Karnataka HC stays notification deferring payment of Variable Dearness Allowance to workers from April 1, 2020 to March 31, 2021

By way of an interim order, the Karnataka High Court on Friday stayed the execution and operation of a state government notification allowing industries to defer payment of Variable Dearness Allowance (VDA) to all classes of workers between April 1, 2020 and March 31, 2021..The notification was issued by the State on July 20 this year. .The order passed by a Division Bench of Chief Justice Abhay Shreeniwas Oka and Justice Ashok S Kinagi reads, ."Therefore, in our view, the impugned order is exfacie illegal. For dealing with the situation created by pandemic, the employers and employees can always meet and arrive at a workable solution. Therefore, strong prima facie case is made out. The result of the impugned order is that the employees will not be entitled to VDA, which is integral part of minimum wages fixed under the provisions of the said Act (Minimum wages Act), for the period specified in the impugned order. This is something which is completely impermissible under the said Act and especially, keeping in mind, the objects of the said Act."Karnataka High Court.During the course of the hearing, the state government had argued that the said notification was issued in accordance with Section 26(2) of the Minimum Wages Act. .Section 26 (2) of the said Act reads as follows:."The appropriate Government may, if for special reasons it thinks so fit, by notification in the Official Gazette, direct that [subject to such conditions and] for such period as it may specify, the provisions of this Act or any of them shall not apply to all or any class of employees employed in any scheduled employment or to any locality where there is carried on a scheduled employment.".It was further submitted by the State that as per Section 26 (2), it could always specify that certain provisions of the said Act would not apply to all classes of employees. .The State went on to contend that the notification was issued pursuant to a meeting held with industry representatives and unions, who had cited the financial crisis arising out of the pandemic as a reason for deferment of VDA payments. .Contesting the validity of the notification, the petitioners before the High Court argued that the Section 26 (2) would not apply in the present case. .Referring to the Minimum Wages Act, petitioners argued that once minimum wages are fixed, it was the obligation of the every employer to pay every employee wages at a rate not less than the minimum wage. There was no exception carved out for this under the provisions of the said Act, it was added. .Counsel for the petitioners also relied on the order in Private Hospitals and Nursing Associations and ors v. Secretary, Labour Department, by which the Karnataka High Court had reiterated that VDA is part of minimum wages and could not be separated from the same. .Further, it was argued that fixation of minimum wages is a legislative act. Referring to Supreme Court cases, the petitioners contended that non-payment of minimum wages would amount to "bonded labour", which is prohibited under Article 23 of the Constitution of India. .After hearing the submissions of the contesting parties, the Court observed that the notification did not say that any particular provision of the said Act would not apply to a class of employees. It only mentioned a deferment of the of VDA to all categories of employees, the Bench noted. .The Court went on to note that there was no mention by the state government in any of its documents that the notification was issued as per Section 26(2) of the Minimum Wages Act.."Taking the order as correct, it does not seek to exercise power under Section 26 (2). As pointed out by AAG, there is no noting on the file which refers even the exercise of powers under section 26 (2). The power is exercised by the Honourable Minister on the basis of a communication dated 22 April 2020, minutes of meeting dated 26th May and letter dated 29th May, 2020.None of these three documents even contemplate passing an order under Section 26(2). Formation of opinion recording necessity of passing order under section 26 (2) is not reflected from any the State Government or from the Statement of objections by the State Government.".With these observations, the Court went on to the stay the impugned notification.