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Historical perspective of Payment of Wages Act, 1936

The current paper seeks to analyse the historical perspective of the Payment of Wages Act, 1936, as enacted under the colonial rule of British Crown in India, that is, the social, economic, political and legal factors which led to the necessity of enacting the Act as well as the history of the statute. It becomes important to study the historical perspective to understand the background of the Act, the mischief it sought to addresses as well as the scope and object of the Act to help in the better implementation of the Act in the light of poor situation of the labours still even after many years of independence.

Introduction
The Payment of Wages Act, 1936 (hereinafter referred to as the Act) was enacted during the period of colonization with the object, as outlined by the preamble of the Act:
to regulate the payment of wages to certain classes of employed persons.[1]

Therefore, it is a labour welfare legislation which is enacted with two fold aim: first, is to fix the date of payment of wages and secondly, to regulate the deductions from wages whether as fine or otherwise.

As observed by the Bombay High Court in Arvind Mills Ltd. v. K.R. Gadgil[2], the general purpose of the Act is to provide that employed persons shall be paid their wages in a particular form and at regular intervals without any unauthorized deductions.

Looking at the above-discussions, one can get the hint of the circumstances which led to the enactment of the Act, for the closer at the circumstances which led to the enactment of the Act and history of the Act, the same are as follows:

Colonial Rule and Industrialization

The period of early 1700s saw the invention of steam engine by Thomas Newcomen which led to the first industrial revolution in Britain which lasted till 1830s, this led to increase in demand of coal in Britain, expansion in iron and steel industry and transformation of British cottage industry into factories among other innovations.[3]

India was an officially a colony of the British Crown from the period of 1858 to August 1947, and the industrial revolution in Britain had a reverse impact on Indian economy, as due to expansion of industrial base in Britain, it required supply of inputs or raw material and captive market for it products and colonies provided Britain with just the source as well as an outlet and easy transportation through shipment and railway as a result of revolution further helped.

Britain forced India to accept the British goods which destroyed the Indian cottage and handicraft industry and since India was forced to produce the cash crops which Britain required for trade with the other countries. Among the other factors for destruction of Indian industrial sector were: disappearance of princely courts and their patronage, increasing competition of British machine-made goods and increasing demand for Western commodities as a result of foreign influence.

These factors gave the rise of British capitalist industry in India, as the vacuum created by the destruction of Indian industries was filled by it. Industrial development in India until the beginning of the 20th century was mainly confined to four industries namely, cotton and jute industries, coal mining and tea plantation. A few other minor industries such as cotton presses, rice, flour and timber mills, leather tanneries, woollen textiles, paper, sugar, salt, mica, petroleum and iron mines were developed. A few engineering and railway workshops and iron and brass foundries also came into existence.

Slowly India underwent a commercial transformation and not an industrial revolution. British were not eager to lay the foundation for an industrial revolution. First of all, most of the modem industries that did develop were controlled by foreign capitalists. Secondly, though the industrial progress during this phase was steady and continuous but it was extremely slow. This was so as the policy of Britain was never to work for the benefit, welfare or development of the colonies but to supress, oppress and exploit them for personal gain, wealth and prosperity, even the little development done through railway, telegraph and postal system was done for the ease of transportation and communication of British officials in India rather than for convenience of Indians itself.

With the growth of modern industries a new social class was born i.e. the working class. Due to emergence of zamindari and ryotwari system because of which agriculture sector was destroyed, further lack of choice with the farmers to grow crops, destruction of cottage industry, illiteracy, general poverty leading to starvation, poor living conditions and rural backwardness the Indian household did not had any option and were forced to migrate to cities and work for English factories or industries.

The industrial revolution provided the British capitalists with high economic power and more than abundance of labour availability in India put the labour in low economic status with no bargaining power. This led to Indian workers working and living under highly unsatisfactory conditions. Till 1891 there was no regulatory provisions concerning their hours of work. Their did not exist any kind of social insurance against sickness, old age, unemployment, accident or sudden death.

