SC says no action against firms for not paying wages during lockdown

In a major relief to companies, the Supreme Court of India has stayed a Ministry of Home Affairs circular asking employers to pay full wages to workers amid the coronavirus-induced lockdown.

In a judgement passed on May 15, the Supreme Court also asked the Centre and State not to prosecute any private firm or factory over non-payment of wages.

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A bench of Justices NV Ramana, Sanjay Kishan Kaul, and BR Gavai, in a hearing conducted through video conferencing, heard counsel for three private firms including Nagreeka Exports Limited and Ficus Pax Private Ltd against notifications of the Ministry of Home Affairs asking them to pay full wages to employees during lockdown.

The Centre has sought time to reply to this order.

Nagreeka Exports, a textile firm and one of petitioners had sought quashing of the government order asking employers to pay full salary of staff, contract workers, casual workers and others during the lockdown period. This was despite the fact that factories were not operational.

Nagreeka which manufactures and exports cotton yarns, fabrics, and textiles, stated in its plea that because of halt in operations since the lockdown, it has suffered losses to the tune of Rs 1.5 crore till the filing of the plea.

"On top of that, as per the said orders dated March 29, 2020 and March 31, 2020, the petitioner had to disburse full salaries to all its employees on its payroll, which amounts to approximately Rs 1.75 crore," the petition said.

The plea had challenged the constitutional validity of government order dated March 29, 2020, issued by MHA only to limited extent being that "All the employers, be it in the industry or in the shops and commercial establishments, shall make payment of wages to their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during lockdown period."

The petition said that a blanket direction from the government to private establishments to pay full salaries against no work was arbitrary and violative of Article 14 – Right to Equality of the Constitution.

It has also challenged subsequent Government Order dated March 31, 2020, issued by Maharashtra government, only to the limited extent of compelling the petitioner to pay full salary to all its staff, workers, contract workers, and casual workers during the period of lockdown, when its factories are not operational.

The petition has sought to adjudicate whether the Centre and Maharashtra government are empowered to issue direction to private establishments, like the petitioner, to pay 100 percent wages under Disaster Management Act, 2005.

Taxguru in a post said, “The apex court order would be a big relief for the businesses who have been keenly following this case since the outcome affects lakhs of people and others who are associated with them, directly or indirectly.”