Journal Section Jul13

2013 JOURNAL SECTION 193

July, 2013 - 21

The Contract Labour (Regulation &

Abolition) Act, 1970 provides that the principal

employer will ensure that the wages to the

employees of the contractor must be paid in the

presence of the authorized representative of the

Principal Employer. Sub-section 4 of section 21

of the Contract Labour (Regulation & Abolition)

Act stipulates that in case the contractor fails to

make payment of wages within the prescribed

period or makes short payment, then the principal

employer shall be liable to make payment of

wages in full or the unpaid balance due, as the

case may be, to the contract labour employed by

the contractor. On this analogy, a question arises

as to whether principal employer is liable to pay

bonus to the employees of the contractor in case

the contractor, if liable, fails to pay bonus to its

employees. The facts of a case, Shachindra

Kumar, Factory Manager, Hindustan Unilever

Ltd. vs. State of Karnataka, Labour

Department, 2013 LLR 595 (Karn. HC) are that

the officials of the Labour Department conducted

inspection of the records of the Hindustan

Unilever Ltd. (hereinafter referred to as petitioner

in Mangalore and found that the company is not

paying bonus to the contractor labourers on par

with regular employees. A notice was issued to

the petitioners for making payment of bonus to

the contract labourers. The petitioners sent a reply

saying that the contract labourers are not the

employees as defined under the Payment of

Bonus Act, therefore, they are not entitled for

bonus from the principal employer on par with

their regular employees. The Authorities under

the Payment of Bonus Act not being satisfied

with the reply, lodged a complaint before Judicial

Magistrate Ist Class, Managalore alleging that

the Factory Manager and the Unit HR head of

the company (hereinafter referred as petitioners)

have committed violation of provisions of

Payment of Bonus Act and they are guilty of the

offence punishable under section 28 of the said

Act.

The learned Magistrate before whom the

complaint was presented, took cognizance of the

offence and ordered issue of summons to the

petitioners. On coming to know of the same,

petitioners presented a petition under section 482

of the Criminal Procedure Code in the Karnataka

High Court.

The contention urged before the High Court

has been that the Magistrate, without applying

his judious mind even to the averments made in

the complaint wherein the definition of an

employee as defined in Payment of Bonus Act is

extracted which clearly indicated that it does not

include the contract laboureres, has taken

cognizance of the offence alleged, therefore, the

cognizance taken for violation of section 11

punishable under section 28 of the said Act is

bad in law and without jurisdiction.

Section 11 of Payment of Bonus Act, 1965

makes it obligatory on the part of the employer

to pay minimum bonus to its employees.

According to the said section 28 of the Act

if any person contravenes any of the provisions

of this Act or any rule made thereunder or to

whom a direction is given or a requisition is made

under this Act fails to comply with the direction

or requisition, he shall be punishable with

imprisonment for a term which may extend to

six months, or with the, which may extend to one

thousand rupees, or with both.

The Payment of Bonus Act is applicable to

all the factories and other establishments in which

twenty or more persons are employed on any

day during an accounting year.

194 JOURNAL SECTION LLR

July, 2013 - 22

Section 2(13) of the Payment of Bonus Act

defines ‘employee’ as under:-

2(13) “Employee” means any person (other

than an apprentice) employed on a salary or wage

not exceeding ten thousand rupees per mensem

in any industry to do any skilled or unskilled

manual supervisory, managerial, administrative,

technical or clerical work for hire or reward,

whether the terms of employment be express or

implied.

Thus, if a person claims any benefit under

the Payment of Bonus Act, he should fit into the

definition of an employee found in section 2(13)

of the Act. Reading of this definition extracted

above would indicate that it does not include a

contract labourer. On comparison, if the definition

of an employee is looked in both in Employees’

State Insurance Act, 1948 or Employees’

Provident Funds and Miscellaneous Provisions

Act, 1952, specifically includes a contract

labourer also. Conspicuously, the definition of an

employee under the Payment of Bonus Act does

not either expressly or impliedly include a contract

labourer.

The Kerala High Court in the case of

Cominco Binani Zinc Ltd. vs. Pappachan,

reported in 1989 (1) LLJ 452 : 1989 LLR 123

has considered the question as to whether the

persons employed in a canteen run by

independent contractors or by co-operative

societies of the workmen are the employees of

the Management. After considering the provisions

of the Factories Act, Payment of Wages Act,

etc., it has been held that when the responsibility

of running the canteen is entrusted to a contractor

or a society, the workmen employed and paid by

such contractor or society cannot be treated as

workmen of the Management and there is no

employer-employee relationship between the

Management and such employees. The High

Court observed that “the direction given by the

Tribunal to pay bonus to the workers engaged in

the canteen cannot be sustained for the reasons

mentioned earlier”.

The Apex Court, in the case of the workmen

of The Food Corporation of India vs. M/s.

Food Corporation of India reported in 1985

(II) LLJ 4, has considered the relationship of the

contract labourer with the statutory Corporation.

It has been observed at Para 12 that where a

contractor employs a workman to do the work

which he contracted with a third person to

accomplish on the definition as it stands, the

workman of the contractor would not, without

something more, become the workman of that

third person. Therefore, when the contract system

was in vogue, the workmen employed by the

contractor were certainly not the workmen of

the Corporation and no claim to that effect has

been made by the Union.

Having regard to the definition of employee

found in section 2(13) of the Payment of Bonus

Act, the claim of the Labour Department that

the contract labourer are also entitled for payment

of bonus on par with the regular employees, as

contended in the complaint, has no legal basis

and it does not amount to violation of section 11

of the Act attracting punishment under section

28 of the said Act. It is clear that the contract

labourer cannot be treated on par with the regular

employees for the purpose of payment of bonus.

In view of the above, taking cognizance of

the offence by the learned Magistrate in the facts

of this case has been without jurisdiction as no

case was made out against the petitioners for

the offence alleged. When the contract labourers

are not ‘employees’ as defined under Payment

of Bonus Act, there is no obligation on the part of

the employer to pay bonus on par with regular

employees, therefore, it does not constitute

violation as contemplated by section 11 punishable

under section 28 of the Act. Therefore, the

prosecution launched is without authority of law

and even abuse of process of Court and the same

results in unnecessary hardship to the petitioners

hence liable to be quashed.

E-mail : [email protected]


July, 2013 - 23

Employees’ Provident Fund Organisatioan

(EPFO) is one such organization in the country,

which has gained the notoriety of disturbing the

hornets’ nest, often without any reason or

justification which results into multiplicity of

litigation. It is now again contemplating to revise

the definition of wages for contribution towards

the Employees’ Provident Fund and the

Employees’ Pension Scheme. At present, it is

calculated at the rate of 12 per cent on basic

and dearness allowance and the matching

contribution is made by the employers. This

move is being resisted by the ‘industry’, for the

obvious reasons as it will put more burdens on

it. The government introduced a triple test -

‘Ordinarily, Necessarily and Uniformly’ - to

define basic wages for provident fund deduction

through a circular issued on 30th November

2012, but had later stayed its implementation.

Similarly, on 23rd May, 2011 instructions

pertaining to allowances were issued which were

also withdrawn and kept in abeyance.

First of all, it is necessary to know what the

definition of the relevant legal provisions. Section

2(b) defining basic wages which is to be read

with section 6 of the Provident Fund Act,

provides for contribution and read as under :-

“The contribution which shall be paid by the

employer to the Fund shall be twelve per

cent of the basic wages, dearness allowance

and retaining allowance (if any) for the time

being payable to each of the employees

(whether employed by him directly or by

or through a Service Provider) and the

employee’s contribution shall be equal to

the contribution payable by the employer in

respect of him and may, if any employee so

desires, be an amount exceeding twelve per

cent of his basic wages, dearness allowance

and retaining allowance (if any), subject to

the condition that the employer shall not be

under an obligation to pay any contribution

over and above his contribution payable

under this section………….”

Therefore, by reading of the legal provisions

relating to ‘basic wages’ and allowances, it is

clear that contributions under Provident Fund

Act are to be paid only on basic wages [which

specifically excludes house rent allowance

(HRA)], DA and retention allowance. That is

the reason that many organizations of the industry

challenged the proposal of the EPF in various

Despite withdrawing its earlier notifications (dated 23.5.2011 and 30.11.2012) pertaining

allowances for provident fund contributions to the EPFO is again planning to notify its

interpretation on allowances ignoring that in the presence of its Advocates, the Supreme

Court in its order dated 12.4.2013 has directed for final disposal/appeals in this context in

second week of August, 2013. These appeals are about various allowances whether EPF

contributions be deducted or not? The EPFO has not learnt about illegal decision by

demanding and recovering contributions on leave encashment. Ultimately it has to bite the

dust when in 2008, the Supreme Court held that it was illegal and money as recovered was

to be adjusted in future payment to be made by the employers.


