A PROJECT REPORT

ON

“LAW TO FIX MINIMUM WAGES”

A CASE STUDY AND ANALYSIS OF
CONTRIBUTION OF SUPREME COURT

LABOUR AND INDUSTRIAL LAW

4TH SEMESTER
B.A.LL.B. (Hons.)

SUBMITTED TO: SUBMITTED BY:

DR GURMANPREET KAUR KUSHAL KEDIA
ASSISTANT PROFESSOR OF LAW ROLL NO. 16105
Contents
MINIMUM WAGES ACT. 1948 ............................................................. 2
WAGE ADJUDICATION IN INDIA ..................................................... 3
EARLY TRIBUNALS ON MINIMUM WAGES .................................. 9
SUPREME COURT ON WAGES ........................................................ 10
CONCLUSION ....................................................................................... 20
MINIMUM WAGES ACT. 1948

The Minimum Wages Act 1948 is an Act of Parliament concerning Indian labour law
that sets the minimum wages that must be paid to skilled and unskilled labours.

The Indian Constitution has defined a 'living wage' that is the level of income for a
worker which will ensure a basic standard of living including good health, dignity,
comfort, education and provide for any contingency. However, to keep in mind an
industry's capacity to pay the constitution has defined a 'fair wage'.[1] Fair wage is that
level of wage that not just maintains a level of employment, but seeks to increase it
keeping in perspective the industry’s capacity to pay. To achieve this in its first
session during November 1948, the Central Advisory Council appointed a Tripartite
Committee of Fair Wage. This committee came up with the concept of a minimum
wage, which not only guarantees bare subsistence and preserves efficiency but also
provides for education, medical requirements and some level of comfort.

India introduced the Minimum Wages Act in 1948, giving both the Central
government and State government jurisdiction in fixing wages. The act is legally non-
binding, but statutory. Payment of wages below the minimum wage rate amounts to
forced labour. Wage boards are set up to review the industry’s capacity to pay and fix
minimum wages such that they at least cover a family of four’s requirements of
calories, shelter, clothing, education, medical assistance, and entertainment. Under the
law, wage rates in scheduled employments differ across states, sectors, skills, regions
and occupations owing to difference in costs of living, regional industries' capacity to
pay, consumption patterns, etc. Hence, there is no single uniform minimum wage rate
across the country and the structure has become overly complex. The highest
minimum wage rate as updated in 2012 is Rs. 322/day in Andaman and Nicobar and
the lowest is Rs. 38/day in Tripura.

4 Minimum rate of wages. —

(1) Any minimum rate of wages fixed or revised by the appropriate Government in
respect of scheduled employments under section 3 may consist of—

(i) a basic rate of wages and a special allowance at a rate to be adjusted, at such
intervals and in such manner as the appropriate Government may direct, to accord as
nearly as practicable with the variation in the cost of living index number applicable to
such workers (hereinafter referred to as the "cost of living allowance"); or

(ii) a basic rate of wages with or without the cost of living allowance, and the cash
value of the concessions in respect of supplies of essential commodities at concession
rates, where so authorised; or

(iii) an all-inclusive rate allowing for the basic rate, the cost of living allowance and
the cash value of the concessions, if any.

(2) The cost of living allowance and the cash value of the concessions in respect of
supplies of essential commodities at concession rates shall be computed by the
competent authority at such intervals and in accordance with such directions as may be
specified or given by the appropriate Government.

WAGE ADJUDICATION IN INDIA

In India, wage fixation is done under the Minimum Wages Act, through Adjudication,
Arbitration, Wage Boards and Collective Bargaining. There have been various
important decisions of the Supreme Court involving different wage problems where
the Court has laid down certain far-reaching principles. The Supreme Court has come
across the wage related disputes under the Minimum Wages Act, Collective
bargaining process and the appeals from the industrial tribunals. While deciding these
cases, the Court has used in different context and connotations, the related terms for
‘minimum wage’ such as bare minimum, basic minimum, minimum wage, industrial
minimum wage, statutory minimum wage, sustenance wage or subsistence plus level
and the need based minimum wage. The reasons for emergence of these different
nomenclature for the term ‘minimum wage’ is that each case stood before the Supreme
Court from its own background

