India: Repercussions Of Non-Constitution Of Internal Complaints Committee For Dealing With Instances Of Sexual Harassment Of Women At Workplace

Authored by –

Mr. Hitender Mehta, Partner, Vaish Associates Advocates (hitender@vaishlaw.com) &

Ms. Rakshanda Niyazi, Senior Associate, Vaish Associates Advocates (rakshanda@vaishlaw.com)

Introduction

In India, prior to 1997, no codified guidelines or definitions of the term 'sexual harassment' was available. In a landmark judgment, Vishaka vs. State of Rajasthan, AIR 1997 SC 3011, the Supreme Court framed guidelines basing it on the right to equality and dignity accorded under the Constitution of India (popularly known as "Vishaka Guidelines"). Following the Vishaka Guidelines, the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (the "Act") was enacted and published in the Gazette of India vide S.O. 360 (E), dated December 9, 2013. The Act came into force on December 9, 2013.

Having said that, law declared by Supreme Court is binding on all courts within the territory of India in terms of Article 141 of the Constitution of India. In simple words, the judgment of Supreme Court has the force of law.

Applicability and Scope of the Act

The Act extends to 'whole of India' and stipulates that a woman shall not be subjected to sexual harassment at her workplace.1 It is pertinent to note that the Act seeks to protect only women and is not intended to be a gender neutral legislation. The Act provides that an 'aggrieved woman' in relation to a workplace, is a woman of any age, whether employed or not, who alleges to have been subjected to any act of sexual harassment2. Further, the Act applies to both the organized and unorganized sectors in India. The statute, inter alia, applies to government bodies, private and public sector organisations, non-governmental organisations, organisations carrying out commercial, vocational, educational, entertainment, industrial, financial activities, hospitals and nursing homes, educational institutes, sports institutions and stadiums used for training individuals and a dwelling place or a house3 and to unorganized sector also.

Constitution of Internal Complaints Committee (ICC)

The Act inter alia mandates an employer to set-up ICC by an order in writing at each office or branch of an organization employing at least 10 (ten) employees. It further provides that where the offices or administrative units of the workplace are located at different places or divisional or sub-divisional level, the ICC shall be constituted at all administrative units or offices.

Composition and tenure of ICC

The employer shall nominate members of ICC which shall consists of:

  1. A Presiding officer who shall be a woman employed at a senior level from amongst the employees;
  2. Not less than two members from amongst the employees preferably committed to the cause of women or who have had experience in social work or have legal knowledge; and
  3. One member from amongst non-governmental organizations or associations committed to the cause of women or a person familiar with the issues relating to Sexual Harassment.

The Act provides that the term of the Presiding officer or any member of the ICC shall be specified by the employer which shall not exceed three years from the date of their nomination.

Consequences of non-constitution of ICC

Section 26 of the Act stipulates that where the employer fails inter alia to constitute ICC, he shall be punishable with fine which may extend to fifty thousand rupees and for repeated violation of same offence there could be cancellation of the license or withdrawal, or non-renewal or approval or cancellation of the registration by the Government.

Analysis of Gayathri Balaswamy vs. ISG Novasoft Technologies Ltd. case

In the case of Gayathri Balaswamy vs. ISG Novasoft Technologies Ltd. (Mad.), MANU/TN/2293/2014 (hereinafter referred to as "Novasoft case") decided on 2nd September 2014, Hon'ble Madras High Court awarded hefty compensation to the aggrieved woman employee for non-constitution of the ICC.

Brief facts of the Novasoft case

  1. The petitioner employee (Ms. Gayathri Balaswamy), entered into an employment agreement with the first respondent company (ISG Novasoft Technologies Ltd.) on 10.3.2006. Under the said agreement, the petitioner was to be appointed as Vice President (M&A Integration Strategy) with effect from 27.4.2006.
  2. Within few months of the commencement of the contract of employment, some untoward incidents happened, as a consequence of which, the petitioner employee claims to have tendered a resignation on 24.7.2006. But, the resignation didn't take effect. After a year, three letters of termination followed in succession (on 17.10.2007, 12.12.2007 and 20.12.2007).
  3. Thereafter, the petitioner lodged a criminal complaint on 26.12.2007 against two officers of the company for alleged offences under the Indian Penal Code and the Tamil Nadu Prohibition of Harassment of Women Act, 1998 ("The Tamil Nadu Act"). The company also filed criminal complaints of defamation and extortion against the petitioner. Eventually, when both the petitioner and the first respondent landed up before the Supreme Court. The Supreme Court referred the parties for resolution of all their disputes through arbitration.
  4. The petitioner filed a Statement of Claim of Rs.28,88,55,500/- under 12 (twelve) different headings. The Arbitrator passed an Award dated 21.3.2012 directing payment of a sum of Rs. 2 crore as compensation to the petitioner together with interest at 18% per annum from 1.4.2012 and all the counter claims filed by the first respondent company were rejected by the Arbitrator. The first respondent company was also directed to give a no objection certificate indicating that it was a contractual termination as recognised in the industry, so as not to come in the way of the petitioner's future employment.
  5. Aggrieved by the rejection of all the heads of claim except one, by the Arbitrator, the petitioner filed a petition under Section 34 of the Arbitration Act before the Madras High Court.

