Holding

The Court held that the Central Government, under the National Employment Guarantee Fund Rules, 2006, lawfully fixes and releases the approved labour budget and, together with the States, must ensure timely payment of wages and compensation as mandated by the Mahatma Gandhi National Rural Employment Guarantee Act, 2005.

Summary

The petitioners, SwaraJ Abhiyan (VI), challenged the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005, alleging that the Central Government’s fixation of an ‘approved labour budget’ arbitrarily reduced funds to States, caused delays in wage payments and denied compensation, and that social audits were absent. The Court examined the statutory framework, noting that Rule 5 of the National Employment Guarantee Fund Rules, 2006 empowers the Centre to scrutinise and release funds after consultation with States, and that the ‘agreed to labour budget’ is not an unlawful cap. It held that any reduction in funds must be raised by the affected State, not the petitioners, and that the burden of timely wage payment and compensation rests on both the State and Central Governments. The Court directed the Ministry of Rural Development, in consultation with States, to prepare an urgent, time‑bound programme to ensure wages are paid within a fortnight and compensation is paid for delays, while dismissing the petition and closing all issues.

Issues considered

Whether the Central Government’s fixation of an ‘approved labour budget’ under the Act is arbitrary and violates the statutory scheme.
Whether delays in payment of wages and failure to pay compensation under Sections 3(3), 3(4) and Schedule II of the Act constitute a breach of statutory duty.
Whether the absence of social audits constitutes a violation of the Act’s implementation requirements.

Legislation cited

Mahatma Gandhi National Rural Employment Guarantee Act, 2005s. 14(6), s. 3(1), s. 3(3), s. 3(4), s. Schedule II Paragraph 29, s. Schedule I Paragraph 7
National Employment Guarantee Fund Rules, 2006s. Rule 5

Subjects

MGNREGAlabour budgetwage paymentcompensation for delaycentral governmentstate governmentimplementationsocial auditstatutory interpretation

Judgment

398 [2018]REPORTS
SUPREME COURT 5 S.C.R. 398 [2018] 5 S.C.R.

A SWARAJ ABHIYAN (VI)
v.
UNION OF INDIA & ORS.
(Writ Petition (Civil) No. 857 of 2015)
B MAY 18, 2018
[MADAN B. LOKUR AND N. V. RAMANA, JJ.]
Mahatma Gandhi National Rural Employment Guarantee Act,
2005:
C ss. 3(1), 3(3), 3(4) and 14(6); Schedule I Paragraph 7,
Schedule II Paragraph 29 – Writ petition filed u/Art. 32 of
Constitution, highlighting deficiencies in implementation of the Act
– It was alleged that “approved labour budget” fixed by Central
Government violated essence of the Act; that there was unreasonable
reduction in the funds made available to the States and there was,
D delay in payment of wages to the labourers – Held: Central
Government is statutorily empowered (by National Employment
Guarantee Fund Rules) to scrutinize and assess the funds to be
released – Therefore, fixation of “approved labour budget” is not
arbitrary – If there is unreasonable reduction of funds to States, it
E is for the States to object to that – In absence of such objection by
any State, such plea cannot be raised in the petition – It is left to the
Central Government to find a solution in order to avoid delay in
release of funds to the States – In terms of ss. 3(3) and 3(4) and
Schedule II of the Act, worker is entitled to wages within a fortnight
failing which he is entitled to compensation – The burden of
F compliance is on the State Government and Central Government –
The State and Central Governments are directed to prepare an urgent
time-bound programme to make payment of wages and compensation
to the workers – National Employment Guarantee Fund Rules, 2006
– r. 5.
G The Court
HELD: 1.1 Rule 5 of The National Employment Guarantee
Fund Rules, 2006 provides, inter alia, for release of grants from
the National Employment Guarantee Fund (NEGF) to the State
Governments and Union Territory Administrations. Thus. the
H Central Government is statutorily empowered to scrutinize and
398
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 399

assess the funds to be released to the State Governments and A
Union Territory Administrations for the purposes of the Mahatma
Gandhi National Rural Employment Guarantee Act, 2005. The
final assessment is made by the Empowered Committee in
consultation with the State Governments and Union Territory
Administrations. Therefore, it is not as if the ‘agreed to labour
B
budget’ or the ‘approved labour budget’ is fixed arbitrarily by
the Central Government. There is nothing objectionable in this,
more particularly since the process is backed by statutory
provisions. [Paras 18 and 19] [408-C-D, H; 409-A-B]
1.2 Meaningful discussions are necessary while approving
or finalizing the labour budget. The fact that so many States and C
Union Territories have exceeded the expenditure postulated by
the ‘agreed to labour budget’ is an indication that the Scheme is
either well received by the unemployed or the Empowered
Committee is being a little tight-fisted. The release of funds is
for a good socio-economic cause and therefore expeditious and D
sufficient availability of funds should be the objective. Under the
circumstances, it is not correct to say that the Central
Government cannot prepare an ‘agreed to labour budget’ or that
the process of preparing an ‘agreed to labour budget’ is
impermissible or that there is an informal cap on release of funds.
[Para 27] [411-D-F] E

2.1 If there is some sort of a cap or an unreasonable
reduction in the funds made available to the State Governments,
it is really for the concerned State Government to object to the
cap and non-availability of funds. The Court has not been shown
any objection raised by any State to the effect that it has not F
received adequate funds for implementation of the Scheme for
various activities. In the absence of any objection or demand
having been raised for funds by the State Governments (and denial
of funds by the Central Government), the petitioner cannot be
allowed to raise such a contention which ought really to be raised G
by the affected State Government. [Para 24] [410-D-F]
3. Regarding delayed payments, according to the Central
Government, there is some laxity by the State Governments and
Union Territory Administrations in respect of obtaining another
mother sanction, when the Mother sanction based on the “agreed H
400 SUPREME COURT REPORTS [2018] 5 S.C.R.

