Case BriefsHigh Courts

Kerala High Court: The Division Bench comprising of S. Manikumar, CJ and Shaji P. Chaly, J., heard the instant PIL regarding demand to give adequate and sufficient compensation to the workmen, who died on 13-04-014 inside the manhole of Kerala Water Authority sewerage pipeline. It was stated that when the employees were engaged in manhole of sewerage pipelines, adequate and necessary safeguards ought to taken by the Water Authority officials, so as to avoid any accident.

The petitioner relied on the order of Supreme Court in Delhi Jal Board v. National Campaign for Dignity and Rights of Sewerage and Allied Workers, (2011) 8 SCC 568, wherein the Court had issued guidelines, instructions and orders to be adhered, while workers are entering inside the manhole of sewerage pipeline for cleaning. According to the petitioner, the presence of at least an Assistant Engineer of the Kerala Water Authorities in the workplace was mandatory.

Engaging of workmen by the principal employer, Kerala Water Authority, without providing adequate and sufficient gears and tools like oxygen masks to the workers, resulted in the death of two poor workmen inside the manhole.

The Police and Fire and Rescue Service personnel, who had reached the spot, did not have the necessary required tools, to rescue the poor workmen.

Reliance was also placed by the petitioner on Safai Karamchari Andolan v. Union of India, (2014) 11 SCC 224, wherein the Supreme Court had laid down detailed directions for the upliftment of manhole workers.  The following directions were issued:

(i) The persons included in the final list of manual scavengers under Sections 11 and 12 of the 2013 Act, shall be rehabilitated as per the provisions of Part IV of the 2013 Act, in the following manner, namely:-

(a) such initial, one time, cash assistance;

(b) their children shall be entitled to scholarship

(c) allotment of a residential plot and financial assistance for house construction, or a ready-built house with financial assistance;

(d) at least one member of their family, shall be given  training in livelihood skill and shall be paid a monthly stipend during such period;

(e) at least one adult member of their family, shall be given, subsidy and concessional loan for taking up an alternative occupation on sustainable basis;

(f) shall be provided such other legal and programmatic assistance, as the Central Government or State Government may notify in this behalf.

(ii) If the practice of manual scavenging has to be brought to a close and also to prevent future generations from the inhuman practice of manual scavenging, rehabilitation of manual scavengers would need to include:-

(a) Sewer deathsentering sewer lines without safety gears should be made a crime even in emergency situations. For each such death, compensation of Rs. 10 lakhs should be given to the family of the deceased.

(b) Railways – should take time bound strategy to end manual scavenging on the tracks.

(c) Persons released from manual scavenging should not have to cross hurdles to receive what is their legitimate due under the law.

(d) Provide support for dignified livelihood to safai karamchari women in accordance with their choice of livelihood schemes.

(iii) Identify the families of all persons who have died in sewerage work since 1993 and award compensation of Rs.10 lakhs for each such death to the family members depending on them.

(iv) Rehabilitation must be based on the principles of justice and transformation.  

In the light of pronouncement of the Supreme Court in Safai Karamchari Andolan case the Bench ordered the state to pay compensation of Rs 10,00,000 each, to the family members of the persons, who died in sewerage work (manholes, septic tanks). Court, within a period of two months in addition to Rs 4,00,000 which had been already paid to the wives of the deceased.[Baisil Attippety v. Kerala Water Authority, WP(C) No. 11185 of 2014, decided on 18-03-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance before the Court by:

For the petitioner: Adv. K.P. Pradeep

For the respondents: Sr. Adv. P. Benjamin Paul, Sr. GP. V. Tek Chand and Sr. Adv. Millu Dandapani

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Administrative Tribunal (CAT):  Aradhana Johri, Member (A), partly allowed the instant application whereby the applicant had sought for issuance of directions for the release of gratuity and leave encashment which had been illegally withheld by the respondent.

The applicant was appointed to the post of Constable with the respondents on 31-07-1975. A CBI case was registered against the applicant under PC Act and he was suspended with effect from 09-11-1995. However, the suspension was subsequently revoked vide an order dated 28-03-2000. On 02-08-2001, the applicant was convicted by the Trial Court and, consequently, was dismissed from service. Again, the applicant was subsequently reinstated and superannuated on attaining the age of retirement on 31-08-2015. Though the applicant was paid provisional pension, his gratuity and leave encashment for 278 days leave which stood to his credit had been illegally withheld.

As per Rule 69 of the Central Civil Services (PensionRules1972

“(1)(c) No gratuity shall be paid to the Government servant until the conclusion of the departmental or judicial proceedings and issue of final orders thereon.”

The Tribunal relied on Mahanadi Coalfields Ltd. v. Rabindranath Choubey, 2020 SCC OnLine SC 470, wherein the Supreme Court had held that it was permissible for the employer to withhold the payment of gratuity even after the employee had attained his superannuation from service because of the pendency of disciplinary proceedings against him in view of Rule 34.3 of the Rules, 1978, the employer had a right to withhold gratuity during pendency of disciplinary proceedings.

Further, the Tribunal observed that 39 (3) reads as follows:

“(3) The authority competent to grant leave may withhold whole or part of cash equivalent of earned leave in the case of a Government servant who retires from service on attaining the age of retirement while under suspension or while disciplinary or criminal proceedings are pending against him.”

Consequently, the Tribunal ordered that leave encashment of 286 days should be paid to the applicant since the plea of money becoming recoverable had not been taken by the respondents. However, the demand of the applicant for release of gratuity and interest had been rejected.[Baldev Singh v. Union of India, O.A. 879 of 2020, decided on 02-03-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Chhattisgarh High Court: A Division Bench of P.R. Ramchandra Menon and Parth Prateem Sahu JJ., dismissed the appeal being devoid of merits.

The facts of the case are such that one Rajendra Sharma was employed as Driver in the truck owned by non-applicant 1 and insured by non-applicant 2 who while driving from Bilaspur to Raigarh carrying dolomite was attacked and assaulted by some unknown persons with the intention to cause robbery and thereby eventually succumbed to death. FIR was lodged and an application under Section 10 of the Employees Compensation Act 1923 was filed before the Commissioner seeking compensation by the wife and children of the deceased which was thereby granted on grounds that the death happened during the course of employment and fastened the liability to pay on the employer.  Assailing the said order, employer appellant filed an appeal before High Court on grounds that the penalty was imposed without issuing show-cause notice and without affording opportunity of hearing to the employer as envisaged under Section 4A (3) (b) of the Employees’ Compensation Act 1923 wherein appeal was allowed and impugned order was set aside in part relating to the amount of penalty and remitted the matter back to pass award afresh after affording reasonable opportunity of hearing to the employer. The Commissioner had fresh proceedings and issued notice to the parties and awarded 50% of the awarded amount of compensation as penalty and held the employer liable to pay amount of penalty.

Counsel for the appellants-employer submitted that there was again non-compliance of the provisions of Section 4A (3) (b) of Employees Compensation Act 1923. He contended that unless and until there is specific notice in this regard, as directed in MA No.148/2003, the impugned order awarding penalty to the extent of 50% and fastening liability upon appellant is bad in law and liable to be set aside.

Counsel for the respondents submitted that the Commissioner after receipt of the case back on remand, drawn fresh proceeding, granted opportunity of hearing and producing evidence, but appellant employer failed to produce any evidence on the issue. He submitted that the Commissioner is well within four corners of law in awarding penalty of 50% as provided under Section 4A (3) (b) of the Employees’ Compensation Act 1923.

The Court observed that the only ground relevant to the facts is that whether without issuance of notice the entire proceeding drawn by the Commissioner would be considered vitiated or not. The Court further observed that the Appellant was well aware of the fact that the case has been remanded back to the Commissioner with a specific direction for appearance of the parties before the Commissioner and to decide the issue of penalty afresh. It was further observed that the issuance of notice as provided under Section 4A (3) (b) of the Act of 1923 to be mandatory is only to bring it to the knowledge of the employer that the penalty is to be imposed, so that the employer may submit explanation and evidence for the delay occurred in depositing amount of compensation and satisfy the Commissioner on the said issue.

The Court thus held that “In the case at hand, earlier appeal was filed by appellant challenging the order of award of penalty by the Commissioner on the ground of non-issuance of show-cause notice as envisaged under Section 4A(3)(b) of the Act of 1923, which was allowed and the case was remitted back to the Commissioner. Appellant was well aware as to why the case has been remanded back to the Commissioner and also about the proceeding drawn by the Commissioner, but even then appellant has not submitted any explanation nor produced any evidence in this regard. When once the case is remitted back to the Commissioner for limited purpose of considering award of penalty; the appellant appeared before the Commissioner and participated in the proceeding but failed to submit any explanation or bring on record any evidence on issue, then he cannot be permitted to again raise the same ground that specific notice in terms of Section 4A (3) (b) of the Act of 1923 has not been issued.”

