Blog

INTRODUCTION

India has the world’s second largest population with an approximate total of 138 crores [1]. With such a large population India produces a huge work force i.e. skilled and unskilled labour for many industries and factories. Hence it is very important to have proper labour legislations in place to protect the rights of the workmen working at different industries. The Constitution of India under the Seventh Schedule in the Concurrent list empowers both the Central and State government to make legislations on labour and employment. Therefore, there are more than 100 legislation in India enacted either by the Central or State government based upon different subjects like industrial relations, wages, social security, conditions of service and employment, code of conduct and various other matters [2]. Further, the Central Government has recently carried out a major reform to the labour laws by passing three bills i.e. the Occupational Safety, Health And Working Conditions Code, 2020; the Industrial Relations Code, 2020; and the Code on Social Security, 2020. The three codes merge 24 legislations passed by the Central Government [3]. The main objective to carry out the reform is to have uniform laws and to limit the chances of overlapping provisions.

In this paper we are primarily going to discuss about subsistence allowance and its importance under Article 21 of the Constitution. Subsistence allowance is an allowance under which a particular percentage of the entire wage is provided to the workmen by the employer during the period he is suspended from his employment due to an investigation pending against him for any misconduct or wrongful activities carried out by him. The allowance is paid in order to fulfill his and his family’s basic means of livelihood. The Supreme Court and the High Courts have adjudicated upon cases involving ‘subsistence allowance’ and have considered it as a right of a workman under Article 21 of the Constitution. Hence in this paper we are going to discuss about the legal provisions regarding subsistence allowance in India, a brief history of how the courts have dealt with cases involving ‘subsistence allowance’ and have they considered it to be part of a employee’s wage, the importance of the allowance towards the workman and lastly carry out a brief discussion on the question that if subsistence allowance is considered as a right under Article 21 of the Constitution why is it only available to a few class of workmen and employees working in the industry.

RGULATIONS FOR SUBSISTENCE ALLOWANCE IN INDIA

The provisions for subsistence allowance in India is under section 10 A of the Industrial Employment (Standing Orders) Act, 1946. The provisions of the act clearly state that if there are disciplinary proceedings carried out against a workman and he has been suspended from the industry then in such cases the workmen is entitled to an allowance of 50% of his wage preceding the date of suspension for a period of ninety days. Further, the workmen is entitled to get an allowance of 75% of the wage in case of further delay which is not caused due to the conduct of the workmen. A maximum of 180 days should be permitted to complete the disciplinary proceedings. In case of any dispute regarding the subsistence allowance between the employer and the workmen either of the parties can approach the Labour Court within the jurisdiction of the parties. Lastly, if there are any provisions given under the State Legislations that are more beneficial then such provisions should be followed. [4]

As the Central government has made an amendment to the Labour laws and passed 3 new codes, provision for subsistence allowance has been included under the Industrial Relations Code, 2020. Under Section 38 of the Code the provision has been included and is same as the previous provision under the Industrial Employment (Standing Orders) Act, 1946. The only addition that has been included under the code is that a time limit for completion of the disciplinary or investigations should be within a period of 90 days. [5]

The State governments also have provisions for subsistence allowance in their respective legislations and can be applied and availed as and when required.

IS SUBSISTENCE ALLOWANCE CONSIDERED AS A WAGE?

There has been a lot of controversy on the above stated question as different High Courts have different opinions and hence there has been a lot of debate on the question that is subsistence allowance considered as a wage. There are two schools of thoughts that have originated from different set of judgments of the High Court. One school of thought is of the opinion that subsistence allowance cannot be considered as a wage as the employee gets a wage when he in turns fulfills his obligations under the contract signed with the industry i.e. to carry out his set of duties/work and so if he is suspended and has not carried out his part of the contract he is not entitled to any wage. On the contrary another school of thought is of the opinion that even though the contract is not performed by the workmen, the contract has not been suspended and the workmen is still under employment of the Industry and so he is still a part of the industry and has not been terminated therefore he will be entitled to wage/pay as defined under the Payment of Wages Act, 1936. [6]

The set of judgments that do not consider Subsistence Allowance as a wage are as follows – Management of Kirloskar Systems Ltd. [7], the court in the case stated that the remuneration i.e. allowance that was paid to the employees could in no way be considered as a wage as the contract of employment was not fulfilled. Further the court was of the opinion that as the workmen have been suspended as a result of their own misconduct or acts and hence it would be totally wrong to consider subsistence allowance as a wage. In another case of Orissa Road Transport Company Ltd [8], the court looked into definition of wages under the Payment of Wages Act 1936. After analyzing the definition, the court held that subsistence allowance cannot be considered under the definition of wages. Lastly in the case of Karnataka Central Co-Op Bank Ltd. [9], the court reiterated the above opinion and further stated that the allowance that is given to the workmen is to survive during the proceedings and fulfill the bare minimum needs of his and his family. Hence, as no service or work is carried by the workman as given under his contract of employment subsistence allowance cannot be considered as a wage.

