Employees Compensation Act, 1923, provides for payment of compensation to certain classes of employees, for injury by accident, resulting in death or disablement and also in respect of occupational diseases. Section 4 of the Act provides for the manner of computation of compensation. One of the important factors for computing compensation is the `monthly wages’ earned by the Employee.

In the year 2000, the Employees Compensation Act, 1923 was amended, vide. Act 64 of 2000, whereby, in Explanation II under Section 4(1)(b), the monthly wages were quantified as Rs.4,000/-. Even, if the monthly wages drawn by an Employee exceeded Rs.4,000/-, it was deemed to be Rs.4000/- only, for the purpose of computing compensation.

There was no confusion regarding the quantum of monthly wages, till the Amendment that came into force on 18-01-2010, vide., Act 45 of 2009. The Explanation II that was provided under Section 4(1)(b) of the Act was omitted and a new provision in Section 4(1)(B) was introduced.

Under Section 4(1)(B), the Central Government was empowered to notify the `monthly wages’ in relation to an employee, as it may consider necessary. The Central Government in terms of Section 4(1)(B) of the Act, by a notification in the Official Gazette, dated 31-05-2010, specified the `monthly wages’ as RUPEES EIGHT THOUSAND, for the purposes of computing compensation in terms of Sub-Section 4(1) of the Act. The same was further revised to RUPEES FIFTEEN THOUSAND, with effect from 03-01-2020.

The question that has risen now is whether the `monthly wages’ notified in terms of Section 4(1)(B) of the Act should be treated as minimum or maximum?

The reason for raising such question arose in the context of increase in the minimum wages every year, under the Minimum Wages Act, 1948, which was higher than the monthly wages notified in terms of Section 4(1)(B) of the Employees Compensation Act. The Commissioners for Employees Compensation while determining compensation in respect of claims of employees, wherein the monthly wages has not been established, relied on the minimum wages, notified under the Minimum Wages Act, 1948, and restricted the same to Rs.8,000/- as specified in the notification dated 31-05-2010, issued by the Central Government, under Section 4(1) (B) of the Employees Compensation Act, 1923.

When the Minimum wages under the Minimum Wages Act, 1948, have exceeded the `monthly wages’ notified under Section 4(1)(B) of the Employees Compensation Act, 1923, it was argued that the notification issued by the Central Government in terms of Section 4(1)(B) can at best be treated only as a minimum, since the deeming provision on monthly wages found in Explanation II, prior to the Amendment Act, of 45 of 2009, stood deleted.

Support for the said contention was also garnered, by relying on a recent decision of the Hon’ble Supreme Court of India, in the case titled as K. Sivaraman and others v. P. Satish Kumar and Others, dated 13-02-2020, and reported in 2020 ACJ 1361 : 2020 (1) TNMAC Page 273.

The decision of the Hon’ble Supreme Court of India, arose from a judgment of the Madurai Bench of the Hon’ble High Court of Madras, wherein, the question raised was, whether the `Monthly Wages’ notified as Rs.8,000/-, on 31-05-2010, in terms of Section 4(1)(B) introduced by Amendment Act 45 of 2009, can be retrospectively applied, in respect of a Claim that arose due to an accident that occurred on 31-01-2008, prior to the coming into force of the Amendment Act 45 of 2009? While answering the question in the negative, the observations of the Hon’ble Supreme Court of India in paragraph.26 was relied upon which is extracted hereunder;

“26. Prior to Act 45 of 2009, by virtue of the deeming provision in Explanation II to Section 4, the Monthly Wages of an Employee were capped at Rs.4,000/- even where an Employee was able to prove the payment of a monthly wage in excess of Rs.4000/-. The legislature in its wisdom and keeping in mind the purpose of the 1923 Act as a social welfare legislation did not enhance the quantum in the deeming provision, but deleted it altogether. The amendment is in furtherance of the salient purpose which underlies the 1923 Act of providing to all Employees Compensation for accidents, which occur in the course of and arising out of employment. The objective of the amendment is to remove a deeming cap on the monthly income of an Employee and to extend to them compensation on the basis of the actual monthly wages drawn by them.”