 The Court thus dismissed the appeal as the appeal did not involve any question of law which is a prerequisite for entertaining appeal under Section 30 of Employees’ Compensation Act 1923.[Ramjilal Jagannath Partnership Firm v. Kusumdevi, 2020 SCC OnLine Chh 2051, decided on 17-11-2020]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Gujarat High Court: A.P. Thaker J., upholding the decision of the Labour Court with respect to reinstatement of the workman, directed the employer to pay compensation of Rs 55000 as a lump sum against prayer for 100% back wages.

Being aggrieved with the award dated 23-04-2009 passed by the Labour Court, both workmen and the employer have preferred the respective petitions.

The workman has preferred Special Civil Application No. 540 of 2010 contending that he was serving with the employer on the post of supervisor and rendered his services for more than five years with no appointment letter or permanent assurance as such. One fine day, he was terminated from his position without any inquiry. It is further contended that in his reference before the Labour Court wherein he was granted prayer for reinstatement in service, the Labour Court factually and legally erred in not granting 100% back wages. Therefore, he has prayed to quash and set aside the award and grant him the same.

The employer has filed Special Civil Application No. 10377 of 2009 against the award contending that the Labour Court has committed serious error of law and facts in granting reinstatement in service as the workman has admitted that he was working on daily rated basis and in that view of the matter, when work was not available with the employer, he was automatically discharged. Further, it is also contended by the employer that the dispute is contractual in nature which, essentially, does not attract the Industrial Disputes Act, 1947.

Counsel for the petitioner relied on Talwara Cooperative v. Sushil Kumar, (2008) 9 SCC 486, Executive Engineer v. Ayubhai Ladharbhai, 2010 (2) GLH 700 and Counsel for the respondent placed reliance on, General Manager Haryana Roadways v. Rudhan Singh, (2005) 5 SCC 591 and UP State Brassware v. Uday Narain Pandey, (2006) 1 SCC 479.

Court found no error of facts or law committed by the Labour Court with respect to reinstatement and for 100% back wages, it said, “… considering the materials placed on record and the decisions cited, it is found that the workman is not entitled to 100% backwages, however, granting of backwages at 25% is also not proper, especially in view of peculiar facts of this case. At the relevant time, the workman was getting Rs.1500/- and considering the peculiar facts of this case, instead of granting any back wages, it would be just and proper to pay lump sum compensation of Rs.55,000/- for back wages to the workman, which will serve the ends of justice”[Karsan Shivaji Sanghar v. Ashapura Mines, 2021 SCC OnLine Guj 61, decided on 13-01-2021]


Sakshi Shukla, Editorial Assistant has put this story together

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of P. Venkata Subba Rao (Technical Member) and P. Dinesha (Judicial Member) allowed an appeal filed against Order-in-Appeal passed by Commissioner of Customs, Central Excise & Service Tax, (Appeals-II).

The appellant was a 100% Export Oriented Unit (EOU) and was engaged in research and development services of advanced pharmaceutical ingredients and other biopharma products, a wholly-owned subsidiary of Nektar USA. An employee of the parent company, Nektar USA, was sent to India on a secondment to work as a full-time Managing Director of the appellant company, during his tenure as the Managing Director of the appellant, the ‘secondee’ was a full-time employee of the appellant and that there was a relationship of employer-employee between the appellant and the ‘secondee’. Further, since the ‘secondee’ was a citizen of America, the parent company and the appellant company entered into a ‘salary reimbursement agreement’ for the sake of administrative convenience so that the salary of the ‘secondee’ would be paid in foreign currency outside India by the parent company which would be reimbursed by the appellant to its parent entity. The issue that arose was whether the reimbursement of

salary paid to the ‘secondee’, to the parent company, Nektar USA amounted consideration for the provision of manpower recruitment and supply agency services, within the meaning of section 65(68) of the Finance Act, 1994.

The Tribunal relied upon the Supreme Court judgments of Nissin Brake (India) (P) Ltd. [2019 (24) GSTL 563 (Tri-Del.)], reiterated in Komatsu (India) (P) Ltd. v. Commr. Of Service Tax, and Bangalore Bench of the Tribunal in the case of Goldman Sachs Services (P) Ltd. v. Commr. Of Service Tax, Bangalore.

The Tribunal while reproducing the relevant portion of the Komatsu India (P) Ltd. v. Commr. Of Service Tax judgment allowed the appeal holding that the revenue was not disputing that the ‘secondee’ was always under the control and supervision of the appellant and that the appellant’s parent company had absolutely no obligation to pay the salary and other charges to the ‘secondee’ but for remitting secondee’s salary in foreign exchange based on the salary reimbursement agreement.[Nektar Therapeutics (India) (P) Ltd. v. CCE, 2020 SCC OnLine CESTAT 382, decided on 10-12-2020]


Sakshi Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Himachal Pradesh High Court: Vivek Thakur J., while allowing the present petition, made an elaborated discussion over conditions for granting benefit of service and regularization, in the light of Gauri Dutt v. State of Himachal Pradesh, HLJ 2008 (HP) 366.

Background

The petitioner in the instant case was appointed as daily waged surveyor on 1-11-1983 and in the same year, he served at the said position for 61 days. He continued to work as a daily waged Surveyor till 30-06-1987 and with effect from 01-07-1987 to 28-02-1988, he was engaged as daily waged beldar. Thereafter, from 01-03-1988 to 31-10-1989, he was engaged as daily waged Fitter, a Class-III post equivalent to the post of Surveyor. Since 01-11-1989 till his regularization, he was engaged as daily waged Surveyor continuously. Since 1984 till his regularization vide order dated 17-12-2002, with effect from 31-03-2000, he served for 240 days each in every calendar year as a daily waged employee, though in a different capacity, that is, Surveyor, Beldar and Fitter, as mentioned above.

It is also undisputed that pursuant to the decision of Government dated 28-02-2008, taken after passing of judgment by the present High Court in Gauri Dutt v. State of Himachal Pradesh, HLJ 2008 (HP) 366, petitioner was regularized, immediately on completion of 10 years as Surveyor with 240 days each in every calendar year, vide order dated 18-03-2008 from retrospective date with effect from 01-01-2000. Thereafter petitioner had represented to the respondent authority to take into consideration his service with effect from 1984 onwards as he had completed 240 days in each calendar year continuously after 01-01-1984 till his regularization. Feeling aggrieved by omission on the part of respondents authority to take any decision, he had approached this High Court by filing CWP No. 8325 of 2011, which was disposed of vide order dated 11-10-2011 with direction to the respondents-authority to take appropriate action in representation made by petitioner, which was pending consideration before the authority. In pursuance to the order passed by the present High Court, representation of the petitioner was considered by Engineer-in-Chief and was decided vide order dated 28-11-2011, whereby it was concluded by the authority that from 01-03-1988 to 31-10-1989, petitioner was engaged as daily waged fitter and thereafter he continued as daily waged surveyor till his regularization and as post of fitter was equivalent to the post of surveyor, service of the petitioner as fitter with effect from 01-03-1988 to 31-10-1989 was also taken into consideration for counting requisite years for his regularization as surveyor and as such work-charge status was conferred upon the petitioner with effect from 01-01-1998, instead of 01-01-2000.

By way of present petition, petitioner has assailed order dated 28-11-2011, claiming that his entire service with effect from 01-01-1984, since when he has been working as daily waged Surveyor, Beldar and Fitter, with 240 days in each calendar year, is required to be taken into consideration for the purpose of conferring work-charge status upon him and/or regularization of his service.

Observation

The Court referred to the case of  Gauri Dutt, where the essential question was precisely relevant for consideration in the instant case, that is,

Where if an employee has rendered service on daily waged basis on 2 separate posts in lower and higher scales, can the employee be given benefit of the service rendered by him in the lower scale and be regularized in the higher scale by combining the two services after 10 years?

The Division Bench in the aforementioned case held, “when an employee completes 10 years of continuous service combined in two scales, an option should be given to the employee to either accept work charge status in the lower scale or he may continue to work on daily rated basis in the higher scale and claim work charge status in the higher scale of completion of 10 years of continuous service in the said scale…However, if the employee on being given a chance to exercise his option does not convey his opinion within 30 days, he shall be granted work charge status in the lower scale by combining the service rendered in both the scales.” In essence the Bench observed that,

An employee, for regularization against higher scale, cannot have benefit of his service against lower scale for the purpose of counting 10 years service, however, for regularization against lower scale an employee can have benefit of his service against post of higher scale for counting 10 years.

The Court further admitted the fact that the facts of the present case are not exactly similar to the facts of the Gauri Dutt and in the same light observed, “… a case, like present one, wherein the employee initially and finally has been appointed to a post of higher scale and in between to a post of lower scale, has not been discussed and considered therein. However, the essence of the judgment is very clear that for regularization to the post of higher scale, services of employee against the post of higher scale are only to be taken into consideration, but not the services rendered against post having lower scale. Petitioner herein, has continuously served for 240 days in each calendar year w.e.f. 01-01-1984, though against different posts having different scales.”

