Union Of India vs. Heavy Electricals Fac.Emp.Union

REPORTABLE


2026 INSC 74
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION


CIVIL APPEAL NOS.5185-5192 OF 2016


UNION OF INDIA & OTHERS … Appellant (s)


VERSUS

HEAVY VEHICLES FACTORY
EMPLOYEES’ UNION AND
ANOTHER … Respondent(s)


J U D G M E N T

Rajesh Bindal, J.

1. Aggrieved against the order passed by the Division Bench
1
of the High Court dated 30.11.2011, the present appeals have been
filed by the Union of India. Vide the aforesaid judgment, the order
2
passed by the Central Administrative Tribunal dated 24.12.2010
passed in a bunch of applications filed by the respondents, was set
aside.
Signature Not Verified
Digitally signed by
DEEPAK SINGH
Date: 2026.01.20
15:17:47 IST
Reason:

1
High Court of Judicature at Madras
2
Central Administrative Tribunal, Madras Bench (Hereinafter, “CAT”)
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2. Briefly, the issue is as to whether compensatory allowances,
3 4
such as House Rent Allowance , Transport Allowance , Clothing and
5 6
Washing Allowance and Small Family Allowance , would fall within
the term “ordinary rate of wages” for calculation of overtime wages in
7
terms of Section 59(2) of the Factories Act, 1948 .
3. Learned counsel appearing for the appellants, taking us
through the historical background, has drawn our attention to various
letters issued by different Ministries, in terms of which the respondents
will not be entitled to add various components of compensatory
allowances for the purpose of calculation of overtime wages.
3.1 The learned counsel referred to a letter dated 01.09.1959
from the Government of India, Ministry of Defence, addressed to all the
factories, clarifying that wages payable for overtime to the civilian
employees for work in excess of normal working hours and up to 9
hours on any day or 48 hours in a week, overtime will be payable on
basic pay and dearness allowance only. For any period in excess of
that, the overtime shall be calculated on total wages including various
allowances.

3
Hereinafter, “HRA”.
4
Hereinafter, “TA”.
5
Hereinafter, “CWA”
6
Hereinafter, “SFA”
7
Hereinafter, “the 1948 Act”
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3.2 Further, reference was made to a letter dated 12.06.2000
issued by the Ministry of Labour, Government of India which provided
that travelling allowance should be added in the basic rate of wage for
calculation of overtime wages in terms of Section 59(2) of the 1948 Act.
3.3 Further, reference was made to an Office Memorandum
dated 14.11.2002 issued by the Ministry of Finance, Government of
India which provided that wages as provided under Section 59(2) of the
1948 Act for the purpose of calculation of overtime will only include
basic pay and dearness allowance/additional dearness allowance and
any other allowances, which are uniformly applicable to all the
government employees. It was specifically mentioned therein that
HRA, TA, and CWA are excluded therefrom.
3.4 Thereafter, reference was made to an Office Memorandum
dated 19.11.2007 issued by the Ministry of Labour and Employment,
Government of India. It referred to an earlier Office Memorandum
dated 16.03.2007 issued by the Ministry of Defence, clarifying that the
TA being compensatory in nature, may not be taken into consideration
for calculating overtime wages under the 1948 Act. With reference to
the aforesaid Office Memorandum, the Government of India, Ministry
of Defence issued another Office Memorandum on 26.03.2008 taking
the same position.
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3.5 The aforesaid Office Memorandum was followed by another
Office Memorandum dated 27.05.2009 issued by the Ministry of Labour
and Employment, Government of India clarifying that allowances of
compensatory nature including HRA, TA, SFA, etc., may be excluded
for the purpose of computing overtime wages under the 1948 Act. The
same was endorsed by the Government of India, Ministry of Defence
vide Office Memorandum dated 26.06.2009.
4. Aggrieved against the aforesaid interpretation made by the
8
appellants, multiple Original Applications were filed before the
Tribunal by employee unions of various factories engaged in
production of defence equipments controlled by the Ministry of
Defence. It was submitted by the learned counsel for the appellants that
the CAT rightly appreciated the contentions raised by the parties and
dismissed the applications vide order dated 24.12.2010. The
respondents challenged the same before the High Court by filing the
9
Writ Petitions . The High Court misdirected itself and wrongly
interpreted the provisions of the 1948 Act by not giving any weightage
to various clarifications issued by the Ministry of Finance, Ministry of
Labour and Employment and Ministry of Defence and gave an

