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The Contract Labour (Regulation &

Abolition) Act, 1970 provides that the principal
employer will ensure that the wages to the
employees of the contractor must be paid in the
presence of the authorized representative of the
Principal Employer. Sub-section 4 of section 21
of the Contract Labour (Regulation & Abolition)
Act stipulates that in case the contractor fails to
make payment of wages within the prescribed
period or makes short payment, then the principal
employer shall be liable to make payment of
wages in full or the unpaid balance due, as the
case may be, to the contract labour employed by
the contractor. On this analogy, a question arises
as to whether principal employer is liable to pay
bonus to the employees of the contractor in case
the contractor, if liable, fails to pay bonus to its
employees. The facts of a case, Shachindra
Kumar, Factory Manager, Hindustan Unilever
vs. State of Karnataka, Labour
Department, 2013 LLR 595 (Karn. HC) are that
the officials of the Labour Department conducted
inspection of the records of the Hindustan
Unilever Ltd. (hereinafter referred to as petitioner
in Mangalore and found that the company is not
paying bonus to the contractor labourers on par
with regular employees. A notice was issued to
the petitioners for making payment of bonus to
the contract labourers. The petitioners sent a reply
saying that the contract labourers are not the
employees as defined under the Payment of
Bonus Act, therefore, they are not entitled for
bonus from the principal employer on par with
their regular employees. The Authorities under
the Payment of Bonus Act not being satisfied
with the reply, lodged a complaint before Judicial
Magistrate Ist Class, Managalore alleging that
the Factory Manager and the Unit HR head of
the company (hereinafter referred as petitioners)
have committed violation of provisions of


Payment of Bonus Act and they are guilty of the

offence punishable under section 28 of the said
The learned Magistrate before whom the
complaint was presented, took cognizance of the
offence and ordered issue of summons to the
petitioners. On coming to know of the same,
petitioners presented a petition under section 482
of the Criminal Procedure Code in the Karnataka
High Court.
The contention urged before the High Court
has been that the Magistrate, without applying
his judious mind even to the averments made in
the complaint wherein the definition of an
employee as defined in Payment of Bonus Act is
extracted which clearly indicated that it does not
include the contract laboureres, has taken
cognizance of the offence alleged, therefore, the
cognizance taken for violation of section 11
punishable under section 28 of the said Act is
bad in law and without jurisdiction.
Section 11 of Payment of Bonus Act, 1965
makes it obligatory on the part of the employer
to pay minimum bonus to its employees.
According to the said section 28 of the Act
if any person contravenes any of the provisions
of this Act or any rule made thereunder or to
whom a direction is given or a requisition is made
under this Act fails to comply with the direction
or requisition, he shall be punishable with
imprisonment for a term which may extend to
six months, or with the, which may extend to one
thousand rupees, or with both.
The Payment of Bonus Act is applicable to
all the factories and other establishments in which
twenty or more persons are employed on any
day during an accounting year.
July, 2013 - 21



Section 2(13) of the Payment of Bonus Act

defines employee as under:2(13) Employee means any person (other
than an apprentice) employed on a salary or wage
not exceeding ten thousand rupees per mensem
in any industry to do any skilled or unskilled
manual supervisory, managerial, administrative,
technical or clerical work for hire or reward,
whether the terms of employment be express or
Thus, if a person claims any benefit under
the Payment of Bonus Act, he should fit into the
definition of an employee found in section 2(13)
of the Act. Reading of this definition extracted
above would indicate that it does not include a
contract labourer. On comparison, if the definition
of an employee is looked in both in Employees
State Insurance Act, 1948 or Employees
Provident Funds and Miscellaneous Provisions
Act, 1952, specifically includes a contract
labourer also. Conspicuously, the definition of an
employee under the Payment of Bonus Act does
not either expressly or impliedly include a contract
The Kerala High Court in the case of
Cominco Binani Zinc Ltd. vs. Pappachan,
reported in 1989 (1) LLJ 452 : 1989 LLR 123
has considered the question as to whether the
persons employed in a canteen run by
independent contractors or by co-operative
societies of the workmen are the employees of
the Management. After considering the provisions
of the Factories Act, Payment of Wages Act,
etc., it has been held that when the responsibility
of running the canteen is entrusted to a contractor
or a society, the workmen employed and paid by
such contractor or society cannot be treated as
workmen of the Management and there is no
employer-employee relationship between the
Management and such employees. The High
Court observed that the direction given by the
Tribunal to pay bonus to the workers engaged in
the canteen cannot be sustained for the reasons
mentioned earlier.
July, 2013 - 22


The Apex Court, in the case of the workmen

of The Food Corporation of India vs. M/s.
Food Corporation of India reported in 1985
(II) LLJ 4, has considered the relationship of the
contract labourer with the statutory Corporation.
It has been observed at Para 12 that where a
contractor employs a workman to do the work
which he contracted with a third person to
accomplish on the definition as it stands, the
workman of the contractor would not, without
something more, become the workman of that
third person. Therefore, when the contract system
was in vogue, the workmen employed by the
contractor were certainly not the workmen of
the Corporation and no claim to that effect has
been made by the Union.
Having regard to the definition of employee
found in section 2(13) of the Payment of Bonus
Act, the claim of the Labour Department that
the contract labourer are also entitled for payment
of bonus on par with the regular employees, as
contended in the complaint, has no legal basis
and it does not amount to violation of section 11
of the Act attracting punishment under section
28 of the said Act. It is clear that the contract
labourer cannot be treated on par with the regular
employees for the purpose of payment of bonus.
In view of the above, taking cognizance of
the offence by the learned Magistrate in the facts
of this case has been without jurisdiction as no
case was made out against the petitioners for
the offence alleged. When the contract labourers
are not employees as defined under Payment
of Bonus Act, there is no obligation on the part of
the employer to pay bonus on par with regular
employees, therefore, it does not constitute
violation as contemplated by section 11 punishable
under section 28 of the Act. Therefore, the
prosecution launched is without authority of law
and even abuse of process of Court and the same
results in unnecessary hardship to the petitioners
hence liable to be quashed.
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Despite withdrawing its earlier notifications (dated 23.5.2011 and 30.11.2012) pertaining
allowances for provident fund contributions to the EPFO is again planning to notify its
interpretation on allowances ignoring that in the presence of its Advocates, the Supreme
Court in its order dated 12.4.2013 has directed for final disposal/appeals in this context in
second week of August, 2013. These appeals are about various allowances whether EPF
contributions be deducted or not? The EPFO has not learnt about illegal decision by
demanding and recovering contributions on leave encashment. Ultimately it has to bite the
dust when in 2008, the Supreme Court held that it was illegal and money as recovered was
to be adjusted in future payment to be made by the employers.