A to labour budget” nears exhaustion or is exhausted. This is a
bottleneck that must be addressed and, as stated in the affidavit,
checklists have been prepared in consultation with the State
Governments and Union Territory Administrations to facilitate
smoother processing of proposals. Perhaps something more
needs to be done and it is left to the Ministry of Rural
B
Development to find a solution. One of the positive measures
adopted by the Ministry of Rural Development to reduce delays
in release of funds is conducting a Mid Term Review with the
State Governments and Union Territory Administrations. [Paras
25 and 26] [411-A-C]
C 4.1 Section 3(3) and Section 3(4) of the Act provide that
every person who has done work given to him or her under the
Scheme, shall be entitled to receive wages and the disbursement
of daily wages shall be on a weekly basis or in any case not later
than a fortnight after the date on which such work was done.
D Schedule II to the Act mentions the conditions for guaranteed
rural 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 15
days from the date of closure of the Muster Roll, the wage seeker
or labourer shall be entitled to receive compensation for the delay
E at 0.05% of the unpaid wages per day of delay beyond the
sixteenth day of closure of the Muster Roll. Thus, the provisions
mandate 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
F payment of wages (whatever the cause) the Central Government
has stated that steps have been taken to ensure that payment of
wages is not delayed. The Central Government has suggested
timelines for payment of wages within 15 days. The Central
Government has required the State Governments and Union
Territory Administrations to formulate rules or issue notifications
G for payment of compensation for delayed payment of wages. As
many as 27 States and Union Territories have formulated and
issued rules or notifications or guidelines or advisories in this
regard. [Paras 35 and 36] [416-B-D; 417-A-B]
4.3 The law requires and indeed mandates payment of wages
H not later than a fortnight after the date on which the work was
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 401

done by the worker or labourer. Any reason for the delay in A
receiving wages is not at all the concern of the worker. He or she
is entitled to get the due wages within a fortnight of completion
of the work. If there are any administrative inefficiencies or
deficiencies or laxity, it is entirely for the State Government and
the Ministry of Rural Development to sort out the problem.
B
Bureaucratic delays or red tape cannot be pedalled as an excuse
to deny payment of wages to the workers. It is precisely to
overcome any inefficiency or deficiency that payment of
compensation is postulated, otherwise the purpose of Section 3
and paragraph 29 of Schedule II of the Act would get completely
defeated. The delayed payment adds several crores to the C
compensation bill. This is to nobody’s advantage and merely adds
an avoidable financial burden on the Central Government. [Paras
39 and 40] [417-E-H; 418-A]
4.4 The Central Government cannot be seen to shy away
from its responsibility or taking advantage of a person who has D
been placed in the unfortunate situation of having to seek
employment under the Act and then not being paid wages for the
unskilled manual labour within the statutorily prescribed time.
The State Governments and Union Territory Administrations may
be at fault, but that does not absolve the Central Government of
its duty. [Para 41] [418-C] E

4.5 Therefore, it is made clear and directed that in terms of
the Act and Schedule II thereof a worker is entitled to payment
of wages within a fortnight of the date on which the work was
done, failing which the worker is entitled to the compensation as
prescribed in paragraph 29 of the Schedule II of the Act. The F
burden of compliance is on the State Governments and Union
Territory 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 Rural
Development, in consultation with the State Governments and G
Union Territory Administrations, is directed to prepare an urgent
time bound mandatory programme to make the payment of wages
and compensation to the workers. This is not only in the interest
of the workers who have expended unskilled manual labour but
also in furtherance of the rule of law which must be followed in
letter and spirit. [Paras 44 and 45] [419-G-H; 420-A-C] H
402 SUPREME COURT REPORTS [2018] 5 S.C.R.

A CIVIL 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,
B Devesh Agnihotri, Mukul Singh, Rajiv Nanda, M. K. Maroria, Ms. Kashvi
Dutta, 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, Anil
C Grover, Dr. Monika Gussain, Manpreet Kaur Bhalla, Sanjay Kumar
Visen, Ajay Marwah, Mool Singh, Varinder Kumar Sharma, Tapesh
Kumar Singh, Aditya Pratap Singh, Mohd. Waquas, V. N. Raghupathy,
Leishangthem Roshmani Kh., Ms. Maibam Babina, Nishant
Katneshwarkar, Ranjan Mukherjee, Daniel Stone Lyngdoh, Mrs. K.
Enatoli Sema, Edward Belho, Amit Kumar Singh, K. Luikang Michael,
D Sibo 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. Anuradha
Arputham, Ms. Simran Jeet, P. Venkat Reddy, Prashant Kr. Tyagi (For
M/s. Venkat Palwai Law Associates), B. Vinodh Kanna, A. Sriram,
E Akshat 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 this
F Court dated 9th August, 2017 it is noted that learned counsel for the
petitioner would like to highlight three issues pertaining to the
implementation of the Mahatma Gandhi National Rural Employment
Guarantee Act, 2005 (for short the Act) and the Scheme framed
thereunder. These issues are:
G 1. Delay in payment of wages and compensation to the
beneficiaries under the Act and the Scheme framed
thereunder.
2. Reduction in person days and consequent reduction in allocation
of funds from the projection made by the State Governments
H and the Union Territory Administrations.
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 403
[MADAN B. LOKUR, J.]