8
O.A. Nos. 1143, 1144, 1132, 1157, 1170, 1214 and 1266 of 2009;
O.A.Nos. 631, 1113, 1114 and 1115 of 2010.
9
W.P. No.609, 1276, 1466, 1980, 1981,1982 and 21035 of 2011.
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interpretation which runs contrary to the scheme of 1948 Act. The
wrong interpretation given by the High Court has put exorbitant
financial burden on the factories. Hence, interference by this Court is
called for.
5. Taking us through the logic behind it, the argument raised
by the appellant is that there may be different allowances paid to
different kinds of employees. The quantum may also be different. Thus,
there would be disparity in calculation of the wages for the purpose of
further calculation of overtime wages for different employees. There
may be a case where some of the workmen may be travelling by
factory buses whereas some may be getting travelling allowance.
Similar may be the position with respect to accommodation provided
to some of the employees whereas some may be getting the HRA.
Similar can be the position with reference to CWA and SFA. In support
of the arguments, reliance was placed on the judgments of this Court
10
in Bridge and Roofs Co. Ltd. Versus Union of India and Ors. , Govind
11
Bapu Salvi and Ors. Versus Vishwanath Janardhan Joshi and Ors.
12
and Union of India and Ors. Versus Suresh C. Baskey and Ors. .

10
1962 SCC Online SC 164
11
(1995) Supp (1) SCC 148
12
1995 INSC 721; (1996) 11 SCC 701
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6. In response, learned counsel for the respondents has taken
us through the scheme of the 1948 Act, and the scope of powers vested
with the Central and the State Governments. While referring to Section
59 thereof, he submitted that the plain and simple meaning thereof is
that, whatever wages, in any form, a workman is getting, the overtime
is to be paid equivalent to the double of that rate. No other meaning
can be assigned. The exclusions that are sought to be made by the
appellants are not permissible. The interpretation, as is sought to be
projected before this Court only by the Ministry of Defence, cannot be
accepted, as any law framed by the Parliament cannot have different
application in different establishments. He referred to a letter dated
22.05.2011 issued by the Government of India, Ministry of Railway
(Railway Board) to General Managers of All India Railways and
Production Units, with reference to grant of overtime wages to the
railway employees from which it is clearly evident that HRA, TA, etc.,
are to be taken into consideration for the purpose of calculation of
overtime wages.
6.1 Further, he submitted that various letters/Office
Memorandums, referred to by the learned counsel for the appellants,
go in different directions. In fact, these are merely views of different
Ministries which cannot be said to be giving true meaning of the
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provisions. There is no power vested with the aforesaid ministries to
issue any clarifications with reference to Section 59(2) of the 1948 Act.
6.2 The argument raised is that in the absence of any power
delegated under the provisions of the 1948 Act, no circular/letter could
be issued by different Ministries for giving a different meaning than
what is evident from the plain language of the 1948 Act. He further
submitted that the 1948 Act, being a beneficial legislation, should be
given liberal construction in favour of the employees. Judgments
referred to by learned counsel for the appellants are distinguishable.
6.3 He also referred to Section 2(vi) of the Payment of Wages
Act, 1936, where the definition of the term ‘wages’ includes all
remuneration whether salary or allowances. Reference was also made
to the definition of wages as contained in Section 2(rr) of the Industrial
Disputes Act, 1947.
6.4 In support of his arguments, reliance was placed upon the
judgments of this Court in Rajasthan State Industrial Development &
13
Investment Corpn. Versus Subhash Sindhi Coop. Housing Society ,
14
and Gujarat Mazdoor Sabha & Anr. Versus State of Gujarat.
7. Heard the learned counsel for the parties and perused the
relevant material on record.