Decision

While allowing the present petition the Court said, “Considering the entire facts and circumstances and also ratio laid down in Gauri Dutt’s case, I am of the considered opinion that services of petitioner with effect from 01-01-1984 to 30-06-1987 when he has served against the post of Surveyor, is required to be taken into consideration for counting his requisite years of service for the purpose of conferring work-charge status/regularization, because there is no break in his daily wage service since 01-01-1984 as though he was engaged against posts having different scales, but his services were never discontinued till his regularization and he had completed 240 days in every calendar year during this period. His services as daily waged Beldar with effect from, 01-07-1987 to 28-02-1988 are not to be taken into consideration for calculating the requisite years, rather has to be excluded for the purpose of calculation of requisite years. But at the same time this period is not to be considered as a period when petitioner has not served at all for the purpose of continuance of service and completion of 240 days in each calendar year. Though, this period is to be taken into consideration for purpose of continuation, but is not to be added to the period of service as Surveyor.”[Ashok Kumar v. State of Himachal Pradesh, CWPOA No. 842 of 2019, decided on 27-11-2020]


Sakshi Shukla, Editorial Assistant has put this story together.

Case BriefsSupreme Court

Supreme Court: In a case where a company provided trained and efficient security guards to clients, claimed that security guards were the employees of the client, the was bench of Navin Sinha* and Surya Kant, JJ has held that merely because the client pays money under a contract to the appellant and in turn the appellant pays the wages of such security guards from such contractual amount received by it, it does not make the client the employer of the security guard nor do the security guards constitute employees of the client.

Background

By Notification dated 17.05.1971[1] issued under Section 1(3)(b) of the EPF Act, the provisions of the EPF Act were made applicable to specified establishment rendering expert services and employing twenty or more persons.

The appellant contended that it was not covered by the said Notification since it was not engaged in rendering any expert services and merely facilitated in providing Chowkidars to its clients at the request of the latter. The salary was paid to the Chowkidars by the client who engaged their services and that the appellant had only 5 persons on its rolls.

The Assistant Provident Fund Commissioner on basis of balance sheets seized during a raid opined that

  • the appellant had more than twenty employees on its rolls and stood covered by the term “expert services” such as providing of personnel under the Notification.
  • wages were not paid directly by the clients to the security guards deployed by the appellant but that the payments were made by the clients to the appellant, who in turn disbursed wages to the security guards.
  • the remedy of an appeal before the Tribunal under Section 7-I was bypassed by the appellant instituting the writ petition directly.

The Allahabad High Court declined interference with the conclusion of expert services being rendered by the appellant. A review petition contending that the appellant stood duly registered under the Private Security Agencies (Regulation) Act, 2005 was also rejected.

Analysis

Private Security Agencies (Regulation) Act, 2005

The Act of 2005 defines a private security agency under Section 2(g) as an organization engaged in the business of providing security services including training to private security guards and providing such guards to any industrial or business undertakings or a company or any other person or property.  A licence is mandatory under Section 4 and those security agencies existing since earlier were mandated to obtain such licence within one year of coming into force of the Act.

A complete procedure is provided with regard to making of an application for grant of a licence under Section 7, renewal under Section 8 of the Act.The eligibility for appointment as a security guard with such security agency is provided under Section 10 of the Act.

Section 11 provides for the condition of the licence and the licence can be cancelled under Section 13. A private security agency under Section 15 is required to maintain a register inter alia with the names, addresses, photographs and salaries of the private security guards and supervisors under its control.

Private Security Agencies Central Model Rules, 2006

The 2006 Rules framed under the Act of 2005, requires verification by the security agency before employing any person as a security guard or supervisor in the manner prescribed. Proper security training of the person employed is the responsibility of the security agency under Rule 5, and Rule 6 prescribes the standard of physical fitness for security guards.

Under Rule 14 the security agency is required to maintain a Register in Form VIII, Part-I of which contains details of the management, Part¬II contains the name of guard, his parentage, address, photograph, badge no. and the salary with the date of commencement.

Part III contains the name of the customer, address, the number of guards deployed, date of commencement of duty and date of discontinuance.

Part IV contains the name of the security guard/supervisor, address of the place of duty, if accompanied by arms, date and time of commencement of duty and date and time of end of duty.

Conclusion

Considering the aforementioned analysis, the Court concluded that the appellant is engaged in the specialised and expert services of providing trained and efficient security guards to its clients on payment basis. The provisions of the Act of 2005 make it manifest that the appellant is the employer of such security guards and who are its employees and are paid wages by the appellant.

Merely because the client pays money under a contract to the appellant and in turn the appellant pays the wages of such security guards from such contractual amount received by it, it does not make the client the employer of the security guard nor do the security guards constitute employees of the client. The appellant therefore is squarely covered by the Notification dated 17.05.1971.

The Court further noticed that the appellant refused to show the statutory registers under the Act of 2005 to the authorities under the EPF Act.  It also took note of the letter dated 03.04.2001 written by the appellant, with the appellant’s balance sheet seized for the financial years 2003¬04, 2004-05,   2005¬06 and 2006¬07 showing payment of wages running into lacs.

The Court, hence, concluded that the appellant has more than 20 employees on its roles and hence, provisions of the Act therefore necessarily apply to it.

[Panther Security Services Pvt. Ltd. v. Employees’ Provident Fund Organisation, 2020 SCC OnLine SC 981, decided on 02.12.2020]


*Justice Navin Sinha has penned this judgment. Read more about him here

For appellant: Advocate S. Sunil

For Respondent: Advocate Divya Roy

[1] “G.S.R. No. 805 : In exercise of the powers conferred by clause   (b)   of   sub-section   (3)   of   Section   1   of   the Employees’ Provident Funds and Family Pension Fund Act, 1952 (19 of 1952), the Central Government hereby specifies that with effect from the  31st May, 1971, the said Act shall apply to every establishment rendering expert services such as supplying of personnel, advice on domestic or departmental enquiries, special services in rectifying pilferage, thefts and payroll, irregularities to factories   and   establishments   on   certain   terms   and conditions   as   may   be   agreed   upon   between   the establishment and the establishment rendering expert services and employing twenty or more persons.”
Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan, R. Subhash Reddy and MR Shah*, JJ had held that it is for the employer to determine and decide the relevancy and suitability of the qualifications for any post, not the Courts.

“Qualifications are prescribed keeping in view the need and interest of an Institution or an Industry or an establishment as the case may be. The Courts are not fit instruments to assess expediency or advisability or utility of such prescription of qualifications. However, at the same time, the employer cannot act arbitrarily or fancifully in prescribing qualifications for posts.”

In the present case, applications were invited by the appellant Bank for the post of Peon by publishing an advertisement in the local newspaper. The eligibility criteria mentioned in the said advertisement was that a candidate should have passed 12th class or its equivalent with basic reading/writing knowledge of English. It specifically provided that a candidate should not be a Graduate as on 01.01.2016

The respondent herein – original writ petitioner, based on the information provided by him in his application, was appointed. While scrutiny of the documents was going on, the appellant Bank came to know about a graduate certificate showing that the respondent was a graduate since 2014.  Thus, it was noticed and found that he was not eligible as per the advertisement and the Circulars and that the respondent deliberately, wilfully and intentionally suppressed the fact that he was a graduate. Therefore, his candidature was cancelled and he was not allowed to join the bank in subordinate cadre. The High Court of Orissa, however, directed the appellant Bank to allow the respondent to discharge his duties as a Peon as per the appointment order.

The Bank submitted that considering the nature of the post – Peon/subordinate cadre, a conscious decision was taken by it that a candidate having the qualification of graduation shall not be eligible and the candidate who passed in 12th standard or its equivalent with basic reading/writing knowledge of English shall only be eligible. Hence, unless it is found to be most arbitrary, the same cannot be the subject-matter of a judicial review.

The Court held that prescribing the eligibility criteria/educational qualification that a graduate candidate shall not be eligible and the candidate must have passed 12th standard is justified and it is a conscious decision taken by the Bank which is in force since 2008. Therefore, the High Court has clearly erred in directing the appellant Bank to allow the respondent-original writ petitioner to discharge his duties as a Peon, though he as such was not eligible as per the eligibility criteria/educational qualification mentioned in the advertisement.

Considering the facts and circumstances of the case at hand, the Court noticed that in the application, the respondent did not disclose that he is a graduate from 2014 and only mentioned his qualification as 12th pass. Therefore, the respondent deliberately, wilfully and intentionally suppressed the fact that he was a graduate. Had it been known to the bank that he was a graduate, he would not have at all been considered for selection as a Peon in the bank.

The Court further held that once having participated in the recruitment process as per the advertisement, thereafter it is not open for him to contend that acquisition of higher qualification cannot be a disqualification and that too when he never challenged the eligibility criteria/educational qualification mentioned in the advertisement.

[Chief Manager, Punjab National Bank v. Anit Kumar Das, 2020 SCC OnLine SC 897, decided on 03.11.2020]


*Justice MR Shah has penned this judgment 

Op EdsOP. ED.

Background

In the background of the unprecedented slump that the Indian economy is currently going through on account of the Covid-19 pandemic and the resulting lockdowns, it had become imperative to bring in some long awaited changes to the Indian labour laws to provide businesses with more leeway to operate and adapt to stay competitive in the global markets. This was also necessary from the point of view of making India self-sufficient. But as the three Codes (recently passed by Parliament in the absence of any significant opposition) set about to revamp the entire Indian Labour Law, what does it entail for the Indian industry and its workmen? In this article we shall be taking a closer look at the Industrial Relations Code, 2020[1].

