Foreign LegislationLegislation Updates

The California’s Governor has signed Assembly Bill 1003, concerning wage theft by employer, into law on September 28, 2021. The highlights of the new legislation are:

 

  • The legislation creates a new offence for the intentional theft of wages by an employer, punishable as either a felony or a misdemeanor.
  • The legislation creates a new type of grand theft for the intentional theft of wages in an amount greater than $950 from any one employee, or $2,350 in the aggregate from two or more employees by an employer in any consecutive 12-month period.
  • The new legislation allows wages, tips, or other compensation that are the subject of a prosecution to be recovered as restitution.
  • The grand theft is punishable either as a misdemeanor by imprisonment in a county jail for up to 1 year or as a felony by imprisonment in county jail for 16 months or 2 or 3 years, by a specified fine, or by a fine and that imprisonment.

*Tanvi Singh, Editorial Assistant has reported this brief.

Legislation UpdatesRules & Regulations

The Delhi Labour Department has notified the Delhi Shops and Establishments (Amendment) Rules, 2021 on September 24, 2021 to further amend the Delhi Shops and Establishments Rules, 1954.

The Rules make the following amendment under the Act:

 

  • Rule 3, substituted, deals with form for submitting statement and other particulars relating to name of the employer, the category of the establishment etc. The Rule provides that the occupier of the establishment, within 90 days of the commencement of work of his establishment shall apply for the registration under the Act, online on the Shop and Establishment Portal of Labour Department.
  • Rule 4, substituted, states that on submission of application online on the Shop & Establishment portal of Labour Department, Government of NCT of Delhi, the registration certificate shall be generated online in Form C.
  • Rule 6, substituted, the occupier shall notify any change in respect of any information under section 5(1) of the Act within 30 days after such change has taken place, online, on the Shop & Establishment Portal of Labour Department, Government of National Capital Territory of Delhi.

 


*Tanvi Singh, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: In a landmark case, the Division Bench of M.R. Shah and Aniruddha Bose, JJ., held that an employee has no right to insist/deny his transfer at a particular place.

The Bench was addressing the case of a Lecturer (Psychology) at Rajkiya Mahavidyalaya, Gajraula, District Amroha; who had made representation for her transfer to Rajkiya Post Graduate College, Noida, Gautam Buddha Nagar. The said representation had been rejected by the Additional Chief Secretary Higher Education, Uttar Pradesh. The petitioner contended before the Court that she had been working at Amroha for the last 4 years and therefore, under the Government policy she was entitled to a transfer.

However, the impugned rejection order reflected that the petitioner had remained posted at Rajkiya Post Graduate College, Noida, Gautam Buddha Nagar from the date of her initial appointment 18-12-2000 to 11-08-2013 i.e. for about 13 years and therefore, her request for posting her again at the same institution was not justified.

Noticeably, the case of the petitioner was dismissed by the High Court of Judicature at Allahabad on the ground that she was not entitled to be posted at the place where she had already worked at a stretch for about 13 years. The High Court had held that in case the petitioner had completed requisite number of years at the place of her present posting, she may request for her transfer to some other place but not to the place where she had already worked for 13 years.

Upholding the decision of the High Court, the Bench held that it is not for the employee to insist to transfer him/her and/or not to transfer him/her at a particular place. It is for the employer to transfer an employee considering the requirement. Accordingly, the Special Leave Petition was dismissed. [Namrata Verma v. State of U.P., Special Leave to Appeal (C) No(s). 36717 of 2017, decided on 06-09-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For Petitioner(s): Mr Parvez Bashista, Adv. Dr Nirmal Chopra, AOR

For Respondent(s): Mr Sanjay Kumar Tyagi, AOR

Case BriefsSupreme Court

Supreme Court: The Bench of K.M. Joseph and S. Ravindra Bhat, JJ. while addressing the matter, observed that,

Public service – like any other, pre-supposes that the state employer has an element of latitude or choice on who should enter its service. Norms, based on principles, govern essential aspects such as qualification, experience, age, number of attempts permitted to a candidate, etc. These, broadly constitute eligibility conditions required of each candidate or applicant aspiring to enter public service.

Appellant (Commissioner of Police, Delhi) on being aggrieved by the Delhi High Court decision by which the respondents were directed to be considered for appointed to the post of Constable of Delhi Police, filed the present appeal.

