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LABOUR LAW
_Anand Prakash_* Revised by Dr. S S. Jaswal·'·'
General Introduction
The law relating to labour in India deals mainly with the regulation of the contract of employment under which the servant, or the employee, undertakes to work for his master, or the employer, for hire or reward. Under the concepts of law, which, under British rule, were imported into India from the common law of England, this relationship was treated mainly as a contractual relationship. The Indian Contract Act, 1872 is based mainly on the law of contract as interpreted by courts of law in England. In interpreting the provisions of this Act, the courts in India borrowed heavily from the case law of English courts.
The central doctrine, which runs through the law of contract, is that the parties are free to make their own contracts. The relationship between master and servant is a voluntary relationship into which the parties may enter on terms laid down by themselves within the limitations imposed only by the general law of contract.^1 The law of contract, however, assumes that there is equal freedom in the parties to enter into a contract, but shuts its eyes to the inequality inherent in the employment relationship. It ignores the superior economic strength and the bargaining power of the employer vis-a vis the person who has to make a living getting employment, or perhaps starves. Workers have sought to redress the balance in this sphere through their organizational strength, by forming themselves into trade union and adopting the device of collective bargaining. They have also sought legislative protection and privilages by exercise of their political power, and thus persuaded the state to intervene effectively on their behalf by providing for matters like safety, health and welfare, regulation of hours of work, leave and holidays and social security. And, depending upon their organizational strength, have also sought regulatory legislation for protection and enhancement of their material well-being and security of their employment.
- Formerly Honorary Professor, Indian Law Institute, New Delhi; Senior Advocate, Supreme Court of India, New Delhi. ** Asst. Research Professor, Indian Law Institute, New Delhi.
- Mansfield Cooper and J.C. Wood, Outlines ofIndustrial Law, 3rd ed., 1958, p. 2.
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In India, legislation relating to labour has grown mainly in the twentieth century. Till the First World War, such legislation was scanty. In the inter- war years, that is, between 1919 and 1939, some essential legislation for the protection of labour was introduced. But the law relating to labour, as we know it today, is mostly the product of the legislation passed after, or soon before India achieved political independence in 1947.
It may, broadly, be stated that labour law of India has given the go-bye to the doctrine of freedom of contract, or laissez-faire, and has recognized the need for giving adequate legal protection to labour. Labour legislation in India has now become an important part of that social and economic legislation in India, which derived its inspiration for the recognition of the wider responsibilities, which the state has undertaken to protect the economically weaker sections of the community. These are often summed up under the convenient heading of the 'welfare state', whose responsibility it is to assure to its citizens not only physical liberty to pursue their avocations according to their liking, and political liberty to choose their own government at reasonable intervals, but also assure social well-being and economic and material opportunities to make the foregoing liberties meaningful and effective. The ideals of the welfare state are embedded in the directive principles of state policy enunciated in the Constitution of the Republic of India. These directives principles emphasise the responsibility of the state to secure just and humane conditions of work and maternity relief; public assistance in cases of unemployment, old age, sickness and disablement and in other cases of undeserved want; protection of the health and strength of workers, and avoiding circumstances which force citizens to enter avocations unsuited to their age or strength. These directive principles also place the responsibility on the state to strive to secure work, a living wage, a decent standard of living; leisure and social and cultural opportunities for people, which, it is axiomatic, must be available for all sections of people, including the working class. The Constitution of India also protects the right of labour to form associations and unions by enshrining it as a fundamental right. These directive principles and fundamental rights already formed the ethos and c o m m i t m e n t of the national m o v e m e n t for political independence, and had found expression in several resolutions of the Indian National Congress and the reports of the National Planning Committee under the Chairmanship of Jawaharlal Nehru. Soon after, and even before, power was formally transferred to Indian hands in 1947; these principles were implemented with vigor in the field of labour legislations in India, adding greatly to the scanty legislation that existed on the subject previous to 1947. The main source of labour law in India is legislation, but it is supplemented by judgments of courts, delivered particularly in the sphere of adjudication of industrial disputes.