July, 2013 - 24

High Courts, which has finally come to the

Supreme Court. In this regards two High Courts

namely; the Gwalior bench of Madhya Pradesh

High Court and Calcutta High Court have given

two diametrically opposite rulings. When it was

brought to the notice of the Supreme Court in a

Special Leave Petition, it granted leave by

clubbing all of them and has posted it for final

hearing in 2nd week of August 2013 only.

Hopefully, the law will be settled for the days to

come. The question of interpretation of the

allowances for attracting Employees’ Provident

Fund contributions has finally reached the

Supreme Court after over 50 years i.e. after

Bridge & Roof Company case. The EPFO is

Respondent and also appellant in another case

i.e. G4 Security Services and August is not too

far. The administrative wisdom calls that the

EPFO should wait for the outcome lest it may

withdraw its notification for the third time after

the interpretation by the Apex Court. It is

pertinent to remind the EPFO that based on an

ex-parte judgment of Bombay High Court, it

has started recovering provident fund

contributions on encashment of leave. Which

when challenged by Manipal Academy the

Supreme Court in 2008 directed the adjustment

of future payment by the employers, the

contributions as recovered with observations that

the encashment of leave will not attract provident

funds contributions since the definition of ‘basic

wages’ given under the Act did not intend to

include such type of payment besides that the

Apex Court in Bridge & Roof Company (India)

Limited has also clearly interpreted the term

‘basic wage’ hence the reliance as placed by

the EPFO on the judgment of Bombay High

Court has not been proper.

The dispassionate analysis of the proposal

of the Employees’ Provident Fund will make it

absolutely clear that it is neither good for the

‘industry’ nor for the employees. No doubt, it

will have huge financial implications both for

industry and government and may even be

counterproductive to the EPFO, as industrial

organisations which are extending coverage to

employees receiving salaries above Rs. 6,500

per month may choose to opt out, depriving the

employees’ coverage under a globally renowned

social security scheme.

Under the current rules, an organised sector

worker is not required to mandatorily join the

provident fund scheme if his/her basic salary

exceeds 6,500 a month.

Most of the employees today join an

organisation above this statutory limit and they

are voluntarily covered by the industry and,

therefore, for employees who are on a higher

salary bracket and receiving allowances as

incentives to promote business, the PF

contribution should be restricted to basic salary.

What is most unfortunate part of the

functioning of the EPFO is that left hand does

not know what the right hand is doing. Its

inefficiency is nowhere more glaringly seen than

in Delhi, under the very nose of the seat of the

power. The wages ceiling for coverage of an

employee is Rs.6,500 per month is effective from

May, 2001 and it continues to remain the same

whereas even an unskilled worker in Delhi is

getting minimum wages at Rs.7,722 per month

and, thus, he/she is an ‘excluded employee’ under

the Employees’ Provident Fund. The

Organisation has sadly not been able to

rationalize this dichotomy for the larger interests

of the workers but often tries to tread on the

path that is full of thistles and is hardly good for

any of the stakeholders.

E-mail : [email protected]


July, 2013 - 25

Though answers are available in these columns but in view of the complicated problems it is advisable to obtain legal

advice on the subject because labour laws are frequently amended and the Governments issue notifications from time

to time besides judicial pronouncements of varying connotations. The bird’s eye view clarifications, given in LLR, will

certainly enable the readers to ask their lawyer/adviser the right question with greater confidence.As desired by some of

questionnaires, not to disclose their identity, their names are not given against their questions.

Our Experts in various subjects, relating to labour laws, endeavour to provide

authoritative solution to the problems supported with case law.

Q

A

Attendance on bio-metric system – no

change in conditions ofservice

Now with the advancement of

technology, we have installed a bio-metric

system for attendance of employees in our

industrial establishment. My query pertains

as to whether it is necessary to give a notice

of change in service conditions as required

under section 9-A of the Industrial Disputes

Act if an employer wants to introduce

Biometric Attendance System?

No. It has been held by the Madras High

Court that introducing computerized time

attendance system will

not come within the

purview of section 9-A

of the Industrial

Disputes Act providing

for a notice in change

of service conditions

and there is no violation of provisions of the

Factories Act or the Rules.

Hindustan Unilever Employees’ Union, Pondicherry vs.

Inspector of Factories, Pondicherry & Ors., 2010 LLR 878

(Mad. HC)

Non-obtaining oflicence by thecontractor –

consequences of

Our establishment is covered by

Contract Labour (Regulation & Abolition)

Act and we have taken registration under

the said Act. One of our contractors

employing more than 20 workers but has not

obtained licence under the Act. The

workers are claiming that in the absence of

obtaining licence, they have become

employees of the principal employees. How

far the workers are justified?

Merely that the contractor has not obtained

licence under the Contract Labour, it will not give

a right to the employees of the contractor to claim

that they have become employees of the principal

employer. Obtaining of licence by the contractor

employing 20 or more workers is a procedural

formality. In this context reference is made to

the judgment of Calcutta High Court wherein it

has been held that for determination of control

and supervision over the contract labour, it is seen

as to who pays the wages and exercises the

disciplinary control over them.

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July, 2013 - 26

It is only Labour Law Reporter wherein the important points of the reported cases are

highlighted so that the busy reader could glance at in a few minutes and update his

knowledge.

M/s. Indian Iron & Steel Company Ltd. (Burnpur Works,

Bumpur) vs. State of West Bengal & Ors., 2011 LLR 771 :

2012-I LLJ 83 (Cal. HC).

Relationship ofemployer and employeebetween the workers ofcontractor and principal

employer

What are the main factors for

determining relationship of employer and

employee? Like any other employer, we also

engage contractors who provide workers to

work in our industrial establishment. How

it can be determined that the principal

employer has no relationship of employer

and employee with the workers of the

contractor?

Whether a particular relationship between

employer and employees engaged through the

contractor is genuine or camouflage is essentially

a question of fact to be determined on the basis

of features of relationship hence to be adjudicated

by the Industrial Tribunal and neither by the

Administrative Tribunal nor by the High Court.

In determining the relationship of employer and

employee, ‘control’ is one of the important tests

but is not to be taken as sole test.1

The Karnataka High Court2 has given the

tests to be applied for determining the existence

of master and servant relationship are as to when

it can be termed as a sham contract.

Who pays?

For whose benefit the workmen work?

Under whose supervision?

Whether disciplinary action can be taken?

If so, by whom?

Has the employer the right to reject the end

product?

Even though the workers through the

contractor have been working for many years

but the Apex Court, in a catena of cases, has

held that this would not be conclusive factor

determining nature of relationship between the

parties as held by Bombay High Court. It was

further clarified that merely because a register is

maintained by the principal employer for the

purpose of attendance of workers of the

contractor, that by itself cannot be a factor which

would disclose the complete control by the

company over these workmen hence no fault can

be found with the Award of the Tribunal holding

that the principal employer did not exercise any

control or supervision.3

Since the principal employer has to take

precaution that under no circumstances, there

should be control and supervision by the officers

of the principal employer hence it is held

appropriate that out of the other staff of the

contractor, there should be at least one of them

designated as a supervisor through whom the

officers of the principal employer could

communicate.

1. Ram Singh vs. Union Territory, Chandigarh, 2004

LLR 47 (SC).

2. Management of V.I.S.L. vs. P.O., 1994 (69) FLR

536 (Karn HC).

3. Bharatiya Kamgar Sena vs. Udhe India Ltd., 2008

LLR 344: 2008 (116) FLR 457: 2008-I LLJ 371 (Bom HC).

Apprentice – notentitled to employment

In addition to other employees, we also

engage Apprentices under the

Apprenticeship Act. The contract of

apprenticeship provides that the

engagement of apprentice will be only for a

specific duration. My query pertains as to

whether an apprentice can claim

employment as a matter of right?

No. An apprentice under Apprenticeship Act

is engaged for the purpose of imparting training

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July, 2013 - 27

Unlike other Labour Journals we don’t publish judgments pertaining to armed forces,

police or government servants to swallow the volume.

by the employer. In one case, the Supreme Court

has held that an apprentice has no statutory right

to claim appointment on completion of his training

unless it is otherwise stipulated in the contract of

service. In the given case, the appointment letter

stated that apprentice may be appointed, but there

is no such mandate on employer to appoint him.

The Supreme Court set aside the judgment of

the High Court whereby the apprentices were

allowed to be appointed as employees by the

employer.