The Industrial Relations Code, 2020 seeks to consolidate and modify the laws relating to trade unions, conditions of employment in industrial establishments or undertakings and investigation and settlement of industrial disputes. It shall replace the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947.

Changes to legal terms

Interestingly, the explanation for the term “appropriate government” mentions that the Central Government shall continue to be the appropriate Government for the Central Public Sector Undertakings even where the Government has divested its stake to below 50%. This could potentially provide a pathway to the Government to undertake further divestment in the PSUs in the future while assuaging the redressal demands of the PSUs employees.

The scope of coverage has been widened to include all employees including supervisory, managerial and administrative staff that were up to now excluded from the ambit of the Industrial Disputes Act. The scope of the term “employer” has also been widened to include almost all employer including contractors and legal representatives of a deceased employer, which were up to now not a part of the said term under the Industrial Disputes Act. Similarly, the definition of the term “workers” (which replaces the term “workman” used in the Industrial Disputes Act) also includes persons employed in supervisory work and even includes working journalists and sales promotion employees. By extension, the widening of these terms also serves to extend the ambit of “industrial dispute” itself.

The definition of the term “industry” has also been elaborated upon to include most enterprises for production, supply and distribution of goods while excluding charitable organisation, sovereign function of the Government and domestic workers.

The definitions of “lay-off”, “lock out” and “retrenchment” have not seen much of a significant change. The term “strike” will now include absenteeism or refusal to work of more than 50% workers. The term “wages” for the purposes of this Code will now constitute basic pay, dearness allowance and retaining allowance, while specifically excluding bonus, HRA, PF contribution of employer, conveyance allowance, overtime allowance, commission, gratuity and any other retirement benefits.

A positive role for the Trade Unions

The new Code prescribes that to be registered and recognised any Trade Union must have (and must continue to have post registration) at least the subscription of 10% workmen or 100 workmen employed in an industrial establishment, whichever is less. Despite being considered body corporates unto themselves the Trade Unions shall be excluded from the purview of the Societies Registration Act, 1860, the Cooperative Societies Act, 1912, the Multi-State Cooperative Societies Act, 2002 and the Companies Act, 2013.

Despite retaining the concept of a Works Committee, the new Code also recognises the recognised Trade Union (the Trade Union with the subscription of 51% or more workers in case of more than one Trade Union) as the sole negotiating union or the negotiating council. Disputes between rival Trade Unions or between Trade Unions and its constituent workers will be adjudicated by the Tribunal. As a precautionary measure to the overtaking of such Trade Unions by external vested interest or mere political aspirants, the Code provides that at least a half of the office bearers of the Trade Union in an unorganised sector shall be persons actually employed in the establishment or the industry.

The Standing Orders under the new law shall apply to every industrial establishment with 300 or more workers (up from the Industrial Disputes Act where this threshold was 100).  The Central Government shall make model standing orders and the employers shall follow suit with their draft standing orders based thereupon within 6 months therefrom. The Trade Unions shall be consulted therein and the draft Standing Orders shall then be certified by a Certifying Officer.

Push for Alternate Dispute Redressal mechanisms  

In my opinion, where the new Code truly shines is in its significant push to avail multiple avenues outside of the traditional labour courts for grievance and dispute redressal. A laudable initiative in the new Code is the provision for the constitution of a Grievance Redressal Committee in all establishments employing 20 or more workers as an in-house redressal mechanism for fast-track redressal (within 30 days) of the grievances of individual workers. The appeal there from goes to the Conciliation Officer. The appeal from the Conciliation Officer in turn goes to the Industrial Tribunal.

Further, in keeping with the times, the new Code has done well to introduce Alternate Dispute Resolution in the Industrial Dispute Redressal mechanism by providing for the provision for voluntary reference and redressal of disputes by way of arbitration. The new Code further provides recognition to settlements (both within and outside conciliation proceedings) and arbitration awards by making them binding on the parties involved.

Besides the usual Industrial Tribunal, the new Code also provides for the establishment of one or more National Industrial Tribunals which shall adjudicate such disputes (by consensus), that are deemed to be of national importance or concern establishments in more than one States, as are referred to it. A very important aspect of the new Code is that it shall also affect all pending disputes which will be transferred to the appropriate forum under the new Code and adjudicated either de novo or from the present stage as deemed fit.

An interesting aspect of the Code is that the appropriate State Government or the Central Government gets a choice to exercise veto on enforcement of any award on “public grounds affecting the national economy or social justice” subject to the subsequent approval of such executive action by the State Legislature or Parliament as the case may be.

The new Code also allows workers to recover money from their employers by initiating proceedings in the prescribed manner with the appropriate Government.

Hire and Fire or Misfire?

The general provisions for continuous service, lay-offs, retrenchment and notice before the closure of business remain more or less the same in the new Code as in the Industrial Disputes Act, 1947. However, where the new Code is a game-changer is in providing employers with more flexibility in hiring and firing by way of appointing fixed-term workers. At the same time, the new Code seeks to balance the scales by extending all the statutory benefits including gratuity to such fixed-term employees as are employed for over a year.

In another much-needed initiative, the new Code also provides for setting up a worker’s reskilling fund for retrenched workers with contribution from both, the employers as well as the appropriate Government.

While the new Code provides a breather for businesses by raising the threshold for the Standing Orders and also takes some laudable initiatives on the disputes redressal side, the major provisions pertaining to layoffs, lockouts and retrenchment (outside of the fixed term workers) remain largely the same and hence, continue to be severely regulated. Given the largely dismal outlook of the economy in the near future and the loss of several huge investments opportunities in the recent past, I fear that this may not be enough and that more sacrifices may be required for the revival of the badly hit Indian industry and to ensure that it is able to compete competitively with the more favourably placed economies for a bigger pie of the global trade of goods and services going forward.


* Advocate-on-Record, Supreme Court of India and disputes resolution lawyer at various Commercial Courts and Industrial Tribunals in Delhi. Author can be reached at gaggar.aditya@gmail.com

[1] The Industrial Relations Code, 2020  

Op EdsOP. ED.

Public sector undertakings, statutory/government bodies and even private parties (“the employer”) may execute contracts with other private parties (“the contractor”) for construction of various projects. While the models for such contracts would vary, the contractor’s obligation to timely complete the project remains a key term of such contracts. However, the contractor’s ability to complete the project within stipulated timelines is also contingent on the employer fulfilling its’ obligations on time, such as, inter alia, providing land for construction on time. A delay by either of the parties in fulfilling their obligations may entitle the other to be compensated for the loss suffered arising from such delay. Such contracts may also provide for dispute resolution through arbitration.

However, in accordance with Section 7 of the Arbitration and Conciliation Act, 1996, the parties have the freedom to refer all or only certain disputes for arbitration. If the parties have agreed to not refer certain disputes for arbitration, the same may be classified as ‘excepted’ matter and any dispute regarding the same would not be arbitrable. Many such construction contracts provide that the contractor will compensate the employer for the delay in completion of the project by payment of liquidated damages. Such liquidated damages may be decided by an employee of the employer such as a designated superintending engineer under the contract (“SE”), whose decision shall be final and binding in this regard. Question arises when there is a dispute between the parties regarding levy of liquidated damages by the employer in such cases. If the decision of the SE of the employer regarding levy of liquidated damages is final and binding, is this an excepted matter and not arbitrable? Further, what is the scope of such alleged excepted matter – whether only quantum of liquidated damages calculated is not arbitrable or even the issue of whether the delay is attributable to the contractor, which gives the employer the right to levy liquidated damages, is not arbitrable?

While these issues have been previously considered by the Supreme Court of India, the said issue was recently re-agitated in Mitra Guha Builders (India) Company v. Oil and Natural Gas Corporation Limited[1]  (“Mitra Guha v. ONGC”). This article seeks to analyse the judgment in Mitra Guha v. ONGC on the abovementioned issues.

Brief Facts

In this case, the respondent, Oil and Natural Gas Corporation Limited (“ONGC”) was the employer and it entered into contract for construction of flats and other works with the appellant, who was the contractor. There was delay in completion of the works and the contractor raised claims against the employer, which were refuted by the employer and consequently, the contractor invoked the arbitration clause as provided in the contract. The employer also levied liquidated damages and withheld amount for the same from the payment to the contractor, which was also sought to be challenged in the arbitration proceedings by the contractor.

In this regard, it is pertinent to note that Clause 2 of the contract provided that in event of delay by the  contractor, the “…contractor shall pay compensation on amount equal to ½% per week as the Superintending Engineer (whose decision in writing shall be final) may decide”. Further for special jobs, if a time schedule had been submitted and the contractor fails to comply with the schedule, “…he shall be liable to pay as compensation an amount equal to ½% per week as the Superintending Engineer (whose decision in writing shall be final) may decide on the contract value”. The entire value of compensation under this clause could not exceed 10% of the tendered cost of the work.

