Bank of India v T.S. Kelawala (1990)

This is the leading authority on no work, no pay in Indian labour law, and the case students are examined on when an employer deducts wages for the period of a strike. The Bombay High Court had held that, in the absence of a term in the contract, an award, a settlement or the service regulations, a bank could not dock the monthly wage at all, and that the employer's only route was disciplinary action. The Supreme Court allowed the Bank's appeal and set that decision aside.

Two appeals were heard together, and the Court framed the common question as: "whether an employer has a right to deduct wages unilaterally and without holding an enquiry for the period the employees go on strike or resort to go-slow". The first appeal concerned a four-hours strike in a nationalised bank; the second concerned a month of go-slow in a private company. The answers differ in an important way, and an answer that gives only the strike half of the case is incomplete.

Demands for wage revision made by the employees of all banks were pending, and the All India Bank Employees' Association had called a countrywide strike. The appellant Bank issued a circular on 23 September 1977 to its managers and agents to deduct the wages of employees who participated in the strike for the days they went on strike.

The respondent Unions called a four-hours strike on 29 December 1977. Two days before, on 27 December 1977, the Bank issued an Administrative Circular warning the employees that participating would be a breach of their contract of service, that they would not be entitled to draw the salary for the full day, and that consequently they need not report for work for the rest of the working hours that day.

The employees struck for four hours from the beginning of working hours on 29 December 1977. It was not in dispute that the banking hours for the public fell within those four hours. The employees resumed work after the strike hours, and the Bank did not prevent them from doing so. On 16 January 1978 the Bank directed its managers and agents to deduct the full day's salary of the participants.

The employees' writ petition succeeded in the High Court, and the Bank's Letters Patent Appeal was dismissed. Hence the appeal.

As the judgment records it, the High Court held that neither the regulations nor the awards nor the settlements empowered the Bank to make the deductions; that in justice, equity and good conscience the Bank could not by the dictate of the circular stifle a legitimate weapon given by law to workers; and that the circular acted as a deterrent to a legally recognised mode of protest. Wages being a fixed monthly sum, the contract was not divisible, and the Bank could not unilaterally reduce it; the breach might give the employer a cause of action, but not a right to deduct pro rata or otherwise. The Bank's remedy, said the High Court, lay in getting the strike declared illegal or in taking disciplinary action for minor misconduct under the regulations. It also rejected the Payment of Wages Act argument on the footing that s. 7(2) enabled deduction only if the Bank had power under the contract.

Sawant J opened by separating two questions that the High Court had run together — the legitimacy of the strike as a weapon, and the liability to lose wages. "The legality of strike does not always exempt the employees from the deduction of their salaries for the period of strike." Legality saves the workers from disciplinary action; it does not entitle them to be paid.

A second misconception was that an inquiry must always precede a deduction. Where misconduct is disputed, an inquiry is essential. But where it is admitted and resorted to on a mass scale, "there is no need to hold an inquiry. To insist on an inquiry even in such cases is to pervert the very object of the inquiry." The Court preserved one exception at once: an employee who says he wished to resume duty but was prevented by other employees, or was denied the employer's assistance, cannot be docked without an inquiry. No employee in the case before it made that contention.

The workers argued that, having struck for only four hours and then worked, they could at most lose pro rata wages. The Court accepted that "Normally, this contention on the part of the workers would be valid" — but not where the strike is timed for the crucial working hours which generate work for the rest of the day, since to accept it there would be to negate the purpose and efficacy of the remedy.

The employees were not prevented from entering the premises after the strike; but their attendance was useless because there was no work left to do, and the Bank had said so in advance. Short of physically preventing them from resuming, the Bank had done all in its power to warn them, and if they chose to enter the premises where they had no work and did none, they did so of their own choice and not at the Bank's direction. Their later resumption of work was therefore not in fulfilment of the contract of service.

The principle is the sentence to memorise: "It is not a mere presence of the workmen at the place of work but the work that they do according to the terms of the contract which constitutes the fulfilment of the contract". And again, in the summary of principles: "It is not enough that the employees attend the place of work. They must put in the work allotted to them." Conversely — and this is the point students drop — if the employees do the allotted work but refuse some formality such as signing the attendance register, even as a protest, no deduction can be made.

There was nothing on record to show that the Act had been made applicable to the Bank. Assuming it applied, the Court held that the High Court's reasoning — that the power under s. 7(2) read with s. 9 comes into play only where the employer already has the power under the service rules — "begs the question". Had the Act applied, the Bank would certainly have had power to deduct under those provisions in the absence of a service rule governing the situation.

The Court drew a further argument from the definitions. Section 2(rr) defines wages as remuneration which would be payable to the workman if the terms of employment, "expressed or implied, were fulfilled", and s. 2(q) defines strike as a cessation of work or a refusal to continue to work. Reading the two together, "wages are payable only if the contract of employment is fulfilled and not otherwise". Hence workers who do not put in the allotted work are not entitled to wages proportionately.

Buckingham and Carnatic Co. Ltd. v Workers of the Buckingham and Carnatic Co. Ltd. was applied for the proposition that a concerted stoppage of a few hours satisfies the definition of "strike" in s. 2(q) and is not a mere individual failure to turn up for work.

