3.

Responsibility for payment of wages –

3 (1)Every employer shall be responsible for the payment to persons employed by him
of all wages required to be paid under this Act: Provided that in the case of persons
employed (otherwise than by a contractor) –

(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 establishments;
(c) upon railways (otherwise 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 case of contractor, a person designated by such contractor who is directly under
his charge. -
>The person so named the person so responsible to the employer or the person so
nominated as the case may be shall also be responsible for such payment.

3 (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.

CASE- (1) Cominco Binani Zinc Ltd v Pappachan, - the appellant company was
obliged to provide and maintain a canteen for its employees. The company entrusted
the running of a canteen to the contractor. It was held that the responsibility to provide
and maintain a canteen under s.46 of the factories act can’t make the management the
ultimate employer for the worker engaged in the canteen for all purposes. They are not
workmen of the management. Therefore the liability of the principal employer is
restricted only to pay wages if contractor fails to pay the same by the virtue of contract
labour act,1970.

(2) Agarwala P.C. v payment of wages inspector,Mp and others- Jiyajirao

cotton mills became a sick company. It owned to its workmen wages for certain
periods. Payment of wages inspector-initiated action under section 15 of the payment
of wages act,1936 against the directors of the company. The authorities under the act
held the directors personally liable to pay the wages. That was affirmed by the HC. The
directors filed appeal challenging the judgement of HC. They were allowed and the
appeals filed by the functionaries under the act was dismissed.

S.4. Fixation of wage-periods

(1) Every person responsible for the payment of wages under section 3 shall fix periods
(in this Act referred to as wage-periods) in respect of which such wages shall be
payable.
 (2) No wage-period shall exceed one month.

5. Time of payment of wages

(1) The wages of every person employed upon or in -

(a) any railway factory or industrial or other establishment upon or in which less than one thousand
persons are employed, shall be paid before the expiry of the seventh day,

(b) any other railway factory or industrial or other establishment shall be paid before the expiry of the
tenth day, after the last day of the wage-period in respect of which the wages are payable:

Provided that in the case of persons employed on a dock wharf or jetty or in a mine the balance of wages
found due on completion of the final tonnage account of the ship or wagons loaded or unloaded as the case
may be shall be paid before the expiry of the seventh day from the day of such completion.

(2) Where the employment of any person is terminated by or on behalf of the employer the wages earned by
him shall be paid before the expiry of the second working day from the day on which his employment is
terminated:

Provided that where the employment of any person in an establishment is terminated due to the closure of
the establishment for any reason other than a weekly or other recognised holiday the wages earned by him
shall be paid before the expiry of the second day from the day on which his employment is so terminated.

(3) The State Government may by general or special order exempt to such extent and subject to such
conditions as may be specified in the order the person responsible for the payment of wages to persons
employed upon any railway (otherwise than in a factory) or to persons employed as daily-rated workers in the
Public Works Department of the Central Government or the State Government from the operation of this
section in respect of wages of any such persons or class of such persons:

Provided that in the case of persons employed as daily-rated workers as aforesaid no such order shall be
except in consultation with the Central Government.

(4) Save as otherwise provided in sub-section (2) all payments of wages shall be made on a working day.

S.6. Wages to be paid in current coin or currency notes

All wages shall be in current coin or currency notes or in both:

Provided that the employer may after obtaining the written authorisation of the employed
person pay him the wages either by cheque or by crediting the wages in his bank account.

S.7. Deductions which may be made from wages

(1) Notwithstanding the provisions of sub-section (2) of section 47 of the Indian
Railways Act 1890 (9 of 1890) the wages of an employed person shall be paid to him
without deductions of any kind except those authorised by or under this Act.
Explanation I: Every payment made by the employed person to the employer or his
agent shall for the purposes of this Act be deemed to be a deduction from wages.