From its very inception the Supreme Court has brought to bear on the adjudication of
industrial disputes, particularly of disputes relating towages and allied problems of
financial concern to the worker, on ethical and social outlook, liberally interpreting the
progressive spirit of the Constitution in certain instances. The Supreme Court may, in
its discretion, “grant special leave to appeal from any judgment, decree, determination,
sentence or order in any cause or matter passed or made by any court or tribunal in the
territory of India.” The Supreme Court ruled at a very early stage of its existence that
 Article 136 was wide enough to give it jurisdiction to entertain appeals from the
decisions of Industrial Tribunals.1 Since then a vast volume of authoritative case law,
binding on all tribunals and subordinate Courts, has come into existence, thereby
imparting to matters essentially economic, the stamp of judicial authority. The Law
Commission's misgivings that “labour matters are being thrust upon a Court which has
not the means or materials for adequately informing itself about the different aspects
of the questions which arise in these appeals and therefore finds it difficult to do
adequate justice”, have not prevented the Supreme Court from expressing itself
decisively and comprehensively on every subject that enters into labour-management
relations. 2
Though the financial position of the employer and the state of national economy have
their say in the matter of wage fixation, “the requirements of a workman living in a
civilized and progressive society also come to be recognized.”3 Hence, according to
the Supreme Court, social philosophy of the age supplies the background for the
decision of industrial disputes relating to the wage structure4. Fixation of wage
structure has been recognized to be among the most difficult tasks that industrial
adjudication has to tackle. Adjudication has to steer such a course that while the
demands of social justice are met by securing to workmen a fair share of the income
which they help to produce, the attempt at fair distribution does not tend to dry up the
source of national income itself. Better living conditions have to be secured for
workmen by giving them their fair wages for their labour, but at the same time the
inroads made on the profits should not be so unreasonable as to drive capital away
from fruitful employment or to affect prejudicially capital formation itself. Thus
several complex factors, some economic and some springing from social philosophy,
give to conflicting considerations, ail of which have to be borne in mind.* 7 “While
the very concept of capital-labour relations is undergoing an evolution underthe
influence of international movements in the cause of labour, the emergence of an
independent democratic State in India has influenced thoughts on this matter even
more profoundly.”78 The Minimum Wages Act was passed in the year 1948 and the
Constitution came into existence in the year 1950. The Supreme Court was first
assigned with the task of determining the constitutional validity of the Minimum

1 Bharat Bank Ltd Ddki vs Employees of the Bharat Bank Ltd., Delhi, A.LR. 1950 S.C. 188.
2
Subramaniam KN, wages in India (New Delhi Publishing House co ltd) at 168
3
Standard Vaccum Raining Co. of India Ltd. Vlts Workman, 1961 ILLJ(8.C) 232
4
Hindustan TimasLtd.v Thair Workman, 196311U(S.C.) 108.
Wages Act in Edward Mills Co. Ltd. V State ofAjmer5,wherein the validity of Sec. 27
of the Act was challenged on the ground of excessive delegation. The power of the
appropriate Government to appoint the Committees under Sec. 5 also came before the
Court. Sec. 27 provides that the appropriate Government, after giving three months,
notice of its intention to do so, may add to either part of the Schedule of the Act, any
employment in respect of which it is of the opinion that minimum rates of wages
should be fixed underthe Act. It was argued that the Act prescribed no principles and
laid down no standard which could furnish an intelligent guidance to the
administrative authority in taking such a decision and that the matter was left entirely
to the discretion of the appropriate Government. Such delegation virtually amounted to
surrender by the legislature of its essential legislative functions. 6The Court, rejecting
the argument, held that conditions of labour differed under different 7circumstances
and from State to State and the expediency of including a particular trade or industry
within the schedule depend upon a number of facts which were not uniform and which
could be determined by a person in charge of the administration of a particular State.
Therefore, the legislature could not be said to have stripped itself of its essential
powers or assigned to the administrative authority any thing except a subordinate
power which was thought necessary to carryout the purpose and policy of the Ad.108
The second issue is that the Government reconstituted the Advisory Committee after
the expiry of its term retrospectively. The Court held that the nature of the Advisory
Committee under Sec. 5(2) is only recommendatory and the final decision is left in the
hands of the Government and hence it is valid 9was left entirely to the discretion of the
appropriate Government. Such delegation virtually amounted to surrender by the
legislature of its essential legislative functions. The Court, rejecting the argument, held
that conditions of labour differed under different circumstances and from State to State
and the expediency of including a particular trade or industry within the schedule
depend upon a number of facts which were not uniform and which could be
determined by a person in charge ofthe administration of a particular State. Therefore,
the legislature could not be said to have stripped itself of its essential powers or

