Scrutiny of records in 10 test-checked field offices showed
that the sanctioning authorities disbursed inadmissible
assistance of ₹20.24 lakh in 29 out of 390 test-checked
cases. The reasons attributable were disbursement of
assistance for 3rd child, disbursement without ensuring
renewal of registration, assistance disbursed to ineligible
beneficiaries, etc. In 4 out of 72 test-checked cases, the
sanctioning authorities paid ₹2.18 lakh in excess of the
eligibility. In another 9 out of 63 test-checked cases,
assistance less than the admissible amount was disbursed,
resulting in short payment of ₹7.94 lakh. The details are
given in Appendix 3.6. Improper sanction of benefits was
pointed out vide Paragraph 3.3.6.3 of the previous report.
12, 2012-13 and 2013-14 as the Board had filed these
ITRs exhibiting income as Nil. The assessments for
other FYs were due for completion by 31.12.2019.
Audit also observed that there were delays ranging
from 3 to 18 months in filing ITRs for FYs 2011-12 to
2016-17 and Form 1046 were either not filed or filed
belatedly. These omissions along with failure of the
Board in obtaining exemption under IT Act, 1961,
resulted in avoidable tax liability aggregating
₹2,358.94 crore including penal interest of ₹755.07
crore (detailed in Appendix 3.7). Out of this, the ITD
had already collected (February 2018) ₹413.09 crore
by attaching the Board's bank account.
During the exit conference (January 2020), the
Secretary to Government, Department of Labour,
accepted that the Board had failed to present its case
professionally and clarified that all possible action had
now been taken to get the exemption and the final
order was awaited. The Secretary, however, expressed
concerns about obtaining the exemption with
retrospective effect.
The fact remains that at the end of March 2019, the
Board had to bear an additional liability of ₹2,358.94
crore including penal interest of ₹755.07 crore
towards income tax, which could have been averted
had the Board followed the provisions available in the
IT Act, 1961, for availing tax exemption. The much
bigger area of concern is that if the Board has to pay
the entire liability amount (without getting any
exemption) towards income tax, it has to be borne
from the receipts of the Board, which are meant for
implementation of the welfare schemes of the
construction workers. This would entail an
expenditure of 43 per cent of the Welfare fund
including penalty and only 57 per cent of the Fund
would be available for the benefit of the beneficiaries.
Sections 22 and 24 of the Act, 1996, mandated that at
least 95 per cent of the funds should be utilised for the
benefit of construction workers. Pursuant to directions
of the Hon'ble Supreme Court of India (August 2015),
the GoI reiterated (June 2016) that welfare funds
should not be used for any purpose other than for
welfare of construction workers and their family
exclusively. In case of any violation, immediate
corrective steps were to be taken and the funds so
spent were to be recouped in welfare funds with
immediate effect. The GoI further clarified (July 2017)
that states could take proactive steps to facilitate
transit accommodation, labour shed-cum-night
shelter, mobile toilets and mobile crèches to
construction workers in the areas of their
concentration prior to their finding work.
Audit observed that in contravention to the provisions
cited, the Board incurred an expenditure of ₹67.98
crore on inadmissible items which was yet to be
recouped to welfare funds (November 2019). The
details are as follows:
Scrutiny showed that after the receipt of GoI's
directives (July 2017), the Board resolved (March
and May 2018) to utilise 33 acre (worth ₹14.76
crore) out of 128.64 acre of land for admissible
purposes47 and sought reimbursement of amount
from KIADB/other agencies on return of the
remaining acquired land (95.64 acre of land costing
₹51.04 crore). There was no further progress and
amount of ₹51.04 crore was yet to be recouped
(November 2019).
➤ Advertisement and publicity expenses - The Hon'ble
Supreme Court highlighted (August 2015) that
expenditure incurred on advertisements with the cess
amount collected was inappropriate and directed that the
amount spent be returned to the accounts of construction
workers. The Board incurred an expenditure of ₹3.93
crore towards advertisement and publicity during the
period from 2013-14 to 2015-16 which was not
admissible and needed to be recouped.
➤ Construction of Kalyana Suraksha Bhavan - Consequent to
State Government's in-principle approval (December
2009) to construct Kalyana Suraksha Bhavan at ITI
Compound, Bannerghatta Road, Bengaluru, the Board
passed (January 2010) a resolution to meet the cost of
this building jointly with the Department of Factories and
Boilers, Labour Department. The Board met the total
cost of construction of ₹14.76 crore out of welfare
funds and received (March 2014) only ₹3 crore
from the Department of Factories and Boilers
against its share of ₹7.38 crore. The Board further
released (August 2018) ₹1.25 crore (estimated cost
was ₹1.79 crore) to Karnataka Rural Infrastructure
Development Limited (KRIDL) for interior work of
fourth floor. The interior work was yet to be
completed. As the construction of such building was
not allowed out of welfare funds, expenditure of
₹13.01 crore48 incurred by the Board was
inadmissible.
The Board had incurred an expenditure of ₹1.21 crore on
developing a software (Karmika-I), which was rolled out in
February 2016. The software provided for online registration,
online data retrieval, elimination of data duplication, cess
module for tracking cess collection, etc. However, it was not
fully functional49 as the SLIs/LIs had not been provided with
computers. Subsequently, the Board invited (July 2017)
tenders for developing a comprehensive software (Karmika-
II) with an estimated cost of ₹54.36 lakh and awarded
(January 2018) the work to M/s Vansh Infotech and paid
₹44.72 lakh for the period from February 2018 to January
2019. The scope of the work included providing only the
manpower and carrying out the work as per requirement of
the Board but the Board did not have any IT staff/expert to
finalise requirements and validate specifications. The Board
did not fix any timeline/milestones though it entrusted
several functional requirements to the agency. The work also
included, among other things, monitoring and programming
of renewals, processing claims, etc., which necessitated that
the old manual data of registration (prior to February 2016)
should be digitised. The Board had entrusted the work of
digitising the manual data to KEONICS in November 2017.
However, there was no progress. Hence, awarding the work
of developing new software to M/s Vansh Infotech without
digitisation of old manual data was not justifiable.
As a result, the software launched in February 2019 was not
fully operational. The Board terminated (April 2019) the
contract as the agency failed to attend to the bugs/issues
and started (June 2019) using Seva Sindhu (e-governance
portal of GoK) for registering eligible beneficiaries. Thus, the
Board failed to achieve its intended objective of having a
comprehensive software for providing better services to
construction workers and monitor cess collection despite
incurring an expenditure of ₹1.66 crore.