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1948, which regulates working conditions in factories where manufacturing process is carried with or without the aid of power. The next in importance from the point of view of number of workmen employed is the Mines Act, 1952, which regulates working conditions in mines. The Plantation Labour Act, 1951 has also a long history and applies to labour employed on land used for growing tea, coffee, rubber, cinchona, or any other plant and connected offices, etc. In addition to the above, there are Acts dealing with special categories of labour like the Motor Transport Workers Act, 1961, which covers all persons employed in transport undertakings engaged in carrying passengers and goods or both by motor vehicles; the Indian Dock Labourers Act, 1934, and the Dock Workers (Regulation of Employment) Act, 1948, which deals with dock labour; the Indian Railways Act, 1890, which deals with rail labour, and the Working Journalists (Conditions of Service and Miscellaneous Provisions) Act, 1955, which lays down the conditions of service of a highly specialized class of employees called 'working journalist'. Besides there, the Shops and Establishments Acts of the various states lay down the working conditions of employees in shops and commercial establishments, which generally means places where goods are sold by retail or whole-sale or where business is carried on. In this category of employment will fall employees in places like offices, shops, hostels, cinema halls, theatres etc.
Hours of work of adults
The broad pattern in the above Acts with regard to hours of work of adults is 48 hours work in a week, with a maximum of 9 hours work in a day, and a compulsory day of rest in the week which should generally be Sunday. There are also restrictions on spread-over of hours of work, which vary, generally speaking, between 10-1/2 hours to 12 hours in a day depending upon the nature of the industry. If any worker is required to work beyond the above maximum hours, he has to be compensated for such over-time work generally at the rate of twice the ordinary rate of wages. Such overtime work is, however, subject to certain maximum limits during the week. The above is the general pattern. However, there are special restrictions on h o u r s of w o r k in certain hazardous or m o r e o n e r o u s jobs like underground mining, where hours of work are more severally restricted, or in highly intellectual employments, like that of working journalists for whom the h o u r s of w o r k are as low as 144 hours during a p e r i o d of four consecutive weeks, or 36 hours a week. Plantations have longer permissible hours of work, the normal work allowed in a week being fifty-four hours, with no limit on the number of hours worked on a particular day. Statutes on the matter of working hours generally lay down only maximum limits. There are industries and particularly offices not attached to factories where the hours of work are less-may be as low as 36 hours per
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week- as a result of custom, usage, contract, settlement or award of industrial tribunals. Although statutes generally provide for payment at the overtime rate for hours of work worked in excess of the statutory limits, the general practice in cases where the actual hours of work are below the statutory limit is to pay at a higher rate for any hours of work beyond those prevalent in the establishment, although the rate of overtime payment in such cases upto the statutory limit is generally less, say one and a half or one and a quarter time the ordinary rate, as against twice the ordinary rate for overtime work in excess of the statutory maximum hours of work.^2
Restrictions on working hours and conditions for women and young persons
There are further restrictions in the matter of hours of work of young persons and women. For example, under the Factories Act, 1948, no woman shall be employed in any factory between 6 p.m. and 7 a.m. and no exemption with regard to daily hours of work can be granted by the chief inspector of factories, as he may grant for male workers. There shall further be no change of shifts in their case except after a weekly holiday or any other holiday. Employment of children below the age of 14 years has been completely prohibited. Further, a child who has completed his fourteenth year or is an adolescent, who has been defined as a person w h o has completed his fifteenth year of age but has not completed his eighteenth year, shall not be required or allowed to work in a factory unless he is certified to be fit to work by the certifying surgeon appointed under the Act. N o child shall be employed or permitted to work in any factory for more than four and a half hours in a day or by night. Further, no adolescent who has not attained the age of seventeen years shall be employed or permitted to work in any factory during night. In the mines the restrictions on employment or women and children and adolescents are even more stringent. T h u s , no w o m a n shall be employed in any mine below ground nor in any mine above ground except between the hours of 6 a.m. and 7 p.m. Moreover, every woman employed in a mine above ground shall be allowed an interval of rest of not less than eleven hours between the termination of employment on any one day and the commencement of the next period of employment. With regard to young persons, it is provided that no child, who is defined as a person who has not completed his fifteen years, shall be employed in a mine nor shall any child to be allowed to be present in any part of a mine which is below ground, or in any open cast working in which any mining operation is being
2. Workmen ofOverseas Airways Corporation v. British Overseas Airways Corporation (1962) I LLJ 257 SC and Karam Chana Thapar & Bros. Ltd. and Others v. Their Workmen (1964) I LLJ 429.
