1961, validating the material provisions of the earlier Act and making them retroactive to the date the earlier Act had purported to come into force. These validated provisions were later incorporated into the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961, demonstrating that retrospective operation, even for an extended period, did not automatically render a statute unconstitutional.

The Act stipulated that any sum paid, collected or recovered, or claimed to have been so, as tax or penalty under Part III of the Bihar Finance Act, 1950 or under rules made thereunder during the period from 1 April 1950 to 31 July 1961 would be deemed to have been validly levied, paid, collected or recovered under the provisions of this Act. It was contended that the retrospective operation covering a ten‑year span rendered the provisions unconstitutional. In rejecting this submission, Justice Gajendra Gadkar, speaking for the Court, observed that when a legislature‑enacted statute is challenged before a court and ultimately struck down, the judicial process may extend over a considerable period. During that interval the legislature may wisely await the final judgment before employing its legislative power to cure the identified defect. If, after the judicial decision, the legislature enacts a validating law that retroactively covers the entire period consumed by the court proceedings, it would be inappropriate to deem the restriction unreasonable merely because the retrospective effect spans a long duration. The Court held that these observations, originally made with reference to a validating Act, fully apply to the legislation presently before it.

The Court also rejected the picture presented by Mr Setalvad regarding the employers’ alleged financial hardship in making payments for the earlier period. The Court noted that for virtually the whole period from 1 April 1959 up to the enactment of the present Act, employers were aware of the existence of a law that ostensibly required payment at the specified rates. As prudent businessmen, they were expected to have made appropriate provisions for such payments, even though they intended to challenge the earlier Act’s validity and eventually succeeded in that challenge. The Court was not convinced that such provisions were generally absent and found the purported hardship to be more imagined than real. Nonetheless, counsel argued that Section 3 of the Act, while giving the rates of wages fixed by the Act retrospective effect from 1 January 1959, also made wages at those new rates payable as of that date for the prior period. According to counsel, this would mean that when an application is filed under Section 20 of Act 11 of 1948, the employer would become liable not only for the arrears of wages but also for compensation under sub‑section 3 of Section 20.

In this case the Court explained that the employer was liable not only for the arrears of wages but also for compensation as prescribed in sub‑section 3 of section 20 of Act 11 of 1948. Sub‑section 3 of that provision, inter alia, authorises the minimum‑wage authority to direct that, where a claim arises because an employee has received less than the minimum rate of wages, the employee shall be paid the shortfall – that is, the amount by which the minimum wages payable exceed the amount actually paid – together with any additional compensation that the Authority deems appropriate, the additional amount being capped at ten times the shortfall. The provision further permits the Authority to order such compensation even where the employer has already paid the shortfall or the amount due to the employee before the application is finally decided. The learned counsel argued that if section 3 were interpreted to mean that the new wage rates applied retrospectively from 1 January 1959, the employer might consequently be required to pay a substantial compensation, a view the Court found conceivable. Moreover, under that interpretation the employer could also face prosecution under section 22 of the Act for failing, on 1 January 1959, to pay the rates that had first been fixed by the Ordinance and subsequently by the impugned Act. The Court, however, was satisfied that section 3 of the impugned Act does not render the new rates payable as of 1 January 1959. The wording of the statute states that “it is hereby enacted that the said minimum rates of wages shall be payable by the employer in the said scheduled employments and be enforceable against him with effect from the 1st January 1959, as if the provisions herein contained have been in force at all material times.” On behalf of the appellant it was contended that this language meant the legislature intended both the effectiveness and the payable date of the minimum wages to be 1 January 1959, thereby making the rates payable for the past period. In other words, the sentence was read as: “the said minimum rates of wages shall be payable by the employer in the said scheduled employments with effect from 1 January 1959 and shall be enforceable against him with effect from 1 January 1959.” The Court observed that, had that been the legislative intention, the statute would have been drafted more simply as “the said minimum rates of wages shall be payable by the employer in the said scheduled employments and enforceable against him with effect from 1 January 1959.” The insertion of the word “be” before “enforceable” indicates that the phrase “with effect from the 1st January 1959” was not meant to apply to both “payable” and “enforceable”. This careful choice of words demonstrates that the legislature intended the new rates to be enforceable from that date, but not necessarily payable from that date.