On the other hand, several high courts while adjudicating upon cases are of the opinion that subsistence allowance has to be considered as part of wage. One of the landmark judgments of Leaf Spring Manufacturing Co. (Pvt.) Ltd [10], laid down that subsistence allowance is part of the wages. The court analyzed the definition of wages under the Payment of Wages Act and was of the opinion that the definition of wages is comprehensive and includes allowances. Therefore, a harmonious reding of Section 10 A of the Industrial Standing orders read with the definition of wages under the Payment of Wages Act will include subsistence allowance within the ambit of its definition. Further, the court emphasized upon the fact that the workman still was a part of employment under the industry and his contract was temporarily suspended hence subsistence allowance should be considered as a part of the wage.

The Supreme Court adjudicated on an appeal which included the question of subsistence allowance to be considered or not be considered as a part of wage. The landmark case of Employee State Insurance Corporation of India v. M/s. Popular Automobiles [11], clarified on the above question. In this case the suspended employees and employer were made liable to remit contributions under the Employee State Insurance Act. The contributions had to be made were from the subsistence allowance that were paid during the time of domestic investigation was being carried out against the employees. The question that arose was whether subsistence allowance a part of the wage to determine the liability of the employee and employer with regards to Insurance Act. The Kerala and Karnataka High Court were of the view that the allowance does not constitute as a wage under section 2(22) of the Act. The Supreme Court overruled the rulings of the High Court and was of the opinion that subsistence allowance does form part of a wage and the employees and employer will be liable to make contributions under the act. A major part of the ruling of the Supreme Court revolves around the relationship of the employee and employer during the period the employee has been suspended. The Court states that even if there is trial going on against the employee and he is suspended from the industry that does not terminate the relationship of the employee and employer. It is only when the trial is concluded and the employee is terminated the contract between the employee and employer will cease to exists. Until then the employee will still be a part of the industry and the subsistence allowance that is paid to him will be considered as a part of his wage.

Hence, the landmark judgment of the Supreme Court lays down the law that subsistence allowance is considered as a part of the wage.

RELATIONSHIP BETWEEN ARTICLE 21 AND SUBSISTENCE ALLOWANCE

Article 21 of the Constitution is one of the most important fundamental right imbedded in the Constitution. Article 21 states that, “No person shall be deprived of his life or personal liberty except according to procedure established by law.”[12] Article 21 includes the ‘right to livelihood’ under ‘right to life’. This is because if a person is deprived of the means of basic livelihood like food, shelter and water he would not be able to survive and this would directly violate the fundamental right under Article 21 of the Constitution. Hence, in the case of Olga Tellis [13], the Supreme Court stated that ‘right to life’ includes the ‘right to live with dignity’. Further, Article 21 of the Constitution is not only available to all the citizens but is available to all “persons” in the country and hence that includes individuals who belong to another nationality and are residing in India. [14]

The question that arises here is that what can be the relationship between Subsistence Allowance and Article 21 of the Constitution. Referring to the Supreme Court’s landmark judgment in the case of O.P. Gupta [15], the Supreme Court defines the expression of ‘subsistence allowance’. It states that the expression of the word ‘Subsist’ is defined in the Oxford English Dictionary as “to remain alive as on food; to continue to exist”. “Subsistence” means-means of supporting life, especially a minimum livelihood.” Hence the provision of subsistence allowance is given to the employees of the company to survive and fulfill their basic necessities during the period they are suspended from working in the industry. It is also provided to the employees so that the proceeding against the employee can be conducted fairly, and they adequately represent themselves through an expert or attorney in the proceedings if required. Therefore, ‘Subsistence Allowance’ is very essential to the employee as it is a means of livelihood for them

The Supreme Court and the High Court in a set of case laws have stated the relationship between Article 21 of the Constitution and ‘Subsistence allowance’ [16]. In the case of A.K. Bindal [17], the court states that if an employee is suspended it would be impossible for an employee to survive and fulfill his basic needs. This would violate the right to life under Article 21 of the Constitution which includes a right to live with dignity under it. It further stated that, “Right to life enshrined in this Article means something more than survival or animal existence.”[18] Hence non-payment of subsistence allowance is a violation under Article 21 of the Constitution. Further, in the case of Shankarla [19], the Supreme Court reiterated the above stated phrase and further said that Subsistence allowance is not a bounty and is a right under the constitution. Recently, in the case of M. Elango [20], the Madras High Court was dealing with the issue of non -payment of subsistence allowance to government employees during the period of suspension. The court in the case held that a denial to pay subsistence allowance is an violation of Article 21 of the Constitution.