13
2013 INSC 94; 2013 (5) SCC 427
14
2020 INSC 572; 2020 (10) SCC 459
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8. In the case in hand, we are concerned with the
interpretation of Section 59(2), which forms part of Chapter VI of the
1948 Act, with the title ‘Working Hours of Adults’. Sections 64 and 65
thereof talk about power to make exempting rules and orders,
respectively. Such powers have been vested with the State
Government. Relevant provision of Section 59(2) of the 1948 Act is
reproduced herein below:
“ 59. Extra wages for overtime.-
xxx xxx xxx
(2) For the purpose of sub-section (1), “ordinary
rate of wages” means the basic wages plus such allowances,
including the cash equivalent of the advantage accruing
through the concessional sale to workers of foodgrains and
other articles, as the worker is for the time being entitled to,
but does not include a bonus and wages for overtime work.”

9. It is pertinent to throw some light on the definition of ‘State
Government’. Although no definition can be found under the 1948 Act,
Clause 60 of Section 3 of General Clauses Act, 1897 defines “State
Government” for different time ‑ periods and clarifies that, after the
commencement of the Constitution (Seventh Amendment) Act, 1956,
State Government means the Governor in a State and the Central
Government in a Union Territory, including situations where functions
are entrusted under Article 258A of the Constitution.
9.1 Section 64 empowers a State Government to make rules
with reference to various issues mentioned therein. Similar is the
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position in sub-section 2 thereof. Sub-section 5 makes it clear that any
rules made under this Section shall remain in force for not more than 5
years.
9.2 Section 65 deals with power to issue exempting orders.
Again, such a power is conferred on the State Government to relax or
modify the provisions of Section 61. Sub-section 2 otherwise also
empowers the State Government or the Chief Inspector (subject to the
control of the State Government) to pass certain exempting orders on
the conditions enumerated in Sections 51, 52, 54, and 56 of the 1948
Act.
9.3 Meaning thereby, as far as Chapter VI is concerned, there
is no power vested with different Ministries of the Government of India
to issue any clarification with reference to Section 59(2) of the 1948 Act,
especially with respect to what is to be included or excluded for the
purpose of calculation of ‘ordinary rate of wages’, in order to
determine the wages payable for overtime to an employee.
10. Now coming to Chapter XI of the 1948 Act, the same is titled
as ‘Supplemental’, containing general provisions. Section 112 thereof
talks about general power to make rules. It empowers the State
Government to make rules providing for any matter, which under the
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provisions of the Act, is to be or may be considered expedient in order
to give effect to the purposes of the 1948 Act.
10.1 Section 113 empowers the Central Government to give
directions to the State Governments for carrying out execution of the
provisions of the Act.
10.2 The aforesaid sections again do not empower the Central
Government to issue any clarification or direction with reference to any
provisions of the 1948 Act. None of the sections empowers the central
government to even frame rules. The entire power is vested with the
State Governments. All that the Central Government can do is, issue
directions to the State Governments.
11. The judgment of this Court in
Bridge and Roofs Co. Ltd.’s
case (supra) does not support the argument raised by the learned
counsel for the appellants as the issue considered therein was, as to
whether production bonus is to be included within the term ‘basic
wages’ as defined in Section 2-B of the Employees’ Provident Funds
and Miscellaneous Provisions Act, 1952. While considering the issue,
this Court opined that irrespective of production, an employee was
entitled to some wages. The incentive is only if the production exceeds
certain parameters. The same cannot be a part of the basic wage. The
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definition of ‘basic wages’, as provided in Section 2-B of the aforesaid
Act excluded number of items.
11.1 The judgment of this Court in
Suresh C. Baskey and Ors.’s
case (supra) relied upon by the learned counsel for the appellants is
distinguishable and is not applicable to the facts of the present case.
The issue under consideration in the aforesaid judgment was as to
whether the employees who are occupying government
accommodation and as such are not being paid HRA, are entitled to
compute the ‘ordinary rate of wages’, by notionally adding the amount
of HRA, which they would have got in case government
accommodation is not allotted to them. The answer by this Court was
in negative. It was opined that legislature in its wisdom included the
cash equivalent to the advantage accruing through the concessional
sale to the workers of food grains and other articles within the term
‘ordinary rate of wages’. The same was not the position with reference
to HRA. It was with reference to Section 59(2) of the 1948 Act.
11.2 The judgment of this Court in Govind Bapu Salvi and Ors.’s
case (supra) also does not support the case of the appellant, as the
issue under consideration in the aforesaid judgment was as to whether
the HRA can be taken into consideration for the purpose of calculation
of overtime wages. This Court opined that since the employees therein
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were allotted official quarters, HRA will not be included for calculation
of wages for overtime, in terms of Section 59(2) of the 1948 Act.
12. Coming to the judgments cited by learned counsel for the
respondents, this Court in Rajasthan State Industrial Development &
, held that executive instructions
Investment Corpn.’s case (supra)
which have no statutory force, cannot override the law. Any notice,
circular, guidelines, etc., which run contrary to the statutory provisions
cannot be enforced.
12.1 In Gujarat Mazdoor Sabha & Anr.’s case (supra), this Court
in part ‘F’ thereof (Paragraph nos. 31-38), explained the scheme and
objectives of the Factories Act, 1948. In part ‘G’ (Paragraph Nos. 39-
43), social and economic value of ‘overtime’ was dealt with. Relevant
portions thereof have been extracted below:
“32. The Factories Act, as it currently stands, was
enacted to guarantee occupational health and safety. It
ensures the material and physical well-being of workers by
fastening responsibilities and liabilities on “occupiers” of
factories. As a legislative recognition of the inequality in the
material bargaining power between workers and their
employers, the Act is meant to serve as a bulwark against
harsh and oppressive working conditions. The Act, primarily
applies to establishments employing more than 10 persons. It
has been purposively and expansively applied to workers,
who may not strictly fall within the purview of the definition,
and yet embody similar roles within the establishments. These
permissible interpretations have been aligned with the
intention of the legislature which has a vital concern in
preventing exploitation of labour.
x x x
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35. The notifications make significant departures
from the mandate of the Factories Act. 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 spreadover 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.