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that is "building and construction industry". All other provisions are similar to the ones already existing in the Act of 1938. Finally, as early as 1933, the evil of pledging of child labour was outlawed under the Children (Pledging of Labour) Act, 1933, whereby any agreement under which the parent or guardian of a child, in return for any benefit received or to be received by him undertook to cause or allow the services of a child to be utilized in any employment was declared to be void. The ban under the Act does not apply t o such agreement as is made without detriment to the child and for reasonable wages and is terminable at not more than one week's notice.
Weekly day of rest, holidays and leave (i) Weekly rest day
There is a provision in almost all statutes with regard to a weekly day of rest, which generally should be on a Sunday. Workers who are deprived of their day of rest are, generally, to be given a substituted rest day in such manner that they do not work continuously for more then ten days. Although all statutes do not necessarily provide for payment for the rest day—for example, the Factories Act and the Mines Act provide for rest day but not for payment for such rest day. However, the trend in recent legislation is to provide such payment. Even in mines and factories the standing orders framed under the Industrial Employment (Standing Orders) Act, 1946, generally provide for payment for the rest day. Moreover, the Minimum Wages Act, wherever applicable, makes payment for the weekly rest day compulsory. So also do the Shops and Establishments Acts of various states. Wherever payment for rest day is not provided for by legislation, tribunals to w h o m references may be made in this regard under the Industrial Disputes Act, 1947 have, through their awards, generally speaking, required employers to pay their workmen for the weekly rest day. It would, therefore, be broadly correct to say that the Indian worker is not only entitled to a rest day every week, but also for payment of full wages for the said rest day.
(ii) Holidays Apart from weekly rest day, through legislation by various states, but more often by practice or through awards of industrial tribunals, provision has also been made for grant of festival holidays to employees, the exact quantum of which, however, varies in accordance with the industry and the region. There has, however, lately been a tendency to reduce the number of such holidays wherever permissible, but without making any drastic changes.^3
- Pfizer (P) Ltd. v. Its Workmen (1962) I LLJ 543: AIR 1963 SC 1103 and Bijli Cotton Mills (P) Ltd. v. Presiding Officer, Industrial Tribunal 1972 (II) LLJ 320: AIR 1972 SC 1903.
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(Hi) Leave
Practically all statutes provide for minimum annual leave with wages at the rate of one day's leave for every 20 days of work for employees who have worked 240 days or more in the previous year. This does not preclude, however, more generous standards of leave being provided by awards, collective agreements, contracts of service or custom and usage. The Factories Act provides that every worker who has worked for 240 days or more in the previous year, will be allowed leave with wages in the subsequent year at the rate of one day for every 20 days of work performed by him during the previous calendar year. In the case of a child, the quantum of leave allowed is at a higher rate being one day for every 15 days of work performed during the previous calendar year. The Mines Act provides for similar leave benefits, except that persons employed below ground are to be allowed leave at the rate of one day for every 15 days of work performed by them. The leave standards for motor transport workers are the same for adults as under the Factories Act, while an adolescent motor transport worker is entitled to one day of leave for every 15 days of work during the previous year. The Plantation Labour Act, 1951, makes provision for annual leave with wages calculated at the rate of one day for every 20 days of work performed by an adult and one day for every 15 days of work performed by a young person. Similarly, the various Shops Acts also make provision for leave, with wages, or privilege leave, as it is sometimes called, at the rate of one day's leave for 20 days of work performed. Generally speaking, under all statutes, the leave entitlements under them are the minimum and not the maximum. The employees are entitled to more leave, if so allowed under any contract, custom, usage, settlement, agreement or award applicable to them.^4 Accumulation of leave is generally allowed to the extent of two years' leave entitlement. Encashment of such leave is allowed only at the time of termination of service by the employer, and in case of resignation, only where the employee had applied for leave but had not been granted leave by his employer. Restrictions are generally placed on the manner of availment of such leave so that normal work is not disrupted. Most Acts, therefore, require that sufficient notice of such leave should be given by the employee. Most statutes do not provide for casual and sick leave, except for special Acts in various states. Casual and sick leave is, however, generally provided in the certified standing orders which are applicable to establishments which employ 100 workmen or more. Moreover, when disputes with regard to casual or sick leave are referred to tribunals or labour courts, they are generally favorably inclined to provide for such leave, particularly if practice
- Alembic Chemical Works Co. Ltd. v. Its Workmen (1961) ILLJ 328: AIR 1961 SC 647.
