SWARAJ ABHIYAN (VI) versus UNION OF INDIA & ORS. on 18 May 2018

[2018] 5 S.C.R. 398

SUPREME COURT REPORTS

[2018] 5 S.C.R.

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SWARAJ ABHIYAN (VI)

v.

UNION OF INDIA & ORS.

(Writ Petition (Civil) No. 857 of 2015)

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MAY 18, 2018

[MADAN B. LOKUR AND N. V. RAMANA, JJ.]

Mahatma Gandhi National Rural Employment Guarantee Act,2005:

Css. 3(1), 3(3), 3(4) and 14(6); Schedule I Paragraph 7,Schedule II Paragraph 29 – Writ petition filed u/Art. 32 ofConstitution, highlighting deficiencies in implementation of the Act– It was alleged that “approved labour budget” fixed by CentralGovernment violated essence of the Act; that there was unreasonablereduction in the funds made available to the States and there was,Ddelay in payment of wages to the labourers – Held: CentralGovernment is statutorily empowered (by National EmploymentGuarantee Fund Rules) to scrutinize and assess the funds to bereleased – Therefore, fixation of “approved labour budget” is notarbitrary – If there is unreasonable reduction of funds to States, itEis for the States to object to that – In absence of such objection byany State, such plea cannot be raised in the petition – It is left to theCentral Government to find a solution in order to avoid delay inrelease of funds to the States – In terms of ss. 3(3) and 3(4) andSchedule II of the Act, worker is entitled to wages within a fortnightfailing which he is entitled to compensation – The burden ofFcompliance is on the State Government and Central Government –The State and Central Governments are directed to prepare an urgenttime-bound programme to make payment of wages and compensationto the workers – National Employment Guarantee Fund Rules, 2006– r. 5.

GThe Court

HELD: 1.1 Rule 5 of The National Employment GuaranteeFund Rules, 2006 provides, inter alia, for release of grants fromthe National Employment Guarantee Fund (NEGF) to the StateGovernments and Union Territory Administrations. Thus. theHCentral Government is statutorily empowered to scrutinize and assess the funds to be released to the State Governments andUnion Territory Administrations for the purposes of the MahatmaGandhi National Rural Employment Guarantee Act, 2005. Thefinal assessment is made by the Empowered Committee inconsultation with the State Governments and Union TerritoryAdministrations. Therefore, it is not as if the ‘agreed to labourbudget’ or the ‘approved labour budget’ is fixed arbitrarily bythe Central Government. There is nothing objectionable in this,more particularly since the process is backed by statutoryprovisions. [Paras 18 and 19] [408-C-D, H; 409-A-B]

1.2 Meaningful discussions are necessary while approvingor finalizing the labour budget. The fact that so many States andUnion Territories have exceeded the expenditure postulated bythe ‘agreed to labour budget’ is an indication that the Scheme iseither well received by the unemployed or the EmpoweredCommittee is being a little tight-fisted. The release of funds isfor a good socio-economic cause and therefore expeditious andsufficient availability of funds should be the objective. Under thecircumstances, it is not correct to say that the CentralGovernment cannot prepare an ‘agreed to labour budget’ or thatthe process of preparing an ‘agreed to labour budget’ isimpermissible or that there is an informal cap on release of funds.[Para 27] [411-D-F]

2.1 If there is some sort of a cap or an unreasonablereduction in the funds made available to the State Governments,it is really for the concerned State Government to object to thecap and non-availability of funds. The Court has not been shownany objection raised by any State to the effect that it has notreceived adequate funds for implementation of the Scheme forvarious activities. In the absence of any objection or demandhaving been raised for funds by the State Governments (and denialof funds by the Central Government), the petitioner cannot beallowed to raise such a contention which ought really to be raisedby the affected State Government. [Para 24] [410-D-F]

3. Regarding delayed payments, according to the CentralGovernment, there is some laxity by the State Governments andUnion Territory Administrations in respect of obtaining anothermother sanction, when the Mother sanction based on the “agreed AB

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Ato labour budget” nears exhaustion or is exhausted. This is abottleneck that must be addressed and, as stated in the affidavit,checklists have been prepared in consultation with the StateGovernments and Union Territory Administrations to facilitatesmoother processing of proposals. Perhaps something moreneeds to be done and it is left to the Ministry of RuralBDevelopment to find a solution. One of the positive measuresadopted by the Ministry of Rural Development to reduce delaysin release of funds is conducting a Mid Term Review with theState Governments and Union Territory Administrations. [Paras25 and 26] [411-A-C]

C4.1 Section 3(3) and Section 3(4) of the Act provide thatevery person who has done work given to him or her under theScheme, shall be entitled to receive wages and the disbursementof daily wages shall be on a weekly basis or in any case not laterthan a fortnight after the date on which such work was done.DSchedule II to the Act mentions the conditions for guaranteedrural employment and the minimum entitlements of labourers.Paragraph 29 relates to wage payment and is of great significance.It provides, inter alia, that in case wages are not paid within 15days from the date of closure of the Muster Roll, the wage seeker or labourer shall be entitled to receive compensation for the delayEat 0.05% of the unpaid wages per day of delay beyond thesixteenth day of closure of the Muster Roll. Thus, the provisionsmandate timely payment and compensation for delayed payment.[Paras 29, 30 and 31] [411-G-H; 412-A-C; 413-E]

