Supreme Court Clarifies Wage Payment Under MGNREGA: Swaraj Abhiyan vs. Union of India (2018)

Introduction

Date of the Judgment: May 18, 2018
Citation: Not available in the provided document.
Judges: Madan B. Lokur, J. and N.V. Ramana, J.

Can the government delay wage payments to rural laborers under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) without facing consequences? The Supreme Court of India addressed this critical question in a Public Interest Litigation (PIL) concerning the implementation of MGNREGA. The court examined issues related to delays in wage payments, reduction in workdays, and the absence of social audits. This judgment clarifies the responsibilities of both the central and state governments in ensuring timely payments and compensation to workers under the MGNREGA scheme.

Case Background

The petitioner, Swaraj Abhiyan, raised concerns about the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA). The core issues highlighted were:

• Delay in payment of wages and compensation to beneficiaries.
• Reduction in person-days and consequent reduction in fund allocation.
• Absence of social audits.

The petitioner argued that the central government’s practice of setting an “agreed to labour budget” was impacting the scheme’s effectiveness. The “agreed to labour budget” was allegedly being used as a cap on expenditure, preventing the generation of muster rolls and denying work to those who sought it. The petitioner also contended that delays in wage payments were rampant, and compensation for these delays was not being provided as mandated by the Act.

Timeline

Legal Framework

The judgment refers to several key provisions of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005:

• Section 3(1) of the Act: Mandates that the State Government shall provide at least one hundred days of unskilled manual work to every household in rural areas whose adult members volunteer to do such work.
  
  “3. Guarantee of rural employment to households . – (1) Save as otherwise provided, the State Government shall, in such rural area in the State as may be notified by the Central Government, provide to every household whose adult members volunteer to do unskilled manual work not less than one hundred days o f such work in a financial year in accordance with the Scheme made under this Act.”
• Section 3(3) of the Act: Specifies that the disbursement of daily wages shall be made on a weekly basis or, at the latest, within a fortnight after the work is done.
  
  “(3) Save as otherwise provid ed in this Act, the disbursement of daily wages shall be made on a weekly basis or in any case not later than a fortnight after the date on which such work was done.”
• Section 4 of the Act: Requires every State Government to frame a Scheme providing not less than one hundred days of guaranteed employment in a financial year.
• Section 14(6) of the Act: Requires the District Programme Coordinator to prepare a labour budget in December every year.
• Paragraph 29 of Schedule II of the Act: States that if wages are not paid within 15 days from the closure of the muster roll, the worker is entitled to compensation at 0.05% of the unpaid wages per day of delay.
  
  “29. (1) In case the payment of wages is not made within fifteen days from the date of closure of the muster roll, the wage seekers shall be entitled to receive payment of compensation for the delay, at the rate of 0.05% of the unpaid wages per day of delay beyond the sixteenth day of closure of muster roll.”

The Act is rooted in Article 243-G of the Constitution, which empowers Panchayats to function as institutions of self-government.

Arguments

Petitioner’s Arguments:

• The “Approved Labour Budget” violates the essence of the Act by allowing the Central or State Government to alter the labor budget.
• The labor budget projections are to be arrived at through the process spelt out in Section 14(6) and paragraph 7 of Schedule I of the Act, and any reduction is against the spirit of the Act.
• The Central Government has started exercising discretionary powers in deciding how much a State can spend on generating employment.
• The generation of the Muster Roll is halted once the State has reached the “Approved Labour Budget.”
• The Central Government must release the funds without any reduction in the quantum once the State Government raises a demand for implementation of the Scheme.
• There is a strong possibility of some persons not getting employment due to insufficiency of funds and the informal cap on the availability of funds.
• The delay caused by the Central Government in steps No. 6 to 9 of the wage payment process is not taken into account for the purpose of payment of compensation.

Respondent’s (Union of India) Arguments:

• The Central Government is statutorily empowered to scrutinize and assess the funds to be released to the State Governments and Union Territory Administrations.
• The ‘agreed to labour budget’ or the ‘approved labour budget’ is not fixed arbitrarily by the Central Government but is done in consultation with the State Governments and Union Territory Administrations.
• There is no informal cap on the release of funds, and funds have been released over and above the ‘agreed to labour budget’ when required.
• Implementation of the Scheme is the responsibility of the States, and hence, securing funds is the responsibility of the States.
• Compensation is only for the delay in uploading the Fund Transfer Orders (FTOs) and does not account for any delay caused thereafter.