Factual Background

In the year 2009, an advertisement was issued wherein applications were invited for the cadre of constable in the Delhi Police.

Applicant Deepa Tomar in her application did not disclose the fact that she was facing criminal trial and the criminal cases were ended in compromise. Standing Committee while assessing the suitability of the candidates deferred Deepa Tomar’s consideration as she was facing trial in criminal proceedings and was charged with committing the offence of kidnapping under Section 364 of Penal Code, 1860.

Division Bench of High Court allowed the petitions of the candidate and quashed their rejection.

Analysis, Law and Decision

Bench noted on perusal of the Standing Order along with Annexure-A that in relation to certain offences, acquittal or exoneration of an accused candidate, per se would not entitle her or him to consideration.

Upon an overall analysis of the Standing Order, this Court is of the opinion that an acquittal or discharge in a criminal proceeding would not per se enable the candidate to argue that the authorities can be compelled to select and appoint her or him.

Decisions for Individual case:

Civil Appeal arising from SLP(C) 13285/2014 (Raj Kumar)

The Screening Committee went through the case records and noted that a compromise was recorded with the approval of the Court with respect to two offences whereas, in the graver offences, the candidate stood trial but was acquitted on account as there was not sufficient evidence and that “material witnesses” did not support the prosecution story.

In Court’s opinion, the compromise recorded in respect of the offences, that were compounded (and the acquittal for lack of evidence) is apparently so on account of material witnesses not appearing or turning hostile, was a relevant factor that the Screening Committee could and did consider.

Shiv Singh

Shiv Singh, respondent, in another case was accused of committing offences punishable under Sections 323, 341, 325, 34 IPC.

The Screening committee considered the charge sheet and the order of the trial court, and having regard to the nature of offences involved, was of the view that the candidate was not suitable, because of his propensity to indulge in such behavior without fear of law. The High Court faulted the Screening Committee’s order, as a mechanical exercise of power, and reasoned that no charge of assaulting the modesty of a woman was made against the candidate and that the charge of theft was unsubstantiated.

Prem Singh Choudhary, SLP (C) No. 4304 of 2013

It was alleged that, he committed offences punishable under Sections 143/323/341 IPC.

It was held that in the light of the materials before the police, the informant had given an exaggerated account, of the incident, which the Screening Committee rejected, mechanically.

In Court’s opinion, scrutiny of the materials, by the High Court, was as if it was sitting in appeal over the decision of the Screening Committee. That body had the benefit of the overall record of the candidate, in the context of considering his or her suitability. Its conclusions should not have been brushed aside, on the ground that it showed the mechanical application of mind, or that the materials did not show involvement in a grave or serious offence.

Deepa Tomar

Screening committee was of the view that the acquittal was by granting benefit of doubt, and that the candidate was unfit for appointment as a Constable (Female) in the Delhi Police because she was accused of having committed a heinous crime i.e. of abduction and that the victim, her husband (Jitender) was still untraceable.

Court expressed its view that,

Courts exercising judicial review cannot second guess the suitability of a candidate for any public office or post. Absent evidence of malice or mindlessness (to the materials), or illegality by the public employer, an intense scrutiny on why a candidate is excluded as unsuitable renders the courts’ decision suspect to the charge of trespass into executive power of determining suitability of an individual for appointment.

 Lastly, expressing its view with norms and its interrelation with judicial review, Bench held that,

Judicial review, under the Constitution, is permissible to ensure that those norms are fair and reasonable, and applied fairly, in a non-discriminatory manner. However, suitability is entirely different; the autonomy or choice of the public employer, is greatest, as long as the process of decision making is neither illegal, unfair, or lacking in bona fides.

Holding that, certain types of offences, like molestation of women, or trespass and beating up, assault, causing hurt or grievous hurt, (with or without use of weapons), of victims, in rural settings, can also be indicative of caste or hierarchy-based behaviour. Each case is to be scrutinized by the concerned public employer, through its designated officials- more so, in the case of recruitment for the police force, who are under a duty to maintain order, and tackle lawlessness, since their ability to inspire public confidence is a bulwark to society’s security, appeals were allowed. [Commissioner of Police v. Raj Kumar, 2021 SCC OnLine SC 637, decided on 25-8-021] 

Case BriefsHigh Courts

Delhi High Court: Anup Jairam Bhambhani, J., emphasizing the principle of res ipsa loquitur and placing a detailed explanation on the same granted just and fair compensation to a person who was 100% disabled due to an accident at his place of work.