Haryana Power Generation Corporation Limited and

Others vs. Harkesh Chand and Others, 2013 (2) LLN 43 (SC).

Applicability of ContractLabour (Regulation &Abolition) Act on an

establishment not beingan ‘industry’

Ours is a Research Institute and the

High Court held that it does not come within

the purview of ‘industry’ under the Industrial

Disputes Act. We also engage contract

labour through the contractors. Are we

liable to seek registration and is the

contractor liable to obtain licence under the

Contract Labour (Regulation & Abolition)

Act? Any case law on the subject will be

highly appreciated.

For applicability of the Act, it is imperative

that the establishment engaging contract labour

must be an ‘industry’ as defined by section 2(j)

of the Industrial Disputes Act. For instance, it

has been held by the Gujarat High Court that the

National Physical Laboratory not being an

industry, the Contract Labour (Regulation &

Abolition) Act will not be applicable whereas the

Equal Remuneration Act will apply and the people

will be entitled to the wages which are being paid

to the permanent sweepers of the Laboratory.

Leelaben Parmer and Others vs. Physical Research

Laboratory and Another, 2011 LLR 813 (Guj. HC).

Compensation under theEmployees’

Compensation Act, 1923

I am practising in Labour Laws and

generally representing those employees

who have met with an accident or their

dependents/legal heirs if the employee has

died in the accident. My query pertains as

to when there is cent per cent disablement

of an injured employee for claiming

compensation under the Employees’

Compensation Act?

It depends upon the incapacity of the victim

of an accident, but at the same time unless a

workman is totally incapacitated, cent per cent

compensation will not be justified as held by

Orissa High Court. The Orissa High Court has

also held that unless a workman is totally

incapacitated, 100% compensation will not be

justified.1 In one case, the

Karnataka High Court has

held that while awarding

compensation in an

accident case,

broader possibilities

should be taken into

consideration.2 To

be more specific,

for permanent and total disability, the following

are some of the instances:—

(i) loss of both hands or a hand and a foot;

(ii) loss of so much vision that the workman can

perform no work that requires eye- sight;

(iii) severe fatal disfigurement e.g. acid cases;

(iv) complete deafness.

When the lower limb of the driver is

amputated below the knee because of the

accident, it will amount to 100% disablement for

calculation of compensation being total loss of

earning capacity.3

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July, 2013 - 28

Labour Law Reporter is not only read, re-read but retained also since its judgments are

authoritatively referred in the Courts and the Tribunals.

Two employees, being professional drivers,

will be entitled to accident compensation by

treating totally disabled since one of them has

lost his eyes and his driving licence cannot be

renewed whereas the other’s disability has

resulted into shortening of his leg due to injury

and he would not be able to drive the vehicle for

long distance.4 100% compensation can be

awarded despite doctor’s recommendation for

40% disability.5

1. Prakash Kumar Staparthy vs. Rama Chandra

Maharana, 1998 LLR 934 (Ori HC).

2. Traffic Manager, New Mangalore Port Trust vs. B.

Radha, 1998 LLR 726 (Kar HC).

3. Oriental Insurance Co. Ltd. vs. Shambhu Nath Yadav,

2007 LLR 1230 (SN):2008-I LLN 139: 2008 Lab IC (NOC)

129 (All HC).

4. United India Insurance Co. Ltd. vs. Y. Ananda Rao

and Another, 2013 LLR (SN) 333 : 2012 (135) FLR 959 (AP

HC)

5. National Insurance Co. Ltd., Jabalpur vs.

Ramkishore Mishra and Others, 2013 LLR 102 (MP HC)

Protected workman –when deemed to have

been declared

Trade Union functioning in our

establishment has been periodically sending

a list of office-bearers of the Union to be

declared as ‘protected workmen’. We raise

objection about submission of membership

statement since the Union has no

representative capacity in our establishment

for want of required number. However, due

to strike, we did not contradict or rebut the

list of ‘protected workmen’ as sent by the

Union. The Union is claiming that in the

absence of any communication within the

stipulated time from the Management, the

office-bearers notified to be declared as

protected workman have become protected

workmen under the Industrial Disputes Act.

What is the legal position?

In the absence of contradiction or rebuttal

by the Management within 15 days of receipt of

the list of the protected workmen, the office-

bearers of the Union will become automatically

protected workmen. It is pertinent to refer one

case wherein it has been held that no objection is

taken by the Management within 15 days from

the communication of the Union as per Rule 61(1)

of the Industrial Disputes (Central) Rules, the

workmen mentioned in that communication would

automatically become entitled to the status of

‘protected workmen’ and the appropriate

authority is empowered to declare the ‘protected

workmen’ after hearing the parties. For dismissal

of the protected workman, it is mandatory to

obtain prior permission under section 33(3) of the

Industrial Disputes Act, 1947 from the concerned

Industrial Tribunal/Labour Court failing which,

there would be no dismissal and the workman

would be entitled to reinstatement with full back-

wages.

Batra Hospital & Medical Research Centre vs. Batra

Hospital Employees’ Union, 2013 LLR 378 (Del. HC)

Payment of ex-gratia

In addition, we are paying ex-gratia to

our employees. Does it come under the

conditions of service?

Yes. Extending benefit of ex-gratia towards

payment of bonus to certain workmen and

denying to others

who indulged in

strike, was held to

be illegal since it

was being paid for

long and it had

become a condition

of service. A condition of service cannot be

changed without following procedure specified

in section 9-A of the Industrial Disputes Act,

1947.

Bharat Fritz Werner Karmika Sangha vs. Management

of Bharat Fritz Werner Ltd., 2012 LLR 1052 (Karn. HC)

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July, 2013 - 29

Q. We notice that the accumulation of

leave under Factories Act is too short. Some

of the employees want to work since they do

not want that their leave should laps. Instead

of availing leave they are interested to work

provided their leaves are encashed. Can we

so allow? Thro. Fax

A. Encashment of Leave with wages is not

permissible under the Factories Act, 1948, as long

as the worker is in employment. However, in case

a worker is discharged or dismissed from service

or quits employment or is superannuated or dies

while in service he or his legal heir or nominee is

entitled to wages, in lieu of the quantum of leave

to which he was entitled immediately before his

discharge, dismissal, quitting employment,

superannuation or death for (including accumulated

un-availed leave), as per provisions of section 79

of this Act.

Q. In our factory, we have to detain some

of the employees due to some exigencies and

urgent orders. We are ready to pay overtime.

Please apprise.

(a) whether we can take overtime work

from the employees,

(b) if yes, how long and whether we have

to seek approval/permission from the

Authority & what will be the components of

overtime? Hira Nand, Rudrapur

A. Overtime work can be taken from the

workers for exigencies such as carrying out

‘urgent repairs’, to the extent prescribed in column

4, subject to the conditions and for the period

prescribed in column 5 of the Schedule appended

below the relevant rule in the State Factories Rules,

framed under section 64 of the Factories Act, 1948.

This Schedule also provides for exemptions to

certain classes of factories specified mentioned in

column 2, for the nature of work specified in

column 3, to the extent provided in column 4,

subject to the conditions and for the period

prescribed in column 5 of this Schedule. For

exigencies, such as for executing urgent orders,

the prior permission of the Chief Inspector of

Factories for exceptional pressure of work under

section 65 of this Act is required, which may be

granted, subject to the following conditions –

• The total number of hours of work on

any day shall not exceed 12 hours

• The, inclusive of intervals for rest, shall

be exce©d 13 hours in any day

• The total hours of work in any week,

including overtime shall not exceed 60 hours

• No worker shall be allowed to work

overtime for more than 7 days at a stretch and the

total number of hours of overtime work in a quarter

shall not exceed 75 hours.

Q. In a place like Delhi, we are not in a

position to get suitable accommodation for

running a factory. However, we have acquired

third floor in a building where we will start

manufacturing optical frames by employing

over 40 employees. Are we liable to seek

registration when it is located at third floor?

Thro E-Mail

A. You are liable to obtain Registration/

License under the provisions of the Factories Act,

1948 and the Delhi Factories Rules, 19650, before

initial location or before beginning to occupy and

use the premises as a factory. At the time of

considering your application for grant of License

on the third floor premises, the Chief Inspector of

Factories office is likely to ask for details of

approval of the factory building plans of the whole

building including third floor, which is a statutory

requirement under section 6 of this Act and also to

check the suitability of the premises on third floor.


July, 2013 - 30

Q. Our establishment is covered under

ESI Act and the Scheme. We have acquired

adjoining plot which has a separate

Municipality Number for extension of our

factory.