Further, Clause 25 of the contract provided for settlement of disputes by arbitration. It stated that all disputes, difference, question or disagreement shall be referred for arbitration. However, “the decision of the Superintending Engineer regarding the quantum of reduction as well as his justification in respect of reduced rates for sub-standard work, which may be decided to be accepted, will be final and binding and would not be open to arbitration…”

The learned arbitrator noted that both the parties were responsible for delay in completion of the project. However, it disallowed the claim for liquidated damages by the  employer on the grounds that under the garb of liquidated damages, what was sought to be imposed was penalty. Further, the arbitrator noted that the  employer was also liable for substantial delay in the project, and thus, could not collect such penalty belatedly. While hearing the challenge to the award, the Single Judge of the  High Court at Delhi (“the Delhi High Court”) re-affirmed the findings of the arbitrator and noted that since the  employer is also responsible for substantive part of delay (60% of the delay), hence the  employer is not entitled to recovery of such penalty. The said findings regarding levy of liquidated damages were overturned by the Division Bench of the Delhi  High Court , on the grounds that liquidated damages had been levied under Clause 2 of the contract, which provided that the decision of the SE is final and binding. Thus, the same was an excepted matter and not arbitrable. Further, the Division Bench noted that even the arbitrator had held the  contractor to be liable for some delay in the completion of the project and that the arbitrator had not given any reason as to why Clause 2 was in the nature of penalty and not a genuine pre-estimate of the loss suffered by the  employer.

Findings of Supreme Court

The Supreme Court affirmed the findings of the Division Bench and held that by virtue of Clause 2 of the contract, the SE was not only conferred with a right to levy compensation but also for determining the liability/quantum of compensation. Since Clause 2 attaches finality to such decision of the SE, the same cannot be the subject-matter of arbitration and Clause 2 provides for the complete mechanism for levy of liquidated damages. In para  18[2], it states that, ‘any’ decision of SE cannot be referred for arbitration and any other meaning to the finality clause would make the agreed Clause 2 and Clause 25 redundant. Thus, in paras 20 and 26[3], it states that delay in completion of work and the levy of liquidated damages could not have been determined by the arbitrator and the only recourse available is in ordinary course of law. The Supreme Court relied on the judgment of interalia Vishwanath Sood v. Union of India[4] (“Vishwanath Sood”) to support its interpretation to Clauses 2 and 25.

The appellant contractor contended that the finality attached in Clause 2 is on quantification of liquidated damages. However, for levy of liquidated damages, there has to be delay and to determine who is responsible for delay, the said issue will have to be determined by an arbitrator. Reliance was placed on BSNL v. Motorola India (P) Limited[5](“BSNL v. Motorola”). However, the Supreme Court rejected the same and held that the case of BSNL v. Motorola is distinguishable on account of different wording of the relevant clauses. The Supreme Court  noted that in BSNL v. Motorola, the entitlement of the party was to recover liquidated damages. Linkage of compensation, in BSNL v. Motorola, to “value of delayed quantity” and “for each week of delay” showed that it was necessary to find out whether there has been delay on part of the supplier. Thus, Clause 16.2 in BSNL v. Motorola did not envisage a complete process for adjudication of the issue. However, in the present case, the Supreme Court held that Clause 2 of the present agreement is a complete mechanism. Thus, the ‘right to levy damages’ is exclusively conferred upon the SE and is final and binding and not arbitrable.

Analysis

It is submitted that while finality can be attached to quantification of damages by SE, however this right to levy liquidated damages by SE is a secondary power, for which the primary issue required to be determined is whether the  contractor had caused any delay to invite levy of liquidated damages. Determination of such a primary issue ought to be arbitrable and in this regard, the reasoning of the Supreme Court in Mitra Guha v. ONGC, should be read in context of the issues highlighted in the following paragraphs.

Party to the agreement cannot be an arbiter in its own cause

The right to levy liquidated damages does not exist in a vacuum and arises only upon breach by the  contractor i.e. when the delay is attributable to the  contractor. Thus, the right to levy liquidated damages is a subsidiary and consequential power and not a primary power to even determine question of breach by the  contractor. The same was also held by the Supreme Court  in State of Karnataka v. Shree Rameshwara Rice Mills[6] (“Rice Mills”) in para 7. While the Supreme Court in Rice Mills case noted that the wording of the relevant clause did not confer finality to the power of officer of the employer to determine question of breach, it held that, in any event, such a power could not be conferred. The same was on the basis that a party to the agreement cannot be an arbiter in his own cause. It held that, “interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions, the adjudication should be by an independent person or body and not by officer party to the contract.”  However, the Supreme Court in Rice Mills case did note that if the contractor has admitted delay or there is no dispute regarding the same, then such officer of the employer would be well within his rights to assess the damage. The same was also followed by the Supreme Court in BSNL v. Motorola[7], however, Mitra Guha v. ONGC did not deal with this issue and only sought to distinguish the case of BSNL v. Motorola on the grounds of wordings of the relevant clause. This dicta in Rice Mills case and BSNL v. Motorola has been followed in J.G. Engineers Private Limited v. Union of India[8] (“J.G. Engineers”), which dealt with a contractual clause similar to the one in Mitra Guha v. ONGC. However, while Mitra Guha v. ONGC, in interpreting Clauses 2 and 25 of the contract, placed reliance on Vishwanath Sood, however, it did not consider the case of J.G.Engineers. Further, even Vishwanath Sood did not have the occasion to consider  Rice Mills case. The dicta that a party to the agreement cannot be an arbiter in its own cause has been further re-affirmed by a three-Judge Bench of the Supreme Court  in  Tulsi Narayan Garg v. M.P. Road Development Authority[9], which was dealing with the question of whether the State could have levied liquidated damages and initiated recovery proceedings for the same, when the dispute was pending before the Arbitral Tribunal.

Reading of Clauses 2 and 25 in light of J.G. Engineers and Rice Mills

The above interpretation is also in consonance with the interpretation of Clauses 2 and  25 of the contract. The Supreme Court  in J.G. Engineers while interpreting Clause 2 (worded similarly to the one in Mitra Guha v. ONGC) noted that “…his decision is not made final in regard to the question as to why the work was not commenced on the due date or remain unfinished by the due date of completion and who was responsible for such delay”.[10] Further, it stated that the said clause does not attach finality to the “question as to whether the contractor had failed to complete the work or portion of work within the agreed time schedule, whether the contractor was prevented by any reasons beyond its control or by the acts or omissions of the respondents, and who is responsible for the delay.”[11]

The Supreme Court in J.G. Engineers noted that the consequential decision of the SE in regard to quantification/levy of liquidated damages, is made final “if there is no dispute as to who committed the breach. That is if the contractor admits that he is in breach or if the arbitrator finds that the contractor is in breach”. Further, Clause 25 in Mitra Guha v. ONGC, excludes the decision of SE regarding ‘quantum’ of reduction of rates ‘in case of sub-standard work’ as excepted matter. The same cannot be read to expand the scope of ‘excepted matter’ to include the dispute on whether the contractor is responsible for the delay, thereby inviting levy of liquidated damages.

The Supreme Court  in Mitra Guha v. ONGC has stated in paras 19 and 20[12] that if further adjudication under Clauses 2 and 25 is allowed, it will render the agreement meaningless and redundant. It further notes in para 26 that remedy against the decision of SE in Clause 2 shall lie in ordinary course of law and not arbitration. In this regard, first it is reiterated that the scope of finality attached to decision of SE in Clause 2 read with Clause 25 is on the levy/quantification of liquidated damages. The same is consequential to and distinct from the primary power of adjudicating the issue of the party responsible for such breach and for this, the employer cannot be an arbiter in his own cause. Second, the Supreme Court has not considered that even if the claim against levy of liquidated damages is not referred to the arbitrator, the  contractor may refer other claims such as escalation on account of delay caused by the employer to the arbitrator. In such case, the arbitrator will be required to determine the party responsible for delay in completion of the contract. In the event finality is attached to the SE’s decision on the  contractor being responsible for delay for levy of liquidated damages, there may be contrary findings on the said issue by the SE and the arbitrator. Further, even if recourse is taken to the ordinary course of law, the same may lead to multiplicity of proceedings and contrary findings on the same issue of determining the party responsible for delay. Thus, even in Rice Mills and J.G. Engineers, the Supreme Court stated that the SE’s decision to levy liquidated damages can attain finality only if there is no dispute on breach by the contractor. It is to be noted that in Mitra Guha v. ONGC, the arbitrator had recorded a finding that both the parties were responsible for the delay, which was not upset by any of the courts. However, the arbitrator had faulted with SE for imposition of liquidated damages on other grounds. 