x x x

36. While enacting the Factories Act, Parliament
was cognizant of the occasional surge of the demand for, or
requirement of, the manufacture of certain goods which would
demand accelerated production. The law-makers were aware
of the exigencies of the war effort of the colonial regime in
World War II, with its attendant shortages, bottlenecks and, in
India, famine as well. Section 64(2) of the Factories Act
envisages exemption from certain provisions relating to
working hours in Chapter VI, for instances such as urgent
repairs, supplying articles of prime necessity or technical
work, which necessarily must be carried on continuously.
Section 65(2) enables classes of factories to be exempt from
similar provisions in order to enable them to cope with an
exceptional pressure of work. However, these exemptions are
circumscribed by Sections 64(4) and 65(3) respectively, at
limits that are significantly less onerous than those prescribed
by the notifications in question. Despite these concessions,
these provisions do not enable an exemption of Section 59
which prescribes mandatory payment of overtime wages to
the workers at double the ordinary rate of their wages.

x x x

38. We are unable to find force in the arguments of
the learned counsel for the respondent. The impugned
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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
fathomable, 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
capitalise on the pandemic to force an already worn-down
class of society, into the chains of servitude.”

x x x

42. The rationale behind fixing of double the rate of
wages for overtime in Mamarde [Y.A. Mamarde v. Authority
under the Minimum Wages Act, (1972) 2 SCC 108] was
separately noted by the Punjab and Haryana High Court, in
interpreting overtime for the purpose of the Factories Act,
in ITC Ltd. v. Provident Fund Commr. [ITC Ltd. v. Provident
Fund Commr., 1986 SCC OnLine P&H 715 : ILR (1988) 1 P&H
73] , where the Court held : (ITC Ltd. case [ITC
Ltd. v. Provident Fund Commr., 1986 SCC OnLine P&H 715 :
ILR (1988) 1 P&H 73] , SCC OnLine P&H para 27)

x x x

43. The principle of paying for overtime work at double
the rate of wage is a bulwark against the severe inequity that
may otherwise pervade a relationship between workers and
the management. The Rajasthan High Court in Hindustan
Machine Tools Ltd. v. Labour Court [Hindustan Machine Tools
Ltd. v. Labour Court, 1993 SCC OnLine Raj 17 : (1994) 1 LLN
256] emphatically noted that the workers cannot contract out
of receiving double the rate for overtime as a way of industrial
settlement. The Court held : (SCC OnLine Raj paras 6 & 9)