It would be gainful to extract Section 4(1)(B) that was introduced by the Amendment;

“1-B. The Central Government may, by notification in the official Gazette, specify, for the purpose of Sub-section (1), such monthly wages in relation to an employee as it may consider necessary”.

It would be pertinent to point out that the words used is, for the purpose of Sub-section (1) Such Monthly Wages in relation to an employee as it may consider necessary, is the most significant phrase, which is substituted, after deleting the deeming provision that was found in Explanation II. Therefore, the Central Government has specified/quantified RUPEES EIGHT THOUSAND as the “monthly wages” by notification dated 31-05-2010 and further increased it to Rupees Fifteen Thousand, vide notification dated 03-01-2020, for the purpose of computing compensation under Section 4(1) of the Act.

The quantum of monthly wages having been clearly specified in terms of the provisions of the Employees Compensation Act, 1923, itself, any recourse to the Minimum Wages, fixed under the Minimum Wages Act, 1948, would be contrary to the provisions of the Employees Compensation Act, 1923.

Further, living wages are notified as Minimum Wages under the Minimum Wages Act, for the sustenance of an Employee. The prescription of Minimum Wages notified under the Minimum Wages Act, 1948, cannot be adopted for computing compensation under the Employees Compensation Act, 1923, Since both the Acts have different legislative objects.

The misconception has also probably stemmed from the isolated reading of Paragraph.26 of the above referred decision, wherein it is stated that compensation to be on `actual monthly wages‘ drawn by the Employee. If it is so, it would run contrary to Section 4(1)(B) of the Employees Compensation Act and the Notification issued in terms thereof, making it otiose.

Therefore, to conclude, it can be emphatically stated that the Quantum notified as the `monthly wages’ in terms of Section 4(1)(B) alone can be taken for the purpose of computing compensation under the Act. The question, whether the amount specified as monthly wages in the notification is minimum or maximum would therefore be irrelevant.

“Dynamics of Employment changes and mutates after formulation of a new policy but dictated by the dictum of Hon’ble Courts”

– Ankur Mittal, Advocate

The concept of Regularisation of services is a means to condone any procedural irregularity and is meant to cure only such defects which are attributable to notions followed while making appointments. Regularisation and permanence in employments/appointments are mutually exclusive concepts and, thus cannot be equated on the same pedestal. But it is a well settled law that Regularisation is not a mode of appointment and it can be done on the basis of instructions/circulars/policies as per the observations of Hon’ble Supreme Court in the case of State of Mysore v. S.B. Narayanappa, 1967 SCR 128 as well as R.N. Nanjundappa v. T. Thimmiah and Ors., 1972 SLR 1994.

The service rules governing the service conditions of the government employees provides for three modes of recruitment, first by way of direct recruitment, other by way of promotion and third one by way of deputation or by way of transfer from one department to another department or from the boards and corporations and vice versa. The mode and method of recruitment is provided by the service rules of the concerned departments, however how the direct recruitment is to be effected, has not been mentioned in the statutory service rules enacted by the government under the proviso to Article 309 of the Constitution of India. The State Governments with a view to adopt uniform mode and method for direct recruitment usually classify the employees in various groups and has constituted Staff Selection Commission and Public Service Commission, to device and carry the selection process by issuance of public advertisement on the basis of the requisition sent by the different government departments.

The recruitment process is often delayed on various counts, the foremost reasons being challenge to the advertisement or the criteria adopted for selection. The delay in the selection process ultimate leads to delay in the appointment of requisite regular manpower in the department sending the requisition. In order to overcome such situations, Government issues executive instructions either by invoking Article 162 of the Constitution of India or the proviso to Article 309 of the Constitution of India thereby, authorising the Head of the departments to make adhoc arrangements generally for a period of 6 months or till the time regularly selected candidates joins, whichever is earlier. These adhoc appointments then are extended from time to time on account of non-recruitment of candidates to be selected after following proper recruitment procedures. The adhoc arrangement sometimes continue for years altogether on account of delay in the recruitment of regular candidates.