3. Absence of social audits being conducted. A
2. We have heard learned counsel for the petitioner as well as the
learned Attorney General in detail in respect of these issues and have
also gone through the various affidavits and written submissions.
3. The Act was enacted by Parliament with the objective, inter
alia, of enhancing the livelihood security of poor households in rural areas B
by providing at least one hundred days guaranteed wage employment to
every such household whose adult members volunteer to do unskilled
manual work.
4. Section 3(1) of the Act provides that the State Government
shall in rural areas (as notified by the Central Government) provide to C
every household whose adult members volunteer to do unskilled manual
work not less than one hundred days of such work in a financial year in
accordance with the Scheme made under the Act. Section 3(3) provides
that the disbursement of daily wages shall be made on a weekly basis or
in any case not later than a fortnight after such work has been done.
Section 3 of the Act reads as follows: D
“3. Guarantee of rural employment to households. - (1) Save
as otherwise provided, the State Government shall, in such rural
area in the State as may be notified by the Central Government,
provide to every household whose adult members volunteer to do
unskilled manual work not less than one hundred days of such E
work in a financial year in accordance with the Scheme made
under this Act.
(2) Every person who has done the work given to him under the
Scheme shall be entitled to receive wages at the wage rate for
each day of work.
F
(3) Save as otherwise provided in this Act, the disbursement of
daily wages shall be made on a weekly basis or in any case not
later than a fortnight after the date on which such work was done.
(4) The Central Government or the State Government may, within
the limits of its economic capacity and development, make G
provisions for securing work to every adult member of a household
under a Scheme for any period beyond the period guaranteed
under sub-section (1), as may be expedient.”
5. Section 4 of the Act provides that to give effect to the provisions
of Section 3 thereof every State Government shall frame a Scheme
H
404 SUPREME COURT REPORTS [2018] 5 S.C.R.

A providing not less than one hundred days of guaranteed employment in a
financial year to every household in the rural areas covered under the
Scheme and whose adult members, by application, volunteer to do
unskilled manual work subject to the conditions laid down in the Act and
in the Scheme.
B 6. In terms of Section 4 of the Act a working Scheme has been
formulated and is in place and there is no dispute in this regard.
Reduction in person days through approved labour budget and
allocation of funds
7. The grievance of the petitioner under this head is succinctly
C stated and understood by the Union of India in its written submissions of
14th March, 2018 as follows:
(a) “Approved Labour Budget” violates the essence of the Act
which does not envisage any role for the Central or State
Government in altering the labour budget in any form.
D (b) The labour budget projections are arrived at through the process
spelt out in Section 14(6) and paragraph 7 of Schedule I of
the Act1 and any reduction of the labour budget goes against
the spirit of the Act.
(c) The Central Government has started exercising discretionary
powers in deciding how much a State can spend on generating
E employment.
(d) The generation of the Muster Roll is halted once the State
has reached the “Approved Labour Budget”.
To appreciate the grievance of the petitioner, it is necessary to refer to a
few more provisions of the Act.
F
Approved labour budget
8. Article 243-G of the Constitution was introduced by the 73rd
Amendment Act and this endows the Panchayats with such powers and
authority as may be necessary to enable them to function as institutions
of 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 detailed
methodology laid down by the State Government. All works to be executed by the
Gram Panchayats shall be identified and placed before the Gram Sabha, and such works
which are to be executed by the intermediate Panchayats or other implementing agencies
shall be placed before the intermediate or District Panchayats, along with the expected
H outcomes.
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 405
[MADAN B. LOKUR, J.]

9. Section 14 of the Act provides for the appointment of a District A
Programme Coordinator who is the Chief Executive Officer of the District
Panchayat or the Collector or any other district level officer of an
appropriate rank as decided by the State Government. The District
Programme Coordinator is expected to implement the Scheme in the
district, in addition to his/her other functions.
B
10. Section 14(6) of the Act requires the District Programme
Coordinator to prepare, in the month of December every year, a labour
budget for the next financial year containing the details of anticipated
demand for unskilled manual work in the district and the plan for
engagement of labourers in the works covered under the Scheme and
submit it to the District Panchayat. C
11. The step by step requirement (as submitted by the petitioner
and in which there is no serious disagreement voiced by the Union of
India)2 for identification of works, their finalization, planning and approval
of the labour budget under the Act and the Scheme is as follows:
D
Step 1 Gram Panch ayat Sectio n 16 (1 ) o f th e Act:
i dentifies work s to be
t ak en up in area bas ed on “The G ram P an chay at s hall be
recom men datio ns o f the respo ns ible for id entification o f
Gram/W ard Sabh a th e p ro jects in the Gram Sabh a
area to be taken un der a
Schem e as p er th e E
recomm endation s of the G ram
Sabha an d th e W ard Sab ha and
for ex ecuting and superv isio n
o f works .”