Decision of the Arbitrator and the High Court on the Different Heads of Claim of the Petitioner

Claim no. Description of the Claim Claim amount (Rs.) Decision of the Arbitrator Decision of the Hon'ble Madras High Court

1.

Bonus for the Completion of first year of employment 21,60,000 Rejected In concurrence with the view of the Arbitrator.

2.

Arrears in salary 11,62,500 Rejected In concurrence with the view of the Arbitrator.

3.

Severance payouts 1,17,00,000 Allowed In concurrence with the view of the Arbitrator.

4.

Bonus for the second year of employment 18,00,000 Rejected In concurrence with the view of the Arbitrator.

5.

Non-revision of salary after the end of the first year of employment. 67,50,000 Rejected In concurrence with the view of the Arbitrator.

6.

Failure of the respondent to transfer the claimant to the United States of America (USA) 3,51,00,000 Rejected In concurrence with the view of the Arbitrator.

7.

Non-compliance of the procedure by the respondent while purportedly terminating the claimant 3,51,00,000 Rejected In concurrence with the view of the Arbitrator.

8.

Not providing bonus in the second year of employment 18,00,000 Rejected In concurrence with the view of the Arbitrator.

9.

Not providing the learning and training opportunity 26,10,000 Rejected In concurrence with the view of the Arbitrator.

10.

Failure to provide stock option under the Company's employee stock option scheme 4,50,00,000 Rejected In concurrence with the view of the Arbitrator.

11.

Loss of employment opportunity 5,76,00,000 Rejected In concurrence with the view of the Arbitrator.

12.

Damages for non-constitution of committee to inquire into allegations of sexual harassment 9,07,00,000 Rejected The Court differed with the Arbitrator on this head of claim and modified the arbitration award by allowing an additional compensation of Rs.1,68,00,000/- (Rupees one crore and sixty eight lakhs only) to the petitioner towards the 12th head of her claim.

This has been discussed in detail in the following paragraphs.

Compensation for non-constitution of ICC to inquire into allegations of sexual harassment

The complaint of sexual harassment formed the basis for a series of litigation between the parties, both civil and criminal, and they ultimately culminated in the arbitration proceedings. Eventually, after holding that the non-constitution of a committee to inquire into allegations of sexual harassment cannot be the basis for compensation, the Arbitrator rejected the 12th head of claim of the petitioner.

The 12th head of claim was for compensation of Rs.9.07 crores towards exemplary damages for non-compliance with the law laid down by the Supreme Court of India in Vishaka case. According to the petitioner, she suffered harassment at the hands of her superior by name Mr. Krishna Srinivasan, which actually forced her to tender her resignation on 24.7.2006. It was the case of the petitioner in her claim statement before the Arbitrator that the sexual harassment by Mr. Krishna Srinivasan never stopped. The petitioner sent a mail dated 14.12.2007 to the Board of Directors complaining about the inappropriate behaviour of Mr. Krishna Srinivasan. However, the company did not constitute a Complaints Committee as required by the decision of the Supreme Court in Vishaka.

Further, the award of Arbitrator stated that since there was a grievance committee in place in the company, to which, she never complained at any time, while she was in service and also since the persons, to whom she complained, were not the directors of the company, the conclusion came out that the prosecution launched by her was only a step taken to bring them to the negotiating table as a legal strategy is completely perverse.

The Court however held that the entire reasoning given by the Arbitrator from paragraph 30 onwards is completely perverse and does not at all reflect the correct position in law. The first conclusion reached by the Arbitrator in paragraph 30 of the award that even if the natural right of an employee to a safe working environment is breached, the measure of damages cannot be more than a year's salary, is certainly not in tune with the Public Policy in India. The fact that a sexually harassed woman employee, has a right, in addition to other rights, to walk out of the company on the ground of breach of contract, is not a ground to hold that the measure of damages cannot be more than that fixed for a breach. This conclusion of the Arbitrator that the petitioner always had a right to go out, is simply akin to affixing a seal of approval upon the decision of Mr. M.F. Hussain to leave the country on the ground that if he did not have a safe living atmosphere in India, it is always open to him to move out.