Factual Backdrop

Petitioner’s son (Bharat) who was 28 years of age was the victim of an accident at the age of about 21 years which had left him 100% disabled. Instant petition was filed by petitioner’s father since petitioner was stated to be virtually bed ridden and not in a position to file to pursue his claim against the respondents.

Petitioner had made claims against the respondents BSES Rajdhani Power Limited and Bryn Construction Company.

Further, it was submitted that petitioner had suffered an accident due to certain work performed by Bryn for BRPL, which led to the filing of the present petition.

Cause of Permanent Disability

 Bharat, who was then about 21 years of age, while working as an electrician with Bryn, was tasked with rectifying a fault in an electricity pole that was causing fluctuation in the electricity supply at a farmhouse and suffered a fall while performing the task since the electricity pole that he had climbed on, snapped and fell.

Bharat’s dismal physical state apart, it was also evident to this court that Bharat was a psychological wreck, not least because in the course of interaction with this court, he broke- down on several occasions.

Depression and Anxiety

 As per medical opinion in regard to Bharat’s psychological state, his level of mental depression and anxiety fall in the “abnormal range”.

Questions for Consideration

  • Given his medical condition, what course of action should be adopted for Bharat’s further rehabilitation, continuing care and welfare?
  • Is Bharat entitled to receive any monetary compensation for the injury suffered by him as a result of the accident; if so, from which of the respondent or respondents?
  • If the answer to (ii) above is in the affirmative, in what manner should the compensation be calculated?

Analysis, Law and Decision

While analyzing and penning down this interesting decision, Court addressed a very fundamental issue, whether Bharat was an ‘employee’ of Bryn or was engaged by Bryn to perform the task that led to the accident.

It was noted that Bryn did not expressly admit that Bharat was their employee; nor that he had been engaged by them to perform the task in question.

However, there was also no denial of any kind, whether express or implied, that Bharat was working for Bryn. The thrust of Bryn’s counter-affidavit is that BRPL is responsible to compensate Bharat for the injury, since at the relevant time Bharat was working under BRPL’s supervision and performing BRPL’s tasks.

Court took note of the fact that while BRPL and Bryn both contended that all requisite safety equipment and precaution were made available by them, neither BRPL nor Bryn explained why such equipment, if available, failed to protect Bharat from the serious injury he suffered. 

Opinion of the Court

Bench opined that Bharat was working for Bryn and was tasked with certain maintenance work to be performed on an electricity pole owned by BRPL; which pole, it turned-out, was not strong enough to take Bharat’s weight or was not rooted securely in the ground, and thereby fell, as a result of which Bharat sustained serious injuries. It is also evident that Bharat was not provided any safety gear before he was directed to climb the pole to undertake the task.

 Principle of res ipsa loquitur

High Court added to its analysis that the instant matter would be squarely covered by the principle of res ipsa loquitur, whereby no detailed evidence, much less a trial, is required to establish ex-facie negligence on the part of BRPL and Bryn.

The said maxim was lucidly explained in the leading Supreme Court decision of Shyam Sundar v. State of Rajasthan, (1974) 1 SCC 690,

 The maxim res ipsa loquitur is resorted to when an accident is shown to have occurred and the cause of the accident is primarily within the knowledge of the defendant. The mere fact that the cause of the accident is unknown does not prevent the plaintiff from recovering the damages, if the proper inference to be drawn from the circumstances which are known is that it was caused by the negligence of the defendant. 

Elaborating further, the Court stated that the accident could not have occurred had Bryn and/or BRPL not been negligent in taking reasonable precautions to avoid it; which gave rise to their strict liability for the injuries sustained by Bharat.

The undated declaration with no proof of payment made to Bharat, though the declaration signed by Bryn accepting payment of a small sum of compensation in full and final settlement from Bryn and absolving them of any further liability.

In Court’s view, the above-mentioned declaration, deserved no credence or value since it smacked of being a document procured by Bryn precisely for the purpose of absolving itself of any further claim or liability vis-à-vis Bharat, by suborning a hapless and resourceless victim with a small amount of monetary bait, knowing full well that their actual liability would be much more.

Bench further expressed that merely because there were more than one respondent attempting to foist blame or liability on each other, that would not defeat the just claim of the petitioner’s son.

