India: Employment Law Alert- February 2023

Greetings!

We at Singhania and Partners are committed to keeping our readers informed about the latest legal developments across India. In this month's edition, we bring you the latest updates on employment laws in India.

Our Employment Law Alert is your one-stop destination for monthly updates on employment laws across the country. It includes recent circulars issued by Central and State Governments regarding employment law and significant decisions made by the Supreme Court and High Court.

We hope you find this edition informative and valuable. Happy reading!

REGULATORY UPDATE

1. Clarification regarding the minimum due benefit to be paid from the employees' deposit linked insurance scheme fund to the eligible family members

The Ministry of Labour and Employment, vide its notification dated January 2, 2023, has issued directions regarding the minimum due benefit to be paid from the Employees' Deposit Linked Insurance ("EDLI") Scheme fund, to the eligible family members who were beneficiaries in cases of death of eligible employees but the amount paid to them was less than the stipulated minimum assurance benefit of INR 2.5 Lakh (Rupees Two Lakh Fifty Thousand) resulting in short payments. The said directions provide that:

• All zonal officers ("ZO") are requested to ensure that regional officers ("RO") in their respective jurisdictions shall identify all such EDLI claims which have been settled and where, the minimum benefit has not been paid in the intervening period, such ZO shall immediately release the balance benefits due if any.
• A consolidated report shall be sent by the ZO to the Employee Provident Fund Organisation ("EPFO") head office confirming that the minimum EDLI benefits have been given in all eligible cases and there are no short payment cases.
• The report is to be sent within 15 (fifteen) days on or before January 16, 2023.

2.Launch of integrated online services portal, 'Silpasathi', in West Bengal

The Labour Department, Government of West Bengal, vide notification dated December 27, 2022, notified the integration of 13 (thirteen) services under the Labour Department, Government of West Bengal, through a single end-to-end 'State Single Window Portal' available at www.silpasathi.wb.gov.in.

These services include, inter alia, procurement and renewal of licenses and registrations under the Factories Act, 1948; Boilers Act, 1923; Contract Labour (Regulation and Abolition) Act, 1970 ("CLRA Act"); shops and Establishments Act, 1963, etc., with effect from January 1, 2023.

3. The West Bengal minimum wages notification

The office of the Labour Commissioner, West Bengal, vide notification dated January 16, 2023, has released the minimum rates of wages effective from January 1, 2023, to June 30, 2023.

4. Switching of Employees' State Insurance Corporation domains to https://esic.gov.in

All existing https://esic.nic.in¹ and https://esic.in have been moved to https://esic.gov.in. Further, all existing email ids are also mapped with the new domain.

5. Online filing of applications under the CLRA in Puducherry

The office of the Chief Inspector of Factories & Boilers, Puducherry, vide its notification dated January 12, 2023, has mandated online filing of the following applications:

• Application for a license under the CLRA for engagement in factories of Puducherry, Mahe and Yanam regions of Puducherry.
• Application for renewal of a license under the CLRA for engagement in factories of Puducherry, Mahe and Yanam regions of this Union Territory.

FROM THE BENCH

Supreme Court

1. Supreme Court refers to a larger bench the question of whether an employee covered under the Employee State Insurance Act, 1948 ("ESI Act") can claim compensation under the Motor Vehicles Act, 1988 ("MVA") for a motor accident.

In the case of Rajkumar Agrawal vs Vehicle Tata Venture¹, the division bench, constituting Justices A. S. Bopanna and Sudhanshu Dhulia, referred the matter to a larger bench in the absence of any authoritative judgements on the issue.

Brief Facts

The appellant suffered injuries resulting in his lower limb amputation. The Motor Accident Claims Tribunal (MACT) initially awarded him compensation, and the respondents contested this award.

The Allahabad High Court reversed the tribunal's judgement on the ground that an employee insured under the ESI Act would be barred from claiming compensation or damages of a similar kind by virtue of section 53 of the ESI Act. Hence the present appeal.