(a) Will construction on such adjoining

plot, with a different Municipality Number

attract ESI contribution?

(b) ESIC has a Branch Manager but I

am not aware of his role. Can such a

Manager also ask for production of record

from an establishment covered under the

ESI Act? Hari Om, Kanpur

A.(a) If the construction is the expansion of

the present building the same will be coverable

under the provisions of the ESI Act. However,

in case, the construction activity remains a

separate entity even if the plot of land is adjoining

the present building, in such event, the ESI scheme

will be applicable w.e.f. the date of the production

starts which includes trial run, if any.

(b) As far the manager of branch office,

inspecting record is concerned, normally the

branch office manager (local office manager)

does not inspect the records but there are certain

small places where the number of factories/

establishments is very small. At such places, the

manager of branch office is entrusted the duties

of Social Security Officer (Inspector) also

alongwith his normal duties. In the case of

accident also, the manager is also supposed to

inspect the relevant record.

Q. Our establishment is covered under

the ESI and in case of an accident, what

formalities are to be complied? Thro Fax

A. In the case of accident, you have to

inform the manager, branch office. You have

also to make entries in the accident register

maintained by you. Where there is a panel system

of providing medical cover, you have also to

inform Insurance Medical Officer.

Q(a) I have just been enrolled as a

member of ESI. When I can avail the

medical benefits?

(b) In case of emergency if, as a

member I have to take the treatment in the

private hospital, can I seek the

reimbursement from ESI?

Gopal Krishan, Gurgaon

A(a) The medical facilities can be availed

by the insured persons and his family from the

Ist day of coverage itself.

(b) In case of emergency, the medical

services can be obtained from the nearest hospital

but thereafter you must get a reference from ESI

hospital/dispensary, if required.

Q. What is the maximum period for

which an employee can avail sickness

benefit under ESI? K.S. Batra, Delhi

A. There are 3 types of sickness benefit,

(a) sickness benefit - which can be availed for a

maximum period of 91 days in any two

consecutive benefit periods, (b) extended sickness

benefit - which can be availed for a duration of

309 days extended to two years in deserving cases

(this is in addition to 91 days i.e. 91 days + 309

days), (c) enhanced sickness benefit - 7 days for

vasectomy operation and 14 days for tubectomy

operation which can be extended in case of post

operative complications.


July, 2013 - 31

Q. We are running a orphanage and the

only support by the way of donations. We

are employing over 15 employees in addition

to more than 20 volunteers. Will our

orphanage be covered under the Provident

Funds Act? Thro. E-mail

A. Any establishment is coverable under the

EPF&MP Act, 52 provided the establishment is

engaged in scheduled activities provided under

Schedule-I of the Act or Schedule of other

establishment notified thereunder and 20 or more

employees are employed therein. Volunteers if

not paid wages will not be regarded as employee.

Q. For how many years an employee has

to be member of the provident fund to be

entitled to pension on his death or the

duration of the years of his employment

before his resignation? Thro. E-mail

A. Employees Pension Scheme, 1995

prescribe minimum 10 years membership to be

entitled for Members Pension on retirement/

Superannuation. Otherwise for Members Pension

on disablement and Pension payment to Family

members upon death of the member prescribes

no eligibility period of service.

Q. I am pursuing my MBA in HR

Development. I come across pre-discovery

period but I have not been able to

understand as to what does it mean? In my

query, I have been informed the pre-

discovery period as date of coverage under

the Act and prior to that, the employer will

be liable to pay provident fund of the

employee who has not been covered. Am I

right? E-Mail

A. ‘Pre-discovery period under the EPF

Law implementation process is understood as the

gap period between the ‘Date of Applicability’

of the EPF law upon the ‘Establishment’ in

accordance with provisions contained in section

1(3) of the EPF&MP Act,’52 and the date of

issue of coverage intimation and Code Number

by the EPF authorities to the ‘Establishment’ on

a date subsequent to ‘Applicability Date’.

Employers obligation for compliance under the

EPF Law accrues from the date of applicability

and as such compliance for pre-discovery period

will be obligatory upon the ‘Employer’.

Q. In our charitable organisation,

honorary workers - who are called Sewadar

- come to render service to the needy

handicap children. They are paid only

conveyance. Since our establishment is

covered under the Act, the P.F. Authority

has asked us that we should cover such

Sewadars also. What is the legal position?

Thro Fax

A. Payment of Conveyance to Sewadar in

cash is likely to be construed as remuneration

against service rendered by such person and as

such likely to attract contribution payment liability.

Q. In our establishment, employing 40

employees, there is no such employee who

is getting Rs.6,500 since all are getting more

than the prescribed salary. Are we liable to

be covered under the Act and the Scheme?

R.K. Mehra, Faridabad

A. Definition of ‘Employee’ provided under

section 2(f) of the EPF&MP Act,’52 does not

provide any pay ceiling limitation and as such, all

employees disregarding any pay limit, will be

reckoned for coverage purpose of your

establishment.


To our Readers,

The readers of the Labour Law

Reporter will bear testimony that

we have always endeavoured to

provide the maximum possible

and relevant information since

innovation is our passion. The

variety of regular features by well

known experts adds further value

to its utility. In a step towards better

service, another feature under the

caption Case Study has been

started.

An interesting and topical case is

being taken up to show that how it

is either won or lost. Intelligence

plays pivotal role in every walk of

life, more so in the legal field where

the parties are pitted against each

other to fight the battle through

experts in the subject.

Editor

RESIGNATION MUST BE VOLUNTARY

If the workman protested on the very next day of hisresigning, it is not voluntary

An appeal before the Supreme Court has been directed against

the final judgment and order dated 4.10.2008 passed by the High

Court of Punjab & Haryana at Chandigarh whereby the DivisionBench of the High Court dismissed the appeal filed by the appellant-company herein and confirmed the order of the learned Single Judge.

The only question that was posed for determination before thelearned single Judge of the High Court was as to whether the workmanhad voluntarily resigned on 1.10.1992 as claimed by the Managementor was he forced to resign on 30.9.1992 as alleged by the workman?After finding that had the workman resigned voluntarily on 1.10.1992,he would not have complained to the Management on that very dayand run from pillar to post, by making various complaints to higherauthorities, including the Chief Minister of the State and if the workmanhad committed any misconduct, like theft etc., the Management couldhave held a domestic enquiry and taken a suitable action as per law,the Single Judge ultimately concluded that the workman wasretrenched from employment without complying with section 25-F ofthe Industrial Disputes Act.

It has been held that it is relevant to note that in order to find outthe correctness of the order passed by the learned Single Judge, thewritten claim before the Labour Court, the workman has specificallyalleged that on 1.10.1992, he sent a notice-cum-application to theManagement and a news item to this effect was duly published in avernacular local daily.

This factual aspect and version, particularly the receipt of notice-cum-application dated 1.10.1992 from the workman, has not beendenied in the written statement filed by the Management. The mainemphasis in the written statement of the Management was that theworkman had voluntarily tendered his resignation on 1.10.1992. It is

brought to our notice that the Labour-cum-Conciliation Officer has not disputed the important fact that theworkman protested in writing on the very next day of the incident.

Whether the complaint sent by the workman on 7.10.1992 and the resignation tendered by him on1.10.1992 was voluntary or not, have not been adverted to by the Labour Court. According to us, these arethe real issues in this case.

As rightly observed by the Division Bench that there are contradictory findings by the Labour Courtwith regard to claim of the workman that he was tortured by the Management on 30.9.1992 and was madeto write the resignation letter on 1.10.1992. Again, it was rightly observed by the Division Bench thatcertain relevant facts such as workman had been in service since 1977 and in such circumstances whetherthere is any need to resign without any acceptable reason that too without any monetary incentive andcomplaint on the same day to the Management and higher authorities including the Chief Minister, werenot at all considered by the Labour Court and merely accepted that the workman tendered the resignationin his own writing.

Hence, while on going through the entire reasoning of the Labour Court, materials placed and standtaken by the workman and the Management, we are satisfied that the learned Single Judge was fully

justified in interfering with the conclusion arrived at by the Labour Court which has been rightly affirmed by

the Division Bench. Consequently, the appeal of the Management fails and the same is dismissed with

costs quantified at Rs.10,000.

M/s. Atlas Cycle (Haryana) Ltd. vs. Kitab Singh, 2013 LLR 231 (SC)

July, 2013 - 32


Some of the formatshave to be repeated butevery time we keep onmaking improvementsdepending upon thechanging scenario andjudicial pronounce-ments.