The Government stated (November 2019) that the agency
was unable to handle and complete the task within the
stipulated time. It further stated that the Board claimed back
(September 2019) the amount of ₹44.72 lakh along with
penalty (as per Clause 5 of the agreement) from the agency
as the new software was not working properly and its
optimal use was not possible. The reply was not fully
acceptable as the Clause 5 of the agreement contained
penalty clause only for delay in deployment of manpower
and hence recovery of ₹44.72 lakh was not assured.
The Board had been investing surplus amounts in fixed
deposits (FDs) after calling for the quotations from the
banks. The Investment Register/FD Register was maintained
in softcopy (excel) without any mechanism for verification by
the officers of the Board. The balances reflected in the
investment Registers were not verified/reconciled with the
physical Fixed Deposit Receipts and bank confirmation
statements to ensure its correctness. Out of total fixed
deposits amounting to ₹4,803.63 crore as at the end of
March 2017, bank confirmations were available for only
₹1,810.46 crore. Audit, therefore, could not ascertain the
correctness of the balance fixed deposits amounting to
₹2,993.17 crore in the absence of the confirmation of
balances from the relevant banks. The investment as at the
end of March 2019 was ₹6,337.28 crore (as per unaudited
accounts). Scrutiny of investments in FDs valuing more than
₹10 crore showed that:
The said FD attracted rate of interest of 5.1 per cent per
annum. However, the bank documents showed that no
interest was credited on closure of the FD. In addition, an
amount of ₹1,27,500 was deducted from the principal
amount towards TDS, which was incorrect as no interest
was paid.
➤ In 12 test-checked cases involving ₹625 crore (43 FDs),
the Board invested ₹430 crore (32 FDs) at rates lower
than the available rates which resulted in loss of interest
of ₹2.46 crore (Appendix 3.9). As these are only
illustrative cases, the Board should look into this aspect in
all other cases also to preclude any further likelihood of
loss of revenue.
During the exit conference (January 2020), the Secretary to
Government, Department of Labour, agreed to the possibility
of fund mismanagement and assured to get it enquired.
The observations discussed in paragraphs 3.1.4 and 3.1.5
indicate lack of commitment on the part of the
Government/Board to take forward the issue of workers'
welfare besides reflecting on the absence of strong and
effective institutional mechanism.
It is recommended that a robust internal control
mechanism within the Board should be put in place to
ensure that cess is realised effectively from all
sources, the cess is used for the purpose for which it is
meant, there is no inadmissible expenditure and
avoidable expenditure towards income tax liability is
addressed.
➤ The Board had not constituted the Internal Audit Wing and
no Internal Audit was carried out in spite of being pointed
out in previous financial audits.
➤ The State Government had not conducted the social audit
on the implementation of the Act, 1996 despite the
directions of Hon'ble Supreme Court of India.
The Government stated (November 2019) that corrective
measures were being undertaken in this regard.
3.1.6.2 Inadequate human resources
Audit observed that though the Board was constituted in
January 2007, it was not provided with necessary staff as
detailed below:
➤ There was inordinate delay in framing C&R Rules as the
State Government was yet to finalise/notify the Rules
(November 2019). This was also pointed out in the earlier
report of the C&AG (Paragraph 3.3.3). Further, there was
no consistency and objective criteria for having assessed
the overall need of staff strength as the requirement of
personnel for Head office/Field offices varied from 1,668
(December 2016) to 262 (June 2017) to 623 (May 2019).
➤ Though the State Government sanctioned (December
2017) 35 posts to be filled up on deputation, 23 of these
remained vacant (March 2019). Majority of the work at
Board was being managed with contractual staff who
even handled cheques/demand drafts and accountability
could not be fixed on them.
➤ During the period from 2014-15 to 2018-19, the post of
Secretary as regular charge was held for 10 months. For
the remaining 50 months, seven incumbents held this
post as additional charge.
➤ In accordance with the Government's instructions, the
officers/officials of Labour Department were entrusted
duties of registering establishments and cess assessment
(LOs), registering beneficiaries and cess collection
(SLIs/LIs) and sanctioning social security benefits (except
pension and disability pension) to ALCs and LOs. These
officers/officials of the Labour Department were to
perform duties for the Board in addition to their regular
charge of administering and enforcing provisions of other
23 central/state acts. Audit noticed that against the
sanctioned 324 posts in these three cadres (ALC, LO and
SLI/LI), 116 posts (36 per cent) were vacant as of May
2019.
Shortage of staff and vacancies in the posts of ALC, LO and
SLI/LI hampered the registration of establishments and
workers and also led to delays in sanctioning the claims.
The Government stated (November 2019) that approval to
C&R Rules was under consideration and the Board would
take action to recruit officers/employees once the C&R Rules
were approved.
It is recommended that the State Government finalise
the C&R Rules of the Board immediately so that
appropriate/qualified persons are appointed to ensure
accountability and prevent handling of finances by the
outsourced employees.
3.1.6.3 Shortfall in registration of establishments
The Board had registered 6,227 establishments in the State
as of December 2018. Audit observed that the Board neither
devised any mechanism to identify the prospective
employers nor complied with the GoI's directives (May 2018)
such as, forwarding copies of work orders to relevant
authorities, developing a mechanism for regular monitoring
of construction activities and use of GIS
technology/mapping, etc., for ensuring registration of
establishments (detailed in Appendix 3.10). Though the
Board received cess proceeds in form of cheques/DDs or
through RTGS/NEFT from employers/cess collecting
authorities, it did not co-relate this data with that available
with the respective LOs to ensure registration of these
establishments and workers employed therein and failed to
maintain a comprehensive database of construction works
undertaken in the State. As a result, there was a shortfall in
registration of establishments to the extent of 99 per cent in
the test-checked districts as detailed in Appendix 3.11.
Further, LOs though empowered, had not conducted
inspection of premises of the establishment in any of the six
test-checked districts during the period from 2014-15 to
2018-19 and hence failed to identify unregistered employers.
During the exit conference (January 2020), the Secretary to
Government, Department of Labour, attributed shortage of
staff as a major constraint and stated that all possible action
would be taken to increase the registration of
establishments."