Issue

The matter being examined here is the potential contradiction in filing a compensation claim simultaneously under the ESI Act and the MVA.

Appellant's Claims

The bar under Sections 53 and 61 of the ESI Act are not absolute bars but merely bar compensation of a similar kind. There is a distinction between a claim for periodic insurance payment and damages or compensation - they are not benefits of a similar kind.

Furthermore, the MVA being a subsequent enactment, and by virtue of the provisions under sections 163(A) and 167 beginning with a non obstante (a clause that ensures the enforceability of one provision over another that is contradictory to it) clause, there is no bar against subsequently claiming compensation under the MVA.

Judgement Referred to by Appellant

1. Regional Director E.S.I Corporation & Anr. Vs. Francis DE Costa & Anr¹.

The general law of tort or special law in the MVA or Workmen's Compensation Act, 1948, may provide a remedy for damages. The insurance coverage under the ESI Act in an insured employment is in addition to but not in substitution of the above remedies. It cannot, on that account, be denied to the employee.

Respondent's Claims

The benefit received under the ESI Act bars the employee from seeking a similar benefit (compensation or damages) under any other act.

Judgements Referred to by Respondents

1. Western India Plywood Ltd. vs P. Ashokan²
2. National Insurance Co. Ltd vs Hamida Khatoon & Ors³

Both reinforce the absolute bar against compensation as stated under Section 53 of the ESI Act, 1948.

Judgement

The division bench found a need for more authoritative judgements on this issue. Furthermore, due to the bench strength being the same as those in the Western India Plywood Ltd. vs P. Ashokan (supra) and National Insurance Co. Ltd vs Hamida Khatoon & Ors (supra) cases, the present bench did not find it prudent to rule on the matter. Therefore, the issue was referred to a larger bench.

In the case of ESI Corporation vs M/s. Radhika Theatre⁴, the division bench of Justice M.R. Shah and Justice C.T. Ravikumar ruled that Section 1(6) of the ESI Act, shall apply even to establishments established before 31.03.1989/20.10.1989 notwithstanding that the number of employees at any time falls below the limit specified by the Act. This was concluded based on the ESI Act being welfare legislation, needing to be read liberally.

Brief Facts

• The respondent ran a Cinema Theatre and paid ESI contributions up to September 1989 but stopped thereafter since its employee strength fell below 20. Therefore, the appellant issued demand notices.
• The respondent challenged the demand notices before the Employees' Insurance (EI) Court contending that before the insertion of Sub-section (6) of Section 1 of the ESI Act, 1948 w.e.f. 20.10.1989, it employed less than 20 persons and therefore was not liable to be covered under the provisions of the ESI Act. The EI Court dismissed the case, and this order was appealed.
• The High Court allowed the appeal, taking the view that amendment to Section 1 shall not be applied retrospectively and shall not apply to an establishment established before 20.10.1989/31.03.1989.
• Against this, the ESI Corporation has preferred the present appeal.

Issues

1. Can a factory or establishment established before October 1989, which now has less than the minimum number of employees specified under the ESI Act, still be subject to the Act for demand notices issued after October 1989?
2. For demand notices issued after October 1989, can Section 1(6) of the ESI Act be applied retrospectively?

Appellant's Contentions

The ESI Act is a social welfare legislation for the workmen concerned. The purpose of the amended sub-section (6) of Section 1 - by virtue of which the ESI Act shall govern all establishments (notwithstanding the number of employees) - is in line with the preamble, object and purpose of the ESI Act.

Demand notices for the period post-October 1989, therefore, cannot be said to be illegal. They may be bad in law as, in that case, Sub-section (6) of Section 1 of the ESI Act can be said to have applied retrospectively.

Judgements Referred to by Appellants

1. Bangalore Turf Club Limited vs Regional Director, ESIC⁵

In this case, it was held that by virtue of the object and purpose of the ESI Act, it should be given a liberal interpretation to assure employee social security.

