Inspector Can't Adjudicate, Quantify Wages Payable As Compensation Under Kerala Industrial Establishments (National & Festival Holidays) Act: High Court

The Kerala High Court recently considered the question as to whether the Inspector, appointed under the Kerala Industrial Establishments (National and Festival Holidays) Act, 1958, can adjudicate and decide the quantum of wages payable as compensation under the statute.

Justice Bechu Kurian Thomas in the decision said that quantifying the amount due to an employee or adjudicating on the right of a person to be entitled to a particular sum and the corresponding obligation of another person to pay a certain quantified sum, are matters that are required to be decided after considering competing claims.

"Nowhere in the Act has the Legislature conferred such a power of adjudication or a power of quantifying the amount due to an employee on the Inspector. Specific powers have been stipulated, as can be exercised by the inspector. When specific powers of inspection and verification have been conferred on the inspector, without any power of adjudication, the intention of the legislature is explicit. As the term Inspector itself suggests, he is entitled to inspect, identify and even file complaints. His power stops with that, and it cannot be extended to confer the power of adjudication," said the court.

The court passed the ruling, while setting aside an order directing a company to pay an amount of Rs 48,72,678/- towards double the rate of wages allegedly payable to the employees for working on three national and eight festival holidays. The authority had issued show-cause notices and also initiated revenue recovery proceedings against senior officers of the company.

The Case

The Chairman and Accounts and Administrative Manager of Poornam Info Vision Pvt. Ltd had challenged the show-cause notices and revenue recovery proceedings intiated against them personally. When several irregularities were noticed by Assistant Labour Officer under the labour legislations including non-payment of double the rate of wages to the employees for working on national and festival holidays and compensatory off for employees, the petitioners were asked to rectify the same vide a notice. 

A show-cause notice was also subsequently issued against the petitioners directing them to pay the additional wages, and also to produce the register and records and show cause as to why they ought not to be proceeded against.

The same was however disputed by the petitioners through their explanation, by contending that the various statutes specified in the show-cause notice were not applicable to their establishment.

Pursuant to the same, an order was issued stating that the employees who had worked on national and festival holidays were not provided with double wages and compensatory off and hence there is a violation of section 5(2) of the Act. The petitioners were directed to pay double the rate of wages to the employees amounting to Rs.48,72,678/-, and revenue recovery proceedings were also initiated against them. 

Arguments

It was contended by Senior Advocate N. Sukumaran, who was assisted by Advocates N.K. Karnis and S. Shyam, that the revenue recovery proceedings were vitiated by malice, and are without authority.

It was averred that the Assistant Labour Officer had no authority to enter into a process of adjudication or to arrive at the quantum allegedly payable by the petitioners towards wages under the Act for allegedly working during holidays.

It was argued that the Inspector under the Act is not vested with any authority to adjudicate on the quantum payable and if at all any quantum is payable as contemplated under the Act, only the employees could have initiated proceedings in accordance with law.

The court was told that no application had been filed by any employee claiming the said wages, which shows that the adjudication and the determination of quantum by the Inspector, was "illegal." 

On the other hand, it was argued by the counsels on behalf of the respondent authorities that the revenue recovery proceedings were initiated as per Section 5(4) of the Act.

It was pointed out that if the petitioners wished to question the proceedings, they would have to follow the procedure contemplated under Section 70 of the Kerala Revenue Recovery Act, 1968, and thus make the entire payment under protest and thereafter contest the demand.

The counsels also relied upon the Doctrine of Implied Power to contend that the Inspector was vested with all the powers to such acts as are necessary for carrying out the purposes of the Act, including the power of issuing an order quantifying the amount due to an employee.

Findings

The court perused the scheme of the Act, and discerned that Section 5(2) creates a right upon the employee to receive twice the wages if he works on a holiday and also to receive a substituted holiday, and that the said amount could be recovered as arrears of land revenue under the Revenue Recovery Act.

It however found that the Inspector had no right to adjudicate and quantify the amount, and rejected the government argument that the power could be traced under Section 7(c) of the Act. 

"Adjudication can be carried out by an authority vested with powers of adjudication. Without specific conferment, the court cannot read into a statute the power of adjudication as conferred upon an Inspector. It is trite law that the authority created by a statute has to act within the four corners of the statute and therefore, such power of adjudication cannot be read into section 7(c) of the Act," it observed. 

The Court also rejected the argument on doctrine of implied powers, and observed that there are limitations to the doctrine. 

"...when there is a specific conferment of an express power of a substantive nature upon an authority, ancillary powers can be read into such an express grant. Moreover, only a fair and reasonable power alone can be read into the statute by resorting to the doctrine of implied power. Further, such a power can be implied only when the statute becomes incapable of compliance or a dead letter. Liberal reliance upon the said doctrine to confer power, even of an adjudicatory nature, upon an inspector can lead to drastic consequences," it added. 

The Court said employees, who claim entitled to double the wages for having worked on a holiday, have the option to move the Labour Court under Section 33C(2) of the Industrial Disputes Act, 1947 or the civil court in accordance with law.

"It is not a situation where he is left without any remedy and once an adjudication is done, recourse to the Revenue Recovery Act is also permissible as per section 5(4) of the Act. The contention that merely because the power of revenue recovery is conferred under the statute, the same indicates conferment of power of adjudication on the Inspector is stretching the language and intent of the Act beyond permissible limits," it observed. 

The Court added that the Managing Director and Administrative Manager also could not be proceeded against personally for the alleged liability of the company. It therefore quashed the impugned order as well as the revenue recovery proceedings that were initiated. 

Additional Advocate General Ashok M. Cheriyan, Public Prosecutor K.A. Noushad, and Advocate Sabeena P. Ismail appeared on behalf of the respondents. 

Case Title: Lt. Col. E.V. Krishnan & Anr. v. State of Kerala & Ors. 

Citation: 2023 LiveLaw (Ker) 4

Click Here To Read/Download The Judgment