W.P. (C) No. 857 of 2015                                                                                                                              Page 1 of 24  

REPORTABLE  

IN THE SUPREME COURT OF INDIA  

CIVIL ORIGINAL JURISDICTION  

WRIT PETITION(CIVIL) NO. 857 OF 2015  

Swaraj Abhiyan (VI)       .....Petitioner  

versus  

Union of India & Ors.       ....Respondents    

J U D G M E N T  

Madan B. Lokur, J.  

1. In the record of proceedings of this 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:  

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 and the Union Territory Administrations.  

3. Absence of social audits being conducted.

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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 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 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:  

“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 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.   

(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.   

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(4) The Central Government or the State Government may, within the  

limits of its economic capacity and development, make 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 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.     

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 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.  

(b) The labour budget projections are arrived at through the process

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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  

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.   

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.  

9. Section 14 of the Act provides for the appointment of a District  

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  

                                                           1There 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 outcomes.      

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is expected to implement the Scheme in the district, in addition to his/her other  

functions.    

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.    

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:  

Step 1 Gram Panchayat identifies  

works to be taken up in area  

based on recommendations of  

the Gram/Ward Sabha  

Section 16(1) of the Act:  

“The Gram Panchayat shall be responsible for  

identification of the projects in the Gram  

Sabha area to be taken under a Scheme as per  

the recommendations of the Gram Sabha and  

the Ward Sabha and for executing and  

supervision of works.”  

Step 2 Gram Panchayat to forward the  

works identified by the Gram  

Sabha to the Programme  

Officer for scrutiny +  

preliminary approval   

Section 16(4) of the Act:  

“The Gram Panchayat shall forward its  

proposals for the development projects  

including the order of priority between  

different works to the Programme Officer for  

scrutiny and preliminary approval prior to the  

commencement of the year in which it is  

proposed to be executed.”   

Step 3 Programme Officer at the  

Block level consolidates plans  

received by allGram  

Section 15(4) of the Act:  

“The Programme Officer shall prepare a plan  

for the Block under his jurisdiction by  

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

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Panchayats  

consolidating the project proposals prepared  

by the Gram Panchayat and the proposals  

received from intermediate panchayats”   

Step 4 Block Panchayat to approve  

the block level plan prepared  

by the Programme Officer and  

forwarding it to the District  

Panchayat for approval  

Section 16(3)(b) of the Act:  

“to approve the Block level Plan for  

forwarding it to the district Panchayat at the  

district level for final approval”    

Step 5 District Programme  

Coordinator to consolidate all  

Block level plans and submit it  

to the District Panchayat   

Section 13(3)(a) of the Act:  

“The District Programme Coordinator shall  

“consolidate the plans prepared by the Blocks  

and project proposals received from  

implementing agencies for inclusion in the  

shelf of projects to be approved by the  

Panchayat at the District level”    

Step 6 District Panchayat finalizes  

and approves block-wise works  

to be taken up under the  

Scheme  

Section 13(2)(a) of the Act:  

“The functions of the Panchayats at the district  

level shall be-  

(a) To finalise and approve block-wise  shelf of projects to be taken up under a  

programme under the Scheme”   

It is after the above exercise is complete that the role of the District Programme  

Coordinator commences.   

12. At this stage it is important to notice: (i) The State Government and the  

Central Government have really no specific role in the formulation of  

programmes for the benefit of the rural areas and in the expenditure that would  

be required to carry out the development activities of the 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; (iii) The requirements made out are  

anticipatory and indicative.  

13. The submission of the petitioner is that, as mandated by the Act, every

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State Government obtains detailed information from every district and prepares  

a labour budget which indicates the expenditure 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 the State Governments and after such discussions, an ‘agreed  

to labour budget’ (different from the labour budget) is prepared.  According to  

the petitioner, there is no question of having these discussions or an ‘agreed to  

labour budget’ particularly when a detailed assessment has been made by the  

District Programme Coordinator and the Panchayat and forwarded by the State  

Government to the Central Government.     

14. On the other hand, the view of the Central Government, based 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 on the person days  

necessary. As mentioned above, this is objected to by the petitioner.   

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 manual work but they are  

prevented from doing so because of an informal cap on expenditure.   

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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 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 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.   

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  

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.  

                                                           3 Swaraj Abhiyan (III)   v.  Union of India & Ors.  (2016) 7 SCC 544   

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(2) The State Governments and Union Territories may also in 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 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  

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 to be released to the  

State Governments and Union Territory 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  

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 the release of funds,  

but whenever required, necessary funds have been released over and above the

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‘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 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.   

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 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 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 Attorney General that the factual position is  

otherwise and it was found that Telangana had not been able to utilize 100%  

                                                           4Upto the date of the written submissions, that is, 13th April, 2018 but the data is said to be incomplete

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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 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 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 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 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 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

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implementation is the responsibility of the 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  

documents as per the financial norms. According to the Central 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 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 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.

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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 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 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 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 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

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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 at 0.05% of the unpaid wages per day of  

delay beyond the sixteenth day of closure of the Muster Roll.  

