Page 159 - DMGT306_MERCANTILE_LAWS_II

Mercantile Laws – II

Notes The employer and the employees may, by mutual agreement, change the scale of wages, and
such agreement does not amount to contracting out within the preview of Sec. 23 of the Act. It
was held that Sec 23 of the Payment of Wages Act does not prevent the employee from entering
into an agreement advantageous or beneficial to him. Deduction from wages is for the betterment
of employees.

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Case Study The Divisional Engineer, G.I.P. Railway v.
Mahadeo Raghoo and Anothers

n case of the Divisional Engineer, G.I.P. Railway v. Mahadeo Raghoo and Anothers,
respondent was a gangman in the employ of the Central Railway Act that time his
Iwages were 18 per month plus dearness allowance. With effect from the 1st November
1947 the Railway Board under Ministry of Railways of the Government of Indian introduced
a scheme of grant of compensatory (city) allowance and house rent allowance at rates
specified in their memorandum. This scheme was modified by the Railway Board’s letter.
As a result of this scheme certain railway employees stationed at specified headquarters
were eligible for the allowance aforesaid at certain specified rates. The 1st respondent thus
became entitled to the allowance of 10 per month. Therefore he was offered a rent
allowance by the government which he refused. The question came up for consideration
that whether deduction could be made regarding the house allowance.
The Court held that, Section 7 of the Act deals with such deductions as may be made from
the wages as defined in the Act, of an employee. Sub-section (2) of section 7 categorically
specifies the heads under which deductions may lawfully be made from wages. Clause (d)
of this sub-section has reference to “deductions for house accommodation supplied by the
employer”, and section 11 provides that such a deduction shall not be made unless the
house accommodation has been accepted by the employee and shall not exceed the amount
equivalent to the value of such accommodation. The definition of “wages” in the Act also
excludes from its operation the value of house accommodation referred to in sections 7
and 11 as aforesaid. The legislature has used the expression “value of any house
accommodation” in the definition of “wages” as denoting something which can be deducted
from “wages”. The one excludes the other. It is thus clear that the definition of “wages”
under the Act cannot include the value of any house accommodation supplied by the
employer to the employee; otherwise it would not be a legally permissible deduction
from wages. It is equally clear that house rent allowance which may in certain circumstances
as aforesaid be included in “wages” is not the same thing as the value of any house
accommodation referred to in the Act. That being so, there is no validity in the argument
advanced on behalf of the 1st respondent that rule 3(i) aforesaid is inconsistent with the
provisions of sections 7 and 11 of the Act. Therefore the appeal allowed.
Question
Critically analyse the above case

Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1593043

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