Employees Provident Fund Organisatioan provides for contribution and read as under :(EPFO) is one such organization in the country,
The contribution which shall be paid by the
which has gained the notoriety of disturbing the
employer to the Fund shall be twelve per
hornets nest, often without any reason or
cent of the basic wages, dearness allowance
justification which results into multiplicity of
and retaining allowance (if any) for the time
litigation. It is now again contemplating to revise
being payable to each of the employees
the definition of wages for contribution towards
(whether employed by him directly or by
the Employees Provident Fund and the
or through a Service Provider) and the
Employees Pension Scheme. At present, it is
employees contribution shall be equal to
calculated at the rate of 12 per cent on basic
the contribution payable by the employer in
and dearness allowance and the matching
respect of him and may, if any employee so
contribution is made by the employers. This
desires, be an amount exceeding twelve per
move is being resisted by the industry, for the
cent of his basic wages, dearness allowance
obvious reasons as it will put more burdens on
and retaining allowance (if any), subject to
it. The government introduced a triple test the condition that the employer shall not be
Ordinarily, Necessarily and Uniformly - to
under an obligation to pay any contribution
define basic wages for provident fund deduction
over and above his contribution payable
through a circular issued on 30th November
under this section.
2012, but had later stayed its implementation.
Therefore, by reading of the legal provisions
Similarly, on 23rd May, 2011 instructions
relating to basic wages and allowances, it is
pertaining to allowances were issued which were
clear that contributions under Provident Fund
also withdrawn and kept in abeyance.
Act are to be paid only on basic wages [which
First of all, it is necessary to know what the specifically excludes house rent allowance
definition of the relevant legal provisions. Section (HRA)], DA and retention allowance. That is
2(b) defining basic wages which is to be read the reason that many organizations of the industry
with section 6 of the Provident Fund Act, challenged the proposal of the EPF in various
July, 2013 - 23



High Courts, which has finally come to the

Supreme Court. In this regards two High Courts
namely; the Gwalior bench of Madhya Pradesh
High Court and Calcutta High Court have given
two diametrically opposite rulings. When it was
brought to the notice of the Supreme Court in a
Special Leave Petition, it granted leave by
clubbing all of them and has posted it for final
hearing in 2nd week of August 2013 only.
Hopefully, the law will be settled for the days to
come. The question of interpretation of the
allowances for attracting Employees Provident
Fund contributions has finally reached the
Supreme Court after over 50 years i.e. after
Bridge & Roof Company case. The EPFO is
Respondent and also appellant in another case
i.e. G4 Security Services and August is not too
far. The administrative wisdom calls that the
EPFO should wait for the outcome lest it may
withdraw its notification for the third time after
the interpretation by the Apex Court. It is
pertinent to remind the EPFO that based on an
ex-parte judgment of Bombay High Court, it
has started recovering provident fund
contributions on encashment of leave. Which
when challenged by Manipal Academy the
Supreme Court in 2008 directed the adjustment
of future payment by the employers, the
contributions as recovered with observations that
the encashment of leave will not attract provident
funds contributions since the definition of basic
wages given under the Act did not intend to
include such type of payment besides that the
Apex Court in Bridge & Roof Company (India)
Limited has also clearly interpreted the term
basic wage hence the reliance as placed by
the EPFO on the judgment of Bombay High
Court has not been proper.


absolutely clear that it is neither good for the

industry nor for the employees. No doubt, it
will have huge financial implications both for
industry and government and may even be
counterproductive to the EPFO, as industrial
organisations which are extending coverage to
employees receiving salaries above Rs. 6,500
per month may choose to opt out, depriving the
employees coverage under a globally renowned
social security scheme.
Under the current rules, an organised sector
worker is not required to mandatorily join the
provident fund scheme if his/her basic salary
exceeds 6,500 a month.
Most of the employees today join an
organisation above this statutory limit and they
are voluntarily covered by the industry and,
therefore, for employees who are on a higher
salary bracket and receiving allowances as
incentives to promote business, the PF
contribution should be restricted to basic salary.

What is most unfortunate part of the

functioning of the EPFO is that left hand does
not know what the right hand is doing. Its
inefficiency is nowhere more glaringly seen than
in Delhi, under the very nose of the seat of the
power. The wages ceiling for coverage of an
employee is Rs.6,500 per month is effective from
May, 2001 and it continues to remain the same
whereas even an unskilled worker in Delhi is
getting minimum wages at Rs.7,722 per month
and, thus, he/she is an excluded employee under
the Employees Provident Fund. The
Organisation has sadly not been able to
rationalize this dichotomy for the larger interests
of the workers but often tries to tread on the
path that is full of thistles and is hardly good for
The dispassionate analysis of the proposal any of the stakeholders.
of the Employees Provident Fund will make it
E-mail :

July, 2013 - 24




Though answers are available in these columns but in view of the complicated problems it is advisable to obtain legal
advice on the subject because labour laws are frequently amended and the Governments issue notifications from time
to time besides judicial pronouncements of varying connotations. The birds eye view clarifications, given in LLR, will
certainly enable the readers to ask their lawyer/adviser the right question with greater confidence.As desired by some of
questionnaires, not to disclose their identity, their names are not given against their questions.