From England, Lord Denning MR in Secretary of State for Employment v Associated Society of Locomotive Engineers and Firemen (No. 2) was quoted on wilful disruption: "Wages are to be paid for services rendered, not for producing deliberate chaos." And the House of Lords in Miles v Wakefield Metropolitan District Council supplied the classic formulation of Lord Templeman: "It cannot be right that an employer should be compelled to pay something for nothing whether he dismisses or retains a worker. In a contract of employment wages and work go together. The employer pays for work and the worker works for his wages. If the employer declines to pay, the worker need not work. If the worker declines to work, the employer need not pay." The Court noted the limit of that decision: on whether an employee engaged in industrial action may claim on quantum meruit, only two of the Law Lords expressed themselves in favour and the other three declined to express a definite opinion.

Among the Indian High Court decisions, all but the Madras line in V. Ganesan had upheld deduction, some for the whole day even where the absence was for a few hours, holding the contract divisible and the deduction not a penalty but an enforcement of the contract, so that no disciplinary proceedings need precede it.

The decisions taking the contrary view were held to rest on wrong presumptions.

1. Confusing the weapon with its cost. The working class has earned the right to strike, and legislation recognises it as an implied right while circumscribing it. But "whether the strike is legal or illegal, the workers are liable to lose wages for the period of strike." The liability to lose wages neither makes the strike illegal nor deprives the workers of it: "During the period of strike the contract of employment continues but the workers withhold their labour. Consequently, they cannot expect to be paid."
2. Treating the monthly contract as indivisible. If it were truly indivisible it would be so for both parties, and an employee whose service ended mid-month by death, resignation or retirement would get nothing for the part-month served — the harsh consequence of Cutter v Powell, rightly criticised and later not followed. The Court saw no difficulty, inequity or impracticability in treating the contract as divisible into days and hours.
3. Equating disputed individual conduct with admitted mass conduct. Service conditions provide for disciplinary proceedings where an individual's misconduct is disputed; they provide no remedy for admitted mass misconduct. "When they are silent on unexpected eventualities, the management should be deemed to have the requisite power to deal with them consistent with law and the other service conditions and to the extent it is reasonably necessary to do so."

"Where the contract, Standing Orders or the service rules/regulations are silent on the subject, the management has the power to deduct wages for absence from duty when the absence is a concerted action on the part of the employees and the absence is not disputed." Whether the deduction is confined to the period of absence or extends further depends on the facts of each case — whether there was work to be done in that period, whether it was in fact done, and whether it was accepted and acquiesced in. Where the employees work after the strike hours and the employer accepts or acquiesces in it, the employer may not be entitled to deduct at all, or only for the hours of strike.

The workers of the appellant company indulged in go-slow in July 1984; the company suspended operations by a lock-out notice and paid no wages for that month. The Industrial Court, on the company's evidence, found that the workmen had not worked full eight hours on any day and had on average worked barely an hour and fifteen to twenty minutes a day, production varying between 7.06 per cent and 13.9 per cent of normal, with wages deducted on the basis of each day's production. Yet, feeling bound by the two Bombay High Court decisions then holding the field, it declared the non-payment an unfair labour practice and directed payment of full wages.

On the merits of go-slow the Supreme Court was emphatic: "go-slow is a serious misconduct being a covert and a more damaging breach of the contract of employment. It is an insidious method of undermining discipline and at the same time a crude device to defy the norms of work." M/s Bharat Sugar Mills Ltd v Shri Jai Singh was cited, where go-slow was called "one of the most pernicious practices that discontented or disgruntled workmen sometime resort to". Once proved, those guilty of it must face consequences which may include deduction of wages and even dismissal.

But proof is the difficulty. Establishing go-slow, when disputed, requires investigation into the process and stages of production, the role of workers at each stage, pre-production activities and the factors bearing on average production; and even when admitted, the loss may be hard to quantify because it can affect production after the go-slow ceases. Unlike a strike, where a simple pro rata deduction may be a just remedy, deducting a uniform percentage of wages matched to the percentage fall in production "may not always be equitable". Hence, where the factum of go-slow or the extent of the loss is disputed, "there should be a proper inquiry on charges which furnish particulars of the go-slow and the loss of production on that account. The rules of natural justice require it".

1. Both appeals were allowed. Where the contract, Standing Orders or service rules are silent, an employer has an implied power to deduct wages for an admitted, concerted absence from duty, without a disciplinary inquiry; and where a statute such as the Payment of Wages Act applies, deduction may also be made under it.
2. A strike, legal or illegal, costs the strikers their wages for the period of the strike; legality only protects them from disciplinary action.
3. On the facts of the bank appeal, because the strike covered the crucial hours which generate the day's work and the Bank had warned the employees in advance, deduction of the full day's salary was justified, and the decision under appeal was set aside with no order as to costs.
4. Go-slow is serious misconduct and wages may be deducted for it, but where it or the extent of the loss of production is disputed, a proper inquiry on particularised charges is required by natural justice.
5. In the go-slow appeal, the Industrial Court's unchallenged finding of go-slow could not be disturbed; but noting that the workmen may not have questioned the production figures because they believed themselves armed with the High Court decisions, the Court gave a limiting direction: "we direct that the appellant will not deduct more than 5 per cent of the wages of the workmen for the month of July 1984".
6. The Court also reiterated that some employees in a mass action may genuinely have wished to work and been unable to do so for want of the management's assistance or protection; their wages cannot be deducted without an inquiry.

Wages are the consideration for work, not for attendance. Where the contract, Standing Orders or service rules make no provision, the employer has an implied power to deduct wages for a period of admitted concerted refusal to work, whether the strike be legal or illegal, and need hold no inquiry into what is not disputed; the quantum of deduction depends on the facts, and may extend to the whole day where the stoppage destroys the day's work and the employer has warned the employees in advance and not accepted their later attendance as performance.