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Linge Gowda Detectiv... v. Authority Under Mini...
Factual and Procedural Background
There are four writ petitions before the Court. Writ Petitions Nos. 13908 of 1997 and 15405 of 1997 were filed by the contractor, while Writ Petitions Nos. 11270 of 1997 and 11356 of 1997 were filed by the principal employer. All four petitions challenge an order passed by the Authority under the Minimum Wages Act directing both the contractor and the principal employer to pay minimum wages to security guards employed by the contractor for guarding the principal employer's establishment. The claim arose from an allegation that minimum wages were not paid in accordance with the Karnataka Minimum Wages Act, 1948 and the Karnataka Minimum Wages Rules, 1958. The Authority held the contractor and principal employer jointly and severally liable, including damages at ten times the amount due.
Legal Issues Presented
- Whether the Minimum Wages Act applies to the detective service agency engaged by the contractor, given that such service has not been notified under the Act.
- Whether the principal employer can be held liable to pay minimum wages to employees of the contractor's detective agency as if they were employees of the principal employer.
- Whether the absence of notification of the detective agency under the Minimum Wages Act absolves the contractor and/or principal employer from liability to pay minimum wages.
Arguments of the Parties
Employees' Arguments
- The detective service agency, although not notified under the Minimum Wages Act, should be treated as part of the engineering industry for the purposes of minimum wages.
- The employees working through the contractor are deemed to be employees of the principal employer due to the contractual relationship and their work under the principal employer’s management.
- The definition of "employer" under Section 2(e) of the Minimum Wages Act supports the principal employer’s liability.
- Reliance on the judgment in A.V Prakash v. Senior Labour Inspector to support their position.
Principal Employer's Arguments
- No employer-employee relationship exists between the principal employer and the detective agency employees.
- Without notification of the detective agency under the Minimum Wages Act, the principal employer is not bound to pay minimum wages.
- Any obligation to ensure payment of minimum wages lies with the contractor if notification existed.
- The contract system remains in force and employees under the contractor cannot be treated as employees of the principal employer.
- The employees are largely part-time, non-perennial workers, and have been paid more than living wages with allowances.
Contractor's Arguments
- The detective agency is not notified under the Minimum Wages Act; therefore, no liability arises under the Act.
- The employees have been paid substantial wages and amenities, exceeding minimum wage requirements.
- No obligation exists to pay minimum wages unless the service is notified by the State Government.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| A.V Prakash v. Senior Labour Inspector [1994 (2) L.L.N 771] | The provisions of the Minimum Wages Act do not apply to detective and security services as they are not covered by the Act. | The Court relied on this precedent to hold that the contractor is not liable to pay minimum wages under the Act since the detective agency was not notified. |
Court's Reasoning and Analysis
The Court carefully considered the statutory definitions under the Minimum Wages Act, particularly the definitions of "employer" and "employee." It noted that the detective service agency had not been notified under the Act, which is a prerequisite for the Act's application to that service. The Court found fault with the reasoning that employees of a detective agency working within an engineering industry should be paid minimum wages applicable to that industry, especially since such services are specifically notified to be covered or excluded under the Act by the Legislature. The absence of such notification for detective agencies means the Act does not apply to them.
The Court rejected the argument that employees of the contractor's detective agency should be considered employees of the principal employer, emphasizing that the contract system was not abolished and no employer-employee relationship existed between the principal employer and the security staff. The Court also took note of the payments and amenities already provided to the employees, which exceeded minimum wage requirements.
Although the Authority had held the principal employer and contractor jointly liable, the Court found this conclusion unsustainable given the statutory framework and lack of notification. The Court thus quashed the Authority's order but directed an ex gratia payment to the employees from the principal employer, reflecting a pragmatic approach to the facts.
Holding and Implications
The orders passed by the Authority under the Minimum Wages Act in these writ petitions are quashed.
As a direct consequence, the principal employer is directed to make an ex gratia payment of Rs. 1,00,000 within four weeks, to be distributed equally among the beneficiaries. The detective agency is permitted to withdraw a previously deposited sum of Rs. 25,000. The Court’s decision does not create new precedent on the substantive application of the Minimum Wages Act but clarifies that without statutory notification, the Act does not apply to detective agencies, and no employer-employee relationship is deemed to exist between the principal employer and contractor’s employees under such circumstances.