Explanation II: Any loss of wages resulting from the imposition, for good and
sufficient cause upon a person employed of any of the following penalties namely:-

(i) the withholding of increment or promotion (including the stoppage of increment at

an efficiency bar);

(ii) the reduction to a lower post or time scale or to a lower stage in a time scale; or

(iii) suspension;

shall not be deemed to be a deduction from wages in any case where the rules framed
by the employer for the imposition of any such penalty are in conformity with the
requirements if any which may be specified in this behalf by the State Government by
notification in the Official Gazette.

PERMISSIBLE DEDUCTION S.7 (2) Deductions from the wages of an employed

person shall be made only in accordance with the provisions of this Act and may be of
the following kinds only namely:

(a) fines;

(b) deductions for absence from duty-

CASE- (i)Bank of India,Bombay and anr v T.S. Kelawala Bombay

and others- * The bank employees demanded wage revision and pending acceptance
of demand decided to go on 4 hrs strike daily. Bank issued a circular to deduct full
day’s wages of such employees who participated in the strike. It was held that strikes
and demonstrations are legitimate forms of protest and they are not banned in this
country. By and administrative circular the legitimate mode of protest allowed and
recognized by law can’t be stifled. -
* It was further held that payment of wages act is regulatory. S7 (2) read with section
9 of the act provides the circumstances under which and the extent to which the
deduction can be made. It is only when the employer has right to make deductions,
resort should be had to the act to ascertain the extent to which the deduction can be
made. No deduction exceeding the limit provided by the act is permissible even if the
contract so provides. there can’t be any contract contrary to or in terms wider than the
import of section 7 and 9 of the act, therefore, wage deduction can’t be made under
section 7(2) of the act if there is no such power to the employer under the terms of
contract.

(ii) Surendranatham Nair and anr. V senior divisional personal officer –

Some of the railway employees had applied for casual leave for participating in an
agitation against the railway administration. The leave was refused but the employees
participated in the agitation. The management deducted the wages for treating the
period of leave applied for as absence from duty. It was held that the leave rules to the
railway employees are contained in the railway establishment code and the rules made
thereunder. The code derives its authority from Article 309 of the constitution and the
rules are made under the delegated power. These rules have general application to all
non gazetted railway servants . Rejection of leave under such circumstances was legal
and proper. Absence from duty, especially for the purpose of participation in an
agitation against the management is unauthorised . An unauthorised absentee has no
right to compel payment of wages for the period of unauthorised absence.

(c) deductions for damage to or loss of goods expressly entrusted to the

employed person for custody or for loss of money for which he is required to
account where such damage or loss is directly attributable to his neglect or
default;

(d) deductions for house-accommodation supplied by the employer or by

government or any housing board set up under any law for the time being in
force (whether the government or the board is the employer or not) or any other
authority engaged in the business of subsidising house-accommodation which
may be specified in this behalf by the State Government by notification in the
Official Gazette;

(e) deductions for such amenities services supplied by the employer as the State
Government or any officer specified by it in this behalf may by general or special
order authorise.

Explanation: The word "services" in this clause does not include the supply
of tools and raw materials required for the purposes of employment;

(f) deductions for recovery of advances of whatever nature (including advances

for travelling allowance or conveyance allowance) and the interest due in
respect thereof or for adjustment of over-payments of wages;

(ff) deductions for recovery of loans made from any fund constituted for the
welfare of labour in accordance with the rules approved by the State
Government and the interest due in respect thereof;

(fff) deductions for recovery of loans granted for house-building or other

purposes approved by the State Government and the interest due in respect
thereof;

(g) deductions of income-tax payable by the employed person;

(h) deductions required to be made by order of a court or other authority

competent to make such order;

(i) deductions for subscriptions to and for repayment of advances from any
provident fund to which the Provident Funds Act 1952 (19 of 1952) applies or
any recognised provident funds as defined in section 58A of the Indian Income
Tax Act 1922 (11 of 1922) or any provident fund approved in this behalf by the
State Government during the continuance of such approval;
 (j) deductions for payments to co-operative societies approved by the State
Government or any officer specified by it in this behalf or to a scheme of
insurance maintained by the Indian Post Office and

(k) deductions made with the written authorisation of the person employed for
payment of any premium on his life insurance policy to the Life Insurance
Corporation Act of India established under the Life Insurance Corporation 1956
(31 of 1956) or for the purchase of securities of the Government of India or of
any State Government or for being deposited in any Post Office Saving Bank in
furtherance of any savings scheme of any such government.