Attendance on biometric system no

change in conditions of

Non-obtaining of
licence by the
consequences of

Q Now with the advancement of

technology, we have installed a bio-metric
system for attendance of employees in our
industrial establishment. My query pertains
as to whether it is necessary to give a notice
of change in service conditions as required
under section 9-A of the Industrial Disputes
Act if an employer wants to introduce
Biometric Attendance System?

Q Our establis hment is covered by

Contract Labour (Regulation & Abolition)
Act and we have taken registration under
the said Act. One of our contractors
employing more than 20 workers but has not
obtained licence under the Act. The
workers are claiming that in the absence of
obtaining licence, they have become
employees of the principal employees. How
far the workers are justified?

A No. It has been held by the Madras High

Court that introducing computerized time
attendance system will
not come within the
purview of section 9-A
of the Industrial
Disputes Act providing
for a notice in change
of service conditions
and there is no violation of provisions of the
Factories Act or the Rules.
Hindustan Unilever Employees Union, Pondicherry vs.
Inspector of Factories, Pondicherry & Ors., 2010 LLR 878
(Mad. HC)

Merely that the contractor has not obtained

licence under the Contract Labour, it will not give
a right to the employees of the contractor to claim
that they have become employees of the principal
employer. Obtaining of licence by the contractor
employing 20 or more workers is a procedural
formality. In this context reference is made to
the judgment of Calcutta High Court wherein it
has been held that for determination of control
and supervision over the contract labour, it is seen
as to who pays the wages and exercises the
disciplinary control over them.

Our Experts in various subjects, relating to labour laws, endeavour to provide

authoritative solution to the problems supported with case law.
July, 2013 - 25



M/s. Indian Iron & Steel Company Ltd. (Burnpur Works,

Bumpur) vs. State of West Bengal & Ors., 2011 LLR 771 :
2012-I LLJ 83 (Cal. HC).

Relationship of
employer and employee
between the workers of
contractor and principal

What are the main factors for

determining relationship of employer and
employee? Like any other employer, we also
engage contractors who provide workers to
work in our industrial establishment. How
it can be determined that the principal
employer has no relationship of employer
and employee with the workers of the
Whether a particular relationship between
employer and employees engaged through the
contractor is genuine or camouflage is essentially
a question of fact to be determined on the basis
of features of relationship hence to be adjudicated
by the Industrial Tribunal and neither by the
Administrative Tribunal nor by the High Court.
In determining the relationship of employer and
employee, control is one of the important tests
but is not to be taken as sole test.1

The Karnataka High Court2 has given the

tests to be applied for determining the existence
of master and servant relationship are as to when
it can be termed as a sham contract.
Who pays?
For whose benefit the workmen work?
Under whose supervision?
Whether disciplinary action can be taken?
If so, by whom?
Has the employer the right to reject the end
Even though the workers through the


contractor have been working for many years

but the Apex Court, in a catena of cases, has
held that this would not be conclusive factor
determining nature of relationship between the
parties as held by Bombay High Court. It was
further clarified that merely because a register is
maintained by the principal employer for the
purpose of attendance of workers of the
contractor, that by itself cannot be a factor which
would disclose the complete control by the
company over these workmen hence no fault can
be found with the Award of the Tribunal holding
that the principal employer did not exercise any
control or supervision.3
Since the principal employer has to take
precaution that under no circumstances, there
should be control and supervision by the officers
of the principal employer hence it is held
appropriate that out of the other staff of the
contractor, there should be at least one of them
designated as a supervisor through whom the
officers of the principal employer could
1. Ram Singh vs. Union Territory, Chandigarh, 2004
LLR 47 (SC).
2. Management of V.I.S.L. vs. P.O., 1994 (69) FLR
536 (Karn HC).
3. Bharatiya Kamgar Sena vs. Udhe India Ltd., 2008
LLR 344: 2008 (116) FLR 457: 2008-I LLJ 371 (Bom HC).

Apprentice not
entitled to employment
Q In addition to other employees, we also
Apprenticeship Act. The contract of
apprenticeship provides that the
engagement of apprentice will be only for a
specific duration. My query pertains as to
whether an apprentice can claim
employment as a matter of right?
A No. An apprentice under Apprenticeship Act
is engaged for the purpose of imparting training

It is only Labour Law Reporter wherein the important points of the reported cases are
highlighted so that the busy reader could glance at in a few minutes and update his
July, 2013 - 26



by the employer. In one case, the Supreme Court

has held that an apprentice has no statutory right
to claim appointment on completion of his training
unless it is otherwise stipulated in the contract of
service. In the given case, the appointment letter
stated that apprentice may be appointed, but there
is no such mandate on employer to appoint him.
The Supreme Court set aside the judgment of
the High Court whereby the apprentices were
allowed to be appointed as employees by the
Haryana Power Generation Corporation Limited and
Others vs. Harkesh Chand and Others, 2013 (2) LLN 43 (SC).

Applicability of Contract
Labour (Regulation &
Abolition) Act on an
establishment not being
an industry
Q Ours is a Research Institute and the
High Court held that it does not come within
the purview of industry under the Industrial
Disputes Act. We also engage contract
labour through the contractors. Are we
liable to seek registration and is the
contractor liable to obtain licence under the
Contract Labour (Regulation & Abolition)
Act? Any case law on the subject will be
highly appreciated.

For applicability of the Act, it is imperative

that the establishment engaging contract labour
must be an industry as defined by section 2(j)
of the Industrial Disputes Act. For instance, it
has been held by the Gujarat High Court that the
National Physical Laboratory not being an
industry, the Contract Labour (Regulation &
Abolition) Act will not be applicable whereas the
Equal Remuneration Act will apply and the people
will be entitled to the wages which are being paid
to the permanent sweepers of the Laboratory.
Leelaben Parmer and Others vs. Physical Research
Laboratory and Another, 2011 LLR 813 (Guj. HC).


Compensation under the

Compensation Act, 1923

I am practising in Labour Laws and

generally representing those employees
who have met with an accident or their
dependents/legal heirs if the employee has
died in the accident. My query pertains as
to when there is cent per cent disablement
of an injured employee for claiming
compensation under the Employees
Compensation Act?