4.2 While admitting and appreciating that there is delay in Fpayment of wages (whatever the cause) the Central Governmenthas stated that steps have been taken to ensure that payment ofwages is not delayed. The Central Government has suggestedtimelines for payment of wages within 15 days. The CentralGovernment has required the State Governments and Union Territory Administrations to formulate rules or issue notificationsGfor payment of compensation for delayed payment of wages. Asmany as 27 States and Union Territories have formulated andissued rules or notifications or guidelines or advisories in thisregard. [Paras 35 and 36] [416-B-D; 417-A-B]4.3 The law requires and indeed mandates payment of wagesHnot later than a fortnight after the date on which the work was done by the worker or labourer. Any reason for the delay inreceiving wages is not at all the concern of the worker. He or sheis entitled to get the due wages within a fortnight of completionof the work. If there are any administrative inefficiencies ordeficiencies or laxity, it is entirely for the State Government andthe Ministry of Rural Development to sort out the problem.Bureaucratic delays or red tape cannot be pedalled as an excuseto deny payment of wages to the workers. It is precisely toovercome any inefficiency or deficiency that payment ofcompensation is postulated, otherwise the purpose of Section 3and paragraph 29 of Schedule II of the Act would get completelydefeated. The delayed payment adds several crores to thecompensation bill. This is to nobody’s advantage and merely addsan avoidable financial burden on the Central Government. [Paras39 and 40] [417-E-H; 418-A]

4.4 The Central Government cannot be seen to shy awayfrom its responsibility or taking advantage of a person who hasbeen placed in the unfortunate situation of having to seekemployment under the Act and then not being paid wages for theunskilled manual labour within the statutorily prescribed time.The State Governments and Union Territory Administrations maybe at fault, but that does not absolve the Central Government ofits duty. [Para 41] [418-C]

4.5 Therefore, it is made clear and directed that in terms ofthe Act and Schedule II thereof a worker is entitled to paymentof wages within a fortnight of the date on which the work wasdone, failing which the worker is entitled to the compensation asprescribed in paragraph 29 of the Schedule II of the Act. Theburden of compliance is on the State Governments and UnionTerritory Administrations as well as the Central Government.One entity cannot pass on the burden to another and vice versa.The Central Government through the Ministry of RuralDevelopment, in consultation with the State Governments andUnion Territory Administrations, is directed to prepare an urgenttime bound mandatory programme to make the payment of wagesand compensation to the workers. This is not only in the interestof the workers who have expended unskilled manual labour butalso in furtherance of the rule of law which must be followed inletter and spirit. [Paras 44 and 45] [419-G-H; 420-A-C]

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ACIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.857 of 2015.

Under Article 32 of the Constitution of India.

Ms. V. Mohana, Jaideep Gupta, Sr. Advs., Anil Grover, S. S.Shamshery, AAGs, Prashant Bhushan, Ms. Cheryl D’Souza, Avik Saha,BDevesh Agnihotri, Mukul Singh, Rajiv Nanda, M. K. Maroria, Ms. KashviDutta, Pushkar Taimni, Raj Bahadur Yadav, Neeraj Kumar Sharma,Ms. Supriya Juneja, Kuldeep S. Parihar, H. S. Parihar, Guntur Prabhakar,Ms. Prerna Singh, Gopal Singh, Manish Kumar, A. P. Mayee, Avnish

M. Oza, Chirag Jain, Ms. Hematika Wahi, Ms. Shodhika Sharma, AnilCGrover, Dr. Monika Gussain, Manpreet Kaur Bhalla, Sanjay KumarVisen, Ajay Marwah, Mool Singh, Varinder Kumar Sharma, TapeshKumar Singh, Aditya Pratap Singh, Mohd. Waquas, V. N. Raghupathy,Leishangthem Roshmani Kh., Ms. Maibam Babina, NishantKatneshwarkar, Ranjan Mukherjee, Daniel Stone Lyngdoh, Mrs. K.Enatoli Sema, Edward Belho, Amit Kumar Singh, K. Luikang Michael,DSibo Sankar Mishra, Ms. Uttara Babbar, Ms. Akanksha Choudhary,Ms. Bhavana Duhoon, Amit Sharma, Ankit Raj, Ms. Indira Bhakar,Ms. Ruchi Kohli, Ms. Aruna Mathur, Avneesh Arputham, Ms. AnuradhaArputham, Ms. Simran Jeet, P. Venkat Reddy, Prashant Kr. Tyagi (ForM/s. Venkat Palwai Law Associates), B. Vinodh Kanna, A. Sriram,EAkshat Kumar, Upendra Mishra, Rajiv Nanda, Bhupesh Narula, K. V.Jagdishvaran, Mrs. G. Indira, V. G. Pragasam, Prabu Ramasubramanian,S. Manuraj, Advs. for the appearing parties.