5
1954 LL.J(S.C.)686.
6
Id. at 637.
7
Subramanya Supra n.3 at 168.
8
Id at 690.
9
Id at 692
 10
assigned to the administrative authority any thing except a subordinate power which
was thought necessary to carryout the purpose and policy of the Ad.10 The second
issue is that the Government reconstituted the Advisory Committee after the expiry of
its term retrospectively. The Court held that the nature of the Advisory Committee
under Sec. 5(2) is only recommendatory and the final decision is left in the hands of
the Government and hence it is valid.11In 1955, the validity of the Minimum Wages
Act was again challenged in Bijay Cotton Mills Ltd. V State of Ajmier,12 wherein
Sections 3,4 and 5 of the Act were challenged on the ground that the restrictions
imposed by these Sections upon the freedom of contract and thus violated the
fundamental right guaranteed under Article 19 (1)(g) of the Constitution. There was an
industrial dispute between the appellants company and its workmen regarding
enhancement of wages and the dispute was referred to an Industrial Tribunal. The
tribunal held that The capacity of the mill precludes the award of higher rates of wages
and higher dearness allowance.” The employees appealed to Appellate Tribunal when
this appeal was pending, the Government fixed the minimum wages at Rs. 56 in the
textile industry under the Act. In the meantime the Appellate Tribunal sent back the
case to the industrial tribunal for further investigation and the latter rejected the basis
upon which the minimum rates of wages of Rs. 56 were fixed by the State, and fixed
11
the minimum rates of wages including the dearness allowance at Rs. 35 only. The
Company in its petition stated that, the minimum wages fixed by the State is
prohibitory and it is not at all possible for the company tocany on its business on
payment of such wages and accordingly closed its mills12. An interesting feature in
this case was that, all the workers working in the mills approached the Company and
expressed their willingness to work at lower rate of wages than the rates prescribed
under the Act. Despite the willingness of the workers the Company is unable to open
the mills by reason of the fact that the Act makes it a criminal offence for not paying
the wages fixed under the Act.15 The workers also filed the other petition supporting
the contentions of the Company. Mr. Seervai, appearing for both the petitioners
invited the Court to hold that the material provisions of the Ad are illegal and ultra
vires by reason of their conflict with the fundamental rights of the employer. The Ad

10
Hindustan Times Supra n.5.

12
Id. at 130.
puts unreasonable restrictions upon the rights of the employer, and the rights of the
employees are also restricted, in as much as they are disabled, from working in any
trade or industry on the terms agreed to between them and their employers.16 Further
it was contended that the provisions relating to the fixation of minimum wages are
unreasonable and arbitrary. The whole thing has been left to the unfettered discretion
of the 'appropriate Government’ and even when a Committee is appointed, the report
of advice of such Committee is not binding on the Government. The restrictions put by
the Act are altogether unreasonable and even oppressive with regard to one class of
employers, who for purely economic reasons are unable to pay the minimum wages
but who have no intention to exploit the labour at all. In such cases the provisions of
the Act have no reasonable relation to the object, which it has in view. The Court held
that ‘it can scarcely be disputed that securing of living wages to labourers which
ensure not only bare physical subsistence but also the maintenance of health and
decency is conducive to the general interest of the public. This is one of the directive
principles of State policy embodied in Article 43 of our Constitution. The employers
cannot be heard to complain if they are compelled to pay the minimum wages to their
labourers even though the labourers, on account of their poverty and helplessness are
willing to work on lesser wages. Further it was held that If it is in the interest of the
13
general public that the labourers should be secured adequate living wages, the
intentions of the employers whether good or bad are really irrelevant. Individual
employers might find it difficult to cany on the business on the basis of the minimum
wages fixed under the Act but this must be entirely due to the economic conditions of
the particular employers. That cannot be a reason for striking down the law itself as
unreasonable. As regards the procedure for fixing of minimum wages, the ‘appropriate
Government’ has undoubtedly been given very large powers. But it has to take into
consideration, before fixing wages, the advice of the committee if the one is appointed
or the representations on its proposals made by persons who are likely to be affected
thereby. Consultation with advisory bodies has been made obligatory on all occasions
of revision of minimum wages and Sec. 8 of the Act provides for the appointment of
the Central Advisory Board for the purposes of advising the Central as well as the
States both in the matter of fixing and revising the minimum wages. In the committees
of advisory bodies, the employers and employees have an equal number of

13
“living wages" implies the wage which meets the socio economic level and not the torn “living
wage’*as defined by Committee on Fair Wages.
 representation and there are certain independent members besides who are expected to
take a fair and important view of the matter. These provisions the Court held, in its
opinion, constitute an adequate safeguard against any hasty or capricious decision by
the ‘appropriate Government’14. In suitable cases the ‘appropriate Government’ has
also been given the power of granting exemptions from the operation of the provisions
of this Ad.21The Court held that the restrictions, though they interfere to someextent
with the freedom of trade or business guaranteed under Article19 (1) (g) of the
Constitution, are reasonable and being proposed in the interests of the general public,
are protected by the terms of Cl. (6) of
Article 19.22 These cases firmly establish that in fixing the minimum wages under the
Act, the hardship caused to individual employers or their inability to meet the burden
has no relevance. The Court had specifically laid down that the workmen shoul atleast
be given adequate living wages, which in reality mean minimum wages.
Secondly the Court analyzed the scope of the term ‘minimum rates of wages’ fixed
under the Act, that it should ensure not only bare physical subsistence but also the
maintenance of health and decency and thus concurred with the definition of
‘minimum wage’ as defined by the Committee on Fair wages.23 The Court here
liberally interpreted the progressive spirit of the Constitution. Again the employers in
different cases raised the similar contentions without much new impact on the
Supreme Court. It is proposed to examine them at the appropriate stage.
In the above two cases the Supreme Court was called upon to decide the validity of the
Minimum Wages Law itself as well as on the question of power vested with the
appropriate Government to interfere with matters of wage fixation which under
common law was considered to be in the realm of contract between parties based upon
notions of freedom of contract. Very rightly the Court had no difficulty to reject the
older jurisprudence as pleaded even by Mr. Seervai and opt for the new jurisprudence
of Industrial Law. The outcome of these two decisions clearly establish that in fixing
the statutory minimum wage the capacity of the employer to pay is not a relevant
factor. Apart from the above, there are series of judgments through which it can be
traced the evolution of judicial pronouncements on the question of wages specially
pertaining to the principles that ought to be followed under different circumstances
and in respect of fixation of different levels of wages. In the present state of society