It depends upon the incapacity of the victim

of an accident, but at the same time unless a
workman is totally incapacitated, cent per cent
compensation will not be justified as held by
Orissa High Court. The Orissa High Court has
also held that unless a workman is totally
incapacitated, 100% compensation will not be
justified.1 In one case, the
Karnataka High Court has
held that while awarding
compensation in an
broader possibilities
should be taken into
consideration.2 To
be more specific,
for permanent and total disability, the following
are some of the instances:
(i) loss of both hands or a hand and a foot;
(ii) loss of so much vision that the workman can
perform no work that requires eye- sight;
(iii) severe fatal disfigurement e.g. acid cases;
(iv) complete deafness.
When the lower limb of the driver is
amputated below the knee because of the
accident, it will amount to 100% disablement for
calculation of compensation being total loss of
earning capacity.3

Unlike other Labour Journals we dont publish judgments pertaining to armed forces,
police or government servants to swallow the volume.
July, 2013 - 27



Two employees, being professional drivers,

will be entitled to accident compensation by
treating totally disabled since one of them has
lost his eyes and his driving licence cannot be
renewed whereas the others disability has
resulted into shortening of his leg due to injury
and he would not be able to drive the vehicle for
long distance.4 100% compensation can be
awarded despite doctors recommendation for
40% disability.5
1. Prakash Kumar Staparthy vs. Rama Chandra
Maharana, 1998 LLR 934 (Ori HC).
2. Traffic Manager, New Mangalore Port Trust vs. B.
Radha, 1998 LLR 726 (Kar HC).
3. Oriental Insurance Co. Ltd. vs. Shambhu Nath Yadav,
2007 LLR 1230 (SN):2008-I LLN 139: 2008 Lab IC (NOC)
129 (All HC).
4. United India Insurance Co. Ltd. vs. Y. Ananda Rao
and Another, 2013 LLR (SN) 333 : 2012 (135) FLR 959 (AP
5. National Insurance Co. Ltd., Jabalpur vs.
Ramkishore Mishra and Others, 2013 LLR 102 (MP HC)

Protected workman
when deemed to have
been declared
Trade Union functioning in our
establishment has been periodically sending
a list of office-bearers of the Union to be
declared as protected workmen. We raise
objection about submission of membership
statement since the Union has no
representative capacity in our establishment
for want of required number. However, due
to strike, we did not contradict or rebut the
list of protected workmen as sent by the
Union. The Union is claiming that in the
absence of any communication within the
stipulated time from the Management, the
office-bearers notified to be declared as
protected workman have become protected
workmen under the Industrial Disputes Act.
What is the legal position?

In the absence of contradiction or rebuttal


by the Management within 15 days of receipt of

the list of the protected workmen, the officebearers of the Union will become automatically
protected workmen. It is pertinent to refer one
case wherein it has been held that no objection is
taken by the Management within 15 days from
the communication of the Union as per Rule 61(1)
of the Industrial Disputes (Central) Rules, the
workmen mentioned in that communication would
automatically become entitled to the status of
protected workmen and the appropriate
authority is empowered to declare the protected
workmen after hearing the parties. For dismissal
of the protected workman, it is mandatory to
obtain prior permission under section 33(3) of the
Industrial Disputes Act, 1947 from the concerned
Industrial Tribunal/Labour Court failing which,
there would be no dismissal and the workman
would be entitled to reinstatement with full backwages.
Batra Hospital & Medical Research Centre vs. Batra
Hospital Employees Union, 2013 LLR 378 (Del. HC)

Payment of ex-gratia
Q In addition, we are paying ex-gratia to
our employees. Does it come under the
conditions of service?
A Yes. Extending benefit of ex-gratia towards
payment of bonus to certain workmen and
denying to others
who indulged in
strike, was held to
be illegal since it
was being paid for
long and it had
become a condition
of service. A condition of service cannot be
changed without following procedure specified
in section 9-A of the Industrial Disputes Act,
Bharat Fritz Werner Karmika Sangha vs. Management
of Bharat Fritz Werner Ltd., 2012 LLR 1052 (Karn. HC)

Labour Law Reporter is not only read, re-read but retained also since its judgments are
authoritatively referred in the Courts and the Tribunals.
July, 2013 - 28



Q. We notice that the accumulation of

leave under Factories Act is too short. Some
of the employees want to work since they do
not want that their leave should laps. Instead
of availing leave they are interested to work
provided their leaves are encashed. Can we
so allow?
Thro. Fax
A. Encashment of Leave with wages is not
permissible under the Factories Act, 1948, as long
as the worker is in employment. However, in case
a worker is discharged or dismissed from service
or quits employment or is superannuated or dies
while in service he or his legal heir or nominee is
entitled to wages, in lieu of the quantum of leave
to which he was entitled immediately before his
discharge, dismissal, quitting employment,
superannuation or death for (including accumulated
un-availed leave), as per provisions of section 79
of this Act.
Q. In our factory, we have to detain some
of the employees due to some exigencies and
urgent orders. We are ready to pay overtime.
Please apprise.
(a) whether we can take overtime work
from the employees,
(b) if yes, how long and whether we have
to seek approval/permission from the
Authority & what will be the components of
Hira Nand, Rudrapur
A. Overtime work can be taken from the
workers for exigencies such as carrying out
urgent repairs, to the extent prescribed in column
4, subject to the conditions and for the period
prescribed in column 5 of the Schedule appended
below the relevant rule in the State Factories Rules,
framed under section 64 of the Factories Act, 1948.
This Schedule also provides for exemptions to
certain classes of factories specified mentioned in


column 2, for the nature of work specified in

column 3, to the extent provided in column 4,
subject to the con ditions and for the period
prescribed in column 5 of this Schedule. For
exigencies, such as for executing urgent orders,
the prior permission of the Chief Inspector of
Factories for exceptional pressure of work under
section 65 of this Act is required, which may be
granted, subject to the following conditions
The total number of hours of work on
any day shall not exceed 12 hours
The, inclusive of intervals for rest, shall
be exced 13 hours in any day
The total hours of work in any week,
including overtime shall not exceed 60 hours
No worker shall be allowed to work
overtime for more than 7 days at a stretch and the
total number of hours of overtime work in a quarter
shall not exceed 75 hours.