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provided to the Indian worker was through the Workmen's Compensation Act, 1923. As originally passed, the Act was limited in its scope, but by subsequent amendments, the scope has been extended, and certain loopholes plugged. The first major amendment in the Act was carried out as a result of the Report of the Royal Commission on Labour in India, which recommended that the Act should be extended to cover as completely as possible the workers in organized industry, and should be gradually extended to workers in less organized employment, beginning with those who are exposed to more risks. As a result of these recommendations, the Act was amended in 1933, thereby substantially modifying the Act of 1923 in scope, title to compensation, amount of compensation, and classes of dependents entitled to compensation and benefits payable under the Act. Since then, amendments have been carried out in the Act from time to time. Large section of the Indian workers earning salary not exceeding Rs. 1,000 a month, are protected by the Workmen's Compensation Act or other ancillary legislation which extends the operation of the Act to other employments or provides for alternative ways of safeguarding the employees who suffer injury, or contract disease, during the course of, and arising out of, their employment. The minimum amount of compensation payable under the Workman's Compensation Act, has been enhanced from Rs. 50,000/- to Rs. 80,000/- in case of death and from Rs. 60,000/- to Rs. 90,000/- in case of permanent total disablement with effect from 8-12-
2000.^5 F r o m the same date ceiling of the m a x i m u m a m o u n t of compensation has been doubled from Rs. 2.28 lakhs to Rs. 4.56 lakhs in case of death and from Rs. 2.74 lakhs to Rs. 5.48 lakhs in case of permanent total disablement.^6 The Act gives s t a t u t o r y recognition t o t h e need for adequate compensation to workmen, in cases where personal injury is caused to them by accident arising out of, and in the course of, their employment. The employer would not, however, be liable to pay such compensation where the injury does not result in the total or partial disablement of the workman for a period exceeding three days. Ordinarily, the employer is not liable to pay any compensation where the injury complained of is the result of an accident which is directly attributable to the workman having been at the time thereof under the influence of drinks or drugs; or his having willfully disobeyed an order expressly given or a rule expressly framed for the purpose of securing his safety, or having willfully removed or disregarded any safety guard or other device which he knew to have been provided for the purpose of securing the safety of the workmen. Except in such cases, the workman would be entitled to compensation as provided under the Act, provided he is able to establish that the injury was caused owing to an
- Gazette of India, 8.12.2000 Part Π, S. 4 (Extra).
- See Annual Repon 2003-2004 (Ministry of Labour, Government of India), p. 3; also see, Thomas Paul, XXXIX ASIL (2003), p. 537.
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accident arising out of, and in the course of, his employment. Even these defences are not open to an employer for avoiding liability in cases where the injury has resulted in the death of the workman. This is for the reason that the deceased workman's dependents must be provided for in any event, and should not undergo acute suffering due to the default of the earning member which brought about his death. The expression "arising out of" suggests the cause of accident and the expression 'in the course of points out to the place and circumstances under which the accident takes place at the time when it occurred. A casual connection or association between the injury by accident and employment is necessary. The onus is on the claimant to prove that accident arose out of and in the course of employment.^7 Where the workman died due to natural lightning while working at the site, it was held by the Supreme Court that in order to succeed in his claim for compensation, it is no doubt, that the accident must have causal connection with the employment and arise out of it; but if the workman is injured as a result of natural force of lightning, though it in itself has no connection with employment of deceased, the employer can still be held liable if the claimant shows that the employment exposed the deceased to such injury. In the present case the deceased was working on the site and would not have been exposed to such hazard of lighting had she not been working so. Therefore, the appellant was held liable to pay compensation.^8 In another case,^9 a person was employed as a driver of the bus. He died of heart failure at a bus stop where he stepped out to have refreshment. His widow claimed compensation, which was awarded by the Commissioner of W o r k m e n ' s Compensation against the insured employer and not the insurance company. O n appeal, the single judge of the high court held that both the insurance company and the employer are jointly and severally liable to pay compensation. And therefore, two appeals were filed, one by the insurance company and the other by the employer. It was held by the division bench of the high court that the connection between accident and employment might be established if the strain had contributed to or accelerated the accident. If probabilities were in favour of the applicant, then, the Commissioner of Workmen's Compensation was justified in inferring that the accident arose out of and in the course of the employment. In this case there could be no dispute that the driver died in the course of his employment since there was no occasion for him to be at the bus stand
- M/s Chowgate and Co. (Pvt.) Ltd. v. Smt Felicidate AIR 1970 Goa 127.