Hence, we can clearly observe that the right to subsistence allowance is a fundamental right of an employee and covered under Article 21 of the Constitution.

IS SUBSISTENCE ALLOWANCE AVAIALABE TO ALL THE EMPLOYEES IN THE INDUSTRY?

The provision of Subsistence allowance is defined under Section 10 A of the Industrial Employment (Standing Orders) Act, 1946. Under the said section it is clearly stated that ‘workman’ employed in an industry are entitled to the right of subsistence allowance as per the percentage fixed in the legislation. Closing analyzing the definition of ‘workman’ given under Section 2 (s) of the Industrial Disputes Act, 1947, it seems that only a set of employees in an industry are entitled to the provision of subsistence allowance. The definition of ‘workman’ has been interpreted by the Supreme Court in a set of judgments [21] which state that some of the main factors to consider if an employee is covered under the definition of workman are – i. Existence of a master-servant relationship, ii. Nature and the kind of functions performed, iii. The kind of work is either manual, skilled, unskilled, technical operational, clerical or supervisory in nature iv. Mode of recruitment, source of employment, designation, contract, terms of employment, amount of wage are some of the other factors that need to be considered. Further, the court in these cases laid down that persons that are carrying out purely managerial and supervisory work are not covered under the definition of ‘workman’ [22]. The reason being that the persons working as mangers or supervisors have implied powers of hiring and firing, granting of leaves and participation in the business policies. Therefore, as per the definition under Section 10 A of the Industrial Employment (Standing Orders) Act, 1946 only a specific set of people who come within the definition of ‘workman’ under the Act are entitled to the provision of subsistence allowance. But as stated above in a series of case laws that subsistence allowance is considered as a right under Article 21 of the Constitution. Hence, will it be fair to draw a distinction between employees of a factory who will be entitle to the provision of subsistence allowance.

Article 21 of the Constitution is a basic right that is available to all persons in India and if the Supreme Court of India has mandated the ‘right to live with dignity’ as a right to life all the employees of a industry should be entitled to get the provision of subsistence allowance. But there is no legislation as such that mandates the right of subsistence allowance to all the employees of the industry/factory. The only reason that the Supreme Court has emphasized on subsistence allowance being a right under Article 21 is to ensure that an employee could survive and meet basic expenses for livelihood. Hence, if the allowance is not granted to employees working in a managerial position or supervisory position it would be difficult for them to survive as well because even, they rely on their salaries and that is the only source of income for them to meet their basic and necessary expenses. If during the period they are suspended and are not paid any allowance their right to live with dignity would be affected. This also leads to discrimination among the employees of the industry. It would be a violation of Article 14 of the constitution which deal with equality. Even though under certain circumstance based on intelligible differentia there can be differential treatment given under certain circumstance, [23] the act of not providing subsistence allowance to a set of employees will not qualify under the exception. As there is no reasonable nexus between the discrimination and it is not based on intelligible differentia because the right to live with dignity is a right available to every person and any violation based on it would be against the principles of the Constitution.

But the recent case law of M. Elango [24], by the Madras High Court has laid the foundation to prohibit any such violation under the Constitution. In this case as the secretary of a Cooperative Society was suspended for several irregularities. During the period he was suspended he was not paid any allowance because he was working in a managerial and administrative capacity and hence did not qualify as a ‘workman’ under the definition of the act to avail the right of subsistence allowance. Hence, filed an appeal in the High Court. The court was of the opinion that every person working under an industry has to fulfil his basic needs and if during suspension of his employment he is not paid any allowance he will not be able to sustain himself therefore every employee is entitled to such allowance through which he can sustain himself and fulfill his basic needs.

Therefore, there is strong need for the Supreme Court of India to take a suo-moto action to clarify the discrepancy in the labour legislation and recommend the Parliament to make certain amendments to the provisions to mandate a certain percentage or sum to every employee as subsistence allowance during the period he is suspended from his employment.