The Order of the Court was delivered by

MADAN B. LOKUR, J. 1. In the record of proceedings of thisFCourt dated 9th August, 2017 it is noted that learned counsel for thepetitioner would like to highlight three issues pertaining to theimplementation of the Mahatma Gandhi National Rural EmploymentGuarantee Act, 2005 (for short the Act) and the Scheme framedthereunder. These issues are:

G1. Delay in payment of wages and compensation to thebeneficiaries under the Act and the Scheme framedthereunder.

2. Reduction in person days and consequent reduction in allocationof funds from the projection made by the State GovernmentsHand the Union Territory Administrations.

3. Absence of social audits being conducted.

2. We have heard learned counsel for the petitioner as well as thelearned Attorney General in detail in respect of these issues and havealso gone through the various affidavits and written submissions.

3. The Act was enacted by Parliament with the objective, interalia, of enhancing the livelihood security of poor households in rural areasby providing at least one hundred days guaranteed wage employment toevery such household whose adult members volunteer to do unskilledmanual work.

4. Section 3(1) of the Act provides that the State Governmentshall in rural areas (as notified by the Central Government) provide toevery household whose adult members volunteer to do unskilled manualwork not less than one hundred days of such work in a financial year inaccordance with the Scheme made under the Act. Section 3(3) providesthat the disbursement of daily wages shall be made on a weekly basis orin any case not later than a fortnight after such work has been done.Section 3 of the Act reads as follows:

“3. Guarantee of rural employment to households. - (1) Saveas otherwise provided, the State Government shall, in such ruralarea in the State as may be notified by the Central Government,provide to every household whose adult members volunteer to dounskilled manual work not less than one hundred days of suchwork in a financial year in accordance with the Scheme madeunder this Act.

(2) Every person who has done the work given to him under theScheme shall be entitled to receive wages at the wage rate foreach day of work.

(3) Save as otherwise provided in this Act, the disbursement ofdaily wages shall be made on a weekly basis or in any case notlater than a fortnight after the date on which such work was done.

(4) The Central Government or the State Government may, withinthe limits of its economic capacity and development, makeprovisions for securing work to every adult member of a householdunder a Scheme for any period beyond the period guaranteedunder sub-section (1), as may be expedient.”

5. Section 4 of the Act provides that to give effect to the provisionsof Section 3 thereof every State Government shall frame a Scheme A

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Aproviding not less than one hundred days of guaranteed employment in afinancial year to every household in the rural areas covered under theScheme and whose adult members, by application, volunteer to dounskilled manual work subject to the conditions laid down in the Act andin the Scheme.

B6. In terms of Section 4 of the Act a working Scheme has beenformulated and is in place and there is no dispute in this regard.

Reduction in person days through approved labour budget andallocation of funds

7. The grievance of the petitioner under this head is succinctlyCstated and understood by the Union of India in its written submissions of14th March, 2018 as follows:

(a) “Approved Labour Budget” violates the essence of the Actwhich does not envisage any role for the Central or StateGovernment in altering the labour budget in any form.

(b) The labour budget projections are arrived at through the processspelt out in Section 14(6) and paragraph 7 of Schedule I ofthe Act[1] and any reduction of the labour budget goes againstthe spirit of the Act.

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(c) The Central Government has started exercising discretionarypowers in deciding how much a State can spend on generatingEemployment.

(d) The generation of the Muster Roll is halted once the Statehas reached the “Approved Labour Budget”.To appreciate the grievance of the petitioner, it is necessary to refer to afew more provisions of the Act.

FApproved labour budget

8. Article 243-G of the Constitution was introduced by the 73rdAmendment Act and this endows the Panchayats with such powers andauthority as may be necessary to enable them to function as institutionsof State Government.G

1 There shall be a systematic, participatory planning exercise at each tier of Panchayat,conducted between August to December month of every year, as per a detailedmethodology laid down by the State Government. All works to be executed by theGram Panchayats shall be identified and placed before the Gram Sabha, and such workswhich are to be executed by the intermediate Panchayats or other implementing agenciesshall be placed before the intermediate or District Panchayats, along with the expectedHoutcomes.

9. Section 14 of the Act provides for the appointment of a DistrictProgramme Coordinator who is the Chief Executive Officer of the DistrictPanchayat or the Collector or any other district level officer of anappropriate rank as decided by the State Government. The DistrictProgramme Coordinator is expected to implement the Scheme in thedistrict, in addition to his/her other functions.

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10. Section 14(6) of the Act requires the District ProgrammeCoordinator to prepare, in the month of December every year, a labourbudget for the next financial year containing the details of anticipateddemand for unskilled manual work in the district and the plan forengagement of labourers in the works covered under the Scheme andsubmit it to the District Panchayat.