Step 2 Gram Panch ayat to Sectio n 16 (4 ) o f th e Act:
forward the wo rk s F
i dentified b y th e Gram “The G ram P an chay at s hall
S abha to th e P rogramm e forward its prop os als fo r the
Officer for s cru tiny + d ev elop men t p rojects in clu din g
p reliminary ap prov al th e o rd er o f prio rit y between
d ifferen t wo rks to th e
Prog ram me Officer fo r scrutin y G
and prelimin ary ap pro val prior
to t he comm encement of the
year in which i t is proposed to
b e ex ecu ted.”

2
Essentially this is only a procedural matter. Too much should not be read into the
‘disagreement’ if any. H
406 SUPREME COURT REPORTS [2018] 5 S.C.R.

A
Step 3 P rogramm e Officer at S ecti on 15(4) of the Act:
t he Block level
co ns olid ates plans “The Program me Officer shall
received by allGram p repare a plan for the Block
P anchay ats u nder his jurisd iction by
co ns olidating the project
B p rop osals prepared by the
Gram Panchayat and the
p rop osals received from
i ntermedi ate p an chayats”

Step 4 B lock Panchayat to S ecti on 16(3)(b) of the Act:
C ap prove the block level
plan prepared by the “t o approve the Block level
P rogramm e Officer and P lan fo r fo rwarding it to the
forwarding it to the d istrict Panchayat at th e
Distri ct Panchayat for d istrict level for final
ap proval ap proval”
D Step 5 Distri ct Program me S ecti on 13(3)(a) of the Act:
C oordinator to
co ns olid ate all Block “The District Program me
l evel plans and subm it it C oordin ator s hall “con solid ate
t o the District Panchay at t he plans prepared by t he
B locks and p roject proposals
E received from im plem enti ng
ag encies for inclus ion in the
s helf of projects to be
ap proved by the Panch ayat at
t he District level”

Step 6 Distri ct Panchayat S ecti on 13(2)(a) of the Act:
F
finalizes and app roves
block -wis e works to be “The functions of the
t aken up under the P anchayats at the d istrict level
S cheme s hall be-

a. To fin ali se and
G ap prove block -wis e
shelf of projects to be
taken up under a
program me under th e
Scheme”

H
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 407
[MADAN B. LOKUR, J.]

It is after the above exercise is complete that the role of the District A
:
Programme Coordinator commences.
r shall 12. At this stage it is important to notice: (i) The State Government
lock and the Central Government have really no specific role in the formulation
y
t
of programmes for the benefit of the rural areas and in the expenditure
he that would be required to carry out the development activities of the B
e Panchayat; (ii) The provisions and steps form the basis of the number of
person days of work in a year in each year and the fund requirement;
s” (iii) The requirements made out are anticipatory and indicative.
Act: 13. The submission of the petitioner is that, as mandated by the
Act, every State Government obtains detailed information from every C
evel district and prepares a labour budget which indicates the expenditure
o the anticipated and the person days necessary for implementation of the
programmes in the concerned rural area However, the Central
Government in the Ministry of Rural Development through an Empowered
Committee discusses the annual labour budget with representatives of
Act: the State Governments and after such discussions, an ‘agreed to labour D
budget’ (different from the labour budget) is prepared. According to the
me petitioner, there is no question of having these discussions or an ‘agreed
olid ate to labour budget’ particularly when a detailed assessment has been made
e
osals by the District Programme Coordinator and the Panchayat and forwarded
nti ng by the State Government to the Central Government. E
n the 14. On the other hand, the view of the Central Government, based
yat at
on experience, is that some State Governments are not able to fully
utilize the proposed labour budget and therefore through discussions, the
labour budget is appropriately rationalized to a reasonable figure based
Act: on the person days necessary. As mentioned above, this is objected to F
by the petitioner.
t level 15. The further grievance of the petitioner is that the ‘agreed to
labour budget’ works as a cap on the expenditure for every financial
year and the generation of the Muster Roll is stopped. Therefore, even
though there would be unemployed persons willing to do some unskilled G
wise manual work but they are prevented from doing so because of an informal
s to be
a
cap on expenditure.
er the 16. Essentially, the submission of learned counsel for the petitioner
is that first of all there cannot be an ‘agreed to labour budget’ for the
reason that once the State Government raises a demand for
H
408 SUPREME COURT REPORTS [2018] 5 S.C.R.

A implementation of the Scheme under the Act, the Central Government
must release the funds without any reduction in the quantum. The second
objection by learned counsel for the petitioner is that if the amount
demanded by the State Government is not released there is a very strong
possibility of some persons not being able to get employment due to
insufficiency of funds and also due to the informal cap on the availability
B
of funds.
17. We are not in agreement with learned counsel on both the
submissions. We may mention that we have already dealt with some
facets of this issue in our judgment and order of 13th May, 20163 and
have 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 National
Employment Guarantee Fund (NEGF) to the State Governments and
Union Territory Administrations. It prescribes that:
“(1) Before the beginning of each financial year on or before 31st
D January, all Secretaries of the State Governments and Union
Territories concerned with the implementation of the Act and the
State Employment Guarantee Scheme shall present their annual
work plan and labour budget to the Ministry of Rural Development.
(2) The State Governments and Union Territories may also in
E their annual work plan and labour budget submit proposals for
any work other than those specified in Schedule I of the Act.
(3) The Ministry of Rural Development may examine the
proposals received by it on or before the 31st of January of
each financial year and review the performance of the States
F and Union Territories with respect to the implementation
of the Act and estimate the amount to be released to the
State Governments and Union Territory Administrations
from the National Fund.
(4) Release of funds to the State Governments and Union Territory
G Administrations shall be made in accordance with the directions
issued 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 Central
Government is statutorily empowered to scrutinize and assess the funds
3
H Swaraj Abhiyan (III) v. Union of India & Ors. (2016) 7 SCC 544
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 409
[MADAN B. LOKUR, J.]