Hence, both respondents would be held jointly and severally liable, giving them liberty to recover the whole or any part of compensation paid, from one another.

High Court’s Inference

  • Without delving into the technical semantics of whether Bharat was an ‘employee’ of Bryn within the meaning of the Employee’s Compensation Act, suffice it to say that Bharat was performing the task in question for Bryn and at their instance
  • Bharat is unable to perform even the most basic, personal, daily chores himself and is all but 100% dependent on others; and as a result, though Bharat is living, he is barely alive;
  • On the principle of ‘strict liability’, both Bryn and BRPL are, jointly and severally, liable to compensate Bharat for putting him in his current state;
  • Section 4(2)(a) of the Employee’s Compensation Act mandates that apart from the liability to pay compensation, the employer is also under obligation to reimburse all actual medical expenses incurred by an employee for treatment of injuries. Furthermore, section 4-A provides that failure of an employer to pay compensation in a timely manner would attract payment of both interest and penalty for the delayed payment of compensation;
  • Reading the Bryn-BRPL Agreement and section 12 of the Employee’s Compensation Act together, it is seen that section 12 also fixes liability upon the “principal” for payment of compensation to an injured employee, with a right in the principal to recover the same from the contractor, if work was being carried-out by a contractor. In the present case the principal would therefore be BRPL and the contractor would be Bryn
  • Allowing the petition, Court awarded Bharat relief in two broad categories:
  1. Monetary Relief
  2. Non-Monetary Relief by way of directions.

Details of the relief can be referred to in the Judgment.

In view of the above discussion, petition was disposed of. [Kehar Sigh v. GNCTD, 2021 SCC OnLine Del 4198, decided on 25-08-2021]


Advocates before the Court:

For the Petitioner: Prabhsahay Kaur, Amicus Curiae.

Saraswati Thakur, Advocate.

For the Respondents: Satyakam, Additional Standing Counsel for GNCTD/R1

Ravi Gupta, Senior Counsel with Sunil Fernandes, Standing Counsel for BRPL-RPL with Anju Thomas, Shubham Sharma and Sachin Jain, Advocates for R2.

A.K. Sharma, Advocate for R3. Saurabh Sharma, Advocate for Indian Spinal Injuries Centre.

Sayli Petiwale, Advocate for Anil Mittal, Advocate for State of U.P.

Case BriefsHigh Courts

Punjab and Haryana High Court: Girish Agnihotri, J., held that the decision of the employer to fill up the vacancies at any particular time depends upon the public need, administrative exigencies and availability of infrastructure or budgetary provision. There was no legal obligation on the part of the State that if the vacancies had fallen vacant, the State must fill up the said vacancies immediately.

The petitioner Navdeep Singh Brar and 55 others had filed the instant writ petition with a prayer to direct the State of Punjab to give age relaxation to them for applying against the posts of Police Sub Inspectors, in the cadre of District Police, Armed Police Intelligence and Investigation advertised on 06-07-2021. A further prayer was made to count their age in lines with the judgment of the Supreme Court in Cognizance for Extension of Limitation whereby the period starting from 15-03-2020 till further orders was directed to be considered as Zero Period in view of COVID-19 pandemic: In Re. The prayer was also made to allow the petitioners to provisionally appear in the examination scheduled for the above-said posts.

Although, the petitioners had conceded that they do not fulfill the age criteria prescribed in the advertisement and that their age was beyond the age of 28 years which was required for the said post. The petitioners had based their case on the official tweet of the Chief Minister of Punjab made on 12-07-2020, wherein the CM had responded to the query of one Mr Amarpal Singh from Ludhiana and had said that, “the official announcement of the increase in recruitment age from 28 years to 32 for DSPs and Sub Inspectors will be made in the coming days…”

The petitioners pleaded that since 2016 to till date, no recruitment process had been initiated by the Government and that the inaction on the part of the respondents had adversely affected their chances to appear and compete for the said posts of Sub Inspector as they had lost their chance to face the recruitment due to non-conducting of the exams by the respondents.

Reliance was placed by the petitioners on the recent decision of the Delhi High Court in Najma v. Govt. of NCT of Delhi, WP(C) No. 8956 of 2020, wherein the High Court had held that the promise of CM is of binding nature.