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11. The step by step requirement (as submitted by the petitionerand in which there is no serious disagreement voiced by the Union ofIndia)[2] for identification of works, their finalization, planning and approvalof the labour budget under the Act and the Scheme is as follows:

DStep 1Gram Panchayat Section 16(1) of the Act: identifies works to be taken up in area based on “The Gram P anchayat shall be recommendations of the responsible for identification of Gram/W ard Sabha the projects in the Gram Sabha area to be taken under a Scheme as per the Erecommendations of the Gram Sabha and the W ard Sabha and for executing and supervision of works.”Step 2Gram Panchayat to Section 16(4) of the Act: forward the works Fidentified by the Gram “The Gram P anchayat shall S abha to the P rogramme forward its proposals for the Officer for scrutiny + development projects including preliminary approval the order of priority between different works to the Programme Officer for scrutiny Gand preliminary approval prior to the commencement of the year in which it is proposed to be executed.”

2 Essentially this is only a procedural matter. Too much should not be read into the‘disagreement’ if any.

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AStep 3Programme Officer at S ection 15(4) of the Act: the Block level consolidates plans “The Programme Officer shall received by allGram prepare a plan for the Block Panchayats under his jurisdiction by consolidating the project Bproposals prepared by the Gram Panchayat and the proposals received from intermediate panchayats” Step 4Block Panchayat to S ection 16(3)(b) of the Act: Capprove the block level plan prepared by the “to approve the Block level Programme Officer and P lan for forwarding it to the forwarding it to the district Panchayat at the District Panchayat for district level for final approval approval” DStep 5District Programme S ection 13(3)(a) of the Act: Coordinator to consolidate all Block “The District Programme level plans and submit it Coordinator shall “consolidate to the District Panchayat the plans prepared by the Blocks and project proposals Ereceived from implementing agencies for inclusion in the shelf of projects to be approved by the Panchayat at the District level” FStep 6District Panchayat S ection 13(2)(a) of the Act: finalizes and approves block-wise works to be “The functions of the taken up under the P anchayats at the district level Scheme shall be- a.To finalise and Gapprove block-wise shelf of projects to be taken up under a programme under the Scheme” H

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Act:me olidate e osals nting n the yat at t level wise to be a er the It is after the above exercise is complete that the role of the DistrictProgramme Coordinator commences.

12. At this stage it is important to notice: (i) The State Governmentand the Central Government have really no specific role in the formulationof programmes for the benefit of the rural areas and in the expenditurethat would be required to carry out the development activities of thePanchayat; (ii) The provisions and steps form the basis of the number ofperson days of work in a year in each year and the fund requirement;(iii) The requirements made out are anticipatory and indicative.

13. The submission of the petitioner is that, as mandated by theAct, every State Government obtains detailed information from everydistrict and prepares a labour budget which indicates the expenditureanticipated and the person days necessary for implementation of theprogrammes in the concerned rural area However, the CentralGovernment in the Ministry of Rural Development through an EmpoweredCommittee discusses the annual labour budget with representatives ofthe State Governments and after such discussions, an ‘agreed to labourbudget’ (different from the labour budget) is prepared. According to thepetitioner, there is no question of having these discussions or an ‘agreedto labour budget’ particularly when a detailed assessment has been madeby the District Programme Coordinator and the Panchayat and forwardedby the State Government to the Central Government.

14. On the other hand, the view of the Central Government, basedon experience, is that some State Governments are not able to fullyutilize the proposed labour budget and therefore through discussions, thelabour budget is appropriately rationalized to a reasonable figure basedon the person days necessary. As mentioned above, this is objected toby the petitioner.

15. The further grievance of the petitioner is that the ‘agreed tolabour budget’ works as a cap on the expenditure for every financialyear and the generation of the Muster Roll is stopped. Therefore, eventhough there would be unemployed persons willing to do some unskilledmanual work but they are prevented from doing so because of an informalcap on expenditure.

16. Essentially, the submission of learned counsel for the petitioneris that first of all there cannot be an ‘agreed to labour budget’ for thereason that once the State Government raises a demand for A

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Aimplementation of the Scheme under the Act, the Central Governmentmust release the funds without any reduction in the quantum. The secondobjection by learned counsel for the petitioner is that if the amountdemanded by the State Government is not released there is a very strongpossibility of some persons not being able to get employment due toinsufficiency of funds and also due to the informal cap on the availabilityBof funds.

17. We are not in agreement with learned counsel on both thesubmissions. We may mention that we have already dealt with somefacets of this issue in our judgment and order of 13th May, 2016[3] andhave nothing to add to that.C

18. Rule 5 of The National Employment Guarantee Fund Rules,2006 provides, inter alia, for release of grants from the NationalEmployment Guarantee Fund (NEGF) to the State Governments andUnion Territory Administrations. It prescribes that:

“(1) Before the beginning of each financial year on or before 31stDJanuary, all Secretaries of the State Governments and UnionTerritories concerned with the implementation of the Act and theState Employment Guarantee Scheme shall present their annualwork plan and labour budget to the Ministry of Rural Development.

