1. The only question which arises in this appeal in this appeal is whether, having regard to provisions of S. 7(2)(f) of the Payment of Wages Act. 1936 hereinafter referred to as the Act, the employer-appellant was entitled to adjust the sum of Rs. 600.35 towards the dues of Rs. 983.46, which according to the employer, were due from the employee, as advance paid on behalf of the employee to a house building association.
2. It is not in dispute that the employee second respondent resigned from the service in October, 1975. Since the employer did not pay his salary for September, 1975, Rs. 403.42, and for 15 days in October, 1975 Rs. 196.93, in all totalling Rs. 600.35, the employee filed an application under S. 33-C(2) of the Industrial Disputes Act, 1947 before the Presiding Officer, Labour Court, Madurai.
3. The defence of the employer was that the employer was to receive a sum of Rs. 983.46, as balance of the advance paid on behalf of the employee for the purposes of building a house by the Housing Building Association of the employees of the employer. The employee dose not dispute that the amount was advanced by the employer and that the every month a sum of Rs. 15, was being deducted from his wages towards the repayment of the advance given by the employer. His contention however was that even though he had resigned from service, the only permissible deduction was at the rate at which the deduction was being made while he was in employment and therefore, the employer was entitled to deduct Rs. 22.50 only from the wages due for September, and part of October, 1975. This contention was accepted by the Labour Court and the Labour Court directed a payment of Rs. 814.25 on account of arrears of wages from 1st September, 1975, to 15th October, 1975. The employer filed a writ petition in this Court. The learned single Judge accepted the claim of the employer that the employee was not entitled to wages for the unexpanded portion of the leave with wages for which a claim was made by him and the claim was allowed by the Labour Court. However, the learned Judge took the view that the employer could not have deducted more than Rs. 22.50 from the arrears of wages claimed and, therefore, the correct amount payable to the employer was computed at Rs. 577.85. This order is challenged by the employer in this appeal.
4. The short point raised by the learned counsel on behalf of the appellant is that the restriction in the matter of deduction by the employer did not apply in the instant case, because of the provisions of S. 7(4) of the Act. The learned counsel appearing on behalf of the employee has contended that assuming that S. 7(4) of the Act was available to the employer, the contract between the employer and the employee being only in respect of payment of Rs. 15 per month, the employer could not deduct anything more than Rs. 22.50. It is not disputed before us that the employer had a right to deduct some amount at least from the wages which were payable to the employee. What is, however, contended on behalf of the employer is that in view of the resignation of the employee all the arrears of advance remaining unpaid could be deducted from the balance of wages due to the employee, while according to the employee it was open to the employer to pursue such other remedy as he may have, like a civil suit for the recovery of the balance of the advance which remained unpaid and that so far as the payment of arrears of wages were concerned, he could not deduct anything more than the rate at Rs. 15 per month.
5. S. 7(1) of the Act mandatorily requires that notwithstanding the provisions of sub S. (2) of S. 47 of the Indian Railways Act, 1890, the wages of an employed person shall be paid to him without deduction of any kind except those authorised by or under this Act. The permissible deductions are set out in sub-S. (2) of this section. Under clause (f) of sub-S. (4) of S. 7 deductions for recovery of advances of whatever nature and the interest due in respect thereof or for adjustment of over-payment of wages are permissible. Sub. S. (3) however, further restricts the permissible deductions which are not to exceed in certain cases 75 per cent of the wages and in other cases 50 per cent of such wages.
6. The relevant important provision however in sub. S. (4) of S. 7, which reads as follows -
"Nothing contained in this section shall be constructed as precluding the employer from recovering from the wages of the employed person or otherwise any amount payable by such person under any law for the time being in force other than the Indian Railways Act, 1890. ...."
This provision is relied upon by the employer and according to him the employee is liable to pay to the employer the balance of the amount outstanding in respect of the advance paid to the House Building Association. The effect of sub. S. 4 is that the provisions of S. 7(1) to 7(3) are not applicable, if it is possible for the employer to show that the liability of the employee flows from a provision of any other law. Now it is obvious that as between the employer and the employee, the liability and the rights will be governed by the Contract Act, especially so, when the employee ceased to be in the employment of the employer. As a matter of fact the argument of the learned counsel for the employee itself implies that the provisions of the Contract Act are not excluded because even the learned counsel for the employee contended that under the Contract Act, the only contract which is enforceable is the contract to pay Rs. 15 per month. Now, we are dealing with a case of an employee who is no longer in the employment and the question of deduction of Rs. 15 per month till the advance is wholly cleared off, does not arise in the case of the employee concerned. It is difficult to accept the argument that even though the amount is excess of the arrears of wages payable is due from the employee, the employer can deduct only Rs. 22.50 and that he should take such proceedings as he may be entitled, to recover the balance. The relationship between the parties now being governed by the Contract Act and as a result of the provisions of Contract Act, the employee being a debtor and the employer now being a creditor and this being the subsisting relationship, it is difficult for us as to how in view of S. 7(4) of the Act the employee can resist the action of the employer in adjusting the entire amount due on account of the wages, especially when the dues exceed the amount payable to him. In our view, the learned Judge is clearly in error in restricting the adjustment only to Rs. 22.50.
7. Accordingly, the order of the learned Judge of this Court is set aside and the order of the Presiding Officer, Labour Court, Madurai, is also set aside. The writ appeal is, therefore, allowed. There will be no order as to costs.