1. There are 4 writ petitions. Writ Petitions Nos. 13908 of 1997 and 15405 of 1997 have been filed by the contractor. Writ Petitions Nos. 11270 of 1997 and 11356 of 1997 had been filed by the principal employer. All the four writ petitions challenge the order passed by the Authority under the Minimum Wages Act.
2. There was an order by the Authority under the Minimum Wages Act directing the contractor and the principal employer to pay minimum wages.
3. The facts very briefly are: A claim application was filed against the contractor and against the principal employer. The contractor had employed security guards for guarding the establishment of the principal employer. It was alleged in the application that minimum wages were not paid as per the Karnataka Minimum Wages Act, 1948, read with the Karnataka Minimum Wages Rules, 1958 (hereinafter referred to as the Act and the Rules). The learned authority, after hearing the principal employer as well as the contractor, held that minimum wages as required under the Act would include the minimum wages that is paid to the employees of the principal employer and that shall be paid to the workers who were employed by the contractor. The authority also determined damages at ten times and ordered payment making both the principal employer as well as the contractor jointly and severally liable.
4. Smt. Sheela, learned counsel appearing for the employees, strenuously submitted that although the detective service agency does not come within the purview of the Minimum Wages Act, since such service has not been notified, it would still be treated for the purpose of the Minimum Wages Act, as a service coming under the engineering industry. She elaborated her submission by saying that the contractor who dealt with the detective service had a contract entered into between the principal employer and the contractor and pursuant to the contract the employees were made to work with the principal employer and, therefore, they are deemed to be workmen not under the contractor but under the principal employer. Learned counsel took me through the definition of “employer,” as found in S. 2(e) of the Minimum Wages Act, which reads as follows:
“2(e) ‘employer’ means any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees in any scheduled employment in respect of which minimum rates of wages nave been fixed under this Act.”
5. She also drew my attention to the definition of an employee. “Employee” under the Act reads as follows:
“‘Employee’ means any person who is employed for hire or reward to do any work, skilled or unskilled, manual or clerical, in a scheduled employment in respect of which minimum rates of wages have been fixed; and includes an out-worker to whom any articles or materials are given out by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of that other person where the process is to be carried out either in the home of the out-worker or in some other premises not being premises under the control and management of that other person; and also includes an employee declared to be an employee by the appropriate Government; but does not include any member of the armed forces of the union.”
6. It was submitted that reading of S. 2(e) read with S. 2(i) would clearly indicate that the principal employer is bound to pay the minimum wages as per the principal employer's schedule. Her grievance is not against the contractor since it was strenuously submitted that the beneficiaries are deemed to be under the employment of the principal employer. It was common ground that detective service agency does not come within the purview of the minimum wages since such service has not been notified. The judgment of this Court in A.V Prakash v. Senior Labour Inspector [1994 (2) L.L.N 771], has held that the provisions of the Minimum Wages Act shall not apply to detective and security service since it is not covered by the Act.
7. Sri Gururajan, learned counsel for the principal employer, strenuously submitted that there was absolutely no employer and employee relationship between the principal employer and the beneficiaries and, therefore, they are not bound to pay minimum wages. If, however, the detective agency was notified under the Minimum Wages Act, then there would have been an obligation on the part of the principal employer to ensure that the contractor pays minimum wages. In the absence of a notification, it was strenuously submitted that the principal employer is not obliged to pay the minimum wages as is being paid to the other employees.
8. Sri Sanjeev, learned counsel for the contractor, strenuously submitted that even according to the claimants no liability is fastened on to the contractor since detective agency does not come within the purview of the Minimum Wages Act as detective agency has not been notified by the State Government even according to the claimants no liability is fastened on to the detective agency.
9. The learned authority in its order has dealt with this issue under issue (2) whether the Minimum Wages Act is applicable to the respondent-company?