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 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 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  

wages into various stages such as––  

i. measurement of work;  

ii. computerising the muster rolls;  

iii. computerising the measurements;  

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.

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(c) The computer system shall have a provision to  

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  

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  

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  

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 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 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  

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Governments does not submit 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 budget. It is  

also submitted that the wage payment process or wage cycle is as follows:  

MGNREGA Wage Payment Process  

Sl Activity Description Responsibility  

1. Muster Roll  

is closed  

Muster Roll is a document,  

which record the attendance  

of workers at the worksite  

State  

Government  

2. Data entry of  Muster Roll +  

measurement  

book  

The details of the  

attendance and the  

measurement of the work  

done are entered into the  

Management Information  

System.  

State  

Government  

3. Generation of  

Wage List  

After these two items are  

recorded, the wages  

payable to the worker is  

calculated and an electronic  

Fund Transfer Order (FTO)  

is generated.  

State  

Government  

4. 1st Signature  

on Fund  

Transfer  

Order  

This is approved  

electronically by a  

designated authority. It  

requires two electronic  

signatures. This is the  

“maker” portion.  

State  

Government  

5. 2nd signature  

on Fund  

Transfer  

Order  

After the first signature, it  

is electronically sent to the  

second signatory. This is  

the “checker” portion. This  

then gets pushed as an e-

pay order onto the  

MNREGA server.  

State  

Government

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6. Sent to  

Public Fund  

Management  

System (run  

by Ministry  

of Finance)  

These files are then pulled  

from the MGNREGA  

server to the Public Fund  

Management System  

(PFMS) server. The  

following steps happen at  

that level:  

Public Fund Management  

System will send these files  

to the accredited bank.  

The accredited bank will  

send the files to the sponsor  

bank.   

Sponsor Bank will process  

the files using National  

Payments Corporation of  

India.  

PFMS shares responses  

with NREGASoft.  

Central  

Government/  

Payment  

Agency  

7. Sent to State  

Employment  

Guarantee  

Fund –  

NeFMS  

The PFMS window  

notionally sends it to the  

State Employment  

Guarantee Fund. This bank  

account under the NeFMS  

is solely for wage payments  

Central  

Government/  

Payment  

Agency  

8. Sent to Post  

Office/Bank  

After notionally passing  

through the State  

Employment Guarantee  

Fund it is then sent to the  

Post Office/Bank.  

Central  

Government/  

Payment  

Agency  

9. Deposited in  

workers  

account  

The payment agency  

deposits the money into the  

workers account.  

Central  

Government/  

Payment  

Agency  

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

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payment of compensation, meaning thereby that the Central Government  

washes its hands off any liability for payment of compensation.  

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 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 Government has suggested the following  

timelines for payment of wages within 15 days:  

PROCESSES PERIOD  

STAGE – I T+8  

Last date of Muster roll as per e-muster T  

Data entry of attendance into MIS T+2  

Measurement of the work and entering the same in  

NREGASoft  

T+5  

Generation of wage list. T+6  

Generation of FTOs (1st Signatory). T+7  

Approval of FTO for payment (2nd Signatory). T+8  

STAGE – II T+9 to T+15  

Signing of Pay Orders by US of MoRD (In  

NeFMS States/UTs)  

T+9 to T+11  

Crediting into Bank Accounts of Beneficiary by  

FIs  

T+10 to T+15

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36. In addition to the above, the Central Government has required 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.  

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.  

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 relevant) the contents of an article in the  

Business Standard of 8th August, 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, availability of funds and a lack of administrative compliance.  

 W.P. (C) No. 857 of 2015                                                                                                                              Page 20 of 24  

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 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 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.  

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 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

 W.P. (C) No. 857 of 2015                                                                                                                              Page 21 of 24  

advantage of a person who has 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.  

42. Learned counsel for the petitioner has drawn our attention 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 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 of  

wage seeker.  

b. Date of closure of muster roll.  

c. The duration of such delay.  

d. Total wage payable.  

 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 is payable or not.  The  

compensation shall be met from the State Employment Guarantee Fund  

(SEGF) upfront.  This can be recovered from the functionaries/agencies  

responsible for the delay.

 W.P. (C) No. 857 of 2015                                                                                                                              Page 22 of 24  

10.6 The exceptions when compensation is not payable are:  

a. Compensation is not due.  

b. Natural calamities.  

10.7 The Programme Officer will ensure that compensation claims are  

settled during the prescribed time, i.e. within 15 days of compensation  

being due, and such claims will not be allowed to 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 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].    

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 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 payment of wages or compensation violates  

statutory provisions.  

 W.P. (C) No. 857 of 2015                                                                                                                              Page 23 of 24  

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 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.  

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 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   

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

 W.P. (C) No. 857 of 2015                                                                                                                              Page 24 of 24  

Act and the Scheme more effective and must also 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.  

                                                                                      .....................................J  

               (Madan B. Lokur)  

New Delhi;             .....................................J  

May 18, 2018                                                                    (N.V. Ramana)