There was no provident fund scheme, only an inadequate maternity benefit scheme came into operation in 1930s. The real wages of factory workers declined during the period of 1889 to 1929 and the average worker lived below the margin of subsistence. Underfed housed like animals, without light, air and water, the Indian Industrial workers, one of the most exploited of all in the world of Industrial capitalism. Being concerned by an exploitative imperialist colonial rule, in course of time the Indian labours were compelled to adopt a militant anti-imperialist approach and became a part of the freedom movement.

The India industrial capitalist class developed after 1858. It soon entered into competition with the British capitalist and gradually realised that its growth was checked by the official trade, tariff, transport and financial policies of the Government. While struggling for independent economic growth that came into conflict with imperialism on almost every basic economic issues, the Indian Capitalist class needed active and direct Government help to compensate it for its initial weakness in competing with the firmly established industries of Western Europe. The contemporary industries of France, Germany and Japan were being developed with active and massive Government help.

Such help was denied to Indian capitalists. The higher bureaucracy was foreign and unsympathetic or rather hostile to Indian industrial efforts. Indian capitalist feared, above all, domination and suppression by the far stronger foreign capital. Their instinct for survival, in particular, aroused after 1918 when a large scale inflow of foreign capital investment with the Indian industry began to enter and the giant British Industrial Corporation started forming subsidiaries in India in order to take advantage of the tariff protection granted during the 1920s and 1930s, the cheaper Indian labour and nearness of the market. Indian capitalist now raised the slogan of Indian domination of Indian Markets.

Indian capitalists, thus increasingly found themselves in open contradiction with the colonial economic structure, administrative machinery and policies. They gradually realised that they needed a nation state and a Government favourable to indigenous capitalists. The rapid development of Indian trade and industry could not occur so long as foreign imperialism dominated the country.
The series of devastating famines engulfed India from 1866 to 1901 and the day dreams of guided developments entirely shattered. During this period, the working and living conditions of the labour were poor and by the end of the 19th century.

During the non-cooperation movement in 1920-22 and Swadeshi movement in 1905-11, the Indian capitalist under the leadership of Congress leaders tried to rejuvenate the Indian cottage industry and ventured to establish certain industries in the tune of spirit and inspiration of the movement. However, the two world-wars and economic depression throughout the world make hindrances in the path of industrialisation and development of India. The drain of wealth during two hundred years of British raj ruined India and the development was never considered seriously as a policy by the imperialist Government.

Rise of Trade Unionism

Indian trade union like their counterparts elsewhere emerged as a bye-product of the modern industrial enterprises. Arbitrary and high-handed treatment of workers by employers as well as exploitative working conditions created among workers a shared sense of helplessness and dissatisfaction with employers.

In the beginning around 1880 sporadic attempts were made by employees to express their discontent towards employer and Government through strikes and protest meetings. However, genuine trade unionism in India began when the Madras Labour Union was formed in 1918.

The founder of the organised labour movement in India may be said to be N.M. Lokhande, who was himself a factory worker. In 1884, he organised an agitation and called for a conference of workers in Bombay to make representation to the factory Commission just then appointed. As no redress was effected by the Government, Lokhande convened a mass meeting in Bombay in April, 24. 1890 which was attended by about 10 thousand workers.

In response to the resolution adopted in the meeting, the Mill owners of Bombay agreed to grant a weekly holiday to the workers. Encouraged by this, Lokhande organised the Bombay Mill Hands Association of which, he was elected President. Dinabandhu, the first working class newspaper was also started by Lokhande to create awareness towards the grievances of the working class.

During the period 1904-1911 there was a remarkable advance in the organisation of labour movement. A strike in the Bombay Mills in protest of the extension of working hours, a series of strikes in the railways, in the Government Press in Calcutta and the Swadeshi Movement launched in Bengal in 1905 gave tremendous impetus to the trade union movement. In Chennai, Bombay and Calcutta the postal workers formed unions as Postal Clubs.