14
Bijoy Cotton Milk Supra n. 12.
the primary requirement is that all workmen must get at least a minimum wage, which
should not only be a bare minimum but it should also provide them some measure of
education, medical requirements and other amenities. In determining the minimum
wage the financial capacity of the employer or industry is irrelevant, the case of fair
wage stands on a different footing. In assessing the capacity, the main consideration to
be borne in mind is that “the industry should be able to maintain production with
efficiency and the fixation of the rates of wages should be such that there are no
movements from one industry to another owing to wide disparities.” In a case where
the employer is already paying minimum wage and the claim is for fair wage, the
question of the financial capacity of the employer is not only relevant but is pertinent,
because fixing the limit of fair wage would depend upon the capacity of the employer
to pay.15
EARLY TRIBUNALS ON MINIMUM WAGES

In Rajamani Transports V Their Workmen16 the Labour Appellate Tribunal has

observed that the capacity of a concern or an industry to pay minimum wages is not
relevant for fixing the minimum wages, which should be paid by the industry. The
workmen must get minimum wages and if the management cannot afford to do so, it
has no right to exist. In Gormany Tile Works v Their Workmen an attempt was made
be the management to make out that the factory is in a poor financial position and has
not got sufficient capacity to pay the higher wages and the capacity to pay is one of the
determining factors to decide the question as to what are the minimum wages that
should be paid. The workers contended that the wages paid to all the workers ar
abnormally low and that they should be substantially increased. The evidence clearly
shows that the condition of the factory is by no means prosperous. If the capacity of a
concern to pay wages is a determining factor in fixing the minimum wages, then the
court would have preferred to hold that the position of the factory does not justify the
enhancement of the very low wages which are now being paid and held that the fact
that the financial position of the factory is unsatisfactory cannot be taken into
consideration in fixing the minimum wages which have to be paid. In Plywood
products and Their Workmen the question arose whether workmen working in a
nascent industry paying wages to unskilled workmen not lower than the wages

15
Express News Paper (P) Ltd. V Union cf India. 19611LU 365. SC.
16
1952 LLJ 785. (LAT).
 prevalent in the locality for similar occupation and especially when they had income
from agriculture to supplement their living is justified? Was considered by the Labour
Appellate Tribunal. This was an employer’s appeal from the award given by the State
Industrial Tribunal, Allahabad, by which the minimum wage of the unskilled workmen
has been raised. This factory was situated on the outskirts of Sitapur Municipality. The
Management contended that having regard to its struggling position to the prevailing
rates of wages in the industry and in the area, to the amenities provided by it to labour
and the fact that labour in this concern is drawn from the villagers who have
supplementary sources of income from agriculture, the time has not come as yet for
raising the scale of wages. The welfare of the State demands the development of
industries, which will lead to the extension of avenues of employment and increased
national wealth. When the concerned industry is in a nascent state and if at that stage
an undue burden of wages is placed upon it, it may be nipped in the bud and the
avenues of employment, which the concerned industry opened out might be closed.
Such a state of affairs would recoil upon the concerned workmen themselves as they
would lose their employment altogether. First the industry should be allowed to
establish on firm grounds, then there will be time enough for labour to claim increase
in wages. In raising the wages the stage of the development of the industry concerned
its capacity to pay the prevailing rates in that industry and other industries in that area
and the supplementary income source of labour should not be lost sight of. No less
important is also the fact that the cost of living index at that time was showing a
downward trend. The Tribunal applying the above arguments to the facts of the case
held that the demand for increase in the minimum wages was unjustified. 17Thus it can
be found that there was already a conflict of views in the highest Labour Tribunal in
the land on the question whether capacity to pay had to be considered while fixing
minimum wages due to workmen in the earliest days.
SUPREME COURT ON WAGES