Respondent's Contentions

Sub-section (6) of Section 1 of the ESI Act, which came to be inserted on 20.10.1989, cannot be made applicable retrospectively and would be effective only on or after 20.10.1989.

Provisions and Judgements Referred to by the Court

Articles 21, 38, 39, 41 and 43 of the Constitution of India, 1950; social and economic justice as mentioned in the Preamble to the Constitution; the rights to medical and disability benefits are fundamental human rights under Article 25(2) of the Universal Declaration of Human Rights; and Article 7(b) of the International Convention on Economic, Social and Cultural Rights.

1. Transport Corporation of India vs ESI Corporation⁶
2. Buckingham and Carnatic Co. Ltd. vs Venkatiah⁷
3. Bombay Anand Bhawan Restaurant vs ESI Corportation⁸

All three cases emphasised the nature of the ESI Act as welfare legislation intended to secure employee benefits in case of sickness, maternity, employment injury etc., to provide a safe insurance cover to employees likely to suffer from various physical illnesses during their employment.

When two views are possible on their applicability, the view that furthers the legislative intention should be preferred over a technical or narrow interpretation. Any welfare act must receive a liberal construction, but the same must flow from the words used in the section.

Judgement

The Supreme Court held that while the primary rule of interpretation of statutes may be the literal rule when considering beneficial or welfare legislation, The Supreme Court has, on numerous occasions, adopted the liberal rule of interpretation.

Before the insertion of sub-section (6) of Section 1 of the ESI Act, only those establishments/factories engaging more than 20 employees were governed by the ESI Act. But on and after 20.10.1989, irrespective of the number of persons employed, a factory/establishment shall be governed by the ESI Act.

Therefore, for the demand notices after 20.10.1989, every factory/establishment shall be liable, and with respect to such a notice, section 1(6) of the ESI Act cannot be said to be applied retrospectively. Only in the case of demand notice for the period before inserting Sub-section (6) of Section 1 of the Act can it be said to have been applied retrospectively.

The High Court has erred in allowing the appeal and setting aside demand notices even for the period after 20.10.1989.

3. Supreme Court: Employees under Voluntary Retirement Scheme (VRS) not on par with superannuated peers in pay revision

In Maharashtra State Financial Corporation Ex-Employees Association & Ors. v. State of Maharashtra & Ors.⁹, a division bench of Justices Dipankar Dutta and S. Ravindra Bhat scrutinised the fixation of a date for implementing the Fifth Pay Commission recommendations, as applied to the respondent Corporation. They noted that for pay revision, employees who retired under VRS are in a separate category from other employees.

Brief Facts

• The appellant association challenged a judgement of the Bombay High Court, calling a decision of the Industry, Energy and Labour Department, Government of Maharashtra (hereafter "the State") is arbitrary and discriminatory.
• The decision denied the benefit of revising pay scales to employees of the Maharashtra State Financial Corporation (hereafter "MSFC") who had retired or died between 01.01.2006 to 29.03.2010.

Issue:

Is excluding employees who retired before 29.03.2010 and confining pay revision benefits arbitrary and/or discriminatory?

Appellants Submissions

The Appellants were in continuous service and had even received the benefit of interim revision, pending the finalisation of pay scales in accordance with the Pay Commission Report. Those in employment on and after 29.03.2010, and those who continued in service after 01.01.2006 but retired before 29.03.2010, belonged to the same category.

The cut-off date for pay revision is arbitrary because several employees have retired and would be deprived of the benefit of pay revision merely because the MSFC chose to implement the decision on a particular date.

Those who had sought voluntary retirement must be included on the ground that they had secured benefits and not completed their tenure based on Clause 5 of the VRS scheme¹⁰.