(2) The State Governments and Union Territories may also inEtheir annual work plan and labour budget submit proposals forany work other than those specified in Schedule I of the Act.

(3) The Ministry of Rural Development may examine theproposals received by it on or before the 31st of January ofeach financial year and review the performance of the StatesFand Union Territories with respect to the implementationof the Act and estimate the amount to be released to theState Governments and Union Territory Administrationsfrom the National Fund.

(4) Release of funds to the State Governments and Union TerritoryAdministrations shall be made in accordance with the directionsGissued by the Ministry of Rural Development from time to time.”[Emphasis supplied by us].

19. It is quite clear that apart from anything else, the CentralGovernment is statutorily empowered to scrutinize and assess the funds H3 Swaraj Abhiyan (III) v. Union of India & Ors. (2016) 7 SCC 544

to be released to the State Governments and Union TerritoryAdministrations for the purposes of the Act. The final assessment ismade by the Empowered Committee in consultation with the StateGovernments and Union Territory Administrations. Therefore, it is notas if the ‘agreed to labour budget’ or the ‘approved labour budget’ isfixed arbitrarily by the Central Government. We do not see anythingobjectionable in this, more particularly since the process is backed bystatutory provisions.

Cap on funds

20. It has been brought on record by the Union of India in itsaffidavit of 4th December, 2017 that not only is there no informal cap onthe release of funds, but whenever required, necessary funds have beenreleased over and above the ‘agreed to labour budget’. It is stated thatin 2015-16 as many as 16 State Governments and Union TerritoryAdministrations had exceeded the ‘agreed to labour budget’ and fundshad been released. In 2016-17 as many as 20 State Governments andUnion Territory Administrations had exceeded the ‘agreed to labourbudget’ and funds released. The position was similar for 2017-18 with12 State Governments and Union Territory Administrations exceedingthe ‘agreed to labour budget’ and funds released.[4] This is possible only ifthere is no cap, informal or otherwise and the generation of the MusterRoll continues.

21. Learned counsel for the petitioner pointed out instances wherethere had been a shortage of funds released to two States namely Tripuraand Telangana.

22. In this regard, it was pointed out by the learned AttorneyGeneral that as far as Tripura is concerned, there were some allegationsof corruption in the sense of mis-utilization of funds and that was beinginvestigated. It was reported that the funds made available had not beenused for the purpose for which they were released. We need not delveinto this issue at all and leave it at that.

23. As far as the State of Telangana is concerned it was statedthat according to the State functionaries there was 100% utilization byJune 2017 itself that is in a period of about two months. We find thisdifficult to appreciate and in fact we were informed by the learned 4 Upto the date of the written submissions, that is, 13th April, 2018 but the data is saidto be incomplete.

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AAttorney General that the factual position is otherwise and it was foundthat Telangana had not been able to utilize 100% funds released as perthe ‘agreed to labour budget.’ In the written submissions filed by theUnion of India on 13[th] April, 2018 it is stated as follows:

“However, the State has never exceeded 12 crores person daysBexcept in FY 2015-16 which was a severe drought year andprovision for additional 50 days were granted by CentralGovernment to help the rural poor tide over the impacts of thenational calamity. The State after due consultation with the Ministryagreed to 12 crores person days for FY 2017-18. This was 20%more than the approved Labour Budget of FY 2016-17 and dueCconsideration was given to the increased demand for work underthe scheme. It is important to mention here that Telangana receivedthe highest ever allocation (Rs.2539.20 Cr) of MGNREGA fundsin FY 2017-18. Despite having no paucity of funds in FY 2017-18, the State could not generate 100% of the agreed to LabourDBudget.”

24. What is most significant and important, in our opinion, is that ifthere is some sort of a cap or an unreasonable reduction in the fundsmade available to the State Governments it is really for the concernedState Government to object to the cap and non-availability of funds. WeEhave not been shown any objection raised by any State to the effect thatit has not received adequate funds for implementation of the Scheme forvarious activities. In the absence of any objection or demand havingbeen raised for funds by the State Governments (and denial of funds bythe Central Government) we are of the view that the petitioner cannotbe allowed to raise such a contention which ought really to be raised byFthe affected State Government.

25. The Central Government through the Ministry of RuralDevelopment has expressed the view in its affidavit of 3rd January,2018 that implementation of the Scheme is the responsibility of the Statesand, hence, securing funds for implementation is the responsibility of theGStates. We cannot accept this blanket statement, particularly when itconcerns delayed payments. It is true that when the Mother Sanctionbased on the ‘agreed to labour budget’ nears exhaustion or is exhausted,the concerned State or Union Territory must obtain another MotherSanction by providing the Central Government with the requisite documents as per the financial norms. According to the CentralGovernment, there is some laxity in this regard by the State Governmentsand Union Territory Administrations, which cannot be overlooked in viewof the General Financial Rules. This is a bottleneck that must beaddressed and, as stated in the affidavit, checklists have been preparedin consultations with the State Governments and Union TerritoryAdministrations to facilitate smoother processing of proposals. Perhapssomething more needs to be done and we leave it to the Ministry ofRural Development to find a solution.

