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Payday nears, scanner on order

Several industries, especially those in the small and medium sector, and traders may find it hard to pay up
Several industries, especially those in the small and medium sector, and traders may find it hard to pay up — one of the reasons they have been clamouring for fiscal support from the Centre in the form of a stimulus package.

  |   Calcutta   |   Published 21.04.20, 09:36 PM

As payday for the first full month of the lockdown approaches, companies and retail establishments are trying to figure out the implications of a Union home ministry order and a Supreme Court observation.

Many are veering towards the view that full salary and wages for April might have to be paid because of the twin factors, regardless of the near-zero revenue inflow during the month because of the collapse of supply chains and distribution networks.

But not everyone concurs with this view.

Several industries, especially those in the small and medium sector, and traders may find it hard to pay up — one of the reasons they have been clamouring for fiscal support from the Centre in the form of a stimulus package.

The Centre, through the Union home ministry, had issued a directive on March 29, saying: “All the employers, be it in industry or in the shops and commercial establishments, shall make payment of wages of their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during the lockdown.”

Two days later, a Supreme Court bench headed by the Chief Justice of India, mentioned in an order: “We trust and expect that all concerned, viz. state governments, public authorities and citizens of the country will faithfully comply with the directives, advisories and orders issued by the Union of India by letter and spirit.”

The Supreme Court was responding to a petition filed for redress of the grievances of migrant labourers.

Although the observation made by the apex court in its order was made in a different context — to stop the misery of migrant workers — the government believes that the blanket observation of the apex court obliges everyone to scrupulously follow all orders, directives and advisories of the Centre.

In subsequent directives not related to wages, the home ministry has asserted that the observation must be treated as a direction from the apex court.

“I have received several calls from my clients over the past few weeks seeking opinion on the wage issue. They wanted to understand if the government’s directive is an order or an advisory and if it is binding on all. According to me, till such time the MHA order is not modified or set aside by a competent court, it is binding and remains in force,” said N.G. Khaitan, senior partner of Khaitan & Co.

But a senior lawyer said: “The direction issued by the government to employers to pay wages to all the workmen neither comes within the framework of the Disaster Management Act (DMA), 2005, or the Epidemic Diseases Act, 1897. Nor is it backed by statutory law.”

He added: “A reading of the provisions of the DMA Act would show that powers have not been vested with either the state or the central government to direct private employers to pay wages during a disaster despite the employees not working. The scope of the act empowers committees to frame plans to meet disasters.”

Power to override

Others point out that the directive was issued under the provisions of the DMA and would override any other legislation including the Industrial Disputes Act, 1947, and other labour laws that govern workers’ wages.

A section of lawyers said this was because of Section 72 of the DMA, which says the act shall have overriding effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

But there is a caveat here: this section has never been put to legal test; the courts have never adjudicated whether the act can override labour and wage laws.

A private company, Nagareeka Export, has filed a writ before the Supreme Court challenging the March 29 directive. Lawyers said that for the plea to succeed, the apex court would have to take the uncommon step of going against its own observations.

If the home ministry order holds and the companies fail to pay up, they face the risk of running foul of the provisions of Section 188 of the Indian Penal Code that can be invoked for disobedience of an order promulgated by a public servant.

Several countries have committed huge fiscal stimulus measures to shore up faltering, coronavirus-ravaged businesses and provide some sort of wage protection to furloughed employees.

“The need of the hour is that the government comes out with a robust fiscal package to support the industry and help them come out of the pandemic stronger,” said Mayank Jalan, president of the Indian Chamber of Commerce.

Industry has been clamouring for a Rs 9-10-lakh-crore stimulus package — a demand the government has yet to concede.

A Calcutta-based industrialist said: “There may be a direction to pay wage and salaries but if small establishments are left to fend for themselves without any support from the government, many will go belly up. This will further endanger livelihood. There has to be a balance between legal stricture and economic reality.”

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