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Quantum Of Monthly Wages Notified In Terms Of Section 4(1)(B) Of Employees Compensation Act, 1923 - Whether Minimum Or Maximum ?

Employees Compensation Act, 1923, provides for payment of compensation to certain classes of employees, for injury by accident, resulting in death or disablement and also in respect of occupational diseases. Section 4 of the Act provides for the manner of computation of compensation. One of the important factors for computing compensation is the `monthly wages' earned by the Employee.

In the year 2000, the Employees Compensation Act, 1923 was amended, vide. Act 64 of 2000, whereby, in Explanation II under Section 4(1)(b), the monthly wages were quantified as Rs.4,000/-. Even, if the monthly wages drawn by an Employee exceeded Rs.4,000/-, it was deemed to be Rs.4000/- only, for the purpose of computing compensation.

There was no confusion regarding the quantum of monthly wages, till the Amendment that came into force on 18-01-2010, vide., Act 45 of 2009. The Explanation II that was provided under Section 4(1)(b) of the Act was omitted and a new provision in Section 4(1)(B) was introduced.

Under Section 4(1)(B), the Central Government was empowered to notify the `monthly wages' in relation to an employee, as it may consider necessary. The Central Government in terms of Section 4(1)(B) of the Act, by a notification in the Official Gazette, dated 31-05-2010, specified the `monthly wages' as RUPEES EIGHT THOUSAND, for the purposes of computing compensation in terms of Sub-Section 4(1) of the Act. The same was further revised to RUPEES FIFTEEN THOUSAND, with effect from 03-01-2020.

The question that has risen now is whether the `monthly wages' notified in terms of Section 4(1)(B) of the Act should be treated as minimum or maximum?

The reason for raising such question arose in the context of increase in the minimum wages every year, under the Minimum Wages Act, 1948, which was higher than the monthly wages notified in terms of Section 4(1)(B) of the Employees Compensation Act. The Commissioners for Employees Compensation while determining compensation in respect of claims of employees, wherein the monthly wages has not been established, relied on the minimum wages, notified under the Minimum Wages Act, 1948, and restricted the same to Rs.8,000/- as specified in the notification dated 31-05-2010, issued by the Central Government, under Section 4(1) (B) of the Employees Compensation Act, 1923.

When the Minimum wages under the Minimum Wages Act, 1948, have exceeded the `monthly wages' notified under Section 4(1)(B) of the Employees Compensation Act, 1923, it was argued that the notification issued by the Central Government in terms of Section 4(1)(B) can at best be treated only as a minimum, since the deeming provision on monthly wages found in Explanation II, prior to the Amendment Act, of 45 of 2009, stood deleted.

Support for the said contention was also garnered, by relying on a recent decision of the Hon'ble Supreme Court of India, in the case titled as K. Sivaraman and others v. P. Satish Kumar and Others, dated 13-02-2020, and reported in 2020 ACJ 1361 : 2020 (1) TNMAC Page 273.

The decision of the Hon'ble Supreme Court of India, arose from a judgment of the Madurai Bench of the Hon'ble High Court of Madras, wherein, the question raised was, whether the `Monthly Wages' notified as Rs.8,000/-, on 31-05-2010, in terms of Section 4(1)(B) introduced by Amendment Act 45 of 2009, can be retrospectively applied, in respect of a Claim that arose due to an accident that occurred on 31-01-2008, prior to the coming into force of the Amendment Act 45 of 2009? While answering the question in the negative, the observations of the Hon'ble Supreme Court of India in paragraph.26 was relied upon which is extracted hereunder;

"26. Prior to Act 45 of 2009, by virtue of the deeming provision in Explanation II to Section 4, the Monthly Wages of an Employee were capped at Rs.4,000/- even where an Employee was able to prove the payment of a monthly wage in excess of Rs.4000/-. The legislature in its wisdom and keeping in mind the purpose of the 1923 Act as a social welfare legislation did not enhance the quantum in the deeming provision, but deleted it altogether. The amendment is in furtherance of the salient purpose which underlies the 1923 Act of providing to all Employees Compensation for accidents, which occur in the course of and arising out of employment. The objective of the amendment is to remove a deeming cap on the monthly income of an Employee and to extend to them compensation on the basis of the actual monthly wages drawn by them."

It would be gainful to extract Section 4(1)(B) that was introduced by the Amendment;

"1-B. The Central Government may, by notification in the official Gazette, specify, for the purpose of Sub-section (1), such monthly wages in relation to an employee as it may consider necessary".

It would be pertinent to point out that the words used is, for the purpose of Sub-section (1) Such Monthly Wages in relation to an employee as it may consider necessary, is the most significant phrase, which is substituted, after deleting the deeming provision that was found in Explanation II. Therefore, the Central Government has specified/quantified RUPEES EIGHT THOUSAND as the "monthly wages" by notification dated 31-05-2010 and further increased it to Rupees Fifteen Thousand, vide notification dated 03-01-2020, for the purpose of computing compensation under Section 4(1) of the Act.

The quantum of monthly wages having been clearly specified in terms of the provisions of the Employees Compensation Act, 1923, itself, any recourse to the Minimum Wages, fixed under the Minimum Wages Act, 1948, would be contrary to the provisions of the Employees Compensation Act, 1923.

Further, living wages are notified as Minimum Wages under the Minimum Wages Act, for the sustenance of an Employee. The prescription of Minimum Wages notified under the Minimum Wages Act, 1948, cannot be adopted for computing compensation under the Employees Compensation Act, 1923, Since both the Acts have different legislative objects.

The misconception has also probably stemmed from the isolated reading of Paragraph.26 of the above referred decision, wherein it is stated that compensation to be on `actual monthly wages' drawn by the Employee. If it is so, it would run contrary to Section 4(1)(B) of the Employees Compensation Act and the Notification issued in terms thereof, making it otiose.

Therefore, to conclude, it can be emphatically stated that the Quantum notified as the `monthly wages' in terms of Section 4(1)(B) alone can be taken for the purpose of computing compensation under the Act. The question, whether the amount specified as monthly wages in the notification is minimum or maximum would therefore be irrelevant.

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