Respondent's Submissions

MSFC is an autonomous corporation and is not bound to follow the terms and conditions applicable to Maharashtra Government employees. It must independently generate its income from its resources to meet additional expenditures.

MSFC is not bound by the decision of the State to implement the decisions of the Fourth, Fifth and Sixth Pay Commissions for its employees, nor was it directed to do so.

The employees of MSFC cannot claim, as a matter of right, any benefit of pay revision without MSFC's ability to bear the burden of such pay increase.

The fixation of the cut-off date is a policy matter, depending on various considerations such as financial constraints and the number of employees. Granting any benefit to employees normally involves fixing of the cut-off date. Devising a limited retrospective limit for the employees on the MFSC's rolls lessens the financial burden. Thus, the fixation of the cutoff date in the present case was not arbitrary.

Judgement

The Court held that while the decision to revise pay and the extent of revision are policy matters, they are also matters of larger public interest. Whilst the fixation of the cut-off date for the grant of benefits cannot be questioned, the Court may examine the impact of such fixation and whether it results in discrimination.

There is no distinction between those who retired (or died in service) before 29.03.2010 and those who continued and were granted the pay revision. And the exclusion of employees on such a basis is violative of Article 14 of the Constitution of India.

However, employees who secured VRS benefits and left service voluntarily cannot claim parity with those who superannuated. VRS employees found the VRS offer beneficial. Apart from the regular terminal benefits they were entitled to, the additional amount each of them was given was an exgratia amount paid to end the employer-employee relationship. Consequently, there can be no question of the VRS employee claiming past rights since that would frustrate the scheme's purpose.

Similarly, those who ceased to be employees due to termination, dismissal, etc., would not be entitled to the benefits of pay revision either.

High Courts

1. Delhi High Court bars employees from challenging enquiry findings on 'adequacy or reliability' grounds

The Delhi High Court, in its single bench judgement in Sneh Aggarwal vs Punjab National Bank, ruled that under Article 226 of the Constitution of India, an employee cannot challenge the findings of a disciplinary committee on the grounds of adequacy or reliability.

Brief Facts

• This petition was filed by Sneh Aggarwal, a bank employee who was dismissed from service in the year 1995 for misconduct and fraud after the bank conducted a departmental enquiry.
• The petitioner was handed over FDR No. 20/91. Following this, she applied for a demand loan at the parliament street branch pledging the same FDR. The bank then detected that though the FDR purported to have been issued for a sum of Rs. 60,000/-, only a sum of Rs. 6,000/- was deposited.
• Following this criminal case was lodged with CBI, and post suspension, a departmental inquiry was initiated upon the production of the enquiry report the charge was established beyond doubt.
• The petitioner then raised an industrial dispute since conciliation was not successful.
• The employee challenged the award passed by the Central Government Industrial Tribunal (CGIT), where the petitioner's claim for reinstatement in service was dismissed.

Issue

Whether the findings of departmental authorities in disciplinary proceedings can be challenged by the employee under Article 226 of the Constitution of India

Petitioners Contentions

• The petitioner submitted that the tribunal holds no power to deal with the issue of fairness of domestic enquiry. It was submitted that the respondent had not impugned the previous award dated 10.08.2011 challenging the tribunal's finding on the aspect of fairness of domestic tribunal but only sought to lead evidence before the tribunal against the petitioner.
• It was also submitted that the findings of the tribunal are contradictory, based on irrelevant material, and the same can be inferred by the court in the exercise of its writ jurisdiction. It was contended that the tribunal did not appreciate the evidence led by the parties. Rather, it ventured into evidence led by the parties before the Enquiry Officer, which contradicts the court's directions.
• The petitioner contended that there was no hue and cry regarding the issuance of FDR with a delay of 74 days; as a senior was involved, the petitioner could not take any step against him.
• It was submitted that the tribunal relied on manipulated ledger sheets. Attention was drawn towards the Cashier's long book and cashbook of the day when FDR was issued to buttress the contention that the amount of Rs. 6000/- as alleged by the respondent, was not found to be deposited.
• It was contended that the respondent withheld evidence, but the Learned Tribunal failed to draw an adverse inference in accordance with Section 114(g) of the Evidence Act. Another contention submitted was that despite noting that the letter marking the lien was not disputed arrived on its own, finding that this letter was forged. Further, it was the respondent's duty to produce all documents about FDR and mark lien on them, but the bank concealed the letter, and the petitioner produced a copy.