Sole Reliance upon Vishwanath Sood 

The Supreme Court in Mitra Guha v. ONGC relied upon Vishwanath Sood to come to its findings as Clause 2 being considered was similar in both cases. However, the Supreme Court did not discuss the case of J.G.Engineers which also had a similarly worded clause for levy of liquidated damages. Vishwanath Sood stated that Clause 2 provides a complete mechanism and the SE has the discretion to determine the liquidated damages within a permissible range after considering the pleas of the contractor, which may include any mitigating circumstances being pleaded by the contractor. Thus, the decision of the SE is a considered decision. However, in this regard, the same has to be read in light with decision of the Supreme Court in Rice Mills and J.G. Engineers and considered to be applicable to a situation only where there is no dispute by the contractor on the question of breach by the contractor. It is not clear whether the judgment of J.G. Engineers was brought on record before the Supreme Court  in Mitra Guha v. ONGC. On previous occasions, the Delhi High Court and the  High Court of Madhya Pradesh (“the MP High Court”) had the occasion to consider J.G. Engineers and Vishwanath Sood together.

The Delhi High Court in Winner Constructions Private Limited v. Union of India[13], read down the scope of Vishwanath Sood by reading it with J.G. Engineers and BSNL v. Motorola to hold that “the issue of non-arbitrability is only upon the question of any compensation, which the Government might claim in terms of Clause 2 of the Contract. In other words, the issue whether the contractor had delayed the project would still be arbitrable.[14]

It further relied upon para 10 of Vishwanath Sood  to come to the said conclusion, which itself stated that,

“10. We may confess that we had some hesitation in coming to this conclusion. As pointed out by the Division Bench, the question of any negligence or default on the part of the contractor has many facets and to say that such an important aspect of the contract cannot be settled by arbitration but should be left to one of the contracting parties might appear to have far reaching effects. In fact, although the contractor in this case might object to the process of arbitration because it has gone against him, contractors generally might very well prefer to have the question of such compensation decided by the arbitrator rather than by the Superintending Engineer. But we should like to make it clear that our decision regarding non arbitrability is only on the question of any compensation which the Government might claim in terms of clause 2 of the contract …We have already pointed out that this is a penalty clause introduced under the contract to ensure that the time schedule is strictly adhered to…This is not an undefined power. The amount of compensation is strictly limited to a maximum of 10% and with a wide margin of discretion to the Superintending Engineer, who might not only reduce the percentage but who, we think, can even reduce it to nil, if the circumstances so warrant. It is this power that is kept outside the scope of arbitration. We would like to clarify that this decision of ours will not have any application to the claims, if any, for loss or damage which it may be open to the Government to lay against the contractor, not in terms of Clause 2 but under the general law or under the Contract Act.

(emphasis supplied)

Similarly, even the MP  High Court in  Shridhar Dubey v. Union of India[15] read down the scope of a similarly word Clause 2 and the impact of Vishwanath Sood by reading it together with the case of J.G. Engineers, Rice Mills and BSNL v. Motorola. The MP High Court held that, “prima facie, the liability for compensation arises when the contractor has failed to maintain the deadline for completion…Thus, in case where there is dispute as regards to the quantum of compensation, the respondent may be within their right to say that the same is “excepted” from being arbitered…it is in this context the decision rendered by Supreme Court in Vishwanath Sood v. Union of India[16], and the Coordinate Bench in Pawan Kumar Jain[17]  is relevant” to hold that,  had the J.G. Engineers and Rice Mills been also discussed by the Supreme Court  in Mitra Guha v. ONGC, it is arguable that findings could have been different.

It is also to be noted that the dispute resolution envisaged through arbitration in Clause 25 in Vishwanath Sood and J.G. Engineers started with the words, “except as otherwise provided in the contract, all questions and disputes…shall be referred to the sole arbitration”. The phrase ‘except as otherwise provided’ was relied upon by the Supreme Court in Vishwanath Sood to hold that Clause 2 is excepted under Clause 25. However, Clause 25 in Mitra Guha v. ONGC does not contain such an exception and the exception provided in Clause 25 is to the decision of SE for “quantum” of reduction as well as his justification for reduced rates “for sub-standard work” and not for delay in completion of work.

Conclusion

The Supreme Court in Mitra Guha v. ONGC while holding that Clause 2 is a complete mechanism to decide on whether there was a delay in completion of work and on levy of liquidated damages by SE, did not have occasion to consider the principles enunciated in Rice Mills and J.G. Engineers as such the judgment does not seem to have been relied upon by the parties. Thus, it expands the scope of ‘excepted matter’ by a broad reading of Clause 2 to include even the determination of party responsible for delay as ‘excepted matter’ and hence not arbitrable. It is to be noted that the arbitrator in this case had attributed delay to both parties but had sought to deny the levy of liquidated damages on other grounds and not because the arbitrator held that the contractor was not responsible for any delay. ONGC had pleaded that out of delay of 640 days, a delay of 273 days was attributable to the  contractor, which was also taken into consideration by the Single Bench of the Delhi High Court in upholding the findings of the arbitrator. Thus, the expansion of the scope of the finality attached to the decision of SE in levy of liquidated damage, to include decision on the party responsible for delay in completion of work was not warranted as the same was not the primary issue before the Supreme Court in Mitra Guha v. ONGC. Thus, as a precedent Mitra Guha v. ONGC, may still be distinguishable and it can be argued that finality attached to SE’s decision is restricted to quantification of damages. However, this right to levy liquidated damages by SE is a secondary power, which is consequential to the primary issue of whether the contractor had caused any delay to invite levy of liquidated damages. The latter primary issue ought to be arbitrable in light of the principles discussed in Rice Mills, J.G. Engineers and BSNL v. Motorola, which the Supreme Court has not considered in Mitra Guha v. ONGC.


 *Partner at L&L Partners, Litigation, Delhi

**Associate at L&L Partners, Litigation, Delhi

[Authors’ Note: The views expressed are personal and do not represent views of the firm.  The views expressed do not constitute legal advice.]

[1] (2020) 3 SCC 222

[2] Ibid.

[3] Ibid

[4](1989) 1 SCC 657

[5] (2009) 2 SCC 337

[6](1987) 2 SCC 160

[7] (2009) 2 SCC 37, para 24.

[8](2011) 5 SCC 758, paras 19-21

[9] 2019 SCC OnLine SC 1158

[10]J.G. Engineers Pvt. Ltd. v. Union of India, (2011) 5 SCC 758, para 17.

[11]Ibid, para 17.

[12] (2020) 3 SCC 222

[13] 2016 SCC OnLine Del 2494

[14]Ibid, para  20.

[15] 2016 SCC OnLine MP 8013

[16] (1989) 1 SCC 657

[17] Pawan Kumar Jain v. Union of India, 2009 SCC OnLine MP 398

Case BriefsForeign Courts

Supreme Court of the Democratic Socialist Republic of Sri Lanka: A Full Bench of Priyantha Jayawardena, PC, Murdu N.B. Fernando, PC, and S. Thurairaja, PC, JJ., allowed an application for special leave to appeal filed aggrieved by the order of the High Court.

The applicant-respondent-petitioner (workman) was employed as the Farm Manager of the respondent-appellant-respondent Company (employer). He had filed an application in the Labour Tribunal claiming compensation for the alleged unlawful termination of services and gratuity from the employer. The employer had stated that the termination was due to ‘frustration’ of the contract of employment as the farm in which the employer worked was closed down as it was not feasible to continue with its operations. After inquiry the Labour Tribunal had ordered compensation to the workman for the wrongful termination of employment. Being aggrieved, the employer had appealed the High Court where the appeal was allowed and order of the Labour Tribunal was set aside. Thus, the current appeal was filed by the workman. The Counsel for the employer, Viran Corea with Sarita de Fonseka had raised a Preliminary Objection stating that the workman had not complied with Rule 2 read with Rule 6 of the Supreme Court Rules of 1990 and moved for a dismissal of the application in limine. They further contended that workman had filed, by way of motion several documents without assigning any reason for the delay and/or inability to have tendered the said documents along with the petition. Per Contra, the counsel for the workman, Ms. Kaushali Rubasinghe with Mr. Kushani Harischandra, submitted that in terms of Rule 2 read with Rule 6 of the Supreme Court Rules, documents have to be annexed where the application contains allegations of fact which cannot be verified by reference to the judgment or Order in respect of which special leave to appeal is sought. It was submitted that no prejudice had been caused to the rights of the employer or the administration of justice due to the non-availability of those documents. Further, they contended that the application was taken up for support for the first time; no objection was raised on the maintainability of the application. However, the objection regarding non-compliance was raised only when the matter was taken up for support for the second time.

The Court while explaining Rule 2 read with Rule 6 specified that documents that are required to be annexed to an application for special leave to appeal, if allegations of facts referred to in such an application cannot be verified by reference to the judgment in respect of which special leave to appeal is sought. The Court further held that there was no provision requiring the filing of objections in an appeal. Hence, the statement of objections and the verifying affidavit filed by the workman before the High Court are not necessary to consider the instant application thus; said documents are not material documents to consider granting of special leave to appeal in the instant application. Preliminary Objection raised by the employer was overruled imposing costs.[Hiranya Surantha Wijesinghe v. Tenderlea Farms (P) Ltd., 2020 SCC OnLine SL SC 7, decided on 17-09-2020]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Telangana High Court: A Division Bench of Raghvendra Singh Chauhan, CJ and T. Vinod Kumar, J., while addressing a writ appeal observed that the High Court cannot decide whether the FIR is a false or frivolous one.