(kk) deductions made with the written authorisation of the employed person
for the payment of his contribution to any fund constituted by the employer or
a trade union registered under the Trade Union act 1926 (16 of 1926) for the
welfare of the employed persons or the members of their families or both and
approved by the State Government or any officer specified by it in this behalf
during the continuance of such approval;

(kkk) deductions made with the written authorisation of the employed person
for payment of the fees payable by him for the membership of any trade union
registered under the Trade Union Act 1926 (16 of 1926);

(l) deductions for payment of insurance premia on Fidelity Guarantee Bonds;

(m) deductions for recovery of losses sustained by a railway administration on

account of acceptance by the employed person of counterfeit or base coins or
mutilated or forged currency notes;

(n) deductions for recovery of losses sustained by a railway administration on

account of the failure of the employed person to invoice to bill to collect or to
account for the appropriate charges due to that administration whether in
respect of fares freight demurrage wharfage and carnage or in respect of sale of
food in catering establishments or in respect of sale of commodities in grain
shops or otherwise;

(o) deductions for recovery of losses sustained by a railway administration on

account of any rebates or refunds incorrectly granted by the employed person
where such loss is directly attributable to his neglect or default;

(p) deductions made with the written authorisation of the employed person for
contribution to the Prime Minister's National Relief Fund or to such other Fund
as the Central Government may by notification in the Official Gazette specify;

(q) deductions for contributions to any insurance scheme framed by the Central
Government for the benefit of its employees.

S.7 (3) the total amount of deductions which may be made under sub-section (2) in
any wage-period from the wages of any employed person shall not exceed -
 (i) in cases where such deductions are wholly or partly made for payments to
co-operative societies under clause (j) of sub-section (2) seventy-five per cent
of such wages and

(ii) in any other case fifty per cent of such wages:

Provided that where the total deductions authorised under sub-section (2) exceed
seventy five per cent or as the case may be, fifty per cent of the wages the excess may
be recovered in such manner as may be prescribed.

(4) Nothing contained in this section shall be construed as precluding the employer
from recovering from the wages of the employed person or otherwise any amount
payable by such person under any law for the time being in force other than the Indian
Railways Act 1890.

Deduction by order of court-

CASE- (I) Manager Rajapalayn Mills ltd. V Lbour court,Madurai and

anr- An employee resigned from services. While in service the employee had taken
the loan for house building. The employer, after the resignation of the employee
adjusted certain salary amount due to be paid to the employee against the house
building loan. In a claim for salary by the employee it was held that after resignation
the employee ceased to be in employment and therefore, his relationship with the
employee after resignation will be governed by the contract act and the provisions of
sub-section (1) to (3) of section 7 of the payment of wages act will not apply. In such a
case it would be open to the employer to adjust the entire amount due on account of
wages under section 7(4) of the payment of wages act.

(II) Nathulal v M.P. State road transport corporation and others- a driver
in the employment of MP State road transport corporation was found responsible for
causing accident and was directed to pay rs.3,700 as damages to transport corporation
and the same was directed to be deducted in monthly instalments of rs 25 from his
salary. This order was challenged by the petitioner. It was held that section 7 (2) © of
the payment of wages act permits deduction for damages only when the damages or
loses is directly attributable to the negligence or default of the employee and in order
to hod an employee negligent it is essential that he should be afforded an opportunity
of being heard against such a charge. In the present case no such opportunity has been
given to the petitioner employee and therefore the order of deduction is liable to be
quashed.

Deduction with consent-

CASE- (I) Monsukh Gopinath Jadhav v. W.M. Bengal- It was held that there
is nothing illegal in t he action of the employer or the representative union in arriving
at a settlement and the clause in the settlement providing for deduction of certain
amount and paying it to the employees union. Such a settlement doesn’t contravene
s.7 of the act because this section permits deduction with the consent of the employees.