Differentiating with the said judgment of the Delhi High Court, the Bench clarified that the decision of the Delhi High Court was with regard to Chief Minister’s statement relating to governmental policy. On the contrary, the case at hand dealt with a prescribed procedure which required to be followed so as to amend the statutory Rules (especially Rule 12.6 of the Rules). Further, observing that after the said tweet, the matter for increase of upper age limit of SI from 28 to 32 years was examined in the office of Director General of Police, Punjab, various field officers were consulted and most of the field officers were not in favour of increase of upper age limit due to the questionable physical fitness at the age of 32 years, particularly physical part of basic training; and also because the same would further increase the upper age limit of reserved categories, the Bench was of the view that the petitioners could not claim to increase the maximum age limit or relaxation merely because the Chief Minister had tweeted in regard thereto.

Cogitating that the Chief Minister along with Council of Ministers had earlier taken a decision as reflected in the memo dated 25-05-2016 (R2) to increase the age limit from 25 to 28 years, the Bench held that the petitioners had no legal right to support the plea that they were entitled to age relaxation/increase in the upper age limit beyond 28 years merely because since 2016, no recruitment process had been initiated by the Government and accordingly their chances of recruitment were affected because the decision of the ‘employer’ whether to fill up the vacancies at any particular time depends upon the public need, administrative exigencies and availability of infrastructure or budgetary provision. There was no legal obligation on the part of the State that if the vacancies had fallen vacant, the State must fill up the said vacancies immediately. The Bench stated,

“There is no legal right with the petitioners to claim that all the vacancies should have been advertised prior to 2021 or even to allege that the inaction of the Department in this regard could be termed as violation of any right.”

In the light of the above, the petition was dismissed and it was held that the petitioners could not claim extension in the upper age limit by taking the plea of COVID situation. More so, because it was not the case of parties that an advertisement in this regard had been initially issued in the year 2019 or 2020 (when the petitioners were allegedly within the maximum age limit) and the selection process had been deferred or delayed because of COVID situation.[Navdeep Sinh Brar v. State of Punjab, CWP-12723 of 2021, decided on 11-08-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For the Petitioners: Mr Pardhuman Garg, Advocate, Mr DK Bhatti, Advocate, Mr BS Dhatt, Advocate and Mr Saurav Bhatia, Advocate

For the State of Punjab: Ms Monica Chhibber Sharma, Sr. DAG, Punjab

Case BriefsHigh Courts

Jharkhand High Court: S.N.Pathak, J., held that the employees of Telco Recreation Club cannot claim parity in pay and other benefits at par with the regular employees of Telco Ltd. The Bench held that,

“When the initial appointment letter of the workmen has not been issued by the petitioner-Management, the question of parity in pay etc. with the employees of the petitioner-Management does not arise.”

Factual Matrix of the Case

The petitioner Company-Telco Ltd., was a leading manufacturer and seller of automobiles in the Country. In 1958, the company had started a separate department under the name and style of “Telco Recreation Club” for carrying activities of welfare and recreation of its employees. The said Telco Recreation Club was a Society registered under Societies Act having a separate legal entity of its own with its own source of income, its own constitution and bye-laws and had no direct connection with the petitioner-company and the petitioner company, under its corporate responsibility, provide financial assistance to several Societies in the area including the said Club.

The case of the petitioner-company was that it had no control over TELCO Recreation Club, which was run and managed by a Managing Committee elected/ selected by its members, yet one Indra Deo Prasad on behalf of 21 persons employed in Telco Recreation Club made a claim of parity in pay and other benefits at par with the regular employees of Telco Ltd. It was also the stand of the company that the government of Bihar had found Telco Recreation Club to be an independent establishment and had made a reference being Ref. Case No. 06 of 1991 to Industrial Tribunal, Ranchi, which was never challenged or objected by the employees of the said Club and therefore, the petitioner-company could not be treated to be the employer of the workmen of Telco Recreation Club.

Decision by the Labour Court

 The Labour Court held that there existed a relationship of employer and employees between the parties, and Telco Recreation Club was a department/wing of the company, and that petitioner-company provided all facilities to said Club and had direct control over the Managing Committee of the said Club as the General Manager of Telco Ltd. was the President of the Club; the reference was maintainable. The Labour Court had further held that the concerned workmen were also permanent employees of  Teclo Ltd., and hence, they were entitled to get pay and other benefits at par with the employees of Telco Ltd. Accordingly, the issue was decided in favour of the workmen.