In paragraph 15 of its decision in Vishaka, the Supreme Court quoted its earlier decision in Nilabati Behera vs. State of Orissa [MANU/SC/0307/1993 : 1993(2)SCC 746], wherein it was held that 'an enforceable right to compensation is not alien to the concept of enforcement of a guaranteed right.' Therefore, the finding that the measure of damages is to be limited to the one provided in the contract for its breach, is to belittle the guaranteed right to a safe working environment.

The finding with regard to vicarious liability in the Arbitrator's award is not in tune with the Public Policy in India. As a matter of fact, the very directions contained in the judgment of the Supreme Court in Vishaka impose an obligation upon every employer to have a committee constituted for the redressal of the grievances of women employees. If the finding with regard to vicarious liability given by the Arbitrator in his award is accepted, then no employer need to constitute any committee, since a victim can always be directed to take recourse individually against the offending employee.

The employer had an obligation imposed by the decision of the Supreme Court, to constitute a committee. The constitution of such a committee was intended to serve two purposes namely (i) to redress the grievances of women employees; and (ii) to send a clear signal to all the employees that complaints of sexual assaults would be enquired into by a committee specially constituted for the purpose, with the participation of outsiders. In other words, the constitution of the committee was to serve both as preventive as well as punitive. It is actually the failure of the first respondent to constitute such a committee, as mandated by law, that gave rise to a vicarious liability on the part of the first respondent. This aspect was completely overlooked by the Arbitrator.

Likewise, the finding of the Arbitrator that the delay on the part of the petitioner in lodging a criminal complaint, especially after moving out of the company, indicated that she was only interested in compensation, was held to be completely perverse. If the company had failed in its legal duty imposed in terms of the decision of the Supreme Court in Vishaka, then the employee cannot be expected to lodge a police complaint even while continuing in employment. The existence of a grievance committee or an ombudsperson can never be an excuse for violating the mandate of law as laid down by the Supreme Court.

The fact that no committee was constituted as per the dictate of Supreme Court was an admitted fact. Therefore, all other issues such as delay in lodging the First Information Report (FIR), the focus on monetary compensation in the correspondence during the pre-litigation stage and the lack of pleading about the sufferance of an emotional or mental injury, etc., were beyond the scope of the actual issue to be decided.

The Court went on saying that the claim of the first respondent that there was an ombudsman and that there was a grievance committee, deserves to be simply thrown out of the window. If the law requires a particular act to be done in a particular manner, it shall be done only in that manner and not otherwise. No ombudsman can be a substitute for a committee as required by the Supreme Court to be constituted.

According the Hon'ble High Court, what is more shocking is the finding of the Arbitrator that the petitioner had not alleged or proved any physical, mental or emotional injury. Emotional or mental injury for a woman is an automatic and natural result of sexual harassment at work place, unless it is pleaded by the offender that the woman in question was happy about it. It was not the case of the first respondent that the petitioner was happy about the harassment and actually welcomed it. The moment harassment is established, emotional and mental injury is to be presumed.

Non-constitution of the committee was held to have actually resulted in the damage suffered by the petitioner being unquantifiable. Therefore, all that an Arbitrator could have done, had he arrived at the correct conclusion with regard to the 12th head of claim, is to have awarded an ad hoc amount as compensation, without any scientific formula being available with mathematical precision.

Considering the status occupied and the position in which the petitioner was employed in the first respondent organisation and considering the opportunities that she lost on account of the non constitution of the committee, the Court was of the view that the grant of an amount equivalent the severance benefit of Rs.1,68,00,000/- (Rupees one crore and sixty lakhs), as compensation towards the 12th head of claim, would be appropriate.

Therefore, in the result, the arbitration award was modified to the effect that apart from the compensation awarded by the Arbitrator, the petitioner will be entitled to an additional amount of Rs.1,68,00,000/- (Rupees one crore and sixty eight lakhs) towards compensation against the 12th head of claim.

From the analysis of the above mentioned case, it may be noted that the Court rejected all other claims of the petitioner and was, by and large, in concurrence with the decision of the Arbitrator on almost all the issues except the claim for damages on account of non-constitution of ICC to inquire into allegations of sexual harassment. Had the company constituted the ICC as contemplated by the Vishaka Guidelines, or as the case may be, the Act, the penalty on account of additional compensation of Rs.1.68 crore could have been avoided. It is therefore up to the employers to err on the side of caution to ensure the compliance of the Act, in the letter and spirit.

Footnotes

1 Section 3 of the Act

2 Section 2(a) of the Act 2

3 Section 2(o) of the Act

© 2016, Vaish Associates Advocates,
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