- State ofRajasthan v. Ram Prasad and Another (2001) 1 LLJ 177 (SC).
- Divisional Manager, United India Insurance Co. Ltd. v. Shanmuga Mudliar T. and others (2003) 1 LLJ. 776 (Mad.).
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(b) where total disablement, temporary or permanent, results from the injury; and (c) where there is temporary disablement, total or partial, due to the injury. The employer is bound to pay the compensation as soon as it falls due. If he does not accept the liability for compensation to the extent claimed, he is bound, under pain of penalty, to make provisional payment to the extent of the liability which he accepts, without prejudice to the right of the workman to make any further claim against him. All claims relating to compensation payable under the Act are to be decided by a commissioner appointed under the Act. The date of payment of compensation falling due shall be the date of accident.^11 The liability to pay interest arises as soon as the injury is caused to the workman.^12 Further, if the commissioner considers the delay by the employer in payment of any compensation due as unjustified, he may impose a penalty not exceeding fifty percent of the amount of compensation due. The most usual cases which have gone to the courts relating t o compensation under the Workmen's Compensation Act arise out of the controversy as to whether an accident has arisen out of, and in the course of, employment of a workman. In this connection, cases decided by the English courts have often been relied upon by the courts in India. The tests applied relate to time, place and casual relationship. The test of time is applied to find out whether the accident happened while the workman was engaged in duties directly arising out of, or incidental to, his employment. The test of place is applied to determine whether the accident occurred on, or near, the premises which are under the control of the employer, or at which he normally carries on his trade or business. The casual relationship appears to be the most important and controversial matter and has regard to the question whether there is sufficient link between the employment and the injury.
The Employers' Liability Act, 1938
Even when the Workmen's Compensation Act, 1923 was on the statute book, the legislature in 1938 passed the Employers' Liability Act, providing that if personal injury is caused to a workman by reason of the negUgence of the employer or his servant, the suit of the employee for damages will not be defeated on this account. Thus, the notorious doctrine of 'common employment' which imputed to the worker an intention to assume certain risks of injury, especially those caused by fellow-workers, was abolished by
- Superintending Engineer KEB Hubli v. Kadappa MaUappa (1984) 1 LLJ 179 (Kara.).
- Madan Mohan Verma v. Mohan Lai (1983) Π LLJ 322 (All).
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statute in India as far back as 1938, while in England such abolition took place as late as in 1948 by the Law Reforms (Personal Injuries) Act. 1948.^13
The Employees' State Insurance Act, 1948
The Employees' State Insurance Act of 1948 seeks to replace the benefits as available to the workmen under the Workmen's Compensation Act, 1923, by a more comprehensive scheme not only of accident benefit, but for other contingencies like sickness, maternity and funeral expenses. The Act applies, in the first instance, to all factories other than seasonal factories, including factories belonging to the government, but the appropriate government is authorized, in consultation with the E m p l o y e e s ' State Insurance Corporation, after complying with the needful formalities, to extend the provisions of the Act to any other establishment or classes of establishments- industrial, commercial, agricultural or otherwise. The definition of 'employee' under the Act is wide so as to include within the ambit of the Act all persons employed in the establishment of the employer, whether directly or through an intermediary and even taken on hire from other employer. There has also been notional extension of the definition to include all employee connected with the administration of the factory or establishment covered by the Act including those concerned with the sales or purchases relating to the factory or establishment.1 4^ In Pondkherry State Weaver's Co op. Society v. Regional Director, Employees'State Insurance Corporation, Madras^15 the question was whether the provisions of the Act are applicable to Weavers' Co-operative Society whose workers are shareholders of the society. It was held that a co-operative society, on registration, becomes a body corporate with a perpetual succession and it is legally independent of its members who constitute the society. Once the society is independent of its members and has a separate legal existence apart from its members, then there is no bar for the society employing its members. And if such members are employed, they are entitled to be covered by the Employees State Insurance Act. In Kunnathunad C.S. Co-operative Society v. Regional Director, E.S.I, C.^16 it was held that a co-operative society is a separate legal entity distinct from its m e m b e r s. Hence a society employing its m e m b e r s for wage in manufacturing process is liable to be covered under the Act. Further, the branch office of Brooke Bond engaged in buying the exporting tea was held to be covered by the definition of shop for the purposes of notification
- O. Kahn-Freund, Labour and the Law, 1972, p. 17.