(Emphasis added)
The CAG has red flags throughout the report against the State
Government. By the end of March, 2019 the liability towards
income tax had increased to ₹2358/- crores with penal interest at
₹755/- crores; all for one solitary reason of not availing exemption
as available under the Act by placing documents before the Income
Tax authorities. Land is acquired from welfare cess fund
notwithstanding the funds available with other organizations of the
State.
17. After all the aforesaid report, one of the construction
workers applies under the Right to Information Act about the
resolutions of the Board qua expenditure. One particular resolution
is as follows:
"PÁAiÀÄð¸ÀÆa-22 (V)
ªÀÄAqÀ½AiÀÄ CzsÀåPÀëgÀ G¥ÀAiÉÆÃUÀPÁÌV E£ÉÆêÁ Qæ¸ÁÖ ªÁºÀ£ÀªÀ£ÄÀ ß
Rjâ¹gÀĪÀ §UÉÎ WÀl£ÉÆÃvÀÛgÀ C£ÀĪÉÆÃzÀ£É ¥ÀqÉAiÀÄĪÀ PÀÄjvÀÄ.
¢£ÁAPÀ: 12.02.2020 gÀAzÀÄ ªÀiÁ£Àå PÁ«ÄðPÀgÀ ¸ÀaªÀgÀ PÀbÉÃj¬ÄAzÀ
ªÀÄAqÀ½AiÀÄ CzsÀåPÀëgÀ G¥ÀAiÉÆÃUÀPÁÌV MAzÀÄ ºÉƸÀ E£ÉÆêÁ Qæ¸ÁÖ ªÁºÀ£ÀªÀ£ÀÄß
MzÀV¸ÀĪÀAvÉ ¸ÀÆa¹gÀÄvÁÛgÉ. CzÀgÀAvÉ ¢£ÁAPÀ: 18.02.2020 gÀAzÀÄ ªÉÄ: £ÀA¢
lAiÉÆÃmÁ ªÉÆÃmÁgï ªÀ¯ïØð ¥ÉæöÊ.°., ¨ÉAUÀ¼ÀÆgÀÄ EªÀjAzÀ ºÉƸÀzÁV ªÁºÀ£ÀªÀ£ÀÄß
Rjâ¹ ªÀiÁ£Àå CzsÀåPÀëjUÉ MzÀV¸À¯ÁVgÀÄvÀÛzÉ. ¸ÀzÀj ªÁºÀ£À RjâAiÀÄ MlÄÖ ªÉÆvÀÛ
gÀÆ.29,29,477/- UÀ¼ÁVgÀÄvÀÛzÉ JAzÀÄ ¸À¨sÉUÉ ªÀÄAqÀ½AiÀÄ PÁAiÀÄðzÀ²ðgÀªÀgÀÄ w½¹zÀgÀÄ.
ªÀÄAqÀ½AiÀÄ ¤tðAiÀÄ: ªÀÄAqÀ½ CzsÀåPÀëgÀ G¥ÀAiÉÆÃUÀPÁÌV ºÉƸÀ E£ÉÆßêÁ Qæ¸ÁÖ
ªÁºÀ£ÀªÀ£ÀÄß Rjâ¹gÀĪÀÅzÀPÉÌ ¸À¨sÉAiÀÄÄ ¸ÀªÁð£ÀĪÀÄvÀ¢AzÀ WÀl£ÉÆÃvÀÛgÀ C£ÀĪÉÆÃzÀ£É
¤ÃrvÀÄ."
This is only a tip of the iceberg. The graph of inadmissible and
wasteful expenditure as produced by the learned counsel for the
petitioners is necessary to be quoted and it depicts as follows:
"Inadmissible & Wasteful expenses can fund
all beneficiaries for education for a year
The afore-quoted gives a clear picture as to how the funds that
have to be used for the welfare of construction workers are treated
or have been wasted elsewhere. Glaring wasteful expenditure is
spending ₹7/- crores on MGNREGA software; spending ₹18/- crores
on Indira canteen expenses and several other wasteful expenditures
and on unauthorised holding training scheme the expenditure that
is shown is ₹745/- crores. These are facts and figures, that very
stubborn, as they cannot be changed.
18. Yet another glaring circumstance, as observed
hereinabove, is the tax liability. The total number of beneficiaries
under the Act is 9,61,930 registered construction workers. The tax
liability that could be avoided was ₹3548/- crores. Who is
responsible? It is the callousness of officers of the Board who have
not applied for tax exemption to the Income Tax Department has
resulted in tax liability. It was not 10, 20 or 100 crores but it was
₹3548/- crores. The investment is noticed hereinabove. ₹6700/-
crores is in fixed deposit. The interest that it generates can take
care of entire education expenses of the children of registered
construction workers. What is happening to the interest is
necessary to be accounted and facts placed before the CAG by the
Board. Therefore, the non-availability of funds to be the reason for
bringing in the amendment to the notification is absolute
gibberish.
19. It now becomes apposite to notice certain orders passed
by the Apex Court from time to time. The Apex Court in the case of
NATIONAL CAMPAIGN COMMITTEE FOR CENTRAL
LEGISLATION ON CONSTRUCTION LABOUR v. UNION OF
INDIA1 while considering entire spectrum of the Act and the Rules
and earlier directions issued from time to time has passed a
comprehensive order. The discussion, direction and general
directions of the Apex Court read as follows:
".... .... ....
Discussion and directions
70. There can be no doubt that the BOCW Act
and its sister legislation, the Cess Act are social justice
legislations. They were enacted keeping in mind the
directive principles of State policy, particularly Article
39 of the Constitution which requires the State to
direct its policy to secure the health and strength of
workers and Article 42 of the Constitution concerning
just and humane conditions of work. In addition,
Article 21 of the Constitution cannot be forgotten. A
life of dignity is a fundamental right given to all
persons and that includes construction workers. It is
in this background that the two welfare and beneficent
legislations must be understood and appreciated.
71. The Statement of Objects and Reasons for the
BOCW Act refers to 8.5 million construction workers (85
lakhs) in 1995-1996. They were the vulnerable section of
society who needed the support of the State for their safety,
health and welfare. They have been consistently let down by
(2018) 5 SCC 607
the State and even directions given by this Court and by the
Ministry of Labour and Employment has not brought about
any substantive change. Governance is not about mouthing
platitudes, or framing good looking schemes, but about
action and it is quite clear to us that insofar as the rights of
construction workers are concerned, that vulnerable section
of society has been badly let down by the governance
structure. To make matters worse for them, the number of
construction workers has increased 5-fold over the last 20
years, as estimated by the Ministry of Labour and
Employment. The task before the State -- to effectively
implement the laws enacted by Parliament for the benefit
and welfare of a vulnerable section of society is enormous,
and as the progression in the case shows, the State might
well be unable to live up to the expectations of Parliament
unless there is a strong will to bring about a positive change.