(1) No fine shall be imposed on any employed person save in respect of such acts and
omissions on his part as the employer with the previous approval of the State
Government or of the prescribed authority may have specified by notice under sub-
section (2).

(2) A notice specifying such acts and omissions shall be exhibited in the prescribed
manner on the premises in which the employment carried on or in the case of persons
employed upon a railway (otherwise than in a factory) at the prescribed place or
places.

(3) No fine shall be imposed on any employed person until he has been given an
opportunity of showing cause against the fine or otherwise than in accordance with
such procedure as may be prescribed for the imposition of fines.

(4) The total amount of fine which may be imposed in any one wage-period on any
employed person shall not exceed an amount equal to three per cent of the wages
payable to him in respect of that wage-period.

(5) No fine shall be imposed on any employed person who is under the age of fifteen
years.

(6) No fine imposed on any employed person shall be recovered from him by
instalments or after the expiry of sixty days from the day on which it was imposed.

(7) Every fine shall be deemed to have been imposed on the day of the act or omission
in respect of which it was imposed.

(8) All fines and all realisations thereof shall be recorded in a register to be kept by the
person responsible for the payment of wages under section 3 in such form as may be
prescribed; and all such realisations shall be applied only to such purposes beneficial
to the persons employed in the factory or establishment as are approved by the
prescribed authority.

Explanation: When the persons employed upon or in any railway, factory or industrial
or other establishment are part only of a staff employed under the same management
all such realisations may be credited to a common fund maintained for the staff as a
whole provided that the fund shall be applied only to such purposes as are approved
by the prescribed authority.

9. Deductions for absence from duty –

(1) Deductions may be made under clause (b) of sub-section (2) of section 7 only on
account of the absence of an employed person from the place or places where by the terms
of his employment , he is required to work such absence being for the whole or any part of
the period during which he is so required to work.
(2) The amount of such deduction shall in no case bear to the wages payable to the
employed person in respect of the wage-period for which the deduction is made in a larger
proportion than the period for which he was absent bears to the total period within such
wage-period during which by the terms of his employments he was required to work:

Provided that subject to any rules made in this behalf by the State Government if ten or
more employed persons acting in concert absent themselves without due notice (that is to
say without giving the notice which is required under the terms of their contracts of
employment) and without reasonable cause such deduction from any such person may
include such amount not exceeding his wages for eight days as may by any such terms be
due to the employer in lieu of due notice.

CASE- (I)Prakash Chandra Johari v Indian overseas bank and anr-

*The petitioner who was a godown keeper of the Indian overseas bank worked
for half n hr on 10th January and 4 and half hrs on 11 jan 1979 and marked
his attendance. The bank deducted 2 days wages treating him as absent from
duty on both the days. The employee made an application under section 15
(2) and (3) of the payment of wages act on the ground that deduction of 2
days wages was unjustified. -
*After inquiry the authority constituted under the payment of wages act held
that the employee had worked for 5 hrs on 2 days and therefore deduction for
5 hrs he had worked was illegal and he was entitled for salary for 5 hrs. The
employee moved a writ petition claiming to full days salary but the suit was
dismissed. -
*Thereafter he preffered special appeal in Rajasthan HC. Dismissing the appeal it was
held in view of section 9(1) of the act an employee is supposed to carry out his duties during
work hrs and in case he for any reason refuses to work or absents himself during these
working periods without permission of the authority competent to permit,his leave of
absence is liable for deduction of wages for the period he is absent.

*It was further made clear that the words “ by the term of his employment” in section 9(1)
qualifies words, “absence of an employed person from the place or places where” and not
the words “such absence being for the whole or any part of the period during which he is
so required to work. Hence the words terms of employment would only refer to place or
places of working of the employee and not the working period. Therefore, the bank was
justified to have deducted the wages for the part of the day.