Findings of the Court

Considering the rival submission of the parties and on perusal of Judgments brought on record, the Bench reached the conclusion that the impugned Award suffered from patent illegalities and was based upon errors of law. Admittedly, there was no relationship of employer-employee between the petitioner-Management and the concerned workman. The Bench clarified,

“Neither in the appointment of workmen nor in the process of their engagement, the petitioner-Management has played any role, therefore, the industrial disputes against the petitioner-Management is wholly illegal and uncalled for.”

The concerned workmen were being governed by the rules, regulations and bye-laws of the Club and not the petitioner-Management. Even the disciplinary control was of the Club and not of the Management. Hence, the findings of the Tribunal were totally perverse and error of law. Finding force in the arguments of the petitioner-company that the Club was incorporated as a separate body and concerned workmen were admittedly appointed by the Club and not by the petitioner-Management, the Bench opined that the claim of the concerned workmen was not sustainable.

Reliance was placed by the Court upon the decision of Supreme Court in Bengal Nagpur Cotton Mills v. Bharat Lal, (2011) 1 SCC 635,  wherein it had held that two of the well-recognized tests to find out whether the contract labourers are the direct employees of the principal employer are-

  • Whether the principal employer pays salary instead of the contractor?
  • Whether the principal employer control and supervises the work of the employees?

Accordingly, the Bench held that in the instant case on both these counts, the workmen had failed to establish their case as they could not establish that they were working directly under control and supervision of the management, hence, the question of the employer-employee relationship did not arise at all.

Placing reliance on Bhuwanesh Kumar Dwivedi v. Hindalco Industries, (2014) 11 SCC 85,wherein, the Supreme Court had held that, “where Labour Court commits patent mistake in law in arriving at a conclusion contrary to law, the same can be corrected by the High Court. In the instant case, the Tribunal has committed a patent error of law to hold that the employer-employee relationship exists between the petitioner-Management and the concerned workman”; the Bench opined that

“In the instant case, the concerned workmen have sought for parity in pay and other benefits at par with the regular employees of TELCO Ltd. whereas the fact is that the petitioner-Management has never issued appointment letters to them rather these workmen were appointed by the Club, which is a separate entity.  When the initial appointment letter of the workmen has not been issued by the petitioner-Management, the question of parity in pay etc. with the employees of the petitioner-Management does not arise and as such the impugned Award suffers from patent illegalities and is fit to be interfered.”

In the backdrop of above, the impugned Award was quashed.  [Management of Motors Ltd. v. State of Jharkhand, 2021 SCC OnLine Jhar 413, decided on 18-06-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance before the Court by:

For the Petitioner: Sr. Adv. Kamal Nayan Choubey, Sr.Adv. V.P. Singh, Adv.  Amit Kumar Das, Adv. Rashmi Kumar and Adv. Arun Kumar Singh

For the Respondents:     Sr. Adv. Ajit Kumar and Adv. Kumari Sugandha

For the State: GP-III O.P. Tiwari

Case BriefsInternational Courts

European Court of Justice (ECJ): The Second Chamber composed of A. Arabadjiev, President of the Chamber, A. Kumin, T. von Danwitz (Rapporteur), P.G. Xuereb and I. Ziemele, JJ., held that Tesco’s work conditions might be gender discriminatory with regards to equal pay for equal work. The Bench clarified,

“The pay conditions of workers of different sex performing equal work or work of equal value can be attributed to a single source comes within the scope of Article 157 TFEU and that the work and the pay of those workers can be compared on the basis of that article, even if they perform their work in different establishments.

The request had been made in proceedings between approximately 6000 workers and Tesco Stores Ltd., which employs or employed those workers in its stores, concerning a claim for equal pay for male and female workers.

Legal context

EU law: Provisions relating to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union The Court of Justice of the European Union shall continue to have jurisdiction to give preliminary rulings on requests from courts and tribunals of the United Kingdom made before the end of the transition period.

Article 119 of the European Economic Community (EEC) Treaty (which became, after amendment, Article 141 EC, now Article 157 of TFEU (Treaty on the Functioning of the European Union) was worded as follows:
Each Member State shall during the first stage ensure and subsequently maintain the application of the principle that men and women should receive equal pay for equal work.

Article 157 TFEU provides:
Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied.