to be released to the State Governments and Union Territory A
Administrations for the purposes of the Act. The final assessment is
made by the Empowered Committee in consultation with the State
Governments and Union Territory Administrations. Therefore, it is not
as if the ‘agreed to labour budget’ or the ‘approved labour budget’ is
fixed arbitrarily by the Central Government. We do not see anything
B
objectionable in this, more particularly since the process is backed by
statutory provisions.
Cap on funds
20. It has been brought on record by the Union of India in its
affidavit of 4th December, 2017 that not only is there no informal cap on C
the release of funds, but whenever required, necessary funds have been
released over and above the ‘agreed to labour budget’. It is stated that
in 2015-16 as many as 16 State Governments and Union Territory
Administrations had exceeded the ‘agreed to labour budget’ and funds
had been released. In 2016-17 as many as 20 State Governments and
Union Territory Administrations had exceeded the ‘agreed to labour D
budget’ and funds released. The position was similar for 2017-18 with
12 State Governments and Union Territory Administrations exceeding
the ‘agreed to labour budget’ and funds released.4 This is possible only if
there is no cap, informal or otherwise and the generation of the Muster
Roll continues. E
21. Learned counsel for the petitioner pointed out instances where
there had been a shortage of funds released to two States namely Tripura
and Telangana.
22. In this regard, it was pointed out by the learned Attorney
General that as far as Tripura is concerned, there were some allegations F
of corruption in the sense of mis-utilization of funds and that was being
investigated. It was reported that the funds made available had not been
used for the purpose for which they were released. We need not delve
into this issue at all and leave it at that.
23. As far as the State of Telangana is concerned it was stated G
that according to the State functionaries there was 100% utilization by
June 2017 itself that is in a period of about two months. We find this
difficult 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 said
to be incomplete. H
410 SUPREME COURT REPORTS [2018] 5 S.C.R.

A Attorney General that the factual position is otherwise and it was found
that Telangana had not been able to utilize 100% funds released as per
the ‘agreed to labour budget.’ In the written submissions filed by the
Union of India on 13th April, 2018 it is stated as follows:
“However, the State has never exceeded 12 crores person days
B except in FY 2015-16 which was a severe drought year and
provision for additional 50 days were granted by Central
Government to help the rural poor tide over the impacts of the
national calamity. The State after due consultation with the Ministry
agreed to 12 crores person days for FY 2017-18. This was 20%
more than the approved Labour Budget of FY 2016-17 and due
C consideration was given to the increased demand for work under
the scheme. It is important to mention here that Telangana received
the highest ever allocation (Rs.2539.20 Cr) of MGNREGA funds
in FY 2017-18. Despite having no paucity of funds in FY 2017-
18, the State could not generate 100% of the agreed to Labour
D Budget.”
24. What is most significant and important, in our opinion, is that if
there is some sort of a cap or an unreasonable reduction in the funds
made available to the State Governments it is really for the concerned
State Government to object to the cap and non-availability of funds. We
E have not been shown any objection raised by any State to the effect that
it has not received adequate funds for implementation of the Scheme for
various activities. In the absence of any objection or demand having
been raised for funds by the State Governments (and denial of funds by
the Central Government) we are of the view that the petitioner cannot
be allowed to raise such a contention which ought really to be raised by
F the affected State Government.
25. The Central Government through the Ministry of Rural
Development has expressed the view in its affidavit of 3rd January,
2018 that implementation of the Scheme is the responsibility of the States
and, hence, securing funds for implementation is the responsibility of the
G States. We cannot accept this blanket statement, particularly when it
concerns delayed payments. It is true that when the Mother Sanction
based on the ‘agreed to labour budget’ nears exhaustion or is exhausted,
the concerned State or Union Territory must obtain another Mother
Sanction by providing the Central Government with the requisite
H
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 411
[MADAN B. LOKUR, J.]