July, 2013 - 33

Pro-forma suggested for

an agreement betweenan employer and

employee whereby theemployer gives loan tothe employee to buy a

house

This agreement is made at…........on this day

of………between M/s……….………

hereinafter referred to as an ‘Employer’ on the

first part and Shri…………….son of

Shri……………..resident of and working

as…………………….with M/s………………

‘Employer’ hereinafter referred to as an

‘Employee’ on the second part.

WHEREAS the Employee’ has applied for

housing loan amounting to Rs…………………..

and the ‘Employer’ has agreed to give the said

loan to the ‘Employer’ and both the parties have

agreed to abide by the following:-

Terms and Conditions

1. That the aforesaid loan shall be repayable

by the ‘Employee’ in…………..years in………

equal monthly instalments. In the event of

termination of the services of the Employee

before the loan amount is fully repaid or due to

resignation, retirement, retrenchment, death or

any other reason, the entire unpaid balance

amount of loan shall become immediately due

and payable to the Employer.

2. The interest on the loan amount

outstanding shall be payable by the Employee at

the rate of…………% (………per cent) per

annum alongwith the monthly instalments of

principal amount which shall be recovered from

the salary of the Employee every month. Be it

clarified that interest for the period from the date

of realization of the Employers cheque towards

loan till the commencement of payment of the

first instalment of the loan is payable alongwith

the first instalment of the repayment of loan.

3. The repayment of loan and interest will

commence from the month following the month

in which the purchase of the house is completed,

or on expiry of……………month from the

month in which the last instalment of loan amount

is disbursed whichever is earlier. As soon as the

purchase of the house is completed and the same

is fit for occupation, the ‘Employee’ shall inform

the Employer about the same.

4. The ‘Employee’ shall secure the

repayment of loan and interest in the following

manner.

(a) By deposit of Title Deed of the House to

be deposited within a period of 60 days from the

date of receipt of last instalment of loan.

(b) authorisation by the ‘Employee’ or his

nominee to the Provident Fund and Gratuity for

adjustment of the balance amount of loan

outstanding, from the Provident Fund

accumulations and Gratuity payable to the

employee to his nominee.

(c) Execution of a Demand Promissory

Note for the amount of loan i.e.

Rs……..(Rs………………..) by the Employee.

On expiry of every three years from the date of

this Promissory Note, a fresh Promissory Note

shall be executed by the ‘Employee’ for the


July, 2013 - 34

amount of loan outstanding at that time.

5. The ‘Employee’ shall confirm that he or

his wife does not possess or own any other

residential house at the place of employment.

6. The House to be purchased /allotted shall

be in the name of the ‘Employee’ or his wife’s

name or jointly with each other. There shall not

be any other co-owner/co-beneficiary other than

his wife.

7. The loan as sanctioned by the ‘Employer’

will be disbursed to the ‘Employee’ only if no

other loan is outstanding with the ‘Employee’.

8. The ‘Employee’ agrees that he will not

create any encumbrance upon the house and the

said house shall not be used for any purpose other

than residential for himself and the members of

his family.

9. The ‘Employee’ has also agreed to give

the undertaking separately as stipulated by clause

4(b) of this agreement to the effect that his

gratuity as well as provident fund will not be

released unless the loan amount is cleared.

10. In case of any dispute relating to the

interpretation of any clause of this agreement or

with regard to the mode of payment of the

instalments or non-payment of instalments, the

matter will be referred to the arbitrator as per

provisions of Indian Arbitration Act, 1990 and the

decision of the arbitrator shall be binding upon

the parties.

IN WITNESS WHEREOF both the parties

append their signatures in token of having

accepted the above terms and conditions.

Employer

Employee

Witnesses:

1…………………………….

2…………………………….

Annexure ‘A’ to the Agreement for Housing Loan

Note : Ever since the Payment of Gratuity Act, 1972 came

into force, there has been general impression that the gratuity

of an employee cannot be adjusted against loan taken by

him. However in 2008, the Punjab & Haryana High Court

has held that declining the adjustment of housing loan against

the gratuity, by the Controlling Authority as confirmed by

the Appellate Authority under the Payment of Gratuity Act,

is liable to be quashed when the employee has made a request

for adjustment of the amount of gratuity towards outstanding

loan against him.1 In another case, the Madras High

Court directed the Management of the bank to calculate the

amount of gratuity and release the amount after adjusting the

amount that was payable by the employee to the bank.2 The

Allahabad High Court has held that amount of gratuity can be

adjusted towards outstanding loan if agreement of loan so

provides. It was further held that adjustment of amount of

gratuity against outstanding loan amount is not barred by the

provisions of section 4(6) of the Payment of Gratuity Act,

1972 pertaining to forfeiture of gratuity.3

1. Punjab and Sind Bank, Chandigarh vs. Regional

Labour Commissioner (Central) and Others, 2008 LLR 735

(P&H HC).

2. M. Mahendran vs. The Chairman-cum-Managing

Director, Indian Overseas Bank Central Office, 2009 (4) LW

342 (Mad. HC)

3. State Bank of Bikaner & Jaipur vs. Appellate

Authority and Others, 2013 LLR 637 (All. HC)


an undertaking by anemployee in favour of M/s……………… ‘employer’

for adjustment ofgratuity and provident

fund

I……………….hereby undertake to give

my consent for adjusting the outstanding amount

of the Housing Loan, if any, against the amount

of gratuity and provident fund which may become

payable to me or to my nominee on termination

of my service on account of superannuation,

death, resignation or otherwise.

The balance amount of gratuity, if any, may

be paid to me or my nominee, as the case may

be. Consent of my nominee to this effect is also

given herein below:

(Employee)

I………………………. the nominee of

Shri………………………..hereby give consent

to the above.

(Nominee)


July, 2013 - 35

Pearls of Wisdom

Witnesses:

1……………………………

2……………………………


a charge-sheet to anemployee for hacking a

computer system

To

……………………….

……………………….

In the capacity of an employee you have

been provided with a computer in order to perform

your duties. it has been brought to our notice

that on ............(date) you have hacked with the

computer with the intent to cause or knowing that

it is likely to cause wrongful loss or damage to

the public or any person destroys or deletes or

alters any information residing in a computer

resource or diminishes its value or utility or affects

it injuriously. Had it not been noticed and checked

timely, it would have resulted into disastrous

consequences.

The above mentioned misconduct, on your

part, is not only grave and serious but also

constitutes an offence under section 66 of the

Information Technology Act, 2000. Without

prejudice to the right of the Management to take

appropriate criminal action, you are hereby called

upon to show cause within 3 days as to why

appropriate disciplinary action should not taken

against you. Should you fail to submit your

explanation, it will be presumed that you admit

the charge and have no explanation to offer.

Authorised Signatory

Note : Hacking with computer system is a serious offence

and an employee, guilty of committing, shall be punished

with an imprisonment upto 3 years or with fine which may

extend to 2 lakh rupees or with both.


a warning to anemployee for publishing

information which isobscene in electric form

To

…………………….

…………………….

It has been brought to the notice of the

Management that you have been misusing the

computer by publishing/transmitting the material

in the electronic form, which is lascivious or

appealing to the prurient interest the effects of

which is such as to tend to deprave and corrupt

persons who are likely, having regard to all

relevant circumstances, to read, see or hear the

matter contained or embodied.

The above act, on your part, is unbecoming

EMAILS INCREASE STRESS

There is a direct link between stress at work place

and email use, researchers have found.

Employees were more prone to increased stress

when reading and sending emails which was indicated

by their increased blood pressure, heart rate and

cortisol level.


July, 2013 - 36

of a responsible employee and the Management

cannot tolerate such depravity and perversity on

your part. The Management cannot close its eyes

for such an offence and, as such, you are here

by administered with a warning that if, in future,

you indulge in such or similar activity no leniency

will be shown to you.



a warning to a workerfor insulting and

outraging the modestyof a woman colleagueby using most obscene

language

To

…………………………

…………………………

While working in the kitchen of the hotel,

you have to coordinate with the other co-

employee including those who are women. Not

only you have to coordinate but deal with them in

a courteous and polite manner lest it may amount

to outraging the modesty of any woman.

It has been brought to the notice of the

Management that on ................at...........while

working in the kitchen you used most-most vulgar

language intruding the privacy of your colleague

(whose name is withheld but it is very much within

your knowledge) and also those who were

present when you uttered obscene language.

The above mentioned misconduct, on your

part, outraging the modesty of the women and

not showing minimum respect to your

colleagues are highly deplorable and make

you liable for appropriate disciplinary action not

excluding dismissal from service. However

keeping in view the long association with the

establishment and also pleading guilty and

assuring that you will not repeat any such and

similar misconduct in future, a lenient view is

being taken by letting you off with a warning and

caution that if any act is repeated in future, no

leniency will be shown to you and the matter will

be reported to the police also.



an affidavit to be givenby the contractor to the

principal employerabout the compliance ofvarious labour laws as

applicable

AFFIDAVIT

I......................S/o Shri…...........................