Q. In a place like Delhi, we are not in a

position to get suitable accommodation for
running a factory. However, we have acquired
third floor in a building where we will start
manufacturing optical frames by employing
over 40 employees. Are we liable to seek
registration when it is located at third floor?
Thro E-Mail
A. You are liable to obtain Registration/
License under the provisions of the Factories Act,
1948 and the Delhi Factories Rules, 19650, before
initial location or before beginning to occupy and
use the premises as a factory. At the time of
considering your application for grant of License
on the third floor premises, the Chief Inspector of
Factories office is likely to ask for details of
approval of the factory building plans of the whole
building including third floor, which is a statutory
requirement under section 6 of this Act and also to
check the suitability of the premises on third floor.
July, 2013 - 29



Q. Our establishment is covered under

ESI Act and the Scheme. We have acquired
adjoining plot which has a separate
Municipality Number for extension of our
(a) Will construction on such adjoining
plot, with a different Municipality Number
attract ESI contribution?
(b) ESIC has a Branch Manager but I
am not aware of his role. Can such a
Manager also ask for production of record
from an establishment covered under the
ESI Act?
Hari Om, Kanpur
A.(a) If the construction is the expansion of
the present building the same will be coverable
under the provisions of the ESI Act. However,
in case, the construction activity remains a
separate entity even if the plot of land is adjoining
the present building, in such event, the ESI scheme
will be applicable w.e.f. the date of the production
starts which includes trial run, if any.
(b) As far the manager of branch office,
inspecting record is concerned, normally the
branch office manager (local office manager)
does not inspect the records but there are certain
small places where the number of factories/
establishments is very small. At such places, the
manager of branch office is entrusted the duties
of Social Security Officer (Inspector) also
alongwith his normal duties. In the case of
accident also, the manager is also supposed to
inspect the relevant record.
Q. Our establishment is covered under
the ESI and in case of an accident, what
formalities are to be complied?
Thro Fax
July, 2013 - 30


A. In the case of accident, you have to

inform the manager, branch office. You have
also to make entries in the accident register
maintained by you. Where there is a panel system
of providing medical cover, you have also to
inform Insurance Medical Officer.
Q(a) I have just been enrolled as a
member of ESI. When I can avail the
medical benefits?
(b) In case of emergency if, as a
member I have to take the treatment in the
private hospital, can I seek the
reimbursement from ESI?
Gopal Krishan, Gurgaon
A(a) The medical facilities can be availed
by the insured persons and his family from the
Ist day of coverage itself.
(b) In case of emergency, the medical
services can be obtained from the nearest hospital
but thereafter you must get a reference from ESI
hospital/dispensary, if required.
Q. What is the maximum period for
which an employee can avail sickness
benefit under ESI?
K.S. Batra, Delhi
A. There are 3 types of sickness benefit,
(a) sickness benefit - which can be availed for a
maximum period of 91 days in any two
consecutive benefit periods, (b) extended sickness
benefit - which can be availed for a duration of
309 days extended to two years in deserving cases
(this is in addition to 91 days i.e. 91 days + 309
days), (c) enhanced sickness benefit - 7 days for
vasectomy operation and 14 days for tubectomy
operation which can be extended in case of post
operative complications.



Q. We are running a orphanage and the

only support by the way of donations. We
are employing over 15 employees in addition
to more than 20 volunteers. Will our
orphanage be covered under the Provident
Funds Act?
Thro. E-mail
A. Any establishment is coverable under the
EPF&MP Act, 52 provided the establishment is
engaged in scheduled activities provided under
Schedule-I of the Act or Schedule of other
establishment notified thereunder and 20 or more
employees are employed therein. Volunteers if
not paid wages will not be regarded as employee.
Q. For how many years an employee has
to be member of the provident fund to be
entitled to pension on his death or the
duration of the years of his employment
before his resignation?
Thro. E-mail
A. Employees Pension Scheme, 1995
prescribe minimum 10 years membership to be
entitled for Members Pension on retirement/
Superannuation. Otherwise for Members Pension
on disablement and Pension payment to Family
members upon death of the member prescribes
no eligibility period of service.
Q. I am pursuing my MBA in HR
Development. I come across pre-discovery
period but I have not been able to
understand as to what does it mean? In my
query, I have been informed the prediscovery period as date of coverage under
the Act and prior to that, the employer will
be liable to pay provident fund of the
employee who has not been covered. Am I
A. Pre-discovery period under the EPF


Law implementation process is understood as the

gap period between the Date of Applicability
of the EPF law upon the Establishment in
accordance with provisions contained in section
1(3) of the EPF&MP Act,52 and the date of
issue of coverage intimation and Code Number
by the EPF authorities to the Establishment on
a date subsequent to Applicability Date.
Employers obligation for compliance under the
EPF Law accrues from the date of applicability
and as such compliance for pre-discovery period
will be obligatory upon the Employer.
Q. In our charitable organisation,
honorary workers - who are called Sewadar
- come to render service to the needy
handicap children. They are paid only
conveyance. Since our establishment is
covered under the Act, the P.F. Authority
has asked us that we should cover such
Sewadars also. What is the legal position?
Thro Fax
A. Payment of Conveyance to Sewadar in
cash is likely to be construed as remuneration
against service rendered by such person and as
such likely to attract contribution payment liability.
Q. In our establishment, employing 40
employees, there is no such employee who
is getting Rs.6,500 since all are getting more
than the prescribed salary. Are we liable to
be covered under the Act and the Scheme?
R.K. Mehra, Faridabad
A. Definition of Employee provided under
section 2(f) of the EPF&MP Act,52 does not
provide any pay ceiling limitation and as such, all
employees disregarding any pay limit, will be
reckoned for coverage purpose of your
July, 2013 - 31





If the workman protested on the very next day of his
resigning, it is not voluntary

To our Readers,

An appeal before the Supreme Court has been directed against

the final judgment and order dated 4.10.2008 passed by the High
Court of Punjab & Haryana at Chandigarh whereby the Division
Bench of the High Court dismissed the appeal filed by the appellantcompany herein and confirmed the order of the learned Single Judge.