26. One of the positive measures adopted by the Ministry of RuralDevelopment to reduce delays in release of funds is conducting a MidTerm Review with the State Governments and Union TerritoryAdministrations. One such Mid Term Review was conducted from 29thAugust, 2017 to 13th October, 2017 to “reorient” them on the financialnorms and the checklists to be adhered to for preparing proposals forrelease of funds. We expect a similar exercise to be conducted for 2018-19 and for subsequent years to tide over any possible stumbling blocks.

27. We reiterate the necessity of meaningful discussions whileapproving or finalizing the labour budget. The fact that so many Statesand Union Territories have exceeded the expenditure postulated by the‘agreed to labour budget’ is an indication that the Scheme is either wellreceived by the unemployed or the Empowered Committee is being alittle tight-fisted. It must be appreciated that the release of funds is for agood socio-economic cause and therefore expeditious and sufficientavailability of funds should be the objective. Under the circumstances,we reject the submission of learned counsel for the petitioner that theCentral Government cannot prepare an ‘agreed to labour budget’ or thatthe process of preparing an ‘agreed to labour budget’ is impermissible orthat there is an informal cap on release of funds.

Compensation for delayed payment of wages

28. The second issue raised by learned counsel for the petitioneris of delay in payment of wages to the beneficiaries and to make itworse, compensation is not paid to them in terms of the Act. Both issuesare intrinsically interlinked.

29. Section 3(3) and Section 3(4) of the Act provide that everyperson who has done work given to him or her under the Scheme shallbe entitled to receivewages and the disbursement of daily wages shall AB

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Abe on a weekly basis or in any case not later than a fortnight after thedate on which such work was done.

30. In this context, Schedule II to the Act mentions the conditionsfor guaranteed rural employment and the minimum entitlements oflabourers. Paragraph 29 relates to wage payment and is of greatBsignificance. It provides, inter alia, that in case wages are not paid within15 days from the date of closure of the Muster Roll, the wage seeker orlabourer shall be entitled to receive compensation for the delay at 0.05%of the unpaid wages per day of delay beyond the sixteenth day of closureof the Muster Roll.

CParagraph 29 of Schedule II of the Act reads as follows:

“Wage payment:––

29. (1) In case the payment of wages is not made within fifteendays from the date of closure of the muster roll, the wageseekers shall be entitled to receive payment of compensationDfor the delay, at the rate of 0.05% of the unpaid wages per dayof delay beyond the sixteenth day of closure of muster roll.

(a) Any delay in payment of compensation beyond aperiod of fifteen days from the date it becomespayable, shall be considered in the same manner asEthe delay in payment of wages.

(b) For the purpose of ensuring accountability in paymentof wages and to calculate culpability of variousfunctionaries or agencies, the States shall divide theprocesses leading to determination and payment ofFwages into various stages such as––

i. measurement of work;

ii. computerising the muster rolls;

iii. computerising the measurements;

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iv. generation of wage lists; and

v. uploading Fund Transfer Orders (FTOs), and specify stage-wise maximum time limits alongwith the functionary or agency which is responsiblefor discharging the specific function.

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(c) The computer system shall have a provision toautomatically calculate the compensation payablebased on the date of closure of the muster roll andthe date of deposit of wages in the accounts of thewage seekers.

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(d) The State Government shall pay the compensationupfront after due verification within the time limitsas specified above and recover the compensationamount from the functionaries or agencies who isresponsible for the delay in payment.

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(e) It shall be the duty of that District ProgrammeCoordinator or Programme Officer to ensure thatthe system is operationalised.

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(f) The number of days of delay, the compensationpayable and actually paid shall be reflected in theMonitoring and Information System and the LabourDBudget.

(2) Effective implementation of sub-paragraph (1) shall beconsidered necessary for the purposes of the section 27 of theAct.”

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31. A perusal of Section 3(3) read with Section 3(4) and paragraph29 of Schedule II of the Act mandates timely payment and compensationfor delayed payment. This needs to be emphasized.

32. The Central Government does admit that there has been delayin payment of wages and some of the causes for delay have beenexplained. These include delay in filling of attendance sheet, delay inmeasurement of work, delay in check measurement, delay in generationof wage list and non-submission or partial submission of requisitedocuments by the States to the Ministry of Rural Development etc. Sincefunds are released in accordance with the provisions of the GeneralFinancial Rules (GFR) and if the State Governments does not submitthe papers or documents in accordance with the GFR, it is difficult forthe said Ministry to release funds.