Respondent's Contentions

• The respondents submitted that the impugned award dated 30.12.2013 has been passed by the tribunal after a detailed examination of the witnesses and documents relied upon the parties, and this court while exercising the writ jurisdiction, may not disturb the findings of fact.

• It was submitted that charges against the petitioner were based upon documentary, oral, and circumstantial evidence before the making of the FDR.
• It was also contended that the petitioner's conduct was suspicious when the FDR was received, she raised a demand loan on the said inflated FDR, and two others settled. Lastly, it was submitted that the punishment awarded to the claimant was commensurate with the gravity of the charges levelled and proved against her.

Judgment

• The court outlined the scope of writ jurisdiction under Articles 226 and 227 of the Constitution of India while examining and adjudicating the impugned order
• In writ jurisdiction, the High Court can interfere with an award of the Labour Court/Tribunal if there is patent illegality or if the award rendered is contrary to law as a measure of 'misplaced sympathy' and thus preserved.
• As the learned tribunal in the present case of this court examined the issue of adherence to principles of natural justice while conducting an enquiry. As the enquiry was made properly, departmental authorities are the sole judge of facts.
• Therefore, it was held that employees could not challenge the findings on the grounds of adequacy or reliability in a proceeding under Article 226 of the Constitution.

2. Telangana High Court exempts voluntary working juveniles from Juvenile Justice (Care and Protection of Children) Act, 2015 ("JJA") provisions.

A single judge bench of the High Court of Telangana, in its judgement of Kothakonda Aishwarya v. The State of Telangana, rep. by its Public Prosecutor, has ruled that if a child is working voluntarily, then Sections 75 and 79 of the JJA do not apply to them.

Brief facts

• The second respondent, a volunteer in District Child Protection Unit, Medchal District, conducted operations to save child labour along with Operation Muskan. Upon information searched, rescuing children employed as labourers.
• On 09.07.2021, the rescue team visited the Everbest Foods Company in Subhash Chandra Nagar, Kushaiguda. During the operation, it was found that girls aged 17, 16 and 14 were working for the company.
• Further, police investigated and filed charge sheets for offences under Sections 75 and 79 of the JJA.

Issue

Whether Sections 75 and 79 of the JJA apply where the juvenile works voluntarily?

Petitioner's Contentions

• The counsel submitted that provisions under Sections 75 and 79 of the JJA are not maintainable as the statements of the children are they were working due to financial problems as they are unable to go to school due to the Corona pandemic.
• According to the petitioner, the girls were working as sales girls where they were picked in one area and dropped in another to move from house to house and kirana shops selling those masalas.
• Even according to the witnesses who formed the team of 'Operation Muskan', when they visited the premises, they found six girls, further details were not revealed.
• The children, when examined, reveal they were working as sales girls to make ends meet.

Judgment

• Section 75 provides for punishment if any person having control over the child assaults, abandons, abuses, exposes or willfully neglects the child resulting in mental or physical suffering. None of the ingredients in the present case is fulfilled; even according to the witnesses, the girls did not speak of any assault, abandonment, or abuse causing physical or mental suffering.
• Section 79 prescribes punishment for ostensibly engaging a child and keeping in bondage for employment or withholding earnings. No such documents were submitted under Section 207 of CRPC before the trial court.
• For the reasons stated above, the proceedings against the petitioner were quashed, and the criminal petition was allowed.