The readers of the Labour Law

Reporter will bear testimony that
we have always endeavoured to
provide the maximum possible
and relevant information since
innovation is our passion. The
variety of regular features by well
known experts adds further value
to its utility. In a step towards better
service, another feature under the
caption Case Study has been

The only question that was posed for determination before the
learned single Judge of the High Court was as to whether the workman
had voluntarily resigned on 1.10.1992 as claimed by the Management
or was he forced to resign on 30.9.1992 as alleged by the workman?
After finding that had the workman resigned voluntarily on 1.10.1992,
he would not have complained to the Management on that very day
and run from pillar to post, by making various complaints to higher
authorities, including the Chief Minister of the State and if the workman
had committed any misconduct, like theft etc., the Management could
have held a domestic enquiry and taken a suitable action as per law,
the Single Judge ultimately concluded that the workman was
retrenched from employment without complying with section 25-F of
the Industrial Disputes Act.

An interesting and topical case is

being taken up to show that how it
is either won or lost. Intelligence
plays pivotal role in every walk of
life, more so in the legal field where
the parties are pitted against each
other to fight the battle through
experts in the subject.

It has been held that it is relevant to note that in order to find out
the correctness of the order passed by the learned Single Judge, the
written claim before the Labour Court, the workman has specifically
alleged that on 1.10.1992, he sent a notice-cum-application to the
Management and a news item to this effect was duly published in a
vernacular local daily.

This factual aspect and version, particularly the receipt of noticecum-application dated 1.10.1992 from the workman, has not been
denied in the written statement filed by the Management. The main
emphasis in the written statement of the Management was that the
workman had voluntarily tendered his resignation on 1.10.1992. It is
brought to our notice that the Labour-cum-Conciliation Officer has not disputed the important fact that the
workman protested in writing on the very next day of the incident.
Whether the complaint sent by the workman on 7.10.1992 and the resignation tendered by him on
1.10.1992 was voluntary or not, have not been adverted to by the Labour Court. According to us, these are
the real issues in this case.
As rightly observed by the Division Bench that there are contradictory findings by the Labour Court
with regard to claim of the workman that he was tortured by the Management on 30.9.1992 and was made
to write the resignation letter on 1.10.1992. Again, it was rightly observed by the Division Bench that
certain relevant facts such as workman had been in service since 1977 and in such circumstances whether
there is any need to resign without any acceptable reason that too without any monetary incentive and
complaint on the same day to the Management and higher authorities including the Chief Minister, were
not at all considered by the Labour Court and merely accepted that the workman tendered the resignation
in his own writing.
Hence, while on going through the entire reasoning of the Labour Court, materials placed and stand
taken by the workman and the Management, we are satisfied that the learned Single Judge was fully
justified in interfering with the conclusion arrived at by the Labour Court which has been rightly affirmed by
the Division Bench. Consequently, the appeal of the Management fails and the same is dismissed with
costs quantified at Rs.10,000.
M/s. Atlas Cycle (Haryana) Ltd. vs. Kitab Singh, 2013 LLR 231 (SC)
July, 2013 - 32




Some of the formats

have to be repeated but
every time we keep on
making improvements
depending upon the
changing scenario and
judicial pronouncements.

Pro-forma suggested for

an agreement between
an employer and
employee whereby the
employer gives loan to
the employee to buy a
This agreement is made at........on this day
hereinafter referred to as an Employer on the
first part and Shri.son of
Shri..resident of and working
as.with M/s
Employer hereinafter referred to as an
Employee on the second part.
WHEREAS the Employee has applied for
housing loan amounting to Rs..
and the Employer has agreed to give the said
loan to the Employer and both the parties have
agreed to abide by the following:Terms and Conditions
1. That the aforesaid loan shall be repayable
by the Employee in..years in
equal monthly instalments. In the event of
termination of the services of the Employee
before the loan amount is fully repaid or due to
resignation, retirement, retrenchment, death or
any other reason, the entire unpaid balance
amount of loan shall become immediately due
and payable to the Employer.
2. The interest on the loan amount
outstanding shall be payable by the Employee at
the rate of% (per cent) per

annum alongwith the monthly instalments of

principal amount which shall be recovered from
the salary of the Employee every month. Be it
clarified that interest for the period from the date
of realization of the Employers cheque towards
loan till the commencement of payment of the
first instalment of the loan is payable alongwith
the first instalment of the repayment of loan.
3. The repayment of loan and interest will
commence from the month following the month
in which the purchase of the house is completed,
or on expiry ofmonth from the
month in which the last instalment of loan amount
is disbursed whichever is earlier. As soon as the
purchase of the house is completed and the same
is fit for occupation, the Employee shall inform
the Employer about the same.
4. The Employee shall secure the
repayment of loan and interest in the following
(a) By deposit of Title Deed of the House to
be deposited within a period of 60 days from the
date of receipt of last instalment of loan.
(b) authorisation by the Employee or his
nominee to the Provident Fund and Gratuity for
adjustment of the balance amount of loan
outstanding, from the Provident Fund
accumulations and Gratuity payable to the
employee to his nominee.
(c) Execution of a Demand Promissory
Note for the amount of loan i.e.
Rs..(Rs..) by the Employee.
On expiry of every three years from the date of
this Promissory Note, a fresh Promissory Note
shall be executed by the Employee for the
July, 2013 - 33



amount of loan outstanding at that time.