The Dispute in the Main Proceedings and the Questions Referred for a Preliminary Ruling

Tesco Stores is a retailer that sells its products online and in 3 200 stores located in the United Kingdom. The stores, of varying size, have a total of approximately 250 000 workers, who are hourly paid and carry out various types of jobs. The company also has a distribution network of 24 distribution centres with approximately 11 000 employees, who are also hourly paid and carry out various types of jobs.

The claimants in the main proceedings were female employees or former employees of Tesco Stores, who brought proceedings against Tesco Stores before the Watford Employment Tribunal (United Kingdom), from February 2018 onwards, on the ground that they had not received equal pay for equal work, contrary to the Equality Act 2010 and Article 157 TFEU. In support of their equal pay claims, the claimants submitted that their work and that of the male workers employed by the company in distribution centers were of equal value and, that they were entitled to compare their work and that of those workers under both the Equality Act 2010 and Article 157 TFEU, although the work was carried out in different establishments.

The company disputed that the claimants had any right to compare themselves with the male workers at the distribution centers in its network, on the ground that there were not common terms of employment, for the purposes of section 79(4) of the Equality Act 2010. The company further argued that Article 157 TFEU was not directly effective in the context of claims based on work of equal value, and therefore the female claimants could not rely on that provision. Similarly, the Tesco Stores contended that it cannot be classified as a ‘single source’ for the terms and conditions of employment in the stores and the distribution centers in its network.

Findings of the Tribunal

The referring Tribunal stated that the female claimants in the main proceedings and the male workers taken as comparators, although employed in different establishments, had the same employer. In order to determine whether the jobs of the female claimants were of equal value to those of their comparators, the referring Tribunal observed there was uncertainty within UK Courts regarding direct effect of Article 157 TFEU, in particular with the distinction articulated in Defrenne (43/75, EU:C:1976:56), between discrimination which may be identified solely with the aid of the criteria based on equal work and equal pay and discrimination which can only be identified by reference to more explicit implementing provisions of EU or national law.

Question Referred

  1. Is Article 157 [TFEU] directly effective in claims made on the basis that claimants are performing work of equal value to their comparators?
    2. Is the single source test for comparability in [Article] 157 [TFEU] distinct from the question of equal value, and if so, does that test have direct effect?

In other words, whether Article 157 TFEU must be interpreted as having direct effect in proceedings between individuals in which failure to observe the principle of equal pay for male and female workers for ‘work of equal value’ that the criterion of ‘work of equal value’, unlike the criterion of ‘equal work’, requires definition by provisions of national or EU law. Furthermore, whether the findings of the Court Defrenne (43/75, EU:C:1976:56), when work of equal value is being compared, is founded on a claim of discrimination that is identifiable only by reference to provisions more explicit than those of Article 157 TFEU?

Analysis and Findings of the ECJ

According to Article 157 TFEU, each Member State is to ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied. Therefore, it imposes an obligation to achieve a particular result and is mandatory as regards both ‘equal work’ and ‘work of equal value’. Thus, the Court remarked,

“Since Article 157 TFEU is of such a mandatory nature, the prohibition on discrimination between male and female workers applies not only to the action of public authorities but also extends to all agreements which are intended to regulate paid labour collectively, as well as to contracts between individuals.”

In Defrenne (43/75, EU:C:1976:56), the Court had stated that discrimination which has its origin in legislative provisions or collective labour agreements is among the forms of discrimination which may be identified solely by reference to the criteria based on equal work and equal pay laid down by Article 119 of the EEC Treaty (which became, after amendment, Article 141 EC, now Article 157 TFEU) – in contrast to those which can only be identified by reference to more explicit implementing provisions.

Accordingly, the Court held that it was apparent from settled case-law that contrary to Tesco Stores’ submissions, the direct effect of Article 157 TFEU is not limited to situations in which the workers of different sex who are compared perform ‘equal work’, to the exclusion of ‘work of equal value’. In the light of the above factors, the Bench held that

“The interpretation that a distinction should be drawn, as regards the direct effect of Article 157 TFEU, according to whether the principle of equal pay for male and female workers is relied upon in respect of ‘equal work’ or of ‘work of equal value’ is such as to compromise the effectiveness of that article and attainment of the objective that it pursues.”