[TABLE] of Submissions:

Innovativeness of the argument: The petitioner innovatively argued that the Central Government’s role in setting an “agreed to labour budget” and limiting compensation to delays only up to the generation of FTOs undermines the MGNREGA’s objectives of providing guaranteed employment and timely wages.

Issues Framed by the Supreme Court

The Supreme Court addressed the following issues:

1. Whether the Central Government can prepare an ‘agreed to labour budget’ or whether the process of preparing an ‘agreed to labour budget’ is impermissible.
2. Whether there is an informal cap on the release of funds.
3. Whether there is a delay in payment of wages to the beneficiaries and whether compensation is paid to them in terms of the Act.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 3(1) of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005: The Court used this provision to highlight the guarantee of 100 days of work.
• Section 3(3) of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005: The Court emphasized the provision for weekly or fortnightly wage disbursement.
• Section 4 of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005: The Court noted the requirement for the State Government to frame a scheme.
• Section 14(6) of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005: The Court explained the role of the District Programme Coordinator in preparing the labour budget.
• Paragraph 29 of Schedule II of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005: The Court relied on this provision to emphasize the mandate for compensation for delayed payments.
• Rule 5 of The National Employment Guarantee Fund Rules, 2006: The Court referred to this rule to explain the release of grants from the National Employment Guarantee Fund.
• Swaraj Abhiyan (III) v. Union of India & Ors. (2016) 7 SCC 544: The Court referred to this previous judgment on the issue.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure the effective implementation of the MGNREGA and protect the rights of the workers. The Court emphasized the importance of timely wage payments and compensation for delays, holding both the central and state governments accountable.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

Logical Reasoning:

The Court rejected the Central Government’s argument that its responsibility ends after the second signature on the Fund Transfer Order (FTO). The Court emphasized that the entire process of wage payment, including the transfer of funds to the worker’s account, must be completed within the stipulated time. The Court also noted that bureaucratic delays cannot be an excuse to deny payment of wages to the workers.

The Court emphasized that the purpose of Section 3 and paragraph 29 of Schedule II of the Act would be completely defeated if delayed payment of wages was allowed. The court also noted that delayed payment adds several crores to the compensation bill, which is an avoidable financial burden on the Central Government.

The court also considered the Annual Master Circular (FY 2017-2018) which validated the objection raised by the petitioner that payment of compensation goes beyond the signing of FTOs. The court held that the Central Government cannot violate its own Master Circular and seek to absolve itself of any liability.

The Court also considered the fact that the Ministry of Rural Development is making all efforts for improving the Stage-I and Stage-II of the wage payment process. The Court noted that while there is some improvement, it is not enough and there cannot be any justifiable reason to delay payment of wages or justifiable denial of compensation for delayed payment of wages.

The Court made it clear that any delay in payment of wages or compensation violates statutory provisions.

The Court directed the Central Government, in consultation with the State Governments and Union Territory Administrations, to prepare an urgent time-bound mandatory program to make the payment of wages and compensation to the workers.

The Court did not discuss the third issue relating to social audits.

The Court concluded that all issues pertaining to the Act now stand closed and concluded. The Court complimented the petitioner for highlighting issues of seminal importance and the Ministry of Rural Development for reacting positively and bringing about some significant changes to make the Act and the Scheme more effective.

The Court also noted that the efforts of the petitioner and the Ministry should continue to be inexorably for the socio-economic benefit of the millions of unemployed persons in the country.

“The law requires and indeed mandates payment of wages not later than a fortnight after the date on which the work was done by the worker or labourer.”

“Any reason for the delay in receiving wages is not at all the concern of the worker. He or she is entitled to get the due wages within a fortnight of completion of the work.”

“Bureaucratic delays or red tape cannot be pedalled as an excuse to deny payment of wages to the workers.”

Key Takeaways

• Timely Wage Payment: Workers under MGNREGA are entitled to receive their wages within a fortnight of completing their work.
• Compensation for Delays: If wages are not paid within the stipulated time, workers are entitled to compensation at the rate of 0.05% of the unpaid wages per day of delay.
• Shared Responsibility: Both the central and state governments are responsible for ensuring timely wage payments and compensation.
• No Caps on Funds: There is no informal cap on the release of funds for MGNREGA, and additional funds should be released when needed.
• Accountability: Bureaucratic delays or red tape cannot be used as excuses for delaying wage payments.

