01 Oct 2020

The financial losses cannot be offset on the weary shoulders of the labouring worker, who provides the backbone of the economy - Supreme Court of India

Case : Gujarat Mazdoor Sabha & Anr. Vs. The State of Gujarat (Writ Petition (Civil) no. 708 of 2020)

Court : Supreme Court of India

Bench : Justice Dr. D Y Chandrachud, Justice Indu Malhotra and Justice K M Joseph

Decided on : 01 Oct 2020

Relevant Statutes

Articles 32 & 142 of the Constitution of India

Sections 5, 51, 54, 55 and 56 of the Factories Act, 1948

Brief Facts and Procedural History

1. On 17 April 2020, the Labour and Employment Department of the State of Gujarat issued a notification under Section 5 of the Factories Act, 1948 to exempt all factories registered under the Act “from various provisions relating to weekly hours, daily hours, intervals for rest, Spread over for adult workers” under Sections 51, 54, 55 and 56 of the Factories Act of 1948 respectively. The stated aim of the notification was to provide “certain relaxations for industrial and commercial activities” from 20 April 2020 till 19 July 2020.

2. The notifications make significant departures from the mandate of the Factories Act, 1948. They

(i) increase the daily limit of working hours from 9 hours to 12 hours;

(ii) increase the weekly work limit from 48 hours to 72 hours, which translates into 12-hour work-days on 6 days of the week;

(iii) negate the spread over of time at work including rest hours, which is typically fixed at 10.5 hours;

(iv) enable an interval of rest every 6 hours, as opposed to 5 hours; and (iv) mandate the payment of overtime wages at a rate proportionate to the ordinary rate of wages, instead of overtime wages at the rate of double the ordinary rate of wages as provided under Section 59.

3. The government justifies the action on the ground that industrial employers are faced with financial stringency in the economic downturn resulting from the outbreak of COVID -19. A trade union with a state-wide presence and another with a national presence are before this court in a petition under Article 32 of the Constitution to challenge the validity of the state’s notifications dated 17 April 2020 and 20 July 2020.

4. The first Petitioner is a trade union registered under the Trade Unions Act, 1926 and represents about ten thousand workers employed in factories and industrial establishments in the State of Gujarat. The second Petitioner is a federation of registered trade unions and represents a hundred thousand workmen in factories and establishments across India.

The Issues of the Court

Whether the notifications fall within the ambit of the power conferred by Section 5 of the Factories Act, 1948?

Whether the COVID-19 pandemic and the nationwide lockdown qualify as a ‘public emergency’ as defined in Section 5 of the Factories Act, 1948?

The Observations of the Court

1. Section 5 of the Factories Act, 1948 provides that in a public emergency, the State Government can exempt any factory or class or description of factories from all or any of the provisions of the Act, except Section 67.  Section 5 specifies that an exemption can be granted “in any case of public emergency”. The existence of a public emergency is a pre-requisite to the exercise of power. Whether there exists a public emergency is not left to the subjective satisfaction of the state government.

2. Under Section 5, a situation can qualify as a ‘public emergency’, only if the following elements are satisfied: (i) there must exist a “grave emergency”; (ii) the security of India or of any part of its territory must be “threatened” by such an emergency; and (iii) the cause of the threat must be war, external aggression or internal disturbance. The honourable Supreme Court observed that the existence of the situation must be demonstrated as an objective fact. The co-relationship between cause and effect must exist. Implicitly, therefore, the statutory provision incorporates the principle of proportionality.

3. While interpreting the expression ‘internal disturbance’ Honourable Supreme Court relied on Extra-Judicial Execution Victim Families Association vs. Union of India, (2016) 14 SCC 578, and found that the expression ‘internal disturbance’ must be interpreted in the context in which it is used. Under Article 352, an internal disturbance must be of the order of an armed rebellion threatening the security of India to proclaim an emergency. Similarly, in order to sustain a valid exercise of power under Article 356 on the ground of an internal disturbance, it must be of such a nature as to disrupt the functioning of the constitutional order of the State; in other words, it must be of such a nature that the government of a state cannot be carried on in accordance with the Constitution.

4. The power under Section 5 of the Factories Act, 1948 can be exercised in a “public emergency”. The explanation states that to constitute a public emergency, there must be a grave emergency. The emergency must be of such a nature as to threaten the security of India or a part of its territory. The threat to the security of India or a part of the territory must be caused by war, external aggression or an internal disturbance. The expression ‘internal disturbance’ cannot be divorced from its context, or be read in a manner divorced from the other two expressions which precede it. They are indicative of the gravity of the cause which threatens the security of India or a part of its territory. An internal disturbance must be of similar gravity.

5. While replying to respondent’s submissions referring to Pfizer Private Limited, Bombay vs. Workmen, 11 AIR 1963 SC 1103, the Honourable Court noted that the dispute had arisen during the time of a national emergency imposed by the President in 1962 and there was a need to gear up the industrial production to meet the needs of the nation. In the present situation, the Respondent has in its written submissions admitted that the purpose of the notifications is not to cope with an overwhelming pressure of work, but only to meet the minimum targets.

6. The Honourable Supreme Court was of the opinion that the economic slowdown created by the COVID-19 pandemic does not qualify as an internal disturbance threatening the security of the state.  Though the Union Government has taken recourse to the provisions of the Disaster Management Act, 2005 it has not affected the security of India, or of a part of its territory in a manner that disturbs the peace and integrity of the country.

7. Further, the honourable Supreme Court observed that the impugned notifications do not serve any purpose, apart from reducing the overhead costs of all factories in the State, without regard to the nature of their manufactured products. It would be understandable, and within the realm of reasonable possibility during a pandemic, if the factories producing medical equipment such as life-saving drugs, personal protective equipment or sanitisers, would be exempted by way of Section 65(2), while justly compensating the workers for supplying their valuable labour in a time of urgent need. However, a blanket notification of exemption to all factories, irrespective of the manufactured product, while denying overtime to the workers, is indicative of the intention to capitalize on the pandemic to force an already worn-down class of society, into the chains of servitude. The financial losses cannot be offset on the weary shoulders of the labouring worker, who provides the backbone of the economy.

The Decision Held by the Court

1. The Honourable Supreme Court allowed the writ petition and quashed Notification No. GHR/ 2020/56/FAC/142020/346/M3 dated 17 April 2020 and Notification No. GHR/2020/92/FAC/142020/346/M3 dated 20 July 2020 issued by the Labour and Employment Department of the Respondent State.

2. The Honourable Supreme Court directed that overtime wages shall be paid, in accordance with the provisions of Section 59 of the Factories Act, 1948 to all eligible workers who have been working since the issuance of the notifications.

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