documents as per the financial norms. According to the Central A
Government, there is some laxity in this regard by the State Governments
and Union Territory Administrations, which cannot be overlooked in view
of the General Financial Rules. This is a bottleneck that must be
addressed and, as stated in the affidavit, checklists have been prepared
in consultations with the State Governments and Union Territory
B
Administrations to facilitate smoother processing of proposals. Perhaps
something more needs to be done and we leave it to the Ministry of
Rural Development to find a solution.
26. One of the positive measures adopted by the Ministry of Rural
Development to reduce delays in release of funds is conducting a Mid
Term Review with the State Governments and Union Territory C
Administrations. One such Mid Term Review was conducted from 29th
August, 2017 to 13th October, 2017 to “reorient” them on the financial
norms and the checklists to be adhered to for preparing proposals for
release of funds. We expect a similar exercise to be conducted for 2018-
19 and for subsequent years to tide over any possible stumbling blocks. D
27. We reiterate the necessity of meaningful discussions while
approving or finalizing the labour budget. The fact that so many States
and Union Territories have exceeded the expenditure postulated by the
‘agreed to labour budget’ is an indication that the Scheme is either well
received by the unemployed or the Empowered Committee is being a
little tight-fisted. It must be appreciated that the release of funds is for a E
good socio-economic cause and therefore expeditious and sufficient
availability of funds should be the objective. Under the circumstances,
we reject the submission of learned counsel for the petitioner that the
Central Government cannot prepare an ‘agreed to labour budget’ or that
the process of preparing an ‘agreed to labour budget’ is impermissible or F
that 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 petitioner
is of delay in payment of wages to the beneficiaries and to make it
worse, compensation is not paid to them in terms of the Act. Both issues G
are intrinsically interlinked.
29. Section 3(3) and Section 3(4) of the Act provide that every
person who has done work given to him or her under the Scheme shall
be entitled to receive wages and the disbursement of daily wages shall
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412 SUPREME COURT REPORTS [2018] 5 S.C.R.

A be on a weekly basis or in any case not later than a fortnight after the
date on which such work was done.
30. In this context, Schedule II to the Act mentions the conditions
for guaranteed rural employment and the minimum entitlements of
labourers. Paragraph 29 relates to wage payment and is of great
B significance. It provides, inter alia, that in case wages are not paid within
15 days from the date of closure of the Muster Roll, the wage seeker or
labourer 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 closure
of the Muster Roll.
C Paragraph 29 of Schedule II of the Act reads as follows:
“Wage payment:––
29. (1) In case the payment of wages is not made within fifteen
days from the date of closure of the muster roll, the wage
seekers shall be entitled to receive payment of compensation
D for the delay, at the rate of 0.05% of the unpaid wages per day
of delay beyond the sixteenth day of closure of muster roll.
(a) Any delay in payment of compensation beyond a
period of fifteen days from the date it becomes
payable, shall be considered in the same manner as
E the delay in payment of wages.
(b) For the purpose of ensuring accountability in payment
of wages and to calculate culpability of various
functionaries or agencies, the States shall divide the
processes leading to determination and payment of
F wages into various stages such as––
i. measurement of work;
ii. computerising the muster rolls;
iii. computerising the measurements;
G iv. generation of wage lists; and
v. uploading Fund Transfer Orders (FTOs),
and specify stage-wise maximum time limits along
with the functionary or agency which is responsible
for discharging the specific function.
H
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 413
[MADAN B. LOKUR, J.]

(c) The computer system shall have a provision to A
automatically calculate the compensation payable
based on the date of closure of the muster roll and
the date of deposit of wages in the accounts of the
wage seekers.
(d) The State Government shall pay the compensation B
upfront after due verification within the time limits
as specified above and recover the compensation
amount from the functionaries or agencies who is
responsible for the delay in payment.
(e) It shall be the duty of that District Programme C
Coordinator or Programme Officer to ensure that
the system is operationalised.
(f) The number of days of delay, the compensation
payable and actually paid shall be reflected in the
Monitoring and Information System and the Labour D
Budget.
(2) Effective implementation of sub-paragraph (1) shall be
considered necessary for the purposes of the section 27 of the
Act.”
31. A perusal of Section 3(3) read with Section 3(4) and paragraph E
29 of Schedule II of the Act mandates timely payment and compensation
for delayed payment. This needs to be emphasized.
32. The Central Government does admit that there has been delay
in payment of wages and some of the causes for delay have been
explained. These include delay in filling of attendance sheet, delay in F
measurement of work, delay in check measurement, delay in generation
of wage list and non-submission or partial submission of requisite
documents by the States to the Ministry of Rural Development etc. Since
funds are released in accordance with the provisions of the General
Financial Rules (GFR) and if the State Governments does not submit
G
the papers or documents in accordance with the GFR, it is difficult for
the said Ministry to release funds.
33. Learned counsel for the petitioner submitted that one of the
major causes of delay in payment of wages is the State Government
having insufficient funds even as per the approved or agreed to labour
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414 SUPREME COURT REPORTS [2018] 5 S.C.R.

A budget. It is also submitted that the wage payment process or wage
cycle is as follows:

M GNR EG A W ag e P ay m ent P rocess

Sl A cti vity D es cri ptio n R espo nsibility
B
1. M ust er Ro ll Mu ster Roll is a State G overn ment
is clos ed do cumen t, w h ich
reco rd t he at ten dan ce
of w orkers at th e
w orksi te
C 2. D ata en try of T he details of the State G overn ment
M ust er Ro ll attend ance an d the
+ measu rem ent of the
measu rement w ork do ne are en tered
bo ok into the M an agemen t
In fo rmatio n Sys tem.
D
3. G eneration A fter these tw o item s State G overn ment
of Wage List are reco rd ed, the
w ag es pay able to th e
w orker is calcu lated
and an electron ic F un d
T ran sfer Ord er (FT O)
E is gen erated.

4. 1s t Sign at ure T his is app roved State G overn ment
on Fun d elect ro nically b y a
T ran sfer desi gnated au tho rit y.
O rder It requ ires two
F elect ro nic sign atures.
T his is th e “m ak er”
po rti on .