Since the employees are recruited only on ad hoc basis, the person so recruited may or may not possess the requisite qualification prescribed in the service rules and In this process many a times, adhoc appointee become overage, to participate in the recruitment process. Thus, to remove these irregularities, regularisation policies are framed by the Government by issuing administrative instructions under Article 162 of Constitution of India wherein such candidates who are working either on contract or daily wage or adhoc basis against the sanctioned posts which were initially recruited, are taken out of the purview of the recruitment agency and upon completion of specified number of years upto a particular cut-off date, services of such adhoc/contractual/daily wages employees are regularised subject to certain terms and conditions.

Though the practice of engaging the employees on temporary basis and after some time regularising their services has been held bad in law, yet more often the government departments allow to continue the daily wage/contract/adhoc appointees and the recent trends have seen that the government tendency to recruit on contractual basis has increased manifold in the past few years. As has also been discussed above, that one of the reasons for resorting to the adhoc employment is requirement of manpower, however certain other factors such as lesser financial burden, easy hire and fire also contributes to the tendency of the government to appoint employees on contractual basis.

The adhoc/contract/daily wage employees are generally paid less wages or only the minimum of the regular pay scale as against the salary and other allowances that are paid to the regular government employees such as HRA/DA/fixed medical allowance, LTC, pension. The expenses saved on these accounts are treated as earned revenue and appears to be more economical, despite it all being contrary to the concept of Welfare State. It is pertinent to mention that the Hon’ble Supreme Court came to the rescue of such daily wager/contractual/ad hoc employees while deciding State of Punjab v. Jagjit Singh, Civil Appeal No. 213 of 2013 reported as (2016) 4 SCC 641, wherein the Hon’ble Court ordered to pay the wages equivalent to minimum regular pay scale to such employees. The financial burden on the government is further curtailed by way of such appointments as the government is saved from implementing the recommendations of the pay commission as far as these adhoc/contract/daily wages/work charged employees are concerned as they are precluded from such benefit and only regular employees are conferred the benefit of due and drawn amount of arrears on account of arising on implementation of the pay revision commission.

Apart from the above, from time to time, government also considers that it is easy to hire and fire the daily wage/contractual/adhoc/work charge employees as compared to the regular staff who are being governed by the specific rules and regulations and enjoy the protection of article 311 of the Constitution of India, as the removal of the regular employees, is cumbersome and the procedure takes years to conclude and ultimately, majority of cases fall flat on account of sympathetic attitude of co-employee as well as of disciplinary authority.

As it is said that each coin has two sides, like wise with the adhoc employment which is continued for years altogether, that too in the government sector, often leads to the rising expectation of employees to get the status of regular employee and to enjoy the benefits that are available to them. It is where the regularisation policies comes into pictures, though primarily such policies appears to be driven by the humanitarian considerations and sympathy taking into account the length of service, however more often, the political considerations also plays major role in formulation of such policies. The system of adhocism is not only in violation of the Constitutional Provisions which provides for a legal framework for proper recruitment and removal of the government employees, besides giving them protection and benefits during their service tenure, but such system is also prejudicial to the public at large for the appointees more often do not possess the required qualifications and thus the quality of the services on the government side is compromised. Also, the system of ad hocism has lead to the economical exploitation of the persons who are appointed on contractual basis as they are deprived of the regular pay scales and the benefits that are available to the regular employees.

Even the Judiciary has failed to take serious note of this repeated regularisation policies in its true perspective. No doubt for the last many decades the Hon’ble High Court as well as Hon’ble Supreme Court has deprecated the regularisation policies formulated from time to time, however at the same time more often the Courts has left it to the government to take decision on further course of action and to decide the fate of such employees. And ultimately, the situation remains unchanged on account of government’s repeated tendency to resort to adhocism and the Courts tendency to refrain from interfering in the policy matters.