The climax in the labour movement in this period was reached with the 6 days political mass strike in Bombay in 1908 against the sentence of 6 years imprisonment inflicted on the great leader of freedom movement, Lokmanya Bal Gangadhar Tilak charging him for the offence of sedition.

In 1910, a Kamgar Hitvardhak Sabha was formed by Philanthropists in Bombay. The object of this association were to present petitions to Government and to settle disputes between employers and workers. The First World War broke out in August, 1914. During the period, the rise in the prices of essential commodities, higher cost of living and the increase in factory employment further strengthened the urge of the workers to unite.

The non-cooperation movement launched by Gandhiji during 1919-21 and the formation of the Ahmedabad Textile Labour Association under the leadership of Mahatma Gandhi gave trade union movement a new dimension.

Establishment of International Labour Organisation (ILO) in 1919 of which India is a founder member and the Russian Revolution to establish a Socialist State in 1917 contributed significantly to transform the consciousness of the working class.

In 1921, the International Labour conference adopted a convention on the freedom of association which emphasized that workers should be given the fullest freedom to come together and form trade unions. The movement launched by Sri N.M. Joshi, the father of the modern trade union movements ultimately culminated in the passing of Trade Unions Act, 1926 to recognise the fundamental right of freedom of association to the workers of India. The right to strike and lock out for the first time was conceded indirectly under the provisions of the Indian Trade Disputes Act, 1929 which had the main object of providing a conciliation machinery to bring about peaceful settlement of Industrial Disputes.

The employers in India, from the very beginning, had not viewed the trade union movement with favour, and pleaded that they had absolute right to manage their own business in the way they liked. Refusal to recognise trade unions was sought to be justified by some employers on the plea that the unions were mostly controlled and directed by leaders drawn from outside the ranks of labour.

In the circumstances that prevailed in India since the beginning of Factory Employment, there was hardly any possibility of workers themselves taking concerted action to secure relief from the evils of industrialisation. The achievements of the movement during this period were mainly due to the missionary spirit with which the outsiders led and guided the working class.[4]

Deductions and No Timely Payments

As evident from the above-discussion the traditional industry in India was shattered under colonial rule due to industrial revolution in Britain and the place was taken up by the British Capitalist Industries which had complete control over the resources of production thereby they had the authority to abuse.

On the other hand, the Indian modern factories were not much, that is, the factors of production were in the hands of very few Indian people and they were too under the supervision and control of the Crown by way of tariffs, policies and regulations. They tried to rejuvenate the cottage industry but failed to do so. In other words, the factors of production were restricted to few hands giving them the power to take arbitrary actions as per once whims and fancies.

At the same time, there was abundant labour availability in India ready to work in hazardous industries with no or little safety measures, poor living conditions, longer working hours and no nourishment that too at meagre or starvation wages (as the Minimum Wages Act did not come until 1948 i.e. around the independence).

The trade unionism though existed but as compared to its counterparts in other countries, Indian labour was not able to take the labour movement to its ultimate success whereby it gains enough bargaining power to command authority in negotiations over issues like wages, working hours, safety measures, social security etc. In other words, the labour conditions were poor and they had no negotiating power.

All of this contributed to further deterioration of the labours, as the exploitative tactics the factory owner or managers, that is, the employer used to deduct an arbitrary amount of wages payable to the worker on grounds they found suitable because of which the meagre salary which they were entitled to receive was even further deducted that on no wrong of their own or even if they committed any wrong or act of neglect then an unproportionate amount.

To further contribute to the misery of labourers, there existed a variety of wage period and even then the wages were not paid on time, that is, wages were delayed for months and the working class which hardly was acquainted with the concept of savings, required the timely payment to support their families by providing food, giving clothes and maintaining shelter above their heads. These basic requirements are necessary for any human to survive, and denial of the same to the workers, though indirectly, led to a major crisis for labours.