- Hyderabad Asbestos Cement Products etc. v. E.S.I. Court & Others (1978) ILLJ 181.
- (1983) I LLJ 17 (Mad.).
- (1989) I LLJ 11 (Ker.).
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guards and they were employees under Section 2 (9) of the Employees State Insurance Act, 1948.
The Act establishes a corporation t o implement the scheme of insurance under the Act. The main funds of the corporation are derived from the employers' and employees' contribution, which are specified percentage of their salary or wages. The principal employer is required to pay the employees' contribution in the first instance, with a right to recover the same from the immediate e m p l o y e r. As far as the e m p l o y e e s ' contribution is concerned, the deduction is to be made from the current wages of the employee, and not otherwise, and paid by the principal employer to the corporation. Recovery of the employer's contribution however, cannot be made from the wages payable to an employee either directly or indirectly. The corporation may also accept donations to augment its funds.
Under the Act, the following benefits are available to an employee: (a) periodical payments in case of his sickness; (b) periodical payments to an insured woman worker in case of confinement or miscarriage or sickness arising out of pregnancy (maternity benefit); (c) periodical payments to an insured person suffering from disablement as a result of an employment injury (disablement benefit); (d) periodical payments to dependents of an insured person who dies as a result of an injury sustained as an employee under the Act (dependants' benefits); (e) medical treatment for and attendance on insured person (medical benefit); lastly (f) funeral benefits towards expenditure on the funeral of the deceased insured person. Provision is also made for the payment of compensation in case an employee contracts what is called 'an occupational disease'. Protection is given to an employee who is in receipt of sickness or maternity benefit under the Act so that he cannot be dismissed or discharged or otherwise punished during the time he is in receipt of such benefit.
The Maternity Benefit Act, 1961
The Maternity Benefit Act, 1961 provides for a scheme of maternity benefit to women employees employed in factories, mines, plantations and establishments where person are employed for the exhibition of equestrian, acrobatic and other performances. It may be extended by the state government with the approval of the central government to other
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establishments, industrial, commercial, agricultural or otherwise. The benefits under the Act are available only to employees in factories and other establishments to whom the provisions of the Employees' State Insurance Act, 1948 do not apply. To give the woman employee security of service during the period she is drawing benefit of maternity leave, it is provided that if a woman absents herself from work in accordance with the provisions of the Act, it shall be unlawful for her employer to discharge or dismiss her during, or on account of, her absence, or to give notice of discharge or dismissal on such a day that t h e notice will expire during such absence, or to vary t o her disadvantage any of the conditions of her service. Moreover, any discharge or dismissal of a woman at any time during her pregnancy shall not have the effect of depriving her of the maternity benefit or medical bonus otherwise payable to her under the Act. In State of Kerala v. N. Ramani^23 the respondent petitioner, working as senior assistant in the High Court of Kerela applied for maternity leave, which was sanctioned. In continuation thereof, she was sanctioned leave without allowances for one year. She applied for extension of leave for one more year along with a medical certificate, and a letter of recommendation from the high court. The state government while sanctioning the leave imposed the condition that the period of leave will not be counted for any service benefits including pension. The petitioner in the high court challenged this action. Single judge of the high court set aside the part of the order imposing the condition. The division bench affirmed the view taken by the single judge and held that imposition of the condition that the extended period of medical leave would not be included for service benefits including pension was illegal and incorrect. In Municipal Corporation ofDelhi v. Female Workers (Muster Roll/* question before the court was whether the female workers on the muster roll of the appellant were entitled to maternity benefit or not? The respondents were denied the maternity benefit on the ground that their services were not regularized. The tribunal had by its award allowed the claim of the respondent and directed the corporation to extend the benefit under the Maternity Benefit Act, 1961 to all those muster roll female workers who had put in three years of continuous service. Appeal filed in the high court against the award was dismissed by the single judge and the letters patent appeal was also dismissed on the ground of delay. Therefore, special leave was filed in the Supreme Court. The Supreme Court held that the direction issued by the tribunal should be complied with by the appellants.
23. (1999) II LLJ 485.
24. (2000) LLR 499 (SC).