Facts

In the instant appeal, as per the facts of the case, petitioner was appointed as Village Assistant and later in February 2020 was promoted to Senior Assistant. By order dated 31-07-2020, the petitioner was suspended from his service.

On being aggrieved with the above, petitioner filed the petition before the Single Judge and further the same was dismissed and hence the appeal before this Court.

Contentions 

Petitioner’s Counsel, P.V. Ramana submitted that the allegations made against the petitioner relate to the year 2005-2006 and hence suspending the petitioner after a lapse of 14 years will not serve any fruitful purpose.

The alleged complaint made by Guda Rajeswar to the police on the basis of which a criminal case had been registered against the petitioner is also of the period 2005-2006. Also, the case made out on the said allegations was lost by the complainant before the revenue authorities. Hence the FIR is a false and frivolous one.

Decision and Analysis

Rule 8 of the Telangana Civil Services (Classification, Control and Appeal) Rules, 1991 states that an employee can be suspended either if a Criminal Case is pending or a Departmental Enquiry is contemplated.

In the present matter, Article of charges had been furnished on 31-07-2020 to the petitioner, which clearly points that a departmental enquiry has commenced.

It has also been noted that an FIR was registered against the petitioner for offences under Sections 420, 468, 471, 506 read with 34 of Penal Code, 1860.

Hence on referring the stated rule, it is clear that both the conditions prescribed under Rule 8 are fulfilled in the present matter.

High Court also noted that to determine whether FIR is false or frivolous is not to be decided by this Court. The veracity and authenticity of the FIR are to be decided by the Trial Court.

Bench while analysing the matter also stated that “suspension is not a punishment.”

Suspension is merely suspending the relationship between the employer and an employee.

Court stated that since the petitioner is facing both the Criminal Trial and a Departmental Enquiry, the employer cannot be saddled with such an employee.

In view of the above Court dismissed the appeal on finding no merits. [P. Narasimha Chary v. State of Telangana, 2020 SCC OnLine TS 1021, decided on 16-09-2020]

Case BriefsHigh Courts

Calcutta High Court: Ravi Krishan Kapur, J., while addressing an issue pertaining to Employees’ State Insurance Act, 1948, observed that,

The ESI Act provides for certain benefits to employees in case of sickness, maternity and employment injury and makes provisions for certain other matters in relation thereto. A perusal of the various sections of the Act would reveal that the Act is made applicable to all factories.

Present petition was filed challenging an order passed under Section 85B of the Employees’ State Insurance Act, 1948 whereby the Employees’ State Insurance Authorities levied penal damages of nearly Rs 60 lakhs under Section 85B of the Act on the petitioner establishment for the delay in making payment of its contributions for the period from September 2002 to March 2010.

By a conversion agreement between the owner of Jute Mill and petitioner 1, petitioner 1 was allowed to utilize the entire production capacity of the jute mill for the production of jute goods.

Further, the ESI authorities claimed that a sum of Rs 3,73,04,297 was in arrears out of which only a sum of Rs 1,10,97,511 was on account of ESI contributions and the rest represented damages and interest.

Petitioners contended that the above-stated dues said to be payable by the petitioners were primarily for the period prior to the agreement which had been executed between the owners of the jute mill and petitioner 1.

An impugned order came to be passed inter alia holding the petitioner company liable for a sum of Rs 59,61,588 on account of damages for the delayed payment of contributions for the period from September, 2002 to March, 2010.

Petitioner contended that the said order was liable to be set aside and quashed on the ground that the same was an unreasoned order.

Decision

Bench opined that the question as to whether the damages imposed under Section 85B of the Act are justiciable or not or whether the quantum of damages is in accordance with the principles for computing damages is certainly a dispute which would fall within the ambit of clause (g) of Section 75 (1) of the Act.

Court further added that, under Section 75(1)(g) of the Act, the Insurance Court would ordinarily have jurisdiction to decide the question as to whether damages imposed under Section 85B of the ESI Act are justifiable or not.

Bench referred to the Supreme Court decision in B.M. Laxmanamurthy v. Employees’ State Corporation, Bangalore (1974) 4 SCC 365, wherein it was held that

“the Act is a beneficial piece of social security legislation in the interests of labourers in factories at the first instance with the power to extend to other establishments”.

Thus, the Act is a welfare measure meant to provide certain benefits to the employees in certain cases of sickness, maternity and employment injury. It is also a well-settled principle of statutory interpretation that socio-economic legislation should be interpreted liberally with an end to promote the scheme of the Act and avoid the mischief which it seeks to control.

Crux of the dispute in this petition pertains to the applicability and imposition of the damages by the ESI authorities under Section 85B of the Act.

What is the intention behind the insertion of Section 85B of the ESI Act?

To deter the employer who makes any default or delay in depositing the contribution amount.

In the present matter, there was a delay of 8 years on the part of the establishment in making payment of their ESI dues.

Delayed payment, which means untimely payment gives rise to a breach of the obligations under the Act and for such failure and omission (if not explained) the employer exposes itself to recovery of damages.

Hence, the levy of damages as per Section 85B of the Act was fully justified and warranted.

In view of the admitted indisputable and unassailable fact of delay for more than 8 years in making payment of the ESI contributions, no reasonable or prudent person apprised of these facts could take a different view on the question of whether such non-payment on the part of the petitioners was intentional or not.

Petitioner failed to show any mitigating factors or offer any cogent explanation.

Court further added that in the absence of any prescribed special period of limitation for levy of damages under the Act, the levy of damages or penalty for defaults beyond the period of 3 years cannot be rejected as being beyond the jurisdiction of the respondent Corporation.

Section 93A of the Act clearly provides that both the employer and the person to whom the factory or establishment has been transferred remain jointly and severally liable to pay the amounts due in respect of any amount under the Act.

In view of the above-stated Section, Court stated that a transferee cannot claim that he being the transferee of an establishment is not liable to pay the dues accruing before the transfer.

Court found no aspect of limitation insofar as damages were concerned.

Therefore, failure on the part of the establishment to carry out their statutory obligations was in conscious and wilful disregard of their lawful obligations.

“An the absence of any prescribed special period of limitation for levy of damages under the Act, the levy of damages or penalty for defaults beyond the period of three years cannot be rejected as being beyond the jurisdiction of the respondent Corporation.”

Respondent authorities were directed to take all available steps in accordance with law for expeditious recovery of the balance amount payable under the impugned order by the petitioner.[Premchand Jute & Industries (P) Ltd. v. Employees State Insurance Corporation, 2020 SCC OnLine Cal 1574, decided on 18-08-2020]

Case BriefsHigh Courts

Sikkim High Court: Bhaskar Raj Pradhan, J.has framed an eminent question for determination which will have an impact on the dispensation of justice to complainants under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (the “POSH Act”).

The High Court will determine whether the broad interpretation of the “workplace” under Section 2(o)(vi) of the POSH Act would bring within its ambit attending a private marriage function in a private hotel.

The applicant sought direction upon the respondents not to take any step on the basis of the show-cause notice dated 10-06-2019 and the order of termination pursuant to the report of the respondent 4. 

Petitioner sought to allow him to join the post of a professor of the Department of Mass Communication, appoint him as the Head of the Department and pay his regular salary including his arrears.

Kalol Basu, Counsel represented the applicant and Karma Thinlay Namgyal, Senior Advocate assisted by K.T. Gyatso, on behalf of the respondents.

Applicant’s counsel urged that the entire enquiry conducted by respondent 4 was without jurisdiction as the alleged incident of sexual harassment purportedly had taken place at a hotel during a marriage function and the same does not fall within the definition of “workplace” as per the existing law.

Decision

Bench stated that admittedly the alleged incident took place at a marriage function in a private hotel.

Section 2(o) of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 defines the workplace.

In view of the said definition of “workplace”, it seems that the petitioner does have a strong arguable point on the jurisdiction or the lack of it.

Whether the broad interpretation of “workplace” would bring within its ambit attending a private marriage function in a private hotel, is a question which may have to be examined.

In the stated circumstances, High Court is of the considered view that during the pendency of the writ petition before this court, the respondents 1 to 3 should not give any further effect to the termination order dated 28-06-2019.

The application was disposed of in the above view. [Silajit Guha v. Sikkim University, 2020 SCC OnLine Sikk 99, decided on 20-08-2020]

Hot Off The PressNews

UGC issues notice that no employing Higher Educational Institutions shall keep in their possession any teacher’s original academic certificates/documents which is akin to depriving them of their rights.
The public notice stated,
It has come to the notice of UGC that many of the universities/colleges/institutes collect the original academic certificates, mark-sheets etc. at the time of issuing employment contracts to the teachers and the continue to retain those documents with them.
Due to the above-stated, teachers face a tough time recovering their certificates from their employer educational institutions when they leave their job. Many even have to forego their better prospects as they are not able to recover their documents in time.
Read the notice here: NOTICE

University Grants Commission
[Public Notice dt. 11-08-2020]
Hot Off The PressNews

Clarification regarding checking of records beyond 5 year period for conducting test inspections

The present clarification has been issued in view of the representations of employers regarding the demand for records for test inspection beyond 5 years by the Employees State Insurance Corporation officials.