5. 2n d si gnatu re A fter the first State G overn ment
on Fun d sign ature, it is
T ran sfer elect ro nically sen t to
G
O rder the secon d si gnato ry.
T his is th e “check er”
po rti on . T his th en gets
pu sh ed as an e-pay
order on to the
MN R EG A server.
H
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 415
[MADAN B. LOKUR, J.]

A
6. Sent to T he se file s are t hen Cen tra l
Pu blic Fun d pu lled fro m the G ov ern men t/
M ana gem ent MG N R EG A server t o Paym ent A gen cy
Sys tem ( ru n the Pu blic Fun d
by Min istry Man age men t Sys tem
lity of Finan ce ) (PF MS ) se rver . T he
fo llo wi ng step s B
nment hap pen a t tha t level:

Pub lic Fun d
Man age men t Sys tem
w ill send t hese files to
the a ccre d ited ban k.
nment C
T he accre dited b ank
w ill send t he files to
the sp on sor ban k.

Spo ns or B ank w ill
proce ss th e files u sing D
nment N at ion al Pay ment s
Corp ora tion of Ind ia.

PFM S share s
res pon ses w ith
N RE GA So ft.
E
7. Sent to Sta te T he PFM S w in do w Cen tra l
nment E mpl oy ment no tion ally sen ds it to G ov ern men t/
G ua rantee the State Em plo ym ent Paym ent A gen cy
Fu nd – G uarantee Fun d. Th is
N eFM S ban k acco un t un der
the N eFM S is s olely F
fo r w a g e p aymen ts

8. Sent to Post A fter no tion ally Cen tra l
O ffice/Ban k pass ing th rou gh th e G ov ern men t/
nment
State E m plo ym en t Paym ent A gen cy
G uarantee Fun d it is
the n s e nt to th e Po st G
O ffice /Ba nk .

9. D epo sited in T he paym ent a gen cy Cen tra l
w or kers dep osits t he mon ey G ov ern men t/
ac cou nt into the w orkers Paym ent A gen cy
acco un t.
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416 SUPREME COURT REPORTS [2018] 5 S.C.R.

A 34. According to the petitioner, the delay caused by the Central
Government in steps No. 6 to 9 is not taken into account for the purpose
of payment of compensation, meaning thereby that the Central
Government washes its hands off any liability for payment of
compensation.
B 35. While admitting and appreciating that there is delay in payment
of wages (whatever the cause) the Central Government has stated in its
affidavit of 4th December, 2017 that steps have been taken to ensure
that payment of wages is not delayed. Initially, the onus to prove the
delay and to claim compensation was on the worker but now it has been
provided (since January 2014) that the responsibility for payment of
C compensation is that of the State Government which may recover the
compensation from the defaulting functionary/agency responsible for
the delay in payment of wages. In other words, the Central Government
has realized and appreciated the importance of timely payment of wages
to the workers and has taken steps in this regard. The Central
D Government has suggested the following timelines for payment of wages
within 15 days:

P RO CESSES PE RIOD

STA G E – I T+8
E L ast date of Mu ster rol l as p er e-m us ter T

D ata en try of attendan ce into M IS T +2

M easuremen t of th e wo rk and en terin g th e sam e T +5
in NR EG ASo ft
F
G eneration of w ag e lis t. T +6

G eneration of FT O s (1s t Sig nato ry ). T +7

A pp roval o f FTO for p aymen t (2 nd Si gnato ry). T +8

G STA G E – II T+9 to T+1 5

Sig nin g of Pay Orders by US of M oR D (In T +9 to T+1 1
N eFM S States /UTs )

Creditin g in to Ban k Accoun ts of Beneficiary by T +10 to T+ 15
FIs
H
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 417
[MADAN B. LOKUR, J.]

36. In addition to the above, the Central Government has required A
the State Governments and Union Territory Administrations to formulate
rules or issue notifications for payment of compensation for delayed
payment of wages. As stated in the affidavit of 4th December, 2017 as
many as 27 States and Union Territories have formulated and issued
rules or notifications or guidelines or advisories in this regard.
B
37. It is stated by the Central Government in its written submissions
dated 14th March, 2018 that the compensation envisaged under the Act
is only for the delay caused due to inefficiency on the part of different
State functionaries. Compensation is, therefore, only for the delay in
uploading the Fund Transfer Orders and it does not account for any
delay caused thereafter. C

38. Learned counsel for the petitioner has drawn our attention to
a note prepared by the Department of Expenditure in the Ministry of
Finance of the Government of India. The note is dated 21st August,
2017 and forms a part of the supplementary affidavit of the petitioner
dated 30th November, 2017. The note acknowledges (to the extent D
relevant) the contents of an article in the Business Standard of 8th August,
IOD 2017 to the effect that “the current rules do not compute or compensate
the delay in payments after the generation of FTOs [Fund Transfer
Orders].” It is true that between 10 and 15 lakh pay orders are issued on
an average day and delays are due to infrastructural bottlenecks, E
availability of funds and a lack of administrative compliance.
39. Notwithstanding the large number of pay orders, we are afraid
delays are simply not acceptable. The law requires and indeed mandates
payment of wages not later than a fortnight after the date on which the
work was done by the worker or labourer. Any reason for the delay in F
receiving wages is not at all the concern of the worker. He or she is
entitled to get the due wages within a fortnight of completion of the
work. If there are any administrative inefficiencies or deficiencies or
laxity, it is entirely for the State Government and the Ministry of Rural
Development to sort out the problem. Bureaucratic delays or red tape
T+1 5 cannot be pedalled as an excuse to deny payment of wages to the G
T+1 1 workers. It is precisely to overcome any inefficiency or deficiency that
payment of compensation is postulated, otherwise the purpose of Section
3 and paragraph 29 of Schedule II of the Act would get completely
T+ 15 defeated.
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418 SUPREME COURT REPORTS [2018] 5 S.C.R.