State apathy in a situation such as this virtually amounts to
exploitation of the construction workers, and if the State
turns exploitative, there is little hope for vulnerable sections
of society.
72. In this background and on the available facts and
figures, submissions were made by the learned counsel for
the parties.
73. The learned counsel for the petitioner's principal
submissions were to the effect that the BOCW Act should be
faithfully implemented and the amounts collected for the
benefit of construction workers should be utilised for their
benefit and not for any other purpose, including purchase of
items like washing machines and laptops which obviously
cannot be used by construction workers. On the other hand,
the submissions of the learned Additional Solicitor General
appearing on behalf of the Union of India were to the effect
that all efforts are being made to ensure that there is full and
effective compliance with the provisions of the BOCW Act and
that the Monitoring Committee is supervising these efforts so
that all necessary entitlements and benefits are passed on to
the construction workers.
74. It will be seen from the figures on record
that the quantum of cess collected in one quarter from
31-3-2017 till 30-6-2017 is in the region of about Rs
5000 crores. (The difference between the figure given
by the Secretary in the Ministry of Labour and
Employment and the Standing Committee). This is a
huge amount and would work out to about Rs 20,000
crores annual collection. The figures presented to us
by the CAG or even the Standing Committee do not
reflect such a huge collection. Obviously, there is
something terribly rotten with the collection and
accounting mechanism and it is quite clear that the
exercise of registration, both of the establishments
and of the construction workers is not being carried
out satisfactorily. This is an area that has to be very
seriously looked into by all the State Governments and
the UTAs as well as by the Ministry of Labour and
Employment. Unless there is effective and full
compliance with the provisions regarding collection of
cess, several establishments will remain outside the
net and thousands of beneficiaries will be denied what
is constitutionally and statutorily due to them.
75. Our first direction, therefore, is to the Ministry of
Labour and Employment, the State Governments and the
UTAs to put in place and strengthen the registration
machinery, both for the registration of establishments as well
as registration of construction workers. This should be done
within a specified time-frame to be decided by them, but at
the earliest.
76. Our second direction to the Ministry, the State
Governments and UTAs in this regard is to establish and
strengthen the machinery for the collection of cess. It is a
matter of common knowledge that there is a tremendous
amount of construction activity going on all over the country
and there is no reason why establishments involved in the
construction activity, both formal as well as non-formal,
should not pay the cess, especially when they are utilising
the services of the construction workers. Similarly, there is
no reason why the construction workers of these
establishments should be denied their entitlements and
benefits under the BOCW Act and other laws. As noted
above, huge amounts are involved and we will not be
surprised if the quarterly collection of Rs 5000 crores is
perhaps the minimum -- the cess collected could be much,
much more, if the registration machinery and the collection
machinery are strengthened and work to their potential.
77. As we have seen above, State Governments and
UTAs have framed a large number of schemes allegedly for
the benefit of construction workers. The multiplicity of
schemes brings to mind the adage that too many cooks spoil
the broth. Keeping a track of these schemes is by itself an
enormous task, perhaps resulting in administrative issues
and red tape. It would be worthwhile if a model scheme is
framed by the Ministry of Labour and Employment, which
appears to be best equipped to do so, taking the best
practices (so to speak) of the existing schemes. This model
scheme can then be made available to all concerned, that is,
the State Governments, the UTAs and the Welfare Boards
with the flexibility of making appropriate modifications
wherever necessary.
78. Our third direction, therefore, is to the Ministry of
Labour and Employment to frame one composite Model
Scheme for the benefit of construction workers in
consultation with all stakeholders including NGOs who are
actually working at the grassroots level with construction
workers. While there is an urgency in framing such a Model
Scheme, we would caution the Ministry of Labour and
Employment to make haste slowly and to prepare a Model
Scheme that is comprehensive and can easily be
implemented, is pragmatic and does not involve too much
paperwork.
79. In preparing the Model Scheme, we expect the
Ministry of Labour and Employment to include within it, inter
alia, issues and concerns of education, health, social
security, old age and disability pension and other benefits
that are necessary for living a life of dignity as postulated by
the Constitution of India. We also expect the Model Scheme
to be framed and publicised within a specified time-frame to
be decided by the Ministry of Labour and Employment,
preferably within six months, but in any event on or before
30-9-2018.
80. The CAG in its affidavit of 2-5-2017 has stated
that it carries out three kinds of audits: financial audit,
compliance audit and performance audit. It is explained in
the affidavit that:
"... In financial audit, audit ensures whether the
financial statements are properly prepared or complete
in all respect and are presented with adequate
disclosure. In compliance audit, audit checks whether
the provisions of the Constitution, applicable laws, rules
and regulations and various orders and instructions are
being complied with or not. In performance audit, audit
checks as to what extent the activity, programme or
organisation operates economically, efficiently and
effectively."
81. Unfortunately, as the variance in the figures
shows, there is an absence of an effective audit in at least
one of the three categories of audits, if not in all three. It is
not for us to give any direction to the CAG on how to perform
its functions, being a constitutional authority, but we are of
the opinion that it is necessary for the CAG to take stock of
issues and problems pertaining to the implementation of the
BOCW Act and to ensure that effective and meaningful audits
are carried out, keeping in mind the huge amounts involved.
82. On the issue of audits, it would be worthwhile and
relevant for the State Governments and the Welfare Boards
in every State and UTA to conduct a social audit. The CAG
has prepared detailed guidelines for conducting a social audit
in respect of some other schemes (for example, the Report
of the Working Group on Developing Social Audit Standards
with reference to the Mahatma Gandhi National Rural
Employment Guarantee Act, 2005) and these guidelines can
be adapted mutatis mutandis for carrying out a social audit
in respect of the implementation of the BOCW Act.
