Legal provisions involved: Section 59(2), Sections 64, 65, 112 and 113 of the Factories Act, 1948; Section 3(60) of the General Clauses Act, 1897, Section 2(vi) of the Payment of Wages Act, 1936, Section 2(rr) of the Industrial Disputes Act, 1947

Judgement by: Supreme Court of India

Judge/Bench: Justice Rajesh Bindal and Justice Manmohan

Facts

Employees of the Heavy Electricals Factory claimed that allowances like House Rent Allowance (HRA), Transport Allowance, Clothing and Washing Allowance and Small Family Allowance should be added while calculating overtime wages. These allowances were removed from overtime calculations through a government office memorandum issued in 2009. 

The employees challenged this exclusion before the Central Administrative Tribunal, which ruled in their favour. The decision was later upheld by the Madras High Court, after which the Union of India approached the Supreme Court.

Key legal provisions

Section 59(2), Sections 64, 65, 112 and 113 of the Factories Act, 1948

Section 3(60) of the General Clauses Act, 1897

Section 2(vi) of the Payment of Wages Act, 1936

Section 2(rr) of the Industrial Disputes Act, 1947

Issues raised

Whether the government can exclude certain allowances from overtime wages through executive instructions?

Arguments of the case

The government argued that office memorandums allowed exclusion of compensatory allowances. The employees argued that the law clearly includes these allowances and that executive instructions cannot change the Act.

Judgement

The Supreme Court dismissed the appeals and held that allowances like HRA and transport allowance must be included in overtime wages. It ruled that executive instructions cannot override clear statutory provisions.

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