It was in the year 1958 the Supreme Court, for the first time in Crown Aluminium
Works v Their Workmen,evolved 18a harmonious construction formula based on social
justice for the purpose of wage fixation, and had left a guideline for the tribunals to

18
AIR 1958, SC 30.
follow it in similar cases. What happened in this case was that due to recession in
Aluminium Industry the management closed the rolling mills permanently and brought
about some retrenchment. It also revised the wage structure of the workmen against
which there was a lot of agitation by the workmen. The Government referred the
dispute to the tribunal and the tribunal found that no employer could reduce the wages
to the prejudice of the workmen if the wages already fell in the category of bare
minimum wage. His Lordship, Justice Gajendragadkar observed: “There can be no
doubt that in fixing the wage structure in different industries, industrial adjudication
attempts, gradually and by stages though it may be, to attain the principle objective of
a welfare State, to secure to all citizens justice, social and economic.’ To the
attainment of this ideal the Indian Constitution has given a place of pride and that is
the basis of the new guiding principles of social welfare and common good to which
we have just referred.”'1 Further it was observed that though social and economic
justice is the ultimate ideal of industrial adjudication, its immediate objective in an
industrial dispute relating to the wage structure is to settle the dispute by constituting
such a wage structure as would do justice to the interests of both labour and capital
which would establish harmony between them and lead to their genuine and whole
hearted cooperation in the task of production. It is obvious that cooperation between
capital nd labour would lead to more production and that naturally help national
economy and progress. In achieving this immediate objective, industrial adjudication
taken into account several principles such as the principle of comparable wages,
productivity of the trade or industry, cost of living and ability of the industry to pay.
The application of these and other relevant principles leads to the construction of
different categories of wage structures, such as living wage, fair wage and minimum
wage. It is very difficult to define or even to describe accurately the contents of these
terms. In the case of an expanding national economy the contents of these expressions
are also apt to expand and vary. What may be fair wage in a particular industry in one
country may be living wage in the same industry in another country. Similarly, what
may be a fair wage in a given industry today may cease to be fair and may border on
the minimum wage in future. Industrial adjudication has naturally to apply carefully
the relevant principles of wage structure and decide every industrial dispute so as to do
justice to both labour and capital. In deciding industrial disputes in regard to wage
structure, one of the primary objectives is and has to be the restoration of peace and
goodwill in the industry itself on a fair and just basis to be determined in the light of
all relevant considerations. There is, however, one principle, which admits of no
exception i.e. no industry has a right to exist unless it is able to pay its workmen at
least a bare minimum wage. It is quite likely that in an under developed country,
where unemployment prevails on a very large scale, unorganized labour may be
available on starvation wages, but the employment of labour on starvation wages
cannot be encouraged in a modem democratic welfare State, if an employer cannot
maintain his enterprise without cutting down the wages of his employees below even a
bare subsistence or minimum wage, he would have no right to conduct his enterprise
on such terms. We do not think it would be correct to say that in no conceivable
circumstances can the wage structure be revised to the prejudice of workmen. When
we make this observation, we must add that even theoretically no wage structure can
or should be revised to the prejudice of workmen if the structure in question falls in
the category of the bare subsistence or the minimum wage. If the wage structure in
question falls in a higher category, then it would be open to the employer to claim its
revision even to the prejudice of the workmen provided a case for such revision is
made on merits to the satisfaction of the tribunal. In dealing with a claim for such
revision, the tribunal may have to consider, as in the present case, whether the
employer’s financial difficulties could not be adequately met by retrenchment in
persons already effected by the employer and sanctioned by the tribunal. The tribunal
must also keep in mind some important practical considerations. Substantial reduction
in the wage structure is likely to lead to discontent among workmen and may result in
disharmony between the employer and his employees; and that would never be for the
benefit of the industry as a whole. On the other hand, in assessing the value or
importance of possible discontent amongst workmen resulting from the reduction of
wages, industrial tribunals will also have to take into account the fact that if any
industry is burdened with a wage structure beyond its financial capacity, its very
existence may be in jeopardy and that would ultimately lead to unemployment.32 It is
thus clear that in all such cases all relevant considerations have to be carefully
weighed and an attempt has to be made in each case to reach a conclusion which
would be reasonable on the merits and would be fair and just to both the parties. It is
interesting to note here that the Court viewed only three distinct levels of wages i.e.
living wage, fair wage and minimum wage, but used the different nomenclature to
address the term ‘ minimum wage’ such as bare minimum, bare subsistence wage.
The Supreme Court in Express News papers Ltd. V Union of India,33 has analyzed
different theories enunciated by economists on wage fixation and had gone in depth
studying the I.L.O. Conventions, various Committees Reports and the position
regarding the wage structure prevailing in other countries. By an Act of Parliament, a
Wage Board was constituted to frame a wage structure for all journalists woricing in
the paper industry. In this case, the Wage Board did not pay any regard to the capacity
of the industry to pay while recommending wage fixation to the Government and
therefore, its award was challenged as being bad and unreasonable. Excerpts from the
judgement, delivered by Bhagwati J are as follows:

Broadly speaking wages have been classified into three categories viz. (1) the living
wage (2) the fair wage and (3) the minimum wage.

he concept of minimum wage: In India, however, the level of national income is so

low at present that it is generally accepted that the country cannot afford to prescribe
by law a minimum wage, which would correspond to the concept of the living wage.
What would be the level of minimum wage, which can be sustained by the present
stage of the Country's economy. Most employers and some Provincial Governments
consider that the minimum wage can at present be only a bare subsistence wage, in
fact, even one important Ail India Organization of employees has suggested that a
minimum wage is that wage, which is sufficient to cover the bars physical needs of a
worker and his family. Many others however, consider that a minimum wage must
provide not merely for the bars subsistence of life but for the preservation of the
efficiency of the worker. For this purpose, the minimum wage must also provide for
some measure of education, medical requirements and other amenities... There is also
a distinction between a bare minimum or minimum wage and a statutory minimum
wage. The former is a wage which would be sufficient to cover the bare physical needs
of a worker and his family that is a rate which has got to be paid to the worker
irrespective of the capacity of the industry to pay. If an industry is unable to pay to its
workmen at least a bare minimum wage it has no right to exist. The statutory
minimum wage however is the minimum, which is prescribed by the Statute and it
may be higher than the bare subsistence or minimum wage providing for some
measure of education, medical requirements and amenities, as contemplated above.35
A fair wage is settled above the minimum wage and goes through the process of
approximating towards a living wage. While the lower limit of the fair wage must
obviously be the minimum wage, the upper limit is equally set by what may broadly
be called the capacity of the industry to pay. The capacity of industry to pay can mean
one of the three things viz.,

1} the capacity of a particular unit (marginal, representative or average) to pay;

II) the capacity of a particular industry as a whole to pay or;
III) the capacity of all industries in the country to pay.
In determining the capacity of an industry to pay it would be wrong to take the
capacity of a particular unit or the capacity of all industries in the country. The
relevant criterion should be the capacity of a particular industry in a specified region
and as far as possible, the same wages should be prescribed for all units of that
industry in that region. It will obviously not be possible for the wage fixing Board to
measure the capacity of each of the units of any industry in a region and the only
practicable method is to take a fair cross-section of that industry. It is therefore clear,
that the capacity of an industry to pay should be gauged on an industry-cum-region
basis after taking a fair cross-section of that industry. Relying on these standards, the
Court laid down certain principles for general guidance:

(1) In fixing the rates of wages the capacity of the industry to pay is one of the
essential circumstances to be taken into consideration except in the case of minimum
where the employer is bound to pay the same irrespective of such capacity.

(2) The capacity of the industry to pay is to be considered on an industry-cum-region

basis after taking a fair cross section of the industry.

(3) Factors like elasticity of demand and tightening of the organization, etc., should be
taken into account against the ultimate background so that the burden may not be such
as to drive the employer out of business.

gradually and by stages though it may be, to attain the principal objective of a welfare
State to secure to all citizens justice, social and economic’. To the attainment of this
ideal the Indian Constitution has given a place of pride and that is the basis of the new
guiding principles of social welfare and common good to which we have just
referred.”40 Further it was observed that so far as the bare minimum wage is
concerned, it has been held that no industry has the right to exist unless it is able to
pay its workmen at least a bare minimum wage; in other words, minimum wage is the
 first charge on an industry. In Express News Papers'41 the three concepts, the
minimum wage, fair wage and living wage were examined and it was pointed out that
the content of these three expressions was not fixed and static, and that it varies and

was bound to vary from time to time.

In Standard Vacuum Refining Co. v Its Workmen19, the workmen claimed a bonus for
the year 1956, equivalent to nine months total earnings on the ground that the
employers had admitted their capacity to pay and that the wage actually received was
less than the living wage. The employers contended that they were paying a living
wage and that no bonus was due. The employers relying on the Report of Textile
Committee, 1940, contended that if the living wage there for 1940, is Rs. 55/- and if
this was multiplied by 3.5 (due to a 35 per cent rise in prices between 1940 and for
1956) it comes to Rs.192.55 as the living wage for 1956, and they were paying their
workmen more than that. The workmen relied on the recommendations of the Indian
Labour Conference, 1957, to show that Rs.209.70 approximated to the need based
minimum wage, and that the average wage paid by the employers was fair, but that
there was still a gap between the actual wage and the living wage. The tribunal
accorded a bonus equivalent to five months basic wages. Both the parties challenged
this award. Speaking for the Court Gajendragadkar J. observed: “It is well known that
the problem of wage structure with which industrial adjudication is concerned in a
modem democratic State involves in the ultimate analysis to some extent ethical and
social considerations. The advent of the doctrine of a Welfare State is based on notions
of progressive social philosophy, which have rendered the old doctrine of laissez faire
obsolete. In the nineteenth century the relations between employers and employees
were usually governed by the economic principles of supply and demand, and the
employers thought that they were entitled to hire the labour on their terms and to
dismiss the same at their choice, subject to the specific terms of contract between
them, if any. The theory of ‘hire and fire’ as well as the theory of ‘supply and
demand’, which were allowed free scope under the doctrine of laissez faire no longer
hold the field. In constructing a wage-structure in a given case industrial adjudication
does take into account to some extent considerations of right and wrong, propriety and
impropriety, fairness and unfairness. As the social conscience of the general

