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Case Overview

Case Name: Union of India v. Heavy Vehicles Factory Employees Union and Another

In Union of India v. Heavy Vehicles Factory Employees Union and Another, the Supreme Court of India examined whether compensatory allowances should be included while calculating overtime wages . A bench comprising Justice Rajesh Bindal and Justice Manmohan dismissed a batch of civil appeals filed by the Union of India and upheld the Madras High Court’s ruling . The Court affirmed that allowances like House Rent Allowance (HRA), Transport Allowance (TA), Clothing and Washing Allowance (CWA) and Small Family Allowance (SFA) form part of the “ordinary rate of wages” under the Factories Act 1948 .

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Key Aspects

The dispute arose from long-standing executive instructions issued by various Union Ministries seeking to restrict overtime calculations . The Court examined whether such instructions could override statutory provisions .

• Employees working beyond prescribed hours claimed overtime including compensatory allowances .
• Union Government circulars excluded HRA, TA, CWA, and SFA from overtime computation .
• Central Administrative Tribunal upheld the Government’s view .
• Madras High Court reversed CAT’s order, favouring employees .
• Union of India challenged the High Court ruling before the Supreme Court .

Legal Insights

The Court analysed statutory provisions governing overtime wages under labour law emphasising legislative intent .

• Section 59 Factories Act mandates overtime wages at twice the ordinary rate .
• Section 59(2) Factories Act defines “ordinary rate of wages” as basic wages plus allowances excluding only bonus and overtime wages .
• Executive instructions lack statutory force and cannot override parliamentary enactments .
• Beneficial legislations like the Factories Act must receive liberal interpretation in favour of workers .

Court’s Verdict

The Supreme Court held that compensatory allowances must be included while computing overtime wages under Section 59 Factories Act . It ruled that Union Ministries cannot narrow statutory benefits through executive circulars . Consequently, the appeals were dismissed affirming workers’ entitlement to overtime wages calculated on basic pay along with allowances under the Factories Act 1948 .

Source – Supreme Court of India

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