(II) Kothari Ltd. V Second A.J. cum appellate authority and others- The
question for consideration related t o the validity of deduction of wages of employees who
were prevented from attending duty on account of Andhra bandh. It was held that the
tribunal finds that an employee was not responsible for absence from duty or he was
prevented from attending duty , the management is not entitled to deduct wages. The
tribunal is also empowered to go into the reasons and record a finding in that regard. In
the present case the workmen were prevented from attending duty by the organisers of
the bandh. Therefore, the tribunal has jurisdiction to go into this question.

Explanation : For the purposes of this section an employed person shall be deemed to
be absent from the place where he is required to work if although present in such place he
refuses in pursuance of a stay-in strike or for any other cause which is not reasonable in
the circumstances to carry out his work.

10. Deductions for damage or loss

(1) A deduction under clause (c) or clause (o) of sub-section (2) of section 7 shall not exceed
the amount of the damage or loss caused to the employer by the neglect or default of the
employed person.

(1A) A deduction shall not be made under clause (c) or clause (m) or clause (n) or clause
(o) of sub-section (2) of section 7 until the employed person has been given an opportunity
of showing cause against the deduction or otherwise than in accordance with such
procedure as may be prescribed for the making of such deductions.

(2) All such deductions and all realisations thereof shall be recorded in a register to be
kept by the person responsible for the payment of wages under section 3 in such form as
may be prescribed.

11. Deductions for services rendered –

A deduction under clause (d) or clause (e) of sub-section (2) of section 7 shall
not be made from the wages of an employed person, unless the house-
accommodation amenity or service has been accepted by him as a term of
employment or otherwise and such deduction shall not exceed an amount
equivalent to the value of the house-accommodation amenity or service
supplied and in the case of deduction under the said clause (e) shall be subject
to such conditions as the State Government may impose.

CASE- Baldeo Pandey v presiding officer and anr - * The petitioner was in
the service of the respondent no.2, Tata Iron and steel Co. ltd. And was dismissed from
service on the ground of his conviction in criminal case. Later on he was acquitted of the
charges by the HC. He then made a demand and raised industrial dispute for
reinstatement with full back wages and continuity of services. The labour court passed an
award in favour of the petitioner and he was ordered to be reinstated with full back wages
and other benefits. He was reinstated but was not paid consequential benefits including
arrears of salary. -
* The petitioner then made the claim application under the payment of wages act which
was allowed barring a few claims. For these claims the petitioner filed an application under
section 33- c (2) of the industrial disputes act which was opposed by respondent TISCO.
The application were ultimately disposed of by the labour court whereby certain claims
were allowed while others were rejected. Hence, the petitioner filed this write petition.
*The respondent objected on the ground of res judicata as the claim was made and
adjudicated under the payment of wages act and so it should not have been entertained
under the industrial dispute act. Rejecting this contention HC observed that the provisions
of the payment of wages act relate to the deducted or delayed wages only and the labour
court has not entertained other claims which were not covered by this act. Hence the claim
for the other benefits under the industrial dispute act is not barred by res judicata.

12. Deductions for recovery of advances –

Deductions under clause (f) of sub-section (2) of section 7 shall be subject to the
following conditions namely:
(a) recovery of an advance of money given before employment began shall be made
from the first payment of wages in respect of a complete wage-period but no recovery
shall be made of such advances given for traveling-expenses;

(aa) recovery of an advance of money given after employment began shall be subject
to such conditions as the State Government may impose;

(b) recovery of advances of wages not already earned shall be subject to any rules made
by the State Government regulating the extent to which such advances may be given
and the installments by which they may be recovered. -

12A. Deductions for recovery of loans –

Deductions for recovery of loans granted under clause (fff) of sub-section (2)
of section 7 shall be subject to any rules made by the State Government
regulating the extent to which such loans may be granted and the rate of
interest payable thereon.

13. Deductions for payments to co-operative societies and insurance schemes

Deductions under clause (j) and clause (k) of sub-section (2) of section 7 shall
be subject to such conditions as the State Government may impose.