5. The Employee shall confirm that he or
his wife does not possess or own any other
residential house at the place of employment.
6. The House to be purchased /allotted shall
be in the name of the Employee or his wifes
name or jointly with each other. There shall not
be any other co-owner/co-beneficiary other than
his wife.
7. The loan as sanctioned by the Employer
will be disbursed to the Employee only if no
other loan is outstanding with the Employee.
8. The Employee agrees that he will not
create any encumbrance upon the house and the
said house shall not be used for any purpose other
than residential for himself and the members of
his family.
9. The Employee has also agreed to give
the undertaking separately as stipulated by clause
4(b) of this agreement to the effect that his
gratuity as well as provident fund will not be
released unless the loan amount is cleared.
10. In case of any dispute relating to the
interpretation of any clause of this agreement or
with regard to the mode of payment of the
instalments or non-payment of instalments, the
matter will be referred to the arbitrator as per
provisions of Indian Arbitration Act, 1990 and the
decision of the arbitrator shall be binding upon
the parties.
IN WITNESS WHEREOF both the parties
append their signatures in token of having
accepted the above terms and conditions.
Annexure A to the Agreement for Housing Loan
Note : Ever since the Payment of Gratuity Act, 1972 came
into force, there has been general impression that the gratuity
July, 2013 - 34


of an employee cannot be adjusted against loan taken by

him. However in 2008, the Punjab & Haryana High Court
has held that declining the adjustment of housing loan against
the gratuity, by the Controlling Authority as confirmed by
the Appellate Authority under the Payment of Gratuity Act,
is liable to be quashed when the employee has made a request
for adjustment of the amount of gratuity towards outstanding
loan against him. 1 In another case, the Madras High
Court directed the Management of the bank to calculate the
amount of gratuity and release the amount after adjusting the
amount that was payable by the employee to the bank.2 The
Allahabad High Court has held that amount of gratuity can be
adjusted towards outstanding loan if agreement of loan so
provides. It was further held that adjustment of amount of
gratuity against outstanding loan amount is not barred by the
provisions of section 4(6) of the Payment of Gratuity Act,
1972 pertaining to forfeiture of gratuity. 3
1. Punjab and Sind Bank, Chandigarh vs. Regional
Labour Commissioner (Central) and Others, 2008 LLR 735
(P&H HC).
2. M. Mahendran vs. The Chairman-cum-Managing
Director, Indian Overseas Bank Central Office, 2009 (4) LW
342 (Mad. HC)
3. State Bank of Bikaner & Jaipur vs. Appellate
Authority and Others, 2013 LLR 637 (All. HC)

Pro-forma suggested for

an undertaking by an
employee in favour of M/
s employer
for adjustment of
gratuity and provident
I.hereby undertake to give
my consent for adjusting the outstanding amount
of the Housing Loan, if any, against the amount
of gratuity and provident fund which may become
payable to me or to my nominee on termination
of my service on account of superannuation,
death, resignation or otherwise.
The balance amount of gratuity, if any, may
be paid to me or my nominee, as the case may
be. Consent of my nominee to this effect is also
given herein below:
I. the nominee of
Shri..hereby give consent
to the above.




Pro-forma suggested for

a charge-sheet to an
employee for hacking a
computer system


upon to show cause within 3 days as to why

appropriate disciplinary action should not taken
against you. Should you fail to submit your
explanation, it will be presumed that you admit
the charge and have no explanation to offer.
Authorised Signatory
Note : Hacking with computer system is a serious offence
and an employee, guilty of committing, shall be punished
with an imprisonment upto 3 years or with fine which may
extend to 2 lakh rupees or with both.

Pro-forma suggested for

In the capacity of an employee you have

been provided with a computer in order to perform
your duties. it has been brought to our notice
that on ............(date) you have hacked with the
computer with the intent to cause or knowing that
it is likely to cause wrongful loss or damage to
the public or any person destroys or deletes or
alters any information residing in a computer
resource or diminishes its value or utility or affects
it injuriously. Had it not been noticed and checked
timely, it would have resulted into disastrous
The above mentioned misconduct, on your
part, is not only grave and serious but also
constitutes an offence under section 66 of the
Information Technology Act, 2000. Without
prejudice to the right of the Management to take
appropriate criminal action, you are hereby called

a warning to an
employee for publishing
information which is
obscene in electric form
It has been brought to the notice of the
Management that you have been misusing the
computer by publishing/transmitting the material
in the electronic form, which is lascivious or
appealing to the prurient interest the effects of
which is such as to tend to deprave and corrupt
persons who are likely, having regard to all
relevant circumstances, to read, see or hear the
matter contained or embodied.
The above act, on your part, is unbecoming

Pearls of Wisdom
There is a direct link between stress at work place
and email use, researchers have found.
Employees were more prone to increased stress
when reading and sending emails which was indicated
by their increased blood pressure, heart rate and
cortisol level.
July, 2013 - 35



of a responsible employee and the Management

cannot tolerate such depravity and perversity on
your part. The Management cannot close its eyes
for such an offence and, as such, you are here
by administered with a warning that if, in future,
you indulge in such or similar activity no leniency
will be shown to you.
Authorised Signatory

Pro-forma suggested for

a warning to a worker
for insulting and
outraging the modesty
of a woman colleague
by using most obscene