83. Our fourth direction is to the Ministry of Labour
and Employment, the State Governments and the UTAs to
conduct a social audit on the implementation of the BOCW
Act so that in future there is better and more effective and
meaningful implementation of the BOCW Act. If a mistake
has occurred, and we have no doubt that hundreds of
mistakes have occurred in the implementation of the BOCW
Act, it is more appropriate to admit the mistake for a better
future rather than to justify it or continue to repeat the
mistake. This is more so in the case of the BOCW Act where
crores of men, women and children are involved on a day-to-
day basis and Parliament has thought it appropriate to
legislate for their benefit. The sanctity of laws enacted by
Parliament must be acknowledged -- laws are enacted for
being adhered to and not for being flouted. The rule of law
must be respected and along with it the human rights and
dignity of building and construction workers must also be
respected and acknowledged, to avoid a complete breakdown
of the BOCW Act compounded by serious violations of Part
III of the Constitution guaranteeing fundamental rights.
84. We are pained to record that the Union of India
through the Ministry of Labour and Employment has
acknowledged that directions issued under Section 60 of the
BOCW Act are disregarded by the State Governments and
the UTAs, in the sense that they are not acted upon or are
acted upon whenever it is convenient to the State
Government or the UTA. This is rather disturbing and it is not
necessary for us to say anything more on the subject. We
leave it to the Union of India to discuss and decide on the
modalities and methodologies for ensuring that directions
issued under laws enacted by Parliament are given due
respect by the State Governments and the UTAs and
directions issued thereunder for the implementation of the
laws in letter and spirit are acted upon with due dispatch and
promptitude.
General directions
85. Apart from the specific directions that we
have been constrained to pass, it is necessary to pass
some general directions so that the BOCW Act is fully
implemented with responsibility:
85.1. Every State Government and UTA shall
constitute a State Advisory Committee, if not already
constituted, and that State Advisory Committee shall
meet regularly for conducting its business. It may be
mentioned that Rule 20 of the Building and Other
Construction Workers' (Regulation of Employment and
Conditions of Service) Central Rules, 1998 provides
that the Central Advisory Committee shall meet at
least once in six months. This could be used as a good
guideline for meetings of the State Advisory
Committee.
85.2. Every State Government and UTA shall
constitute an Expert Committee and frame statutory
rules under Section 62 of the BOCW Act, if such
statutory rules have not already been framed. Setting
up an Expert Committee and framing statutory rules
should be in a time-bound manner, with the exercise
being completed preferably within six months and in
any event by 30-9-2018.
85.3. The State Governments and UTAs must
appoint Registering Officers for registration of
establishments and construction workers. This is a
critical aspect of the implementation of the BOCW Act
as well as the Cess Act.
85.4. Every State Government and UTA should
establish a Welfare Board in terms of Section 18 of the
BOCW Act. It must be appreciated that this is not a
body that can be created by an executive order. The
law requires that the Welfare Board shall be a body
corporate having perpetual succession and a common
seal. There are therefore legal formalities to be carried
out for the constitution of a Welfare Board.
85.5. Every State Government and UTA should
establish a Welfare Fund for the benefit of the
construction workers, with appropriate rules for
utilisation of the funds.
85.6. It is imperative that all construction
workers should be given identity cards and should be
registered in terms of Section 12 of the BOCW Act. The
Ministry of Labour and Employment has proposed the
issuance of a Universal Access Number for each
construction worker. We make no comment or
observation about the efficacy or otherwise of a
Universal Access Number. It was submitted by the
learned counsel for the petitioner that smart cards
should be issued to all construction workers. We keep
this issue open and leave it to the Ministry of Labour
and Employment to decide on an appropriate system
of identification and registration, provided it is
effective and meaningful.
85.7. The Ministry of Labour and Employment
shall actively consider making available to the
construction workers the benefits of the Maternity
Benefit Act, 1961 and the Minimum Wages Act, 1948,
the Employees' State Insurance Act, 1948, the
Employees' Provident Funds and Miscellaneous
Provisions Act, 1952, as well as (to the extent
possible) the Mahatma Gandhi National Rural
Employment Guarantee Act, 2005.
85.8. The Ministry of Labour and Employment
should also consider whether projects of the
Government of India in the Railways, Defence and
other establishments are brought within the purview
of the BOCW Act.
85.9. The Monitoring Committee which has had
quite a few meetings so far should pro-actively ensure
full compliance with the provisions of the BOCW Act,
the Cess Act and the directions issued by this Court. It
needs to meet far more frequently, and in any case
once in three months, considering that thousands of
crores of rupees are not being gainfully utilised, and in
some instances, misutilised.
86. The Union of India must take a decision on
the management of the cess already collected. It
appears to us that the benefits and entitlements that
have accrued to the construction workers (millions of
whom have not been identified) cannot be passed on
to them due to the passage of time, with the
whereabouts of some of them not known. Accordingly,
a decision will have to be taken by the Union of India
on the gainful utilisation of the cess already collected
so that the Welfare Boards are not unjustly enriched --
the beneficiaries having unfortunately lost out.
87. It must be appreciated that construction
workers do not assist only in building infrastructure,
but they also assist in building the nation, in their own
small way. Once that realisation dawns upon those
required to implement the BOCW Act and the Cess Act,
perhaps due respect will be shown to Article 21 of the
Constitution and to parliamentary statutes."
(Emphasis supplied)
The Apex Court observes that the State must appreciate that
construction workers do not assist only in building infrastructure but
they also assist in building the nation in their own small way.
Therefore, respect should be shown to Article 21 of the Constitution
and to statutes and directions which directed implementation.
20. It becomes germane to notice, what the State
Government has done pursuant to the direction issued by the Apex
Court. This is released through a communication by Government of
India of the expenditure they are incurring. It is germane to be
noticed and reads as follows:
".... .... ....
It had come to the notice of the Ministry of Labour and
Employment that some State Welfare Boards were issuing
tenders or incurring expenditure on distribution of household
items such as lanterns, blankets, umbrellas, took-kits,
utensils, cycles and similar other articles instead of on
tangible welfare measures such as life insurance, health
insurance, disability cover, maternity benefits and old-age
pensions for the workers. Since the procurement process
adds layers to the entire process, with apprehension of
leakages both at the procurement stage and at the
distribution end, hence this decision was prompted.
Transfer of money in the form of cash has been completely
stopped by the instant order and any monetary assistance
has to be necessarily given through DBT. The order also puts
a ban on the distribution of articles in kind. It mentions that
no benefit can be provided in-kind except in extra-ordinary
circumstances such as natural calamities, epidemics, fire,
accidents caused due to occupational hazard or similar other
crisis and only with the prior approval of the State
Government. This is done with the intent that the welfare of
the construction workers is not compromised during
exceptional situations.