R/o.......................................... Proprietor/

Partner/Director/General Manager of.......

..................................... do hereby solemnly

declare and affirm as under:

1. That we have taken a contract for

carrying on certain activities from M/

s………………………. having its office at

………………..

2. That as per assignment, we have carried

on the same by our workers for the last

month. We have paid wages to our workers in

the presence of the nominee of the principal

employer. Besides that we have

deposited Employees’ Provident Fund and ESI

contributions with the Authorities the detail of

which is enclosed herewith as annexure ‘A’ to

this affidavit. We also undertake to deposit the

contribution under Employees’ Welfare Fund for

our employees.

3. To the best of our knowledge, we have

made compliances of all the applicable labour

laws. Nevertheless, we undertake that if at any

time any laps is noticed or that the Management

of…………………………. is asked to

deposit or make the payment against any

recovery for which we are liable, we undertake

to reimburse the same.

Deponent


July, 2013 - 37

Verification

Verified that the contents of the above

affidavit are true and correct to the best of my

knowledge, belief and record. Nothing has been

concealed there-from. Verified on this.......day

of.....................at………….. (Place).

Deponent

Encl.: Annexure ‘A’


guidelines forconstituting GrievanceRedressal Committee

• On occurrence of a grievance, the employee

or employees involved shall attempt to resolve

the matter on an informal basis with the Head

of the Department. The Head of the

Department will endeavour to decide the

grievance within three days of its receipt.

• If the grievance is not resolved to the

employee’s satisfaction by the informal

discussion, it shall be reduced to writing and

referred to the Manager or the HRD

Executive, as the case may be, by any

designated person on behalf of the Union along

with the supporting evidence. The written

grievance shall set forth the nature of the

grievance, the fact on which it is based, the

alleged clauses of the settlement violated and

the relief requested. The Manager will provide

opportunity for hearing to the union

representative and if, as a result of this

meeting, the grievance remains unresolved, he

shall reply in writing preferably within seven

days of the meeting.

• If the grievance remains unresolved, the

matter may be referred to the Grievance

Redressal Committee.

• The grievance must be taken up promptly

and no grievance will be considered or

discussed which is presented later than one

month after the occurrence of the

grievance.

• All parties concerned - Employees, Union,

and the Employer - shall make every effort

to present, investigate and settle grievance

expeditiously. All settlements of written

grievance shall be in writing.

• Any grievance which is not processed by

any party in the manner described in this

clause shall not be considered. If the

Employer does not answer the grievance

within the specified time limits, the grievance

shall be considered granted in favour of the

aggrieved employee.

• The Grievance Redressal Committee will be

set up to which any dispute or difference

which is not settled by the above referred

grievance procedure, shall be referred to this

Committee which shall comprise of two

representatives of the employer, two

representatives of the union and the

President, an independent person.

• The Grievance Redressal Committee shall

help the Employer and the Employees to sort

out any differences or disputes with regard

to the proper implementation of this

settlement and also help in resolving any

other dispute or difference of whatsoever

nature which may arise between Employees

and the Employer of a particular

Department of establishment. The

Grievance Redressal Committe shall have

the authority to accept the evidence,

question witnesses and require any

information pertinent to the grievances.

• All decisions of the Grievance Redressal

Committee shall be in writing and must be

rendered within one month from the date the

dispute or difference was referred to it.

• The decision, taken by the Grievance

Redressal Committee, will be binding on the

Employer, Employees and the Union.

However, in case of discharge, dismissal or

termination of a workman, if a party/erson is

dissatisfied with the decision of the Board,

the concerned workman will not be debarred

from taking steps.


July, 2013 - 38

Pearls of Wisdom

• If the grievance is not settled by the

Grievance Redressal Committee, the

grievance, dispute or difference will be

submitted to an agreed arbitrator. In case

there is no agreement with regard to the

person or arbitrator, the matter may be

referred mutually for adjudication in the

form of joint reference. The Arbitrator will

give his Award within four months of the

date the matter is referred to him. The

Award of the Arbitrator shall be final and

binding on the Employer involved, the Union

and the Employee(s) involved. No recourse

to any agitation, including demonstration,

shall be undertaken till the procedure

mentioned in this clause is exhausted in

entirety and peace in any establishment and/

or the industry shall not be disturbed.

Note : As per amended section 9(c), it is obligatory

on an employer to set up a Grievance RedressalCommittee which shall consist of equal number ofmembers from the employer and the workmen. TheChairperson of the Grievance Redressal Committeeshall be selected from the employer and from amongthe workmen alternatively on rotation basis every year.The total number of members of the GrievanceRedressal Committee shall not exceed more than six:Provided that there shall be, as far as practicable, onewoman member if the Grievance Redressal Committeehas two members and in case the number of membersare more than two, the number of women membersmay be increased proportionately.


charge-sheet of sexualharassment

To

........................................

It is reported against you that

on.................(date) at.................(time) while on

duty, you tried to molest a female employee and

your behaviour on duty was outrageous to the

modesty of the woman. You are aware that the

female employees, who come for work, are to

be protected but you have indulged in the

activities, which amount to sexual harassment.

The above-mentioned charge is of grave and

serious nature and makes you liable for

appropriate disciplinary action.

You are hereby called upon to show cause,

within 3 days, as to why an appropriate action

should not be taken against you. Should you fail

to submit your explanation within the specified

period, it will be presumed that you admit the

charge and have no explanation to offer.

Disciplinary action, as deemed fit, will be taken

against you without any further ref\erence to you.


Note.—Sexual harassment is a serious misconduct to

such an extent, that even trying to molest amounts to

molesting a female employee when the behaviour of the

employee did not cease to be outrageous. Apparel Export

Promotion Council v. A.K. Chopra, 1999 LLR 169 (SC).

WHAT NOT TO WEAR IF YOU WANT

TO GET PROMOTED

• A worker should look out for materials such as linen and chiffon which can betransparent.• A person should avoid wearing flip-flops in office, as these are almost neverappropriate in an office environment.• An employee should avoid any piece of clothing that shows too much skin.• T-shirts are rarely appropriate for workplace environment - particularly the ones thathave controversial messages written on them.• IF a person has to ask himself if their clothing is work-appropriate, then probably itisn’t.• A worker should avoid wearing any type of athletic wear in the office and if theyhave a Pilates class or tennis match after work, they should pack their clothes tochange into.


July, 2013 - 39

Damages reduced to 5%when delay was not

deliberate

In the appeal filed before the Employees’

Provident Fund Appellate Tribunal, the appellant

has challenged the order dated 10.04.2012, passed

by the EPF Authority under section 14-B of the

Act, on account of delayed remittance of PF dues

on the ground that the EPF Authority has calculated

the amount of damages in a very mechanical fashion

without considering the fact that the delay on the

part of the petitioner was not deliberate but due to

financial crisis.

The Appellate Tribunal observed that section

14-B does not mandate that damages must follow

in the event of every default as the Act uses the

words “may recover”. Such an intention on the

part of the legislature is not decipherable from

section 85B of the Act. This section confers a

discretion upon the EPF Authority to impose

damages and not in the manner as prescribed under

the Scheme, not exceeding the amount of arrears.

Liability of damages does not arise automatically.

It requires application of mind by the deciding

authority and the merits of each case are to be

considered avoiding resorting to arithmetical

calculations following any straight jacket formula.

The power to impose damages under section

14-B is a judicial power to impose damages not

exceeding the amount of arrears within the ceiling,

imposed by the Statute. Exercise of discretion

must be for sound and objective considerations.

Regulation 32A, under which a graded scale for

imposition of damages has been provided, cannot

be regarded as a rigid or inflexible prescription but

guide and channelize the exercise of discretion.

Similarly, regulation 32B structures the exercise

of the discretion to reduce or waive the imposition

of damages. Neither regulation 32A nor regulation

32B can be regarded as inflexible. Default on the

part of the appellant would attract actions under

sections 14-B of the Act for levy of damages. But

while levying damages, due consideration is

required to be given to the situation which led to

default in remittance of dues by the employer and

the reasons for such delay. Delayed payment of

contribution does not ipso facto invite levy of

damages if the employer has furnished sufficient

cause thereof. The order passed by the EPF

Authority contains no elaboration or the manner in

which damages have been quantified in accordance

with the schedule. Adjudicating authority is not

bound to act mechanically in applying the

uppermost limit of the table.

