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Supreme Court declines to stay MHA order of paying salary to workers, issue notice to Govt.

The Supreme Court refused to stay the government circular asking private establishments, including MSMEs to pay full salaries to their employees during the Covid-19 lockdown. However, the apex court directed the ministry of home affairs (MHA) to put on record its policy decision and also asked it to explain as to why its order of March 29 directing private enterprises to pay off full wages without any deductions should not be stayed.

A bench led by justice NV Ramana issued notice to the government and asked solicitor general Tushar Mehta to file reply within two weeks.


It was hearing various petitions filed by companies including Ludhiana Hand Tools Association and Ficus Pax seeking quashing of the MHA’s March 29 circular directing all private enterprises to continue payment of full salaries for the duration of the lockdown. The MHA order had also warned of legal consequences if the directions for payment of full salaries were not complied with.


Ludhiana-based association of hand tools manufacturers, comprising of 41 MSMEs, has blamed the government of passing such orders without due care and deliberation on the financial implications for the employers and had warned that making such payments would lead to the closure of many of the units and which in turn would cause permanent unemployment and will adversely affect the economy.


Such a blanket direction for payment of full salaries is manifestly arbitrary, unconstitutional and unsustainable, MSMEs had said, adding that private employers should be completely exempted from paying their workmen during the lockdown as the one-sided implementation of contract alone was not permitted.


Ludhiana Hand Tools Association also said the MHA order violated the private companies’ right to carry on any occupation, trade or business guaranteed under Articles 19(1)(g) of the Constitution. MSMEs also argued that the Centre lacked the power to direct payment of wages as the provisions of the Disaster Management Act, 2005 cannot “impinge upon express provisions of the Industrial Disputes Act, 1947 and take away the right to layoff workmen during times of natural calamity.”


It is irrational to treat all private establishments alike irrespective of profit, loss, debt, or turnover, the petition said, adding that a blanket direction by MHA is akin to a tax without any statutory backing. “Government has not taken any steps for workforce instead put the burden on employers to pay full wages,” MSMEs said, adding that an employer and employee have reciprocal promises whereby the right of an employee to demand salary is reciprocal to performance of work by such employee.


Besides, the petition said, that an employer has a right not to pay if no work is done. As an alternative, the association had stated that hundreds of crores of unclaimed provident fund and Employees State Insurance Corporation contribution lie in banks attracting interest and the government should utilise these funds rather than burden the private sector.