This is how the combined effect of the factors of colonisation, industrial revolution in Britain and lack of proper trade unionism resulted into exploitation of the labourers of which the deduction from wages and delayed payment of wages was only some of the factors besides others such as poor working condition, low wages, long working hours etc.

History of the Act
The issue of deduction in wages and payment of wages not being uniformed was not paid much heed to, labour being the oppressed the class, until in 1925 a Private Bill was introduced in the Legislative Assembly by the name of Weekly Payment Bill which addressed these issue, but at the time the government declined the Bill by citing that the issue is already under consideration.

In 1926, the Government of India kept in touch with the state or provincial governments and asked them to investigate and collect the requisite information, material etc. regarding the said issues. The material collected clearly showed that the issues very much existed, that is, the high amount of wages were being deducted arbitrarily by the employers and payment of wages to the workers were not prompt and uniform which had put the workers in the worst situation possible.

The material collected from the provincial governments by the Government of India was kept before the Royal Commission on Labour designated in 1929 under the Chairmanship of John Henry Whitley:
to enquire into and report on the existing conditions of labour in industrial undertakings and plantations in British India, on the health, efficiency and standard of living of the workers, and on the relations between employers and employed, and to make recommendations.[5]

The Royal Commission on Labour's report covered vast issues faced by the workers in the different factories such as cotton factories, leather factories, mine workers, railway workers, workers engaged in public work department as well as plantation workers and covered almost all the issued faced by the workers from less wages, long working hours, no holidays to health and welfare, housing, trade unions, workmen compensation, industrial dispute etc.

The report is comprehensive that almost all the labour welfare legislations and industrial laws which we now have from Trade Union Act 1926, Industrial Dispute Act 1947 to Payment of Wages Act 1936, and Minimum Wages Act 1948 etc. owe the origin some way or the other to this report.

Some of the findings and recommendations of the Commission which are worth citing are as follows:

  1. It appeared that fining was a fairly general practice in perennial factories and in railways. It was much less common in mines and other forms of industrial activity and is practically unknown on plantations. It appeared to be most prevalent in cotton textile mills, and for this reason it probably attained greater dimensions in the Bombay Presidency than elsewhere.
     
  2. The average deduction by way of fine was around one percent of the total wage of a worker, but it was significant to look for the individual cases rather on average.
     
  3. Moreover there were deductions on many other grounds such as medical attendance, education, reading rooms, interest on advances of their own wages, charities, religious purposes selected by the employer and various other benefits or causes which were made compulsory.
     
  4. Another common practice followed in some mills was the deduction of two days' pay for one day's absence.
     
  5. Deductions from wages fall roughly into three classes, namely, fines which are imposed for disciplinary reasons, deductions on account of damage sustained by the employer and deductions for the use of material and tools and for other benefits provided by the employer. And in all three cases the Commission considered that there were strong grounds for legislative regulation.
     
  6. The employer, or more commonly his subordinate, determines when a deduction should be made and fixes its amount which is recovered from the wages due to the worker, such practices in other countries have led to number of statutory regulations.
     
  7. The Commission observed the fact that in many cases the workers' wages suffice for little more than the purchase of the primary necessities of life makes even a small deduction a definite hardship, while the larger deductions increased their indebtedness and even crippled their resources for some time.
     
  8. Children should be exempt from fine due to their helplessness, inexperience and low scale of wages.
     
  9. The payment of a fine should not be spread over too long a period, and the Commission recommend that the maximum period should be one month from the date on which the fine was imposed.
     
  10. The minimum amount which could be deducted by way of fine should not exceed in any month half an anna in the rupee of the worker's earnings.
     
  11. The sum realised as fine should be utilised for some purpose beneficial to the employees as a class and should be approved by some recognised authority.
     
  12. In order to protect the workers from arbitrary fines, a notice specifying the acts and omissions in respect of which fines may be imposed should be posted and any other fine should be deemed to be illegal.
     
  13. Any deduction made for goods having been damaged should not exceed the wholesale price of the goods damaged and the damage should directly be attributable to carelessness and negligence of the worker.
     