10. After relying on certain judgments, the learned authority came to the conclusion that the minimum wages of what is paid for an engineering industry shall also be paid to the security guards and, therefore, treated security guards as employees of the principal employer.
11. I have given my careful consideration to the submissions of learned counsel. It appears to me that when no notification has been issued with regard to the detective services, there can be no liability as far as the contractor is concerned to pay the minimum wages as required under the Minimum Wages Act, as has been held in the judgment of this Court in A.V Prakash v. Senior Labour Inspector [1994 (2) L.L.N 771] (vide supra).
12. Now, the question that will arise for consideration is, whether the principal employer can be asked to pay the minimum wages as if detective agency is an engineering industry. There appears to be some fallacy in the logic that when a detective service employee works in the engineering industry, the management would be required to pay the minimum wages in the engineering industry and the same detective if he is posted elsewhere, for example, on private duty, he would not be entitled to minimum wages.
13. This is perhaps why certain services are notified under the Minimum Wages Act. The Legislature in its wisdom has incorporated certain services by notification to be brought under the provisions of the Minimum Wages Act. Unfortunately, as far as detective agencies are concerned there is no such notification under the Act. Therefore, it would be difficult to hold that some employees who are working under the management of an engineering industry would be entitled to minimum wages of that industry while others would not be entitled to minimum wages. The easiest thing for the State to do was to notify detective agencies to be brought under the purview of the Minimum Wages Act. Having not done it, I am unable to accept the contentions of learned counsel for the beneficiaries.
14. There is obviously no employee-employer relationship between the principal employer and the security staff who work under the contractor. It is not the case of the beneficiaries that there was abolition of the contract system under the Contract Labour (Abolition and Regulation) Act. As long as the contract system is not abolished, the contractor is the employer and if the detective agency is not covered by notification under the Minimum Wages Act, then no relief can be granted under the provisions of the Act.
15. It was submitted by Sri Sanjeev, learned counsel for the contractor that the workmen were paid substantial wages and were given all possible allowances such as uniforms, free accommodation and other perquisites. It was further submitted by him that the Minimum Wages Act will not apply to his employees unless it is notified by the State Government. He further submitted notwithstanding this they have been paid living wage and other amenities were also given to the employees.
16. Sri Gururajan, learned counsel for the principal employer, submitted that an agreement was entered into between the principal employer and the contractor and that agreement was strictly enforced and whatever was agreed in terms of the agreement was paid to the workmen. However, he submitted that by no stretch of imagination the workmen under the contractor can be treated as workmen under the principal employer unless the contract system was abolished. In this case, admittedly, the contract system as far as detective agency is concerned, is not abolished by the State Government. He further submitted that most of the employees under the contractor were agriculturists and used to perform part-time detective work whenever jobs were available. He further submitted that their employment was not perennial. In these circumstances, it was submitted that more than a living wage was paid to them and in the absence of notification the employees are not entitled to take advantage of the provisions of the Act.
17. I have carefully considered the contentions of the beneficiaries and the employers. It is most unfortunate that the detective agency has not been brought under the provisions of the Minimum Wages Act. If that was done, there would have been a liability both on the principal employer as well as the contractor to pay minimum wages under the Act. In the absence of such a notification it would be difficult to hold that they are employees of the principal employer and would be entitled to minimum wages as paid to the regular workmen of the principal employer.
18. However, taking into account the facts and circumstances of the case and since the claimants thrusts is only against the principal employer to pay the minimum wages, I direct a total sum of Rs. 1,00,000 to be paid as an ex gratia payment in Writ Petitions Nos. 11270 of 1997 and 11356 of 1997. These are the writ petitions filed by the principal employer. The amount shall be paid within four weeks from the date of receipt of this order before the authority. On such payment and on an application made by the beneficiaries before the authority, the authority shall disburse the amount equally to all the beneficiaries.
19. It is stated that a sum of Rs. 25,000 has been deposited before the authority pending disposal of the writ petitions by the Linge Gowda Detective Agency. The said detective agency is permitted to withdraw the amount.
20. Consequently, the order passed by the Authority under the Minimum Wages Act in these writ petitions stand quashed. There will be no order as to costs.
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