Section 22(1) of the Act comprehensively stipulates
the functions of the State Welfare Boards. Sub-
sections (a) to (g) mandate the State Welfare Boards
to spend the Cess fund on payment of premium for
pension, group insurance scheme, scholarships to
workers' children, medical expenses, maternity
benefits and loans for house construction. As an
exception, sub-section (h) allows the boards to spend
on such other welfare measures and facilities as may
be prescribed. It was observed that some State
Welfare Boards had taken recourse to this sub-section
of the Act and resorted to arbitrary use of cess funds
for construction of buildings and distribution of
articles and utensils instead of using it for the welfare
of construction workers.
The order emphasizes that the social security coverage
stipulated under Section 22(1) (a) to (g) will hold precedence
over any other benefit being provided to the registered
construction workers under Section 22(1) (h) of the Act.
After meeting these priority expenses as mentioned in
Section 2(1)(a) to (g) of the Act, any balance of the cess
fund can be utilized by the Boards for giving additional
benefits as per the mandate given under Section 22(1)(h) of
the Act. To keep a vigilant eye on the nature of
expenditure, the Ministry has asked the State Boards
to furnish an Annual Return on the details of items on
which the expenditure has been incurred under
Section 22(1) (a) to (g) and Section 22(1)(h)
separately."
(Emphasis supplied)
The afore-quoted communication depicts the amount being spent
by the State Welfare Boards on unfruitful expenses like umbrellas,
utensils and transfer of money by cash.
21. If the action of the State is considered on the anvil of the
right to life, as obtaining under Article 21 of the Constitution of
India, it would unmistakably mean that, right to all benefits that the
children of construction workers are entitled to get through the
legislation. The legislation, be it the Act or the Rules, is aimed at
educating the children of construction workers who are below
poverty line inter alia. It is for the purpose of social amelioration
such statutes promulgated are termed as 'bread and butter
statutes' or 'welfare legislations' in the words of the Apex Court.
Such statutes which aim at upliftment of the status of persons
below poverty line should be interpreted in such a way that leans
towards edification of the lives of the poor. The canons of social
legislation and its interpretation is completely different from the
canons of interpretation of taxation laws or of the kind. To achieve
the purpose of the enactment the Courts must lean towards
upliftment of the poor is by now too well settled principle of law.
Quoting judgments of the Apex Court on the issue would only bulk
the subject judgment.
22. The 2nd and 4th petitioners and their children had
legitimate expectation at the time when the children joined the
course that they would be given financial assistance till completion
of the course, as at the time of joining the course the amount that
was fixed would have been enough for completion of education. It
has been varied to the detriment of those children. Therefore, the
State should not have varied the amount to the extent that it has
taken back the benefit to a vintage of 10 years by putting the clock
back to a benefit that prevailed in the year 2011. The state should
never stifle or smother the rights of the poor. There is no reason
whatsoever found in any of the justification projected by the State
to do so.
23. The projection by the respondent Board is that it has
financial constraints. As observed hereinabove, the financial
constraints projected is preposterous, to say the least, as crores of
rupees are spent elsewhere. There is no accounting of the interest
earned on deposits close to ₹7000 crores. When there is complete
budgetary sanction for a benefit that was prevailing at the time
when the applications were submitted by the petitioners, it could
not have been kept in cold storage for close to 7 months; wait till
the change in policy and put them under the bracket of changed
policy and hit them hard. Financial difficulties cannot be projected
to deprive citizens of their constitutional rights. The law does not
permit the State to do so. The benefits once extended to them, as
observed, create a legitimate expectation to the petitioners that
they would get the benefit throughout their period of study. Such
legitimate expectation of these petitioners is completely eroded.
24. Reference being made to the judgment of the Apex Court
in the case of NATIONAL BUILDINGS CONSTRUCTION
CORPORATION v. S.RAGHUNATHAN2 becomes apposite. The
Apex Court has held as follows:
".... .... ....
20. Lord Diplock in Council of Civil Service
Unions v. Minister for the Civil Service [1985 AC 374 :
(1984) 3 All ER 935 : (1984) 3 WLR 1174, HL] laid down that
the doctrine of "legitimate expectation" can be invoked if the
decision which is challenged in the court has some person
aggrieved either (a) by altering rights or obligations of that
person which are enforceable by or against him in private
law; or (b) by depriving him of some benefit or advantage
which either (i) he had in the past been permitted by the
decision-maker to enjoy and which he can legitimately
expect to be permitted to continue to do until there has been
communicated to him some rational grounds for withdrawing
it on which he has been given an opportunity to comment;
or (ii) he has received assurance from the decision-maker
that it will not be withdrawn without giving him first an
opportunity of advancing reasons for contending that it
should not be withdrawn.
(emphasis supplied)
21. The Indian scenario in the field of "legitimate
expectation" is not different. In fact, this Court, in several of
its decisions, has explained the doctrine in no uncertain
terms.
22. In Navjyoti Coop. Group Housing Society v. Union
of India [(1992) 4 SCC 477] the decision of the House of
Lords in Council of Civil Service Unions v. Minister for the
Civil Service [1985 AC 374: (1984) 3 All ER 935: (1984) 3
WLR 1174, HL] was followed and that decision was
summarised in the following words: (SCC p. 494, para 15)
(1998) 7 SCC 66
"It has been held in the said decision that an
aggrieved person was entitled to judicial review if he
could show that a decision of the public authority
affected him of some benefit or advantage which in the
past he had been permitted to enjoy and which he
legitimately expected to be permitted to continue to
enjoy either until he was given reasons for withdrawal
and the opportunity to comment on such reasons."
23. This Court further observed as under: (SCC pp.
494-95, paras 15 and 16)
"The existence of 'legitimate expectation' may
have a number of different consequences and one of
such consequences is that the authority ought not to act
to defeat the 'legitimate expectation' without some
overriding reason of public policy to justify its doing so.
In a case of 'legitimate expectation' if the authority
proposes to defeat a person's 'legitimate expectation' it
should afford him an opportunity to make
representations in the matter.