As per the second proviso to Section 45-A(1) the time limit of 5 years is strictly to be adhered to in determining the contributions and issue of speaking orders of the authorized officer. The said officer shall not ask for any records beyond the period of 5 years from the employer. As the contribution cannot be determined for the period beyond 5 years the SSO shall not ask for any records beyond 5 years from the employer.


Employees State Insurance Corporation

[Circular dt. 28-01-2020]

Case BriefsForeign Courts

Supreme Court of Canada: A Full Bench of Wagner, CJ. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin, JJ. allowed the present appeal of Canada Post Corporation, superseding the rulings of Occupational Health and Safety Tribunal and Federal Court of Appeals.

In the present case, the appellant was Canada Post Corporation, a federally regulated corporation, which provides mail services throughout Canada and the respondent was the Canadian Union of Postal Workers that represents employees of the appellant, including letter carriers. Since the federal government is responsible for the mail services in the country, Canada Post is expected to follow Canada Labour Code. A part of this code deals with workplace health and safety of the employees during the course of their employment. Section 125(1) (z.12) of the Labour Code mandates every employer to ensure that every part of the workplace is inspected once every year for the health and safety of the employees.

The issue in the present case was whether Canada Post Corporation is obligated to inspect every letter carrier routes and points of call as a part of the workplace, according to the code.

While the Health and Safety Officer agreed with the union’s claim, the Appeals Officer at the Occupational Health and Safety Tribunal agreed with the Post. The matter went to the Federal Court of Appeal which let the Appeals Officer’s decision stand and dismissed union’s request for Judicial review (Judicial review is where a court looks at a decision by someone acting on behalf of the government.) But the Federal Court of Appeal said the Appeals Officer made mistakes and decided that the Health and Safety Officer’s decision should stand. This meant Canada Post had to inspect all the routes and places mail was delivered.

The matter finally went to the Supreme Court of Canada for reviewing the decision of the Appeals Officer on the grounds of reasonableness according to the Vavilov framework, which lays down the applicable standard of review. Justice Rowe used the brand new Vavilov framework as laid down in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, to analyze the officer’s decision, finding that the Officer’s decision was reasonable  As provided for in Vavilov, when conducting reasonableness review, a reviewing court must begin its inquiry into the reasonableness of a decision by examining the reasons provided with respectful attention, seeking to understand the reasoning process followed by the decision-maker to arrive at a conclusion. What is required of statutory delegates to justify their decision will depend on the context in which the decision is made. A reasonable decision is one that is based on an internally coherent and rational chain of analysis and that is justified in relation to the facts and law that constrain the decision-maker.

The majority held that it was open to the Appeals Officer to make the decision, and concluded that his decision was based on an internally coherent and rational line of reasoning.

It was held that some parts of the Code are applied in general, to all places where workers had to be during their course of employment but some parts are applied only to places that the employer controlled. The section about inspections was one of these. The purpose of the inspections is to ensure the safety of the workers. Canada Post didn’t control the mail routes or most of the places where the mail was delivered as many of them were on private property. If there were a danger, Canada Post did not have the power to fix it.

Hence, the Supreme Court after exercising its power of judicial review, allowed the decision of the Appeals Officer to stand. [Canada Post Corpn. v. Canadian Union of Postal Workers, 2019 SCC OnLine Can SC 60, decided on 20-12-2019]

Case BriefsHigh Courts

Rajasthan High Court: Mohammad Rafiq, J. disposed of an application seeking a grant of last wages drawn by the employee under the Industrial Disputes Act, 1947.

In the present case, the respondent-employee had moved an application under Section 17-B of the Industrial Disputes Act, 1947 for receiving the amount of wages last drawn by him from the date of filing the application.

The counsel representing the petitioner-employer, Neeraj Jain submitted that the labour court erred in passing the award since there was no master-servant relationship subsisting between the parties.

The Court upon hearing both the parties stated, that once the labour court has declared in its award that the retrenchment of respondent-employee as illegal, even if the execution of the award has been stayed, according to mandate of Section 17-B of the Industrial Disputes Act, 1947 the respondent-employee is having statutory right to receive amount of wages last drawn by him from the date of filing of the application. However, the petitioner-employer will have an option to re-engage the respondent-employee as per the payable wages. The Court directed the petitioner-employer to pay the amount due to the petitioner within a period of six weeks.[Manager Employer v. Judge Industrial Dispute, 2019 SCC OnLine Raj 3027decided on 19-09-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Armed Forces Tribunal (AFT): Justice S.V.S. Rathore and Air Marshal BBP Sinha (Member) partly allowed an application to consider applicant’s disability as aggravated by military service. The applicant filed a petition for grant of disability pension with a delay of 09 years, 09 months and 09 days. He was commissioned fully fit as an officer in the Indian Army in 1972 and was discharged from service in low medical category in 1997. The Release Medical Board (RMB) assessed his disabilities (i) I.H.D. ICDN 411 (CAD) at 11-14% for two years and (ii) Ankylosing Spondylitis at 11-14% for two years, composite assessment at 20% for two years as neither attributable to nor aggravated (NANA) by military service. Therefore, his disability pension claim was rejected. The respondents contended that the applicant approached the Tribunal after a gap of 20 years and such inordinate delay cannot be condoned. The Tribunal rejected this contention of the respondents primarily because the pension is a recurring cause of action. They further contended that disabilities of the applicant have been regarded as NANA by the RMB, hence the applicant is not entitled to disability pension. They further submitted that an incumbent is granted disability pension when invalidated out of service on account of a disability which is attributable to or aggravated by military service and is assessed at 20% or over. On the other hand, the applicant argued that he had picked up these diseases due to stress and strain of service. 

The Tribunal went on answering as to whether the disabilities of the applicant are attributable to or aggravated by military service? The Tribunal relied on Dharamvir Singh v. Union of India, (2013) 7 SCC 316 to address the law on attributability/aggravation of a disability where the Supreme Court took note of the provisions of the Pensions Regulations, Entitlement Rules and the General Rules of Guidance to Medical Officers to sum up the current legal position. ‘Ankylosing Spondylitis’ is an inflammatory disease which, over time, can cause some of the vertebrae in the spine to fuse resulting in a hunched-forward posture. This disease has no known specific cause, though genetic factors seem to be involved. Since the cause of the disease is not clearly known and there is no mention of genetic loading in RMB, therefore, the Tribunal gave the benefit of doubt in favour of the applicant.

The Tribunal held that the RMB had denied attributability/aggravation to the applicant only by endorsing a cryptic sentence that his disability is not connected with military service and that the disabilities of the applicant should be considered as aggravated by military service. The applicant was held entitled to 20% disability element (composite) for both the disabilities for two years after discharge which would round off to 50%. However, the Supreme Court in the case of Shiv Dass v. Union of India, (2007) 9 SCC 274 held that arrears of disability pension are to be restricted to three years prior to the filing of the application if the same has been filed belatedly and the delay is condoned. Since the applicant approached the Tribunal after a gap of more than 09 years, he was not entitled to any arrears due to the law of limitations.[DS Jasrotia v. Union of India, 2019 SCC OnLine AFT 3883, decided on 15-07-2019]

Case BriefsHigh Courts

Jharkhand High Court: Ananda Sen, J. set aside the order of termination and the decision of the Screening Committee CISF, with a direction to reconsider the case of the petitioner.

The petitioner was appointed as constable in CISF. Later Assistant Commandant to CISF informed that the petitioner was involved in a criminal case earlier and this information was sought for by the screening committee. The petitioner submitted the relevant document stating that he had been involved in a land dispute between his family and others and a case had been instituted against him. He also submitted that he was never taken into custody and was finally acquitted. The services of the petitioner were terminated without any hearing. As the letter of termination did not follow the principle of natural justice, the termination order was set aside. Later the petitioner got a show cause notice as to why his services should not be terminated as in the attestation form it was asked that whether the petitioner was involved in any prosecution and he mentioned “no”. Thus on the ground of suppression of factual information and on the ground of furnishing false information, the petitioner was dismissed from service. This order was under challenge before Court.

The respondents filed a counter affidavit stating the petitioner had suppressed the fact that he was prosecuted. They brought on record the guidelines and submitted that a candidate was required to declare as to whether he had been arrested, prosecuted or convicted. If the candidate did not disclose the correct facts, his candidature and appointment could be cancelled.

Reliance was placed on judgment Avtar Singh v. Union of India, (2016) 8 SCC 471 where it was directed that if incumbent was of young age and had done some petty offence, which if disclosed, would not have rendered an incumbent unfit for the post in question, the employer may, in his discretion, ignore such suppression of fact or false information by condoning the lapses. Thus, discretion had been granted to the employer to decide whether in a case of suppression, the offence is trivial in nature or not.

The Court set aside the order of termination and the matter was sent before the screening committee again to decide whether suppression of the fact is fatal on the facts of the criminal case, which was instituted against the petitioner.[Sandeep Kumar v. Union of India, 2019 SCC OnLine Jhar 498, decided on 14-05-2019]