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13. It was opined in the aforesaid judgment that the 1948 Act
was enacted to guarantee occupational health, safety and physical
well-being of the workers. Exemptions as provided under Sections 64
and 65 of the 1948 Act were also discussed. Concessions provided
therein were not applicable to Section 59 which prescribes payment of
overtime wages. An interpretation which restricts or curtails benefits
available to workers under the 1948 Act must be avoided. Chapter VI
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of the aforesaid Act intends to protect the workmen against
exploitation.
14. Further, there was no answer to the argument raised by the
learned counsel for the respondents that the same provision of law is
being interpreted differently by the Ministry of Railways, Government
of India, where all the allowances are being included within the term,
‘ordinary rate of wages’ for the purpose of calculation of overtime
wages. Relevant extract from the letter dated 20.05.2011 issued by the
Ministry of Railway, Government of India, is reproduced herein below:

“The issue of revising the date of effect of OTA w.e.f.
01.01.2006 instead of 01.09.2008 (as communicated vide
para 3 of Board’s letter of even number dated 17.02.2010),
as demanded vide item no.24/2010 in DC/JCM has been
considered by the Board, it has now been decided to revise
the date of effect OTA as 01.01.2006. It is however clarified
that the basic pay and DA element for the purpose of OTA
shall be revised w.e.f 01.01.2006 and other elements
consulting emolument for the purpose of OTA viz HRA and
Transport Allowance etc. shall be taken into account at
revised at revised rates w.e.f 01.09.2008 as per the sixth
CPC recommendations.”

14.1 Different Ministries of the Government of India cannot
assign different meaning to a provision in the Act of Parliament, which
otherwise is clearly evident from the plain reading of Section 59 (2) of
the 1948 Act.
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15. As observed by the High Court, the core of the controversy
rested upon the interpretation of Section 59(2) of the Factories Act,
1948, which defined the "ordinary rate of wages" as basic wages plus
"such allowances" as the worker for the time being is entitled to. The
High Court has rightly opined that it is well-settled principle of
statutory construction that the Legislature never wastes its words.
Notably, when the statute provides for only two specific exclusions:
bonus and wages for overtime work, in the absence of any formal rules
governing the exclusion of other entitlements, the Executive cannot,
through a mere Office Memorandum, read additional exclusions into
the Act that the Legislature did not contemplate. The High Court further
noted that the employees had been in receipt of overtime allowances
calculated by including HRA, TA, SFA, etc., for a considerable duration.
The sudden exclusion of these allowances via the Office Memorandum
dated 26.06.2009, lacks legal authority and is contrary to the literal
mandate of Section 59 of the 1948 Act.
16. We also came across a judgment of Kerala High Court in
V.E. Jossie & Ors. Versus The Flag Officers Commanding in Chief
15
which has taken a view contrary to the view being
Headquarters,
expressed by us in the present judgment. The Kerala High Court was

15
2011 SCC OnLine Ker 4030
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considering correctness of an order passed by the Central
Administrative Tribunal, Ernakulam Bench which upheld the orders
16
passed by the respondents therein discontinuing overtime allowance
on HRA, City Compensatory Allowance, TA, SFA, etc. The High Court
has upheld the view expressed by the Tribunal therein while
upholding the order passed by the authority. The same being contrary
to the view expressed by this Court, we hold that the aforesaid
judgment does not lay down the correct law.
17. For the reasons mentioned above, we do not find any case
is made out for interference with the impugned judgment of the High
Court. The appeals are, accordingly, dismissed.
18. Pending applications, if any, shall also stand disposed of,
with no order as to costs.

.........................................J.
(RAJESH BINDAL)


..........................................J.
(MANMOHAN)
NEW DELHI;
JANUARY 20, 2026.


16
The Flag Officers Commanding in Chief Headquarters
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