A 40. We may add that delayed payment adds several crores to
the compensation bill. This is to nobody’s advantage and merely adds an
avoidable financial burden on the Central Government.
41. We also cannot countenance the view advanced by the
Central Government that it has no responsibility after the second signature
B is placed on the FTO. The wages due to the worker in terms of Stage II
above must be transferred immediately and the payment made to the
worker forthwith failing which the prescribed compensation would have
to be paid. The Central Government cannot be seen to shy away from
its responsibility or taking advantage of a person who has been placed in
the unfortunate situation of having to seek employment under the Act
C and then not being paid wages for the unskilled manual labour within the
statutorily prescribed time. The State Governments and Union Territory
Administrations may be at fault, but that does not absolve the Central
Government of its duty.
42. Learned counsel for the petitioner has drawn our attention
D to the Annual Master Circular (FY 2017-2018). This validates the objection
raised by learned counsel that payment of compensation goes beyond
the signing of FTOs. The relevant provisions of the Annual Master Circular
relied on by learned counsel read as follows:
“10.4 NREGASoft has a provision to calculate the total
E compensation payable, after due verification, based on the date
of closure of Muster Roll (MR) and the date of generation of the
pay order (Fund Transfer Order) for paying wages taking into
account:
a. Date of uploading of FTO for payment of wages in the account
F of wage seeker.
b. Date of closure of muster roll.
c. The duration of such delay.
d. Total wage payable.
G e. Rate of compensation (0.05% per day).
10.5 The compensation is to be paid after due verification. Every
Programme Officer shall, within 15 days from the date that
the delay compensation becomes due, decide whether the
compensation that has been calculated by the NREGASoft
H
SWARAJ ABHIYAN (VI) v. UNION OF INDIA & ORS. 419
[MADAN B. LOKUR, J.]

is payable or not. The compensation shall be met from the A
State Employment Guarantee Fund (SEGF) upfront. This can be
recovered from the functionaries/agencies responsible for the
delay.
10.6 The exceptions when compensation is not payable are:
a. Compensation is not due. B

b. Natural calamities.
10.7 The Programme Officer will ensure that compensation claims
are settled during the prescribed time, i.e. within 15 days of
compensation being due, and such claims will not be allowed to C
be accumulated without any decision of acceptance or rejection.
In all cases of rejection, the Programme Officer shall give detailed
reason(s) for rejection on NREGASoft and maintain record of
the same, in her/his office for future verification. All cases
approved for payment of compensation shall be done in the same
manner as payment of wages. District Programme Coordinator D
will monitor this regularly.
10.8 Failure to settle claims during the prescribed time shall result
in payment of due amount into the account of the worker.”
[Emphasis supplied by us].
E
Surely, the Central Government cannot violate its own Master Circular
and seek to otherwise absolve itself of any liability.
43. Apparently realizing its responsibility, it is stated in the written
submissions of 13th April, 2018 that the Ministry of Rural Development
is making all efforts for improving the Stage-I and Stage-II of the wage
F
payment process. Due to the concerted efforts, the Stage - I timely
payment 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 FY
2017-18. While there is some improvement, it is not enough. There
cannot be any justifiable reason to delay payment of wages or justifiable
denial of compensation for delayed payment of wages. Any delay in G
payment of wages or compensation violates statutory provisions.
44. We therefore make it clear and direct that in terms of the Act
and Schedule II thereof a worker is entitled to payment of wages within
a fortnight of the date on which the work was done, failing which the
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420 SUPREME COURT REPORTS [2018] 5 S.C.R.

A worker is entitled to the compensation as prescribed in paragraph 29 of
the Schedule II of the Act. The burden of compliance is on the State
Governments and Union Territory Administrations as well as the Central
Government. One entity cannot pass on the burden to another and vice
versa.
B 45. In view of the above, we direct the Central Government through
the Ministry of Rural Development, in consultation with the State
Governments and Union Territory Administrations to prepare an urgent
time bound mandatory program to make the payment of wages and
compensation to the workers. This is not only in the interest of the workers
who have expended unskilled manual labour but also in furtherance of
C the rule of law which must be followed in letter and spirit.
46. The third grievance relating to social audits was not urged
before us.
Conclusion
D 47. All issues pertaining to the Act now stand closed and concluded.
The petitioner has, from time to time, highlighted issues of seminal
importance and must be complimented for it. The Ministry of Rural
Development has reacted positively and brought about some significant
changes to make the Act and the Scheme more effective and must also
E be complimented. It must, however, take urgent remedial steps to iron
out the creases, since there is still some way to go before the Act finally
touches the lives of millions of unemployed persons. The efforts of the
petitioner and the said Ministry should continue to be inexorably for the
socio-economic benefit of the millions of unemployed persons in the
country.
F

Kalpana K. Tripathy Directions issued.

G

H