* * *
It may be indicated here that the doctrine of
'legitimate expectation' imposes in essence a duty on
public authority to act fairly by taking into consideration
all relevant factors relating to such 'legitimate
expectation'. Within the conspectus of fair dealing in
case of 'legitimate expectation', the reasonable
opportunities to make representation by the parties
likely to be affected by any change of consistent past
policy, come in."
24. In Food Corpn. of India v. Kamdhenu Cattle Feed
Industries [(1993) 1 SCC 71] it was held that in all State
actions, the State has to conform to Article 14 of the
Constitution of which non-arbitrariness is a significant facet.
It was further observed that there is no unfettered discretion
in public law and a public authority possesses powers only to
use them for public good. It was further observed as under:
(SCC p. 76, para 8)
"8. The mere reasonable or legitimate
expectation of a citizen, in such a situation, may
not by itself be a distinct enforceable right, but
failure to consider and give due weight to it may
render the decision arbitrary, and this is how the
requirement of due consideration of a legitimate
expectation forms part of the principle of non-
arbitrariness, a necessary concomitant of the rule
of law. Every legitimate expectation is a relevant
factor requiring due consideration in a fair
decision-making process. Whether the expectation
of the claimant is reasonable or legitimate in the
context is a question of fact in each case.
Whenever the question arises, it is to be
determined not according to the claimant's
perception but in larger public interest wherein
other more important considerations may
outweigh what would otherwise have been the
legitimate expectation of the claimant. A bona fide
decision of the public authority reached in this
manner would satisfy the requirement of non-
arbitrariness and withstand judicial scrutiny. The
doctrine of legitimate expectation gets assimilated
in the rule of law and operates in our legal system
in this manner and to this extent."
(emphasis supplied)
25. In Union of India v. Hindustan Development
Corpn. [(1993) 3 SCC 499] the meaning of the words
"legitimate expectation" was again considered. Quoting from
the case of Attorney General for New South
Wales v. Quin [(1990) 64 Aust LJR 327] the following lines:
"To strike down the exercise of administrative
power solely on the ground of avoiding the
disappointment of the legitimate expectations of an
individual would be to set the courts adrift on a
featureless sea of pragmatism. Moreover, the notion of a
legitimate expectation (falling short of a legal right) is
too nebulous to form a basis for invalidating the exercise
of a power when its exercise otherwise accords with
law."
the Court observed as under: (SCC p. 549, para 35)
"If a denial of legitimate expectation in a given
case amounts to denial of right guaranteed or is
arbitrary, discriminatory, unfair or biased, gross
abuse of power or violation of principles of natural
justice, the same can be questioned on the well-
known grounds attracting Article 14 but a claim based
on mere legitimate expectation without anything
more cannot ipso facto give a right to invoke these
principles. It can be one of the grounds to consider
but the court must lift the veil and see whether the
decision is violative of these principles warranting
interference. It depends very much on the facts and
the recognised general principles of administrative
law applicable to such facts and the concept of
legitimate expectation which is the latest recruit to a
long list of concepts fashioned by the courts for the
review of administrative action, must be restricted to
the general legal limitations applicable and binding
the manner of the future exercise of administrative
power in a particular case. It follows that the concept
of legitimate expectation is 'not the key which
unlocks the treasury of natural justice and it ought
not to unlock the gates which shuts the court out of
review on the merits', particularly when the element
of speculation and uncertainty is inherent in that very
concept."
26. This doctrine was reiterated in M.P. Oil
Extraction v. State of M.P. [(1997) 7 SCC 592] in which it
was also laid down that though the doctrine of "legitimate
expectation" is essentially procedural in character and
assures fair play in administrative action, it may, in a given
situation, be enforced as a substantive right."
(Emphasis supplied)
The Apex Court considers various forms and hues of legitimate
expectation. When it comes to depriving a person benefit of an
advantage which he had been permitted in the past, such decision
should be fair and should pass muster of Article 14 of the
Constitution of India. It cannot be arbitrary.
25. In yet another judgment, the Apex Court recognizes the
welfare of construction workers and relates it to right to life under
Article 21 of the Constitution of India. The Apex Court in the case of
DEWAN CHAND BUILDERS AND CONTRACTORS v. UNION OF
INDIA3 has held as follows:
".... .... ....
3. The background in which the BOCW Act was
enacted, is set out in the Statement of Objects and Reasons
appended to the Bill preceding its enactment. To better
appreciate the legislative intent, it would be instructive to
refer to the following extract from the Statement of Objects
and Reasons:
"(1) It is estimated that about 8.5 million
workers in the country are engaged in building and
other construction works. Building and other
construction workers are one of the most numerous
and vulnerable segments of the unorganised labour in
India. The building and other construction works are
characterised by their inherent risk to the life and limb
of the workers. The work is also characterised by its
casual nature, temporary relationship between
employer and employee, uncertain working hours, lack
of basic amenities and inadequacy of welfare facilities.
In the absence of adequate statutory provisions, the
requisite information regarding the number and nature
(2012) 1 SCC 101
of accidents is also not forthcoming. In the absence of
such information, it is difficult to fix responsibility or to
take any corrective action.
(2) Although the provisions of certain Central
Acts are applicable to the building and other
construction workers yet a need has been felt for a
comprehensive Central Legislation for regulating their
safety, health, welfare and other conditions of
service."
4. A fairly long Preamble to the BOCW Act is again
indicative of its purpose. It reads thus:
"An Act to regulate the employment and
conditions of service of building and other construction
workers and to provide for their safety, health and
welfare measures and for other matters connected
therewith or incidental thereto."
5. Further, Section 1(4) of the BOCW Act makes it
clear that it:
"1. (4) ... applies to every establishment which
employs, or had employed on any day of the
preceding twelve months, ten or more building
workers in any building or other construction work."