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employer in respect of him, and may, if any employee so desires and if the scheme make provisions therefor, be an amount not exceeding 8V3% of his basic wages, dearness allowance and retaining allowance, if any. Further, it has also been provided that the central government after making such enquiries as it deems fit may by notification in the official gazette increase the employer's contribution from 6V4% to 8%. No employer to whom the scheme applies is permitted by reason only of his liability under the Act to reduce, whether directly or indirectly, the wages of any employee to whom the scheme applies, or the total quantum of benefits in the nature of old age pension, gratuity or provident fund to which the employee is entitled under the terms of his employment, express or implied. Provision is also made in the Act, so that the amount payable to the employee or his nominees is not attached for discharging other liabilities owed by the employee.
Gratuity benefit
Apart from the statutory provident fund and pension schemes provided for under the aforesaid Act, demands had often been made by the workmen covered under the Industrial Disputes Act, 1947, for additional benefit of gratuity in cases of retirement or premature termination of their service, or even resignation after putting in a certain minimum period of service. The industrial tribunals set u p under the Industrial Disputes Act, 1947, considered such demands on the basis of references made to them by the government, and granted the demand in appropriate cases. The award of such a scheme by a tribunal depended, however, on whether the financial capacity of the employer concerned permitted introduction of such a scheme, and also whether such a scheme, existed in other units of the industry in the region. There was also no uniform standard laid down to give guidance to the tribunals as to the quantum of gratuity payable, or the contingencies in which such gratuity should be paid. Decisions of the tribunals with regard to gratuity scheme were often challenged in the high courts but more often in the Supreme Court, which tried to establish certain guidelines for industrial tribunals as to the circumstances in which a gratuity scheme should be framed, the quantum of gratuity and the contingencies in which it should be payable. However, even these decisions of the Supreme Court did not establish any sufficiently definite principles which could avoid disputes in individual cases. Disputes regarding gratuity, therefore, often came up for decision before the industrial tribunals, the high courts as well as the Supreme Court. Meanwhile, demands were being made on the government for laying down a statutory gratuity scheme which would be uniform, and which would not depend on the financial capacity of the employer or the practice in any particular industry. Certain states like West Bengal and Kerala took initiative in this matter by framing gratuity schemes under Acts applicable to these
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states, even before the central government was persuaded to pass the Payment of Gratuity Act, 1972. These state Acts no longer have much relevance in view of section 14 of the Payment of Gratuity Act, 1972, enacted by Parliament, under which it is provided, inter alia, that the provisions of the Act or any rule made thereunder, shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the central Act under consideration. The Payment of Gratuity Act, 1972 applies to every factory, mine, oilfield, plantation, coal and railway company, and to every shop or establishment within the meaning of any law for the time being in force in relation to shops or establishments in a state in which 10 or more persons are employed, or were employed, on any day of the preceding 12 months. In addition to this, the provisions of the Act can also be extended by the central government to other establishments, or class of establishments, in which 10 or more employees are employed. The Act applies to only such employees whose wages do not exceed Rs. 1,000 a month and who do any skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical work. The Act is wide enough to bring within its scope, the entire organized sector of industry and commerce. In relation to its application to shop or establishment, in view of clause (b) of section 1(3) it applies to every shop or establishment within the meaning of any law for the time being in force. It has been held in B. N. Sarda (Pvt.) Ltd v. Kishan K. Borade^25 that there is no justification whatsoever to qualify the words 'any law' by introducing a qualification that the law should be either a Central law or a State law. It does not apply to any person who is employed in managerial or administrative capacity or who holds a civil post under the central government or a state government or who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957. Municipal Board^26 is held to be an 'establishment' governed by the Payment of Graduity Act, 1972. It is not necessary for a legal heir of an employee to first obtain a succession certificate and then apply for payment of gratuity amount. It will depend upon the facts of the case as to whether such certificate could be necessary or not. Andhra Pradesh High Court in Laxmi D. V. A. P. Agricultural University and another^11 has held that the educational institutions such as university carrying on systematic activity by employing more than ten persons was 'establishment' within the Payment of Gratuity Act, 1972. It was observed that the definition of establishment under section 1 (3) (b) of the Payment
- (1981) Lab IC 911.
- Nagar Palika Moradabad v. App. Authority and AMI. Labour Commr. U.P., Kanpur and others (1990) IILLJ 156 (All).
- (2002) 1 LLJ 69 (A.P.).