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33. Learned counsel for the petitioner submitted that one of themajor causes of delay in payment of wages is the State Governmenthaving insufficient funds even as per the approved or agreed to labour H

Abudget. It is also submitted that the wage payment process or wagecycle is as follows:

M GNREGA Wage Payment ProcessSlActivityDescriptionResponsibilityB1. Muster Roll Muster Roll is a State Government is closed document, which record the attendance of workers at the worksiteC2. Data entry of The details of the State Government M uster Roll attendance and the + measurement of the measurement work done are entered book into the Management Information System.D3. Generation After these two items State Government of Wage List are recorded, the wages payable to the worker is calculated and an electronic F und Transfer Order (FTO) Eis generated. 4. 1st Signature This is approved State Government on Fund electronically by a Transfer designated authority. Order It requires two Felectronic signatures. This is the “maker” portion. 5. 2nd signature After the first State Government on Fund signature, it is Transfer electronically sent to GOrder the second signatory. This is the “checker” portion. This then gets pushed as an e-pay order onto the MNR EGA server. H

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SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS.[MADAN B. LOKUR, J.]

A6. Sent to These files are then Cen tral Public Fund pulled fro m the Government/ M anagem ent MGNR EGA server to Paym ent Agency System (run the Pu blic Fund by Min istry Managemen t System of Finance) (PF MS ) server. The follo wing steps Bhappen at that level: Pub lic Fund Managemen t System will send these files to the accredited bank. CThe accredited bank will send the files to the sponsor ban k. Spo nsor B ank will process the files using DNational Payment s Corporation of India. PFM S shares res pon ses with NREGASoft.E7. Sent to State The PFMS window Cen tral Employment notion ally sends it to Government/ Guarantee the State Em ploym ent Paym ent Agency Fund – Guarantee Fun d. This NeFM S bank account under the N eFMS is solely Ffor wage p ayments 8. Sent to Post After notion ally Cen tral Office/Bank passing through the Government/ State Em plo ym ent Paym ent Agency Guarantee Fun d it is then sent to the Post GOffice/Bank . 9. Deposited in The paym ent agency Cen tral workers deposits the money Government/ account into the workers Paym ent Agency account.

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A34. According to the petitioner, the delay caused by the CentralGovernment in steps No. 6 to 9 is not taken into account for the purposeof payment of compensation, meaning thereby that the CentralGovernment washes its hands off any liability for payment ofcompensation.

B35. While admitting and appreciating that there is delay in paymentof wages (whatever the cause) the Central Government has stated in itsaffidavit of 4th December, 2017 that steps have been taken to ensurethat payment of wages is not delayed. Initially, the onus to prove thedelay and to claim compensation was on the worker but now it has beenprovided (since January 2014) that the responsibility for payment ofCcompensation is that of the State Government which may recover thecompensation from the defaulting functionary/agency responsible forthe delay in payment of wages. In other words, the Central Governmenthas realized and appreciated the importance of timely payment of wagesto the workers and has taken steps in this regard. The CentralDGovernment has suggested the following timelines for payment of wages within 15 days:

PROCESSESPERIODSTAGE – IT+8ELast date of Muster roll as per e-muster T Data entry of attendance into MIST+2Measurement of the work and entering the same T+5 in NREGASoft FGeneration of wage list.T+6Generation of FTOs (1st Signatory). T+7 Approval of FTO for payment (2nd Signatory). T+8 GSTAGE – IIT+9 to T+15Signing of Pay Orders by US of MoRD (In T+9 to T+11 NeFMS States/UTs) Crediting into Bank Accounts of Beneficiary by T+10 to T+ 15 FIs H

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T+15

T+11

T+ 15

36. In addition to the above, the Central Government has requiredthe State Governments and Union Territory Administrations to formulaterules or issue notifications for payment of compensation for delayedpayment of wages. As stated in the affidavit of 4th December, 2017 asmany as 27 States and Union Territories have formulated and issuedrules or notifications or guidelines or advisories in this regard.

37. It is stated by the Central Government in its written submissionsdated 14th March, 2018 that the compensation envisaged under the Actis only for the delay caused due to inefficiency on the part of differentState functionaries. Compensation is, therefore, only for the delay inuploading the Fund Transfer Orders and it does not account for anydelay caused thereafter.

38. Learned counsel for the petitioner has drawn our attention toa note prepared by the Department of Expenditure in the Ministry ofFinance of the Government of India. The note is dated 21st August,2017 and forms a part of the supplementary affidavit of the petitionerdated 30th November, 2017. The note acknowledges (to the extentrelevant) the contents of an article in the Business Standard of 8th August,2017 to the effect that “the current rules do not compute or compensatethe delay in payments after the generation of FTOs [Fund TransferOrders].” It is true that between 10 and 15 lakh pay orders are issued onan average day and delays are due to infrastructural bottlenecks,availability of funds and a lack of administrative compliance.

39. Notwithstanding the large number of pay orders, we are afraiddelays are simply not acceptable. The law requires and indeed mandatespayment of wages not later than a fortnight after the date on which thework was done by the worker or labourer. Any reason for the delay inreceiving wages is not at all the concern of the worker. He or she isentitled to get the due wages within a fortnight of completion of thework. If there are any administrative inefficiencies or deficiencies orlaxity, it is entirely for the State Government and the Ministry of RuralDevelopment to sort out the problem. Bureaucratic delays or red tapecannot be pedalled as an excuse to deny payment of wages to theworkers. It is precisely to overcome any inefficiency or deficiency thatpayment of compensation is postulated, otherwise the purpose of Section3 and paragraph 29 of Schedule II of the Act would get completelydefeated.