The officer, conducting enquiry, has not

followed the law in correct perspective. There is

no finding that the appellant has willfully and

deliberately withheld the PF contribution. Hence,

reasonable damages @ 5% per annum from the

date of impugned order. Appeal is disposed of

accordingly.

M/s. Lakshmi Shanmuga Spinning Mills Ltd. vs. RPFC, Trichy

ATA No. 385(13) 2012 decided on 11.3.2013

Minimum wages can besplit for provident fund

contributions

The appellant filed an appeal before the

Employees’ Provident Fund Appellate Tribunal,

questioning the order dated 27.10.2011, passed

by the EPF Authority under section 7-A of the Act,

on the ground that dues have been determined only

on the basis of minimum wages fixed by the State

Government which is illegal.

The EPF Appellate Tribunal observed that the

impugned order has been passed on the basis of

the case of M/s. Gujarat Cypromet Ltd. vs. APFC,

(2005) 1 LLJ 484 wherein it was held that the


July, 2013 - 40

contribution should be made on basic wages.

Accordingly, it is not the intention of the Legislature

to demand contribution on the minimum wages.

This issue has been settled by the Division Bench

of Punjab & Haryana High Court in the case of

APFC, Gurgaon vs. M/s. G4S Security Services

(India) Ltd. & Anr., 2011 LLR 316 wherein it has

been held that EPF Tribunal has rightly held that

the provident fund contributions are not necessarily

to be paid on the wages which are fixed under the

Minimum Wages Act since the basic wages as

defined under the EPF Act and the wages as defined

under the Minimum Wages Act are different. The

employer can split the minimum wages into

allowances like house rent, the conveyance and

washing allowance etc. which would not attract

PF contribution. Accordingly, the dues determined

in the impugned order are not in consonance with

the definition of ‘basic wages’ as defined under

section 2(b) of the Act. Hence, impugned order is

not sustainable and set aside. The appeal is allowed.

M/s. KRIT Life Sciences Ltd. vs. APFC, Kochi

ATA No. 152(7) 2012 decided on 8.4.2013

Nuns rendering divineservices - not

employees to becovered under the Act

In an appeal, filed before the Employees’




thereby assessing the PF dues on enhanced rate of

12% considering the strength of employees more

than 20 in the hospital of the appellant, which is

illegal.

The EPF Appellate Tribunal observed that

there are 9 employees and 7 medical officers in

the hospital of the appellant. Apart from them, the

nuns are rendering services but without any

remuneration. EPF Authority has concluded that

the nuns are employees under the Act and the

appellant is liable to pay contributions @ 12%. If

nuns are included in the strength of employment

of the appellant, the number of employees exceeds

and the appellant is liable to pay contributions at

the enhanced rates.

Section 2(f) of the Act defines the expression

‘employee’. As per definition, as given in this

section, the necessary ingredient of a person to be

an ‘employee’ is that the person should have been

employed for wages. Nuns are not being paid any

wages. Nuns are devoted to active services of

mankind, meditation, living under vows of poverty,

chastity and obedience. There is no finding of the

EPF Authority that the nuns are getting the prices

for their labour/services. Nuns are not appointed

by the hospital of the appellant. Therefore, such

nuns cannot be called as employees of the hospital.

Their status is distinct from paid employees. Nuns

are rendering some sort of voluntary services for

the mankind which cannot be compensated for

money. Hence, the impugned order of the EPF

Authority is not sustainable. Appeal is allowed.

M/s. Maria Theresa Hospital vs. APFC, Kochi

ATA No. 101(7) 2011 decided on 4.4.2013

Assessment of duesbased on inspector

report - to be quashed



questioning the order dated 13.7.2012, passed


on the ground that dues have been determined only

on the basis of deposition made by the Enforcement

Officer which is illegal.


section 7-A of the Employees’ Provident Fund and

Miscellaneous Provisions Act, 1952 enjoins that

the EPF Authority should make an enquiry

independently without being influenced by the

report of the Enforcement Officer. It is also

expected from the EPF Authority to give detailed

reasoning regarding submissions made by the

employer and the Enforcement Officer. It is seen

that the EPF Authority has not done any enquiry to

ascertain the facts that the eligible employees are

deprived of their right of enrollment under the Act.

The report of Inspector is not binding on the EPF


July, 2013 - 41

Authority. But the responsibility is cast upon the

EPF Authority to conduct a fair enquiry without

being influenced by the report of the Inspector.

Hence, the impugned order is not legally sustainable

and quashed. The appeal is allowed.

M/s. Pardi Creations (P) Ltd. vs. APFC, Vapi

ATA No. 802(5) 2012 decided on 14.5.2013

Damages levied fordelay in payment not to

be interfered



challenging the order dated 28.10.2009, passed

by the EPF Authority under section 14-B of the

Act, on the ground that delayed remittance of EPF

contribution was not wilful attracting imposition

of damages.

The EPF Appellate Tribunal observed that it

is a settled position of law that the provisions of

section 14-B of the Employees’ Provident Funds

and Miscellaneous Provisions Act, 1952 being penal

provision should be construed strictly. No doubt

that the relevant provision of the Act would not

lead to the conclusion that penalty must be levied

in all situations. Such an intention on the part of

the legislature is not decipherable from section 14-

B of the Act. When the statutory authority has

discretionary jurisdiction to levy penal damages by

reason of an enabling provision, the same cannot

be construed as imperative. Even otherwise an

endeavour should be made to construe such penal

provisions as discretionary, under the statute to be

mandatory in character.

A perusal of the impugned order indicates that

the appellant had taken a plea to this effect but he

could not establish that it had acted bona fidely

and sincerely while remitting the PF dues. No

cogent reason has been given by the appellant to

establish that there was no malice or malafide

intentions on his part in remitting the dues in time.

Merely by taking a plea that there was no willful

default in delaying the remittance, it cannot be

assumed that the appellant had acted bona fidely

and sincerely in remittance of PF dues without

defeating the provisions of the Act. Accordingly,

the appellant is liable to pay damages imposed in

accordance with the laid down procedure. There

is no infirmity in the impugned order. Hence, appeal

is dismissed.

M/s. Visvas Promoters (P) Ltd. vs. RPFC, Madurai

ATA No. 792(13) 2009, decided on 4.3.2013

Determination of moneyby non-application of

mind - untenable

In an appeal filed before the Employees’




thereby assessing the PF dues on the basis of

report of the Enforcement Officer and records

submitted by the establishment whereas the factual

position is that the EPF Authority has neither taken

into account a sum of Rs.7,76,137/- paid towards

settlement of the claims of 6 employees nor

discussed the records submitted by the employer

during the enquiry which is illegal.


section 7-A of the Employees’ Provident Funds

and Miscellaneous Provisions Act, 1952 enjoins

that the EPF Authority should make an inquiry

independently without being influenced by the

report of the Enforcement Officer. It is also

expected from the EPF Authority to give detailed

reasoning regarding submissions made by the

employer and the Enforcement Officer. These

aspects are lacking in the impugned order. The

impugned order has been passed by the EPF

Authority without application of judicial mind.

Hence, the impugned order is set aside. Matter is

remanded back to the EPF Authority to conduct a

fresh enquiry into the matter and to pass a detailed

and reasoned order after affording appropriate

opportunity to the employer. Appeal is disposed

of accordingly.

M/s. Tobu Enterprises Ltd. vs. RPFC, Delhi

ATA No. 233(4) 2009, decided on 1.4.2013


July, 2013 - 42

Irked by the capricious tendencies by thepowers that be, the Supreme Court of India has ruledin now well-known police reform case that the officersof certain posts should be appointed for fixed-periodof time. They should not be tossed around as per thewhims of their bosses as it hampers theadministration and has demoralizing effect on theofficers. Although the judgment has not been fullyimplemented by the government for one reason orthe other and perhaps our police force still continuesto be one of the most corrupt and un-innovative ofthe world, yet it has brought about very salubriouseffect on the pattern of appointment of some of themost important bureaucratic posts in the country likethose of the Cabinet Secretary, CBI Director etc. Infact, in our country some posts are considered asplum because they are rewarding and are often usedto make illegal earnings and some are known aspunishment posts but there are many posts whichare known as ‘parking lots’. Those who are sent toparking lots are usually await or buy their time for themore coveted or higher appointments. Efficient andhonest officers, generally, suffer in this odious gameof musical chairs.