Hence, the Bench held that a situation in which the pay conditions of workers of different sex performing equal work or work of equal value can be attributed to a single source comes within the scope of Article 157 TFEU and that the work and the pay of those workers can be compared on the basis of that article, even if they perform their work in different establishments. Accordingly, the Bench reached to the conclusion that Tesco Stores constitute in its capacity as employer, a single source to which the pay conditions of the workers performing their work in its stores and distribution centers may be attributed and which could be responsible for any discrimination prohibited pursuant to Article 157 TFEU, which it was for the referring tribunal to determine.[K v. Tesco Stores Ltd., Case C‑624/19, decided on 03-06-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Bombay High Court: The Division Bench of S.C. Gupte and M.S. Karnik, JJ., expressed that for an employer to come to a conclusion of a possible case of cartelization, it is not necessary that the same can happen only after the opening of commercial bids.

Petitioner claimed to be a sole proprietor of a firm carrying on the business of fresh water supply through barges. Petitioner had been one of the contractors supplying water to respondent 1 ONGC.

Respondent 1 invited Indigenous Open Tender for e-procurement for supply of water to its offshore facilities, including the Nhava Supply Base. The said tender was a two bid system – a technical bid followed by a commercial bid.

Along with the petitioner, there were three others who had submitted the bids.

Respondent ONGC had cleared the technical bids of all 4 bidders, including the petitioner and his father at the stage of consideration of commercial bids, the bids of both petitioner and his father were not opened.

Upon evaluation of offers submitted by petitioner and Royal Traders, it came to the notice of Respondent ONGC that the proprietors of two firms were respectively the son and father. Hence considering that the two would have access to vital information pertaining to the bid submitted by the other, the employer concluded that both the bidders have an undisclosed understanding with each other, which would restrict competitiveness thereby offending Section 2 of the Integrity Pact.

Section 2 of the Integrity Pact is as follows:

Commitments of the Bidder/contractor

  1. The Bidder/Contractor will not enter with other Bidders into any undisclosed agreement or understanding, whether formal or informal. This applies in particular to prices, specifications, certifications, subsidiary contracts, submission or non – submission of bids or any other actions to restrict competitiveness or to introduce cartelisation in the bidding process.

Analysis and Decision

High Court stated that the grounds urged by petitioner in support of their challenge to acceptance of bids did not commend the Court.

Though the petitioner and his father had shown as proprietors of different concerns, but they operate from the same premises.

Further, in an earlier contract involving another employer, the petitioner had not only acted both for himself and his father, but had also issued cheques from the same account towards the contracts of himself and his father.

Above being a purely administrative matter, to fault the respondent employer’s decision there must be a case of either perversity in the decision or a colourable exercise on the part of the employer.

Bench expressed that even if the State cannot act in a matter of commercial contract in wholly unreasonable or arbitrary or capricious manner, its administrative decision cannot be put on the pedestal of a quasi-judicial decision.

Court added that as long as the respondent’s decision was reasonably supported by material on record and there was no case of victimization or colourable exercise, the decision could not be faulted.

There is nothing sacrosanct about finding the technical bid of a bidder responsive in a two bid system so as to make it obligatory on the employer to open the commercial bid. The employer may well come upon knowledge of some relevant information, which disqualifies the particular bidder, and in that case may choose not to open his commercial bid. If his disqualification is supported by some material on record, there is nothing further for this Court to inquire.

High Court found no merit in the grounds of challenge urged by the petitioner. [O.K. Marine v. ONGC, 2021 SCC OnLine Bom 799, decided on 8-06-2021]


Advocates before the Court:

Mr. R.D. Soni, i/b. Irvin D’souza, for the Petitioner

Dr. Abhinav Chandrachud, a/w. Mr. Nishit Dhruva, Mr. Prakash Shinde, Ms. Khushbu Chhajed, Mr. Abhishek Bhavsar and Ms. Alisha Shah, i/b. MDP & Partners, for Respondent Nos. 1 and 3.

Mr. Kunal Gaikwad, for Respondent No.4.

Mr. Karl Tamboly, a/w. Mr. Ramiz Shaikh and Mr. Akshay Bafna, i/b. Bafna Law Associates, for Respondent No.5.

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 to 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 CESTAT judgments of Nissin Brake India Pvt. Ltd. v. CCE, 2018 SCC OnLine CESTAT 1690, reiterated in Komatsu (India) (P) Ltd. v. CST, and in Goldman Sachs Services (P) Ltd. v. CST.

The Tribunal while reproducing the relevant portion of Komatsu India (P) Ltd. v. CST 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