CONCLUSION

Subsistence Allowance is a basic necessity that every employee of an industry needs to survive on and carry out his means of livelihood.  That is the reason the Supreme Court has considered the right of subsistence allowance under Article 21 of the Constitution. Hence, it will be unfair and against principles of the Constitution if only a particular set of employees get the provision of subsistence allowance as wage/pay or salary is an integral and important part of an employee’s survival and if they are not given the same their right to live with dignity will be violated. Further, under the amendment of labour laws, the provision of subsistence allowance is no covered under Section 38 of the Industrial Relations Code 2020. Under the provision the right to subsistence allowance is provided to all workers in the industry. Section 2 (zr) of the Code defines the term ‘workers’ and the Parliament has made an effort to make the section extensive and include a large category of people. However, the code does not specify whether the employees carrying out managerial/administrative/supervisory work are entitled to subsistence allowance or not. Hence, it is very important that the Parliament takes note of the discrepancies with the provisions of subsistence allowance and make an amendment to the Section and add a proviso to the same including all employees of a factory to be entitled to the provision of subsistence allowance in case of suspension or issue guidelines with respect to the provision of subsistence allowance to be made available to employees of industry.

REFERENCES

1. “India’s Population ”(Worldometer) <https://www.worldometers.info/world-population/india-population/>
2. Sinha S, “An Overview of Labour Laws in India” (IPleaders, October 2018)<https://blog.ipleaders.in/labour-laws-in-india/
3. Haq Z, “Understanding the New Labour Codes” (Hindustan Times, 24 September 2020 <https://www.hindustantimes.com/indianews/understanding-the-new labour-codes/storyllI015EZK8EYtDHmP9SXVP.html>
4. Industrial Employment (Standing Orders) Act, 1946, Section 10 A
5. Industrial Relations Code, 2020, Section 38
6. Dutta S, “Is Subsistence Allowance a Wage?” (1999) 35 Indian Journal of Industrial Relations98<https://www.jstor.org/stable/pdf/27767637.pdf?refreqid=excelsior%3A766dc22bacdbef72ba611795a2ca5765>
7. ESIC Vs. Management of Kirloskar Systems Ltd., (1985 I LLJ 173)
8. Orissa Road Transport Company Ltd. Vs. Narayan Parida & Anr., (1986 I LLJ 270)
9. Karnataka Central Co-operative Bank Ltd. Vs. Karpi, (1987 I LLJ 197)
10. Indian Leaf Spring Manufacturing Co. (Pvt.) Ltd. Vs. Appellate Authority under Payment of Wages Act, (1993 I LLN 833)
11. Employees State Insurance Corporation Vs. M/s. Popular Automobiles etc., (1997 II CLR 1003)
12. Constitution of India, Article 21
13. Olga Tellis & Ors Vs. Bombay Municipal Council, 1986 AIR 180
14. Jain R, “Article 21 of the Constitution of India – Right to Life and Personal Liberty” (Academike, 13 November 2015) &lt;https://www.lawctopus.com/academike/article-21-of-the-constitution-of-india-right-to-life-and-personal-liberty/&gt;
15. O.P. Gupta Vs. Union of India and Ors., (1988) I LLJ 453 SC
16. Fakirbhai Fulabhai Solanki Vs. Presiding Officer and Anr., (1986) II LLJ 124 SC, Ram Lakhan and Ors. Vs. Presiding Officer and Ors., (2000) 10 SCC 201, State of Maharashtra Vs. Chanderbhan Tale, (1983) II LLJ 256 SC.
17. A.K. Bindal & Anr. Vs. Union Of India & Ors., (2003) 5 SCC 163
18. A.K. Bindal & Anr. Vs. Union Of India & Ors., (2003) 5 SCC 163 [18]
19. State Government Of M.P. & Ors Vs. Shankarlal, [2007] Insc 72
20. Registrar the Co-operative Society N.V. Natarajan & Ors. Vs. M. Elango, 2020 SCC OnLine Mad 384
21. Chintaman Rao Vs. State of Madhya Pradesh AIR (1958) SC 358, John Joseph Khokar Vs. Bhadange B. S. & Ors 1998 (1) LLJ 447 (Bom), Kirloskar Brothers Ltd. Vs. Respondent: The Presiding Officer, Labour Court, Delhi and Anr., [1977(34)FLR206], Devinder Singh Vs. Municipal Council, (2011) 6 SCC 584, Delta Jute & Industries Ltd. Staff Association and Ors. Vs. State of West Bengal and Ors, 2015 (145) FLR 105, Burmah Shell Oil Storage and Distributing Company of India Ltd. and Anr. Vs. Burmah Shell Management Staff Association and Ors., A.I.R. 1971 S.C. 922.
22. Delta Jute & Industries Ltd. Staff Association and Ors. Vs. State of West Bengal and Ors., 2015 (145) FLR 105
23. Dr. Saurabh Choudhary & Ors. Vs. Union Of India & Ors., AIR 2004 SC 2212
24. Registrar the Co-operative Society N.V. Natarajan & Ors. Vs. M. Elango, 2020 SCC OnLine Mad 384