Employees’ Provident Fund Organization is oneof the largest provident fund organizations in theworld in terms of members and volume of financialtransactions that it has been carrying on. Apart fromit, this welfare scheme came into existence in thevery first term of the parliamentary democracy as perthe directive principles of state policy of theconstitution of India. This organization runs threeschemes viz, Employees’ Provident Fund scheme,Employees’ Deposit Linked Insurance Scheme andEmployees’ Pension Scheme. The Employees’Provident Fund Organisation manages Rs.5, 80,247crores for its 6.15 crore members. For all thesereasons, this organization assumes a great deal ofimportance. However, the treatment that is metedout to it scares every well-meaning person. Thisorganization is also obligated upon to instilconfidence among enormously large number ofemployees. Therefore, millions of workers, who arecovered under the umbrella of this organization feelcheated when they get short shrift from theauthorities.

The governmental apathy towards this massiveorganization can be gauged from the fact that in thelast four years nine different bosses have been thrustover it. It may be interesting to note that theEmployees’ Provident Fund Organisation is almost

ten times bigger than the financial behemoth like theUTI. Everybody who has any concern with the EPFOwill vouchsafe that it is crying for radical reforms inits functioning in view of the changed social andeconomic circumstances. But who will do it whennobody is given time to think over the changes andtranslate them into realty? Anyway, after quite a longdithering the Cabinet Committee of appointmentshas chosen Krishna Kumar Jalan, an IAS officer asthe new Central Provident Fund Commissioner. Heis the ninth person to hold the office after 2009. Itmay sound strange but it is a fact that five out of nine

CPFCs could not remain in the office even for twomonths. The average tenure of nine CPFCs has beenjust over six months.

According to a newspaper report, the averageterm of the CPFCs during the NDA regime was 25months. The CPFC is the person who has to take thecrucial decisions with regard to the changes whichare to be introduced. Here the intention is not tomake any comparison between the NDA and theUPA regimes but the incidents compel to draw thedistinctions. Immediately after the coronation of theUPA in 2004, the then CPFC Ajai Singh, who was inthe midst of carrying certain ambitious projects toimprove the archaic processes was ordered to goon leave by the then Labour Minister Sis Ram Olaresulting into the quite burial of those projects.

Needless to say, that EPFO is the novel welfarescheme and this type of scheme is finding its takersin countries like the USA where the working class isdemanding for the pre-funded social security schemeand the federal government is groaning under theweight.

Central Provident Fund

Commissioner in 4 years

Name Tenure (Month)

K Chandramouli 13

Uday Kumar Verma 1

SK Srivastava 0.75

Samirendra Chatterjee 18

Ravi Mathur 1.3

RC Mishra 12.25

Ravi Mathur 1

Anil Swarup 4.5

Krishan Kumar Jalan 0

9


July, 2013 - 43

Q. We have small business employing about70 persons operating at minimal profits. Afterevery 3-4 months some or the other employeestandup and ask for salary increase. If salary isnot increased, there is every possibility of hisleaving the company. Is it not blackmail byemployee? How should I come out of this problem?

Harish Chawla

A. The problem which you have narrated relates

to culture and policies of the organisation established

over a period of time by the management knowingly

or unknowingly. There cannot be one solution of your

problem. It is a case of demand and supply and

patience of management. Big organisations struggle

with such situation in a different way. In small

organisation the visibility of management is very

much available to the employee. It appears that your

organisation has not worked on training of workers

towards building a culture of responsibility and

discipline where employee feels a part of

management. However, one day you have to take a

call. You have to decide what you want. Would you

like to continue like this and succumb every day

before the demands of employees and carry on

business on stretcher or want to fight once for all,

come what may? It appears that employees have

take you for granted and understood your weakness

that you have no substitute of them.

I suggest develop a pool of employees, have

good practices, build a culture of responsibility down

the level, give them their due and show the outdoor

to the employees who intend to raise unreasonable

demands before management. In this process there

may be a situation where you may have to lose the

business due to absence of employees but be

prepared to face that situation once. Make

corrections in the process. Take tough stand with

reasonableness; single out them by identifying such

bad elements.

Q. When we engage an employee, next stepcomes of induction and orientation. Manyorgansiations take it very casually and finish it offby making them aware of rules and regulations. Ithink new employee should be helped learning

about culture and making him integrated with theorganisation. How management can help in thisprocess? I seek your expert advice. Jyoti Rathi

A. When you talk about helping new employee

in learning about the culture so that he can easily be

integrated, first, it is essential to know what

organisation culture is. It is sum of values and rituals

which serve as a glue to integrate the employees of

the organisation. Management should help

employee in identifying the characteristics of

organisation culture and developing compatibility

with values of the employee. Small differences

between values of the employee and organisation

can be patched up, but if the differences are wide,

management should understand it as early as

possible and make the way-out of employee. If you

insist such employee to stay, there are all

possibilities that he will leave the organisation at

first available opportunity and the stay of the

employee in the organisation will be a total lose to

the management. The right culture enables

employees to be pro-active and collaborative and

the wrong culture will create limitations for all

involved. By this way you can help employee

integrating himself with the organisation culture. He

must learn to understand how things move, what

behaviour is accepted and what is not to be done.

Q. It is normally felt that performanceappraisal process does not work in a way far fromsubjectivity. Inconsistency and subjectivity aretwo identified blocks which make this processcontroversial. How you can define a successfulperformance appraisal process? Bhavna Reddy

A. It is said that successful performance

appraisal should be free from subjectivity. Personal

attitudes towards an employee should be kept apart

from the process. But this is all better said than done.

Subjectivity cannot be fully eliminated from the

process. After all it is human emotion. Personal like-

dislike of seniors play important role in the process.

You cannot accept from any person to act like a robot

and assess mechanically. I think if a manager

intelligently sets clear guidelines on competencies

or skills that the team member should demonstrate,


July, 2013 - 44

Readers are welcome to ask for solutions of their work place HR Problems to Labour Law Reporter ordirectly to Mr. Anil Kaushik through his e-mail at : [email protected] OR [email protected](Mob.: 09829133699) -Editor

it should be termed as successful performance

appraisal. Secondly, if manager engages himself in

situations for timely addressing the performance

challenges and correct in-appropriate behaviour of

team members, it should be said that the

performance appraisal process is successful.

In spite of personal like-dislike, manager should

not lack in fairness and make biased opinion against

the team member contrary to documents and general

perception of other employees about that team

member. To make it successful, it is always better to

keep a listing of records on the employee’s

performance throughout the year. This will help

during follow-up meetings and serve as a guideline

to both the employee and the manager in identifying

areas of improvement and skills, the employee

currently performance based on objectives of

organisation.

To maintain the integrity of the complete

process, managers must incorporate specific

behaviours observed and share complete appraisal

method with subordinates. Inconsistencies in the

performance appraisal process occur when

managers do not properly document observed

behaviours.

Q. You have vast experience of managingpeople and guiding organisations. You must havealso confronted with good and bad teams in theorganisation. By your experience what can be the

few principles of highly effective teams?

Naggapa R.

A. I take your question in different way. It is notthe team which is good or bad, effective or ineffective.It is only one or two persons or some time the leaderwho makes the team effective or ineffective.Sometimes, individual traits of one person or of theleader bring bad name to the team. In my experiencethe only principle the make a difference is the onewhich you know by heart, swear by, and live by that.Many teams operate without clear metrics and thusmake decisions which ultimately disappoint them. Ithink team should assign a tangible value to everydeliverable and validate projection by keeping a trackas work goes on. In this manner even a singlemember will not inflate the value and can be easilyidentified if does so. This may help team leader tomake corrections.

Second principle of effective team is that leadershould keep all team communications, facts andstatus reports highly visible. No member should bekept in dark about any process or communication. Ithelps members developing trust among each-otherwhich ultimately increase efficiency of the team.Leader should avoid private communications onteam work. Last one which I feel helps making teameffective is to create interdependence. No one winsunless everyone wins. It fosters insights, flexibilityand resilience. Develop a feeling among all teammembers to adopt these principles voluntarily.

LEADERSHIP IS WHEN PEOPLE ARE READY TO WALK ON WATER

FOR YOU

Our assets walk out of the door each evening. We have to make sure that

they come back the next morning. Performance leads to recognition.

Recognition brings respect. Respect enhances power.

Humility and grace in one’s moments of power enhances

dignity of an organization. Progress is often equal to the

difference between mind and mindset. I want Infosys to be a

place where people of different genders, nationalities, races

and religious beliefs work together in an environment of intense

competition but utmost harmony, courtesy and dignity to add

more and more value to our customers day after day.

Leadership is about making people say, ‘I will walk on water for you’. It is

about creating a worthy dream and helping people achieve it.

N.R. Narayana Murthy, Chairman Infosys

Documents

Journal Section Jul13