Potential Future Impact: This judgment reinforces the rights of MGNREGA workers and is likely to lead to greater accountability and efficiency in the implementation of the scheme. It may also result in a reduction in delays in wage payments and an increase in the payment of compensation for such delays. The judgment will also ensure that the Central Government cannot shy away from its responsibility or taking advantage of a person who has been placed in the unfortunate situation of having to seek employment under the Act and then not being paid wages for the unskilled manual labour within the statutorily prescribed time.

Directions

The Supreme Court directed the Central Government, through the Ministry of Rural Development, in consultation with the State Governments and Union Territory Administrations, to prepare an urgent time-bound mandatory program to ensure the payment of wages and compensation to the workers. This program is to be implemented in the interest of the workers and in furtherance of the rule of law.

Development of Law

Ratio Decidendi: The ratio decidendi of this case is that workers under MGNREGA are entitled to timely payment of wages within a fortnight of the date on which the work was done, and if there is a delay, they are entitled to compensation as prescribed in paragraph 29 of Schedule II of the Act. Both the Central and State Governments are responsible for ensuring compliance with this mandate.

Change in Previous Positions of Law: This judgment clarifies that the Central Government cannot absolve itself of responsibility for delays in wage payments after the second signature on the FTO. It also emphasizes that compensation is due for the entire delay in payment, not just until the uploading of FTOs. This clarifies the extent of the Central Government’s responsibility in the wage payment process and ensures that workers are compensated for the full duration of the delay.

Conclusion

In Swaraj Abhiyan vs. Union of India, the Supreme Court addressed critical issues related to the implementation of MGNREGA, particularly concerning delays in wage payments and the provision of compensation. The Court held that the Central Government is empowered to scrutinize and assess funds but cannot arbitrarily reduce the labor budget. It also clarified that there is no informal cap on the release of funds. Most importantly, the Court emphasized that workers are entitled to receive their wages within a fortnight of completing their work and are entitled to compensation for any delays. The judgment mandates that both the central and state governments are responsible for ensuring timely payments and compensation, reinforcing the rights of MGNREGA workers and promoting greater accountability in the implementation of the scheme.

Category

• Parent Category: Social Welfare Legislation
  • Child Category: Mahatma Gandhi National Rural Employment Guarantee Act, 2005
  • Child Category: Wage Payment
  • Child Category: Compensation for Delay
  • Child Category: MGNREGA Implementation
• Parent Category: Mahatma Gandhi National Rural Employment Guarantee Act, 2005
  • Child Category: Section 3, Mahatma Gandhi National Rural Employment Guarantee Act, 2005
  • Child Category: Section 4, Mahatma Gandhi National Rural Employment Guarantee Act, 2005
  • Child Category: Section 14, Mahatma Gandhi National Rural Employment Guarantee Act, 2005

FAQ

Q: What is the main issue addressed in the Swaraj Abhiyan vs. Union of India case?
A: The case primarily addresses the issue of delays in wage payments and the provision of compensation under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Q: How soon should MGNREGA workers receive their wages?
A: MGNREGA workers should receive their wages within a fortnight (15 days) of completing their work.

Q: What happens if there is a delay in wage payment?
A: If wages are not paid within 15 days, workers are entitled to compensation at the rate of 0.05% of the unpaid wages per day of delay.

Q: Who is responsible for ensuring timely wage payments?
A: Both the central and state governments are responsible for ensuring timely wage payments and compensation.

Q: Can the government impose a cap on MGNREGA funds?
A: No, the Supreme Court clarified that there is no informal cap on the release of funds for MGNREGA, and additional funds should be released when needed.

Q: What should I do if my wages are delayed under MGNREGA?
A: If your wages are delayed, you are entitled to compensation. You should contact the relevant authorities at the state level to claim your compensation.

Q: Does the Central Government have any responsibility after the second signature on the Fund Transfer Order (FTO)?
A: No, the Supreme Court clarified that the Central Government cannot absolve itself of responsibility for delays inwage payments after the second signature on the FTO. The Central Government is responsible for the entire process of wage payment, including the transfer of funds to the worker’s account.