It would be no gainsaying that for the first time there seem a ray of hope, when the Hon’ble Supreme Court in State of Karnataka v. Umadevi 2006 (4) SCC 1, though recognised the right of the government to recruit the employees on temporary basis, however at the same time cautioned that such engagements cannot be resorted to defeat the very scheme of public employment. The Hon’ble Court observed that the consideration of equity in such cases has only limited role to play and cautioned the courts as well that approving such acts on basis of sentiments and sympathetic approach would result in perpetuating illegalities and in the jettisoning of the scheme of public employment and would also deprive many of their opportunity to compete for public employment. While discussing the law regarding regularisation in detail, the Hon’ble Supreme Court directed the Central and State Governments to take steps to regularise as a one time measure, the services of such irregularly appointed, who have worked for ten years or more in duly sanctioned posts but not under cover of orders of courts or of tribunals and further directed then to ensure that regular recruitments are undertaken to fill those vacant sanctioned posts that require to be filled up, in cases where temporary employees or daily wagers are being now employed. However, even today the governments are formulating regularisation policies and the Courts are granting the benefits of regularisation on the parity basis.

It has been consistent proposition of law Public employment in a sovereign socialist secular democratic republic, has to be as set down by the Constitution and the laws made thereunder. The power of a State as an employer is more limited than that of a private employer inasmuch as it is subjected to constitutional limitations and cannot be exercised arbitrarily. Article 309 of the Constitution gives the Government the power to frame rules for the purpose of laying down the conditions of service and recruitment of persons to be appointed to public services and posts in connection with the affairs of the Union or any of the States. It contemplates the drawing up of a procedure and rules to regulate the recruitment and regulate the service conditions of appointees appointed to public posts and accordingly the entire process of recruitment for services is controlled by detailed procedures which specify the necessary qualifications, the mode of appointment, etc. Therefore, once the rules have been framed the appointments shall be made in accordance with such rules only. No government order, notification or circular can be substituted for the statutory rules framed under the authority of law. This is because, following any other course could be disastrous inasmuch as it will deprive the security of tenure and the right of equality conferred on civil servants under the constitutional scheme. It may even amount to negating the accepted service jurisprudence. Therefore, when statutory rules are framed under Article 309 of the Constitution which are exhaustive, the only fair means to adopt is to make appointments based on the rules so framed.

Resorting to the regularization policies is in clear violation of the Constitutional Scheme and further the issuance of mandamus by Courts to regularize the service of employees amounts to perpetuation of illegality and further is in contradiction to the positive concept of equality under Article 14 of the Constitution of India. It is a settled law that the fact that all appointments have been made without following the procedure, or services of some persons appointed have been regularised in the past, is not the ground on which regularisation shall be granted. If illegality has been committed in the past, then such illegality cannot be allowed to perpetuate. Article 14 has a positive concept. No equality can be claimed in illegality. Article 14 has no application or justification to legitimise an illegal and illegitimate action. Article 14 proceeds on the premise that a citizen has legal and valid right enforceable at law and persons having similar right and persons similarly circumstanced, cannot be denied of the benefit thereof. Such person cannot be discriminated to deny the same benefit. The rational relationship and legal back-up are the foundations to invoke the doctrine of equality in case of persons similarly situated, however, if some persons derived benefit by illegality and had escaped from the clutches of law, similarly placed persons cannot plead, nor can the court countenance that benefit had from infraction of law and must be allowed to be retained.

It is thus high time that the government needs to revisit its policies of resorting to the adhoc or temporary employments and the regularization of the employees and further the Courts shall also adopt a pragmatic approach while exercising its power under Article 226 and shall endeavor to give full effect to the law laid down by the Hon’ble Constitution Bench in Umadevi’s case (supra), wherein the Hon’ble Supreme Court has in unequivocal words has cautioned the government as well as courts to not make the Regularization as one of the mode of recruiting the employees in defiance of all rules and constitutional scheme.

Note: The author is the practicing Advocate at the Hon’ble Punjaband Haryana High Court, he is enthusiastic about law and every legal developments. He strives to gain knowledge and expand the horizons of his knowledge over constructive discussions. It is crucial to note that the view expressed in the above said Article are his personal views and not intended to discard any well settled principles of law.