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418SUPREME COURT REPORTS

A40. We may add that delayed payment adds several crores tothe compensation bill. This is to nobody’s advantage and merely adds anavoidable financial burden on the Central Government.

41. We also cannot countenance the view advanced by theCentral Government that it has no responsibility after the second signatureBis placed on the FTO. The wages due to the worker in terms of Stage IIabove must be transferred immediately and the payment made to theworker forthwith failing which the prescribed compensation would haveto be paid. The Central Government cannot be seen to shy away fromits responsibility or taking advantage of a person who has been placed inthe unfortunate situation of having to seek employment under the ActCand then not being paid wages for the unskilled manual labour within thestatutorily prescribed time. The State Governments and Union TerritoryAdministrations may be at fault, but that does not absolve the CentralGovernment of its duty.

42. Learned counsel for the petitioner has drawn our attentionDto the Annual Master Circular (FY 2017-2018). This validates the objectionraised by learned counsel that payment of compensation goes beyondthe signing of FTOs. The relevant provisions of the Annual Master Circularrelied on by learned counsel read as follows:

“10.4 NREGASoft has a provision to calculate the totalEcompensation payable, after due verification, based on the dateof closure of Muster Roll (MR) and the date of generation of thepay order (Fund Transfer Order) for paying wages taking intoaccount:

a. Date of uploading of FTO for payment of wages in the accountFof wage seeker.

b. Date of closure of muster roll.

c. The duration of such delay.

d. Total wage payable.

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e. Rate of compensation (0.05% per day).

10.5 The compensation is to be paid after due verification. EveryProgramme Officer shall, within 15 days from the date thatthe delay compensation becomes due, decide whether thecompensation that has been calculated by the NREGASoft H

is payable or not. The compensation shall be met from theState Employment Guarantee Fund (SEGF) upfront. This can berecovered from the functionaries/agencies responsible for thedelay.

10.6 The exceptions when compensation is not payable are:

a. Compensation is not due.

b. Natural calamities.

10.7 The Programme Officer will ensure that compensation claimsare settled during the prescribed time, i.e. within 15 days ofcompensation being due, and such claims will not be allowed tobe accumulated without any decision of acceptance or rejection.In all cases of rejection, the Programme Officer shall give detailedreason(s) for rejection on NREGASoft and maintain record ofthe same, in her/his office for future verification. All casesapproved for payment of compensation shall be done in the samemanner as payment of wages. District Programme Coordinatorwill monitor this regularly.

10.8 Failure to settle claims during the prescribed time shall resultin payment of due amount into the account of the worker.”[Emphasis supplied by us].

Surely, the Central Government cannot violate its own Master Circularand seek to otherwise absolve itself of any liability.

43. Apparently realizing its responsibility, it is stated in the writtensubmissions of 13th April, 2018 that the Ministry of Rural Developmentis making all efforts for improving the Stage-I and Stage-II of the wagepayment process. Due to the concerted efforts, the Stage - I timelypayment has increased from 26.85% in FY 2014-15 to 86% in FY 2017-18 and Stage-II has increased from 17% in FY 2016-17 to 43% in FY2017-18. While there is some improvement, it is not enough. Therecannot be any justifiable reason to delay payment of wages or justifiabledenial of compensation for delayed payment of wages. Any delay inpayment of wages or compensation violates statutory provisions.

44. We therefore make it clear and direct that in terms of the Actand Schedule II thereof a worker is entitled to payment of wages withina fortnight of the date on which the work was done, failing which the A

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Aworker is entitled to the compensation as prescribed in paragraph 29 ofthe Schedule II of the Act. The burden of compliance is on the StateGovernments and Union Territory Administrations as well as the CentralGovernment. One entity cannot pass on the burden to another and viceversa.

B45. In view of the above, we direct the Central Government throughthe Ministry of Rural Development, in consultation with the StateGovernments and Union Territory Administrations to prepare an urgenttime bound mandatory program to make the payment of wages andcompensation to the workers. This is not only in the interest of the workerswho have expended unskilled manual labour but also in furtherance ofCthe rule of law which must be followed in letter and spirit.

46. The third grievance relating to social audits was not urgedbefore us.

ConclusionD

47. All issues pertaining to the Act now stand closed and concluded.The petitioner has, from time to time, highlighted issues of seminalimportance and must be complimented for it. The Ministry of RuralDevelopment has reacted positively and brought about some significantchanges to make the Act and the Scheme more effective and must alsoEbe complimented. It must, however, take urgent remedial steps to ironout the creases, since there is still some way to go before the Act finallytouches the lives of millions of unemployed persons. The efforts of thepetitioner and the said Ministry should continue to be inexorably for thesocio-economic benefit of the millions of unemployed persons in thecountry.

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