In this case, the Court observed that although section 3 of the impugned Act referred to the date “with effect from the 1st January 1959”, it did not specify any particular date on which the minimum rates of wages were to become payable. Upon close examination of section 4 of the Act, the Court found that the legislature had clearly intended that the new wage rates would become payable only on 21 June 1962, which was the date on which the Madhya Pradesh Minimum Wages Fixation Ordinance 1962 was published in the Gazette and later incorporated into the Act. Section 4, the Court noted, extended to the minimum rates of wages fixed under section 3 the provisions of sections 4A and 5 of the Minimum Wages Act, 1948 (Act 11 of 1948). These provisions dealt with the future revision of the rates fixed by the impugned Act as well as with the substantive provisions contained in sections 12 to 30A of that Act. Among the provisions thereby incorporated was section 20, which laid down the procedure for claims arising from payment of less than the prescribed minimum wages. The first proviso to subsection 2 of section 20 prescribed a limitation period within which an application concerning such a claim had to be filed; the limitation period was one year measured from the date on which the minimum wages became payable. Consequently, the legislature, when granting the impugned Act retrospective effect, had to indicate the date on which the newly fixed rates would become payable. This indication was expressly provided in the proviso to section 4. The Court reproduced the wording of that proviso, which stated that, for claims relating to periods prior to the Gazette publication of the Madhya Pradesh Minimum Wages Fixation Ordinance 1962, the one‑year period referred to in the first proviso to subsection (2) of section 20 would be counted from 21 June 1962, the date of the Ordinance’s publication. The Court held that this provision unmistakably expressed the legislative intent that the rates, although enforceable under section 3 from 1 January 1959, would become payable only from 21 June 1962. The Court affirmed that this construction was the same as that adopted by the High Court and declared it correct. Accordingly, the Court concluded that the appellant’s fear of being held liable for compensation under section 20(3) of the Minimum Wages Act, 1948, or of facing prosecution under section 22 of the same Act merely because the impugned Act had been passed, was unfounded. The Court clarified that the duty to pay the prescribed rates of wages arose only on and from 21 June 1962, and that no liability for compensation or prosecution could be attached for any period prior to that date.

In this case, the Court explained that an obligation to pay compensation under section 20(3) of the Minimum Wages Act, 1948, or to face prosecution under section 22, would arise only if the employer made the payment on 21 June 1962. It was submitted that requiring the employer to make the payment precisely on the date of publication of the Ordinance was unreasonable because immediate compliance might be impracticable. Counsel highlighted that some time would necessarily pass before the employer could become familiar with the detailed provisions of the Act and before he could arrange for the payment. Consequently, there existed a theoretical risk that an application could be filed against the employer under section 20 of the Minimum Wages Act, 1948, seeking a court order for compensation. While acknowledging this theoretical possibility, the Court found that, in practical terms, the likelihood of such an application succeeding was negligible. The Court noted that the payment of compensation is a matter of discretion vested in the minimum‑wage authority, which may decide whether to issue an order. It was considered highly unlikely that the authority would exercise its discretion to impose a compensation order when the employer had complied within a few days after 21 June 1962. The probability of prosecution under section 22 for failing to make payment exactly on 21 June 1962 was judged to be even smaller. Furthermore, the Court observed that such prosecution could be entertained by the courts only after an application under section 20 had been filed, partially succeeded, and the appropriate Government or an authorized officer had sanctioned the complaint. Given these circumstances, the Court did not find it probable that a prosecution would be initiated solely because the payment was not made precisely on the statutory date. Accordingly, the argument that sections 3 and 4 of the impugned Act imposed unreasonable restrictions on the appellant’s fundamental rights was rejected. The final ground raised in support of the appeal, namely that the Act violated Article 20(t) of the Constitution, was based on the premise that the new wage rates became payable from 1 January 1959 even for the past period. If that premise were correct, it would follow that sections 3 and 4 together would render the employer liable for offences under a law that was not in force at the time of the alleged conduct. However, the Court previously held that a proper construction of sections 3 and 4 shows that the new wage rates for the preceding period became payable not from 1 January 1959 but from 21 June 1962. Consequently, the challenge to the validity of those sections on the ground of Article 20(l) of the Constitution was dismissed. All of the points raised in the appeal were found to fail, and the Court ordered that the appeal be dismissed with costs. The dismissal of the appeal was thus the final order.