6. Some of the definitions under Section 2 of the
BOCW Act, relevant for these appeals are:
"2. (1)(b) 'beneficiary' means a building
worker registered under Section 12;
(c) 'Board' means a Building and Other
Construction Workers' Welfare Board constituted under
sub-section (1) of Section 18;
***
(e) 'building worker' means a person who is
employed to do any skilled, semi-skilled or unskilled,
manual, supervisory, technical or clerical work for hire
or reward, whether the terms of employment be
expressed or implied, in connection with any building
or other construction work but does not include any
such person--
(i) who is employed mainly in a managerial or
administrative capacity; or
(ii) who, being employed in a supervisory capacity,
draws wages exceeding one thousand six
hundred rupees per mensem or exercises,
either by the nature of the duties attached to
the office or by reason of the powers vested in
him, functions mainly of a managerial nature;
***
(g) 'contractor' means a person who
undertakes to produce a given result for any
establishment, other than a mere supply of goods or
articles of manufacture, by the employment of building
workers or who supplies building workers for any work
of the establishment, and includes a sub-contractor;
***
(i) 'employer', in relation to an establishment,
means the owner thereof, and includes--
(i) in relation to a building or other construction
work carried on by or under the authority of any
department of the Government, directly without
any contractor, the authority specified in this
behalf, or where no authority is specified, the
head of the department;
(ii) in relation to a building or other construction
work carried on by or on behalf of a local
authority or other establishment, directly
without any contractor, the Chief Executive
Officer of that authority or establishment;
(iii) in relation to a building or other construction
work carried on by or through a contractor, or
by the employment of building workers supplied
by a contractor, the contractor;
***
(k) 'Fund' means the Building and Other
Construction Workers' Welfare Fund of a Board
constituted under sub-section (1) of Section 24;"
7. The scheme of the BOCW Act is that it
empowers the Central Government and the State
Governments to constitute Welfare Boards to provide
and monitor social security schemes and welfare
measures for the benefit of the building and other
construction workers. Section 7 requires every
employer in relation to an establishment to which the
BOCW Act applies to get such establishment
registered. Section 10 makes this requirement
mandatory and therefore, without such registration,
the employer of an establishment, to which the BOCW
Act applies, cannot employ building workers.
8. Chapter IV of the BOCW Act contains
provisions stipulating the registration of building
workers as beneficiaries and requires certain
contributions to be made by such beneficiary at such
rate per month as may be specified by the State
Government. Where the worker is unable to pay his
contribution due to any financial hardship, the Board
can waive the payment of such contribution for a
period not exceeding three months at a time.
9. Chapter V of the BOCW Act sets out the
constitution and functions of the Building and Other
Construction Workers' Welfare Boards. Section 24 sets
out the provision for the constitution of the welfare
fund and its application. Part III of Chapter VI of the
BOCW Act contains provisions concerning the safety,
health and welfare of the construction workers
generally and with reference to specific kinds of
activities.
10. It is thus clear from the scheme of the BOCW
Act that its sole aim is the welfare of building and
construction workers, directly relatable to their
constitutionally recognised right to live with basic
human dignity, enshrined in Article 21 of the
Constitution of India. It envisages a network of
authorities at the Central and State levels to ensure
that the benefit of the legislation is made available to
every building and construction worker, by
constituting Welfare Boards and clothing them with
sufficient powers to ensure enforcement of the
primary purpose of the BOCW Act. The means of
generating revenues for making effective the welfare
provisions of the BOCW Act is through the Cess Act,
which is questioned in these appeals as
unconstitutional.
11. The Statement of Objects and Reasons to the
BOCW Act explained that it had been considered
"necessary to levy a cess on the cost of
construction incurred by the employers on the building
and other construction works for ensuring sufficient
funds for the Welfare Boards to undertake the social
security schemes and welfare measures".
Simultaneously with the enactment of the BOCW Act,
Parliament enacted the Cess Act. The Statement of Objects
and Reasons to the Cess Act noted that the intention was to
"provide for the levy and collection of a cess on
the cost of construction incurred by the employers for
augmenting the resources of the Building and Other
Construction Workers' Welfare Boards constituted by
the State Governments under the Building and Other
Construction Workers' (Regulation of Employment and
Conditions of Service) Ordinance, 1995"."
(Emphasis supplied)
The Apex Court holds that, on a perusal of the scheme it was clear
that legislation is enacted with the sole aim of welfare of
construction workers directly relatable to their constitutionally
recognized right to life, i.e., to live with basic human dignity as
enshrined in Article 21 of the Constitution of India. Why the Apex
Court directed strict implementation of the benefits under the Act is
also found in the afore-quoted paragraphs.
26. In the light of what is held by the Apex Court in the
judgments noticed hereinbefore, the action of the State, in treating
the funds that belonged to the construction workers and their
children as the property of the Board, for bartering away for
wasteful expenditure must be stopped, and stopped forthwith,
as it cannot be forgotten that reference in the preamble to the
Constitution of India to the words "we the people" does not mean
the miniscule elite, or a larger upper middle class only, but it would
be largely inclusive of the people who are below poverty line like
the construction workers. They also have a constitutional right to
live with basic human dignity and also entitled to all the rights that
flow from the statutes. The rights of construction workers cannot be
railroaded in the broad day light by the State, or the Authorities like
the Board. The core issue in the lis revolves round education of two
girl children of construction workers. Therefore, before I say
omega, I wish to observe that the State must be remember that it
should take all steps towards educating women, as it is said,
educating a man, is educating an individual; educating a
woman, is educating a generation.
27. For the aforesaid reasons, the following:
ORDER
(i) Writ Petition is allowed.
(ii) The Notification impugned dated 30-10-2023
stands quashed.
(iii) It is declared that the notification dated 13-08-
2021 would prevail.
(iv) The quashment of the Notification supra will not
come in the way of power of the State to bring in
a notification, if need arises, varying the amount.
But, while so doing, it shall bear in mind the
observations made in the course of the order. It
can never be to the detriment of the welfare of
construction workers and their families.
(v) A mandamus issues to the State and the Board to
disperse educational assistance to the applications
received for financial years 2020-21, 2021-22 and
2022-23 till completion of education thereto.
(vi) The Board shall consider the applications of
similarly situated applicants, bearing in mind the
observations made in the course of the order and
not drive every person to knock at the doors of
this Court seeking identical relief, as the State can
bear the brunt of litigation, but not the poor
citizen.
(vii) The Comptroller and Auditor General of India
shall take up, if not already taken up, and
complete the audit of the funds of the Board
within three months, if not earlier, and place the
report before the Registry of this Court.
(viii) Once the report is received by the Registry, it
shall relist this matter without any delay.
(ix) A copy of this order shall be communicated to the
Chief Secretary, the State of Karnataka for
compliance and report.
(x) A copy of this order shall also be circulated by the
Registry to the Additional Solicitor General of
India for compliance, with the observations made
in the course of the order and the task of getting
the audit report from the office of the CAG.
Sd/-
(M. NAGAPRASANNA)
JUDGE
Bkp
CT:MJ