  14. In deductions for damages of goods, the employers should maintain the registers of the same which will in any case provide the material necessary to determine whether or not further regulation is required.
     
  15. Deductions may be made on account of provision for housing accommodation and of tools and raw materials.
     
  16. Imposition of any fine and deduction made which is not permitted by law should be made penal.
On basis of these recommendations of the Commission, the Government of India rethought the subject and in February 1933 the Payment of Wages Bill, 1933, was presented in the Legislative Assembly and coursed for the purpose of extracting opinions but could not take the shape of the Act because of the dissolution of the Assembly.

In 1935 the Payment of Wages Bill, in light of indistinguishable standards from the prior Bill of 1933 yet altogether overhauled was presented in the Legislative Assembly on 15th February 1935. The Bill was referred to the Select Committee. The Select Committee displayed its report on 2nd September 1935. Consolidating the proposals of the Select Board of trustees, the Payment of Wages Bill, 1935 was again presented in the Legislative Assembly and finally the Payment of Wages Act was passed in 1936 and came into further on 21st March, 1937.

Conclusion
No statute is passed in vacuum, that is, a need of a statute arises in response to the social, economic, cultural etc. circumstances which exist in a state, so in order to address these circumstances the state is enacted to remedy the mischief which is being caused. Thereby, no statute can be read in a vacuum, without referring or appreciating the background in which it was passed, so that it can be read more comprehensively and can be interpreted properly.

The Payment of Wages Act, 1936 was passed by the Legislative Assembly on basis of recommendation of Royal Commission on Labour, when India was under the colonial rule in the background of circumstances as discussed above that is, due to colonial rule majority of industries or factories were held by the English Capitalist who operated the same for prosperity of their own regardless of welfare of the Indian Labour and labour movement was not strong enough to bargain with the employer.

This led to the problem of arbitrary deductions from the wages by the employer and delay in payment of wages which led to the obvious problem of workers not being able to support their families and forced to live in the poor conditions, thereby making it imperative for the Government of India to pass the law which remedy the above-mentioned two problems and contribute to welfare of labour.

Thereby the Act was passed to ensure that the deductions from the wages are proper, i.e. for the valid reasons communicated to the worker well in advance that too only that much which is proportional and prompt as well regular payment of wages to the worker, the same is evident from the Preamble of the Payment of the Wages Act, 1936.

Bibliography
Primary Sources
Bare Acts
  • Payment of the Wages Act, (Act 4 of 1936)
Commission Reports
  • Royal Commission on Labour, Report of the Royal Commission on Labour in India (1929)
Secondary Sources
Articles
  • Natasha kwat, British Colonial Rule on the Indian Economy, Economic Discussion, available at http://www.economicsdiscussion.net/indian-economy/british-colonial-rule-on-the-indian-economy/19007 (last visited on 29.03.2020)
  • Swadeshi Movement: Timeline and Important Facts you must know, India Today, 07.08.2015 https://www.indiatoday.in/education-today/gk-current-affairs/story/swadeshi-movement-286966-2015-08-07 (last visited on 29.03.2020)
Websites
  • Available at: https://shodhganga.inflibnet.ac.in/bitstream/10603/66s023/15/15_chapter%201.pdf (last visited on 29.03.2020)
  • Industrial Revolution, available at: https://www.history.com/topics/industrial-revolution/industrial-revolution (last visited on 29.03.2020)
End-Notes:
  1. Payment of the Wages Act (Act 4 of 1936), Preamble
  2. AIR 1941 Bom 26
  3. Industrial Revolution, available at: https://www.history.com/topics/industrial-revolution/industrial-revolution (last visited on 29.03.2020)
  4. Available at : https://shodhganga.inflibnet.ac.in/bitstream/10603/66s023/15/15_chapter%201.pdf (last visited on 29.03.2020)
  5. Royal Commission on Labour, Report of the Royal Commission on Labour in India i (1929)

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