19
Supra, n. 3.
community becomes more alive and active, as the welfare policy of the State takes a
more dynamic form, as the national economy progresses from stage to stage, and as
under the growing strength of the trade union movement, the collective bargaining
enters the field and the wage-structure ceases to be a purely arithmetical problem.
Considerations of the financial position of the employer and the state of the national
economy have their say, and the requirements of a workman living in a civilized and
progressive society also come to be recognized. It is in that sense, and no doubt to a
limited extent, that the social philosophy of the age supplies the background for the
decision of industrial disputes as to wage-structure. It is because of this socio-
economic aspect of the wage-structure that industrial adjudication postulates that no
employer can engage industrial labour unless he pays it what may be regarded as the
minimum basic wage. If he cannot pay such a wage, he has no right to engage labour,
and no justification for carrying on his industry; in other words, the employment of
sweated labour which would be easily available to the employer in all undeveloped
and even underdeveloped countries is ruled out on the ground that the principle of
supply and demand has lost its validity in the matter of employment of human labour,
and that it is the duty of the society and the welfare State to ensure to every workman
engaged in industrial operations the payment of what in the context of the times
appears to be the basic minimum wage. This position is now universally recognized.”
Further it was observed that in dealing with wage-structure it is usual to divide wages
into three broad categories: the basic minimum wage or the bare subsistence wage;
above it is the fair wage; and beyond the fair wage is the living wage. It would be
obvious that the concepts of these wages cannot be described in definite words
because their contents are elastic and they are bound to vary from time to time and
from country to country. Sometimes the said three categories of wages are described
as the poverty level, the subsistence level and the comfort or the decency level. It
would be difficult, and also inexpedient, to attempt the task of giving an adequate
precision to these concepts. What is a subsistence wage in one country may appear to
be much below the subsistence level in another, the same is a fair wage in one country
may be treated as a living wage in another. Several attempts have nevertheless been
made to describe generally the contents of these respective concepts from time to
time.45 The Court then cited some attempts made in the past to define the concept of
wage including the Report of the Committee on Fair Wages and consider the concept
of living wage. Accordingly the Court held that, looking at the problem of industrial
wages as a whole, it would not be possible to predicate that our wage structure has
reached even the level of a fair wage. It is possible that even some employers may be
paying a very high wage to their workmen, and in such a case it would be necessary to
examine whether the wages paid approximate to the standard of the living wage; but in
deciding this question the proper approach to adopt would be to consider whether the
wage structure in question even approximately meets the legitimate requirements of
the components constituting the concept of living wage. For that purpose it may be not
essential to consider those affairs art this stage and even may not be possible with the
material produced before us to determine what in terms of money those constituents
would denote in the context of today. And accordingly the Court upheld the award of
the tribunal.