3. The benefits of welfare legislation cannot be deprived of mere technicalities held by the Madras High Court.

In Tamil Nadu State Transport Corporation (Coimbatore) Ltd. v. B. Rajeswari, the Madras High Court opined that welfare legislation such as The Maternity Benefits Act, 1961 and its benefits could not be denied on mere interpretation and technicalities, as an interpretation of law should be liberal and it should not defeat the very purpose of welfare scheme.

Brief Facts

• B. Rajeswati (hereinafter "petitioner"), was appointed as Assistant Engineer in the Tamil Nadu State Transport Corporation temporarily and joined the service on 16.09.2013
• The petitioner got married during the training period and on becoming pregnant, requested maternity leave of 180 days but was only granted leave on loss of pay. After the child's delivery, the petitioner continued the remaining training period and was paid ?7500 monthly.
• The petitioner went to Court, and the Single Judge directed the corporation to treat her leave period as a duty and extend all service and Maternity benefits during that period.
• On appeal in the Madras High Court, the transport corporation contended that as per the Government order passed by the Transport Department, there was no provision for maternity leave during the training period.

Petitioner's Submissions

Denial of maternity leave is contrary to the dictum laid down by the Supreme Court. Maternity benefit and the need to be granted full wages during the leave period, along with other benefits, is essential for facilitating woman employees to care for their child.

The Maternity Benefit Act 1961 cannot be interpreted in a way that deprives wages for the maternity period merely on discriminatory treatment of permanent/temporary employment.

Appellant's Submissions

There is no provision for grant of eligible maternity leave during the training period. Non-permanent women employees who have worked for not less than 160 (one hundred and sixty) days in twelve months would be eligible to demand maternity leave. Since the Writ Petitioner had worked only for 145(one hundred and forty-five) days, she is not eligible to get maternity leave

There is no grant for eligible maternity leave during the training period. Letter No. (Ms) 13965 FR 3/2015 dated 20.04.2015 issued by the Personnel and Administrative Reforms (FR III) Department was silent regarding the grant of maternity leave to non-permanent married women who had put in less than one year of continuous service. In the absence of fulfilment of such condition, the writ petitioner, as a matter of right, could not demand total wages and refixation of her seniority.

Judgements Referred to by the Court

1. Workmen of American Express International Banking Corporation vs Management of American Express International Banking Corporation¹¹

In this case, the Court clarified that the question was whether a workman could be said to have been employed for 240 (two hundred and forty) days by the mere fact that he was in service for the whole year whether or not he worked for 240 (two hundred and forty) days.

Though the aforementioned decision was rendered under the context of the Payment of Gratuity Act, 1972, the principle laid down therein is that the employee should have completed the required number of days within the time stipulated and that the Writ Petitioner herein has completed the same.

2. Municipal Corporation of Delhi vs Female Workers (Muster-roll) and another¹²

It was stated that female workers working on a casual basis or a muster roll on a daily-wage basis should be given maternity benefits.

Judgement

The narrow interpretation that the employee must have worked for 160 (one hundred and sixty) days for 12 (twelve) months cannot be accepted. It would suffice if the employee completed 160 (one hundred and sixty) days, even in a period of fewer than 12 (twelve) months. In the present case, the Writ Petitioner had rendered 180 (one hundred and eighty) days of service from 16.09.2013. Even assuming there is a shortage of working days in the twelve calendar months, welfare legislation and the benefits cannot be deprived of mere interpretation and technicalities, as the interpretation of law should be liberal and should not defeat the very purpose of the welfare scheme.

The Court emphasised that the interpretation of law must be balanced and harmonious to uphold legislative intent and the statute's object. The order of the Single Judge was upheld. The writ appeal was dismissed.

These are just a few recent developments in Indian employment law. We hope you find this newsletter informative and helpful. If you have any questions or feedback, please do not hesitate to contact Singhania and Partners LLP.

Footnotes

---

---