The Court held that the earlier decisions of this Court in EdwardMills co and Bijay
Cotton Mills Ltd,5' have firmly established the Constitutional validity of the Act, and
there can no longer be any doubt that in fixing the minimum wage rates as
contemplated by the Act, the hardship caused to individual employers or their inability
to meet the burden has no relevance. What the Act purports to achieve is to prevent
exploitation of labour and for that purpose it authorizes the appropriate Government to
take steps to prescribe the minimum rates of wages in the scheduled industries. In an
underdeveloped country, which faces the problem of unemployment on a very large
scale it is not unlikely that labour may offer to work even on starvation wage.52 The
policy of the Act is to prevent the employment of such sweated labour in the interest
of general public and so in prescribing the minimum wage rates, the capacity of
employer need not be considered. What is being prescribed are only the minimum
wage rates, which a welfare State assumes every employer must pay before he
employs the labour The Petitioners alleged that the minimum wage rates are very
much above the level of what may be properly regarded as minimum wages and it was
essential that before the impugned wage rates were prescribed the employer’s capacity
to pay should have been considered. According to them the burden imposed by the
notification is beyond the financial capacity of the industry. The Committee, which
was constituted by the Government, consisted of eight members, three of whom were
the employers' representatives and three were the employees’ representatives and
while the Chairman was a Professor of Economics in the University College at
Trivandrum, and another independent member was the District Labour Officer. The
report of the Committee consisted of five chapters. Chapter I dealt with the
development of the tile industry in Kerala. Chapter II dealt with the problem of
standardization in the tile industry. Chapter III dealt with the problems of wage
structure area wise. Chapter IV dealt with the problem of minimum wage fixation, its
principles and procedure and the final Chapter recorded the conclusions and
recommendations of the Committee. The Committee has accepted the observation of
the Fair Wages Committee that the minimum wage "must provide not merely for bare
subsistence of life but for the preservation of the efficiency of the worfcer." Then the
Committee examined the food requirements of the employees on the basis of three
consumption units recognized in Dr. Aykroyd’s formula. It then adopted the
assessment made by the Planning Commission and placed the employee’s requirement
at a per capita consumption of 18 yards per unit, then it took into account the
requirement of housing and it held that additional requirements for fuel, lighting and
additional miscellaneous items of expenditure should generally be fixed at 20 per cent
of the total wage in cases where the actual percentage has not been found out by a
family budget enquiry. In this regard it was held that, the Committee came to the
conclusion that a minimum wage must provide not merely for the bare subsistence of
life but for the preservation of the efficiency of the worker, and so it must also provide
for some measure of duration, medical requirements and amenities. The concept about
the components of the minimum wage thus enunciated by the Committee has been
generally accepted by industrial adjudication in this country. Sometimes the minimum
wage is described as a bare minimum wage in order to distinguish it from the wage
structure which is ‘subsistence plus’ or fair wage, but too much emphasis on the
adjective “bare” in relation to the minimum wage is apt to lead to the erroneous
assumption that the maintenance wage is a wage which enables the worker to cover his
bare physical needs and keep himself just above starvation. That clearly is not
intended by the concept of minimum wage. On the other hand, since the capacity of
the employer to pay is treated as irrelevant it is but right that no addition should be
made to the components of the minimum wage which would take the minimum wage
near the lower level of the fair wage, but the contents of this concept must ensure for
the employee not only his sustenance and that of his family but must also preserve his
efficiency as a worker. The Act contemplates that minimum wage rates should be
fixed in the scheduled industries with the dual object of providing sustenance and
maintenance of the worker and his family and preserving his efficiency as a worker.
The Committee recognized regional differences and so introduced five Grades
classified as A, B, C, D and E for the purpose of fixing the wage structure. The final
notification was issued accordingly. Further the Court held that, cases are not
unknown where statutes prescribe a minimum and it is plain from the relevant
statutory provisions themselves that the minimum thus prescribed is not the economic
or industrial minimum but contains several components which takes the statutorily
prescribed minimum near the level of the fair wage, and when that is the effect of the
statutory provision capacity to pay may no doubt have to be considered. It was a
statutory wage structure of this kind with which the Court was dealing in the case of
Express Newspapers because Sec. 9 of the Working Journalists Act, 1955.
CONCLUSION

Of all the case law discussed above only three cases are having a direct bearing upon the
minimum wages that are fixed under the Minimum Wages Act. It is important to note the
fact that in Bijoy Cotton Mills the ratio is very clear that the Court substantiated its view
regarding the minimum wage that is fixed under the Minimum Wage Act to that of the
definition of 'minimum wage’ as defined by the Committee on Fair Wages. Hence the
minimum wage under the Act must not only ensure bare physical subsistence but also the
maintenance of health and decency of the worker and his family In Unichoy the Supreme
Court equated the minimum wage fixe under the Minimum Wages Act to that of the
concept of need base minimum wage as evolved by the 15th Session of Indian Labou
Conference. Thus the Court recognized and laid down the criteria t arrive at the quantum to
fix the minimum rates of wages under the Minimum Wages Act. Though some States
apparently adopted the norms while fixing or revising the minimum rates of wages under
th Act, yet the fact of prevailing low rates of minimum wages remain undisputed. The
reasons obviously are many, which are explored an made open in the next chapter.

Unfortunately after this landmark case the controversy regarding the need based minimum
wage does not appear to have come square before the Supreme Court. The expression
unfortunately is used in order to draw the attention to the fact that even though enough
opportunities arose in the country for workmen to take up the question before the Supreme
Court, such an exercise was never undertaken effectively. Up to a certain point the
Government of India strengthens a labour jurisprudence based essentially on Directive
Principles of State Policy Until that stage the Judiciary and Executive worked in tandem
keeping the interests of workers and employers in mind. Later the Government of India not
losing the sight of this situation started suggesting the low minimum rates of wages as a
policy matter by pragmatic considerations, which has resulted in gradual reducing of the
content of the norms as evolved by the 15th Indian Labour Conference and thus legalised
the existing low wages with the assistance of the views of various Experts and
Commissions.20

20
Article 43. 45, 47 mentioned in the directive principles of state policy under the Indian COnstitution