While working in the kitchen of the hotel,

you have to coordinate with the other coemployee including those who are women. Not
only you have to coordinate but deal with them in
a courteous and polite manner lest it may amount
to outraging the modesty of any woman.
It has been brought to the notice of the
Management that on
working in the kitchen you used most-most vulgar
language intruding the privacy of your colleague
(whose name is withheld but it is very much within
your knowledge) and also those who were
present when you uttered obscene language.
The above mentioned misconduct, on your
part, outraging the modesty of the women and
not showing minimum respect to your
colleagues are highly deplorable and make
you liable for appropriate disciplinary action not
excluding dismissal from service. However
keeping in view the long association with the
establishment and also pleading guilty and
assuring that you will not repeat any such and
similar misconduct in future, a lenient view is
being taken by letting you off with a warning and
caution that if any act is repeated in future, no
July, 2013 - 36


leniency will be shown to you and the matter will

be reported to the police also.
Authorised Signatory

Pro-forma suggested for

an affidavit to be given
by the contractor to the
principal employer
about the compliance of
various labour laws as
I......................S/o Shri...........................
R/o.......................................... Proprietor/
Partner/Director/General Manager of.......
..................................... do hereby solemnly
declare and affirm as under:
1. That we have taken a contract for
carrying on certain activities from M/
s. having its office at
2. That as per assignment, we have carried
on the same by our workers for the last
month. We have paid wages to our workers in
the presence of the nominee of the principal
Besides that we have
deposited Employees Provident Fund and ESI
contributions with the Authorities the detail of
which is enclosed herewith as annexure A to
this affidavit. We also undertake to deposit the
contribution under Employees Welfare Fund for
our employees.
3. To the best of our knowledge, we have
made compliances of all the applicable labour
laws. Nevertheless, we undertake that if at any
time any laps is noticed or that the Management
of. is asked to
deposit or make the payment against any
recovery for which we are liable, we undertake
to reimburse the same.



Verified that the contents of the above
affidavit are true and correct to the best of my
knowledge, belief and record. Nothing has been
concealed there-from. Verified on (Place).
Encl.: Annexure A

Pro-forma suggested for

guidelines for
constituting Grievance
Redressal Committee
On occurrence of a grievance, the employee
or employees involved shall attempt to resolve
the matter on an informal basis with the Head
of the Department. The Head of the
Department will endeavour to decide the
grievance within three days of its receipt.
If the grievance is not resolved to the
employees satisfaction by the informal
discussion, it shall be reduced to writing and
referred to the Manager or the HRD
Executive, as the case may be, by any
designated person on behalf of the Union along
with the supporting evidence. The written
grievance shall set forth the nature of the
grievance, the fact on which it is based, the
alleged clauses of the settlement violated and
the relief requested. The Manager will provide
opportunity for hearing to the union
representative and if, as a result of this
meeting, the grievance remains unresolved, he
shall reply in writing preferably within seven
days of the meeting.
If the grievance remains unresolved, the
matter may be referred to the Grievance
Redressal Committee.
The grievance must be taken up promptly
and no grievance will be considered or
discussed which is presented later than one
month after the occurrence of the


All parties concerned - Employees, Union,

and the Employer - shall make every effort
to present, investigate and settle grievance
expeditiously. All settlements of written
grievance shall be in writing.
Any grievance which is not processed by
any party in the manner described in this
clause shall not be considered. If the
Employer does not answer the grievance
within the specified time limits, the grievance
shall be considered granted in favour of the
aggrieved employee.
The Grievance Redressal Committee will be
set up to which any dispute or difference
which is not settled by the above referred
grievance procedure, shall be referred to this
Committee which shall comprise of two
representatives of the employer, two
representatives of the union and the
President, an independent person.
The Grievance Redressal Committee shall
help the Employer and the Employees to sort
out any differences or disputes with regard
to the proper implementation of this
settlement and also help in resolving any
other dispute or difference of whatsoever
nature which may arise between Employees
and the Employer of a particular
Grievance Redressal Committe shall have
the authority to accept the evidence,
question witnesses and require any
information pertinent to the grievances.
All decisions of the Grievance Redressal
Committee shall be in writing and must be
rendered within one month from the date the
dispute or difference was referred to it.
The decision, taken by the Grievance
Redressal Committee, will be binding on the
Employer, Employees and the Union.
However, in case of discharge, dismissal or
termination of a workman, if a party/erson is
dissatisfied with the decision of the Board,
the concerned workman will not be debarred
from taking steps.
July, 2013 - 37



If the grievance is not settled by the

Grievance Redressal Committee, the
grievance, dispute or difference will be
submitted to an agreed arbitrator. In case
there is no agreement with regard to the
person or arbitrator, the matter may be
referred mutually for adjudication in the
form of joint reference. The Arbitrator will
give his Award within four months of the
date the matter is referred to him. The
Award of the Arbitrator shall be final and
binding on the Employer involved, the Union
and the Employee(s) involved. No recourse
to any agitation, including demonstration,
shall be undertaken till the procedure
mentioned in this clause is exhausted in
entirety and peace in any establishment and/
or the industry shall not be disturbed.
Note : As per amended section 9(c), it is obligatory
on an employer to set up a Grievance Redressal
Committee which shall consist of equal number of
members from the employer and the workmen. The
Chairperson of the Grievance Redressal Committee
shall be selected from the employer and from among
the workmen alternatively on rotation basis every year.
The total number of members of the Grievance
Redressal Committee shall not exceed more than six:
Provided that there shall be, as far as practicable, one
woman member if the Grievance Redressal Committee
has two members and in case the number of members
are more than two, the number of women members
may be increased proportionately.


Pro-forma suggested for

charge-sheet of sexual
It is reported against you that
on.................(date) at.................(time) while on
duty, you tried to molest a female employee and
your behaviour on duty was outrageous to the
modesty of the woman. You are aware that the
female employees, who come for work, are to
be protected but you have indulged in the
activities, which amount to sexual harassment.
The above-mentioned charge is of grave and
serious nature and makes you liable for
appropriate disciplinary action.
You are hereby called upon to show cause,
within 3 days, as to why an appropriate action
should not be taken against you. Should you fail
to submit your explanation within the specified
period, it will be presumed that you admit the
charge and have no explanation to offer.
Disciplinary action, as deemed fit, will be taken
against you without any further ref\erence to you.
Authorised Signatory
Note.Sexual harassment is a serious misconduct to
such an extent, that even trying to molest amounts to
molesting a female employee when the behaviour of the
employee did not cease to be outrageous. Apparel Export
Promotion Council v. A.K. Chopra, 1999 LLR 169 (SC).

Pearls of Wisdom
A worker should look out for materials such as linen and chiffon which can be
A person should avoid wearing flip-flops in office, as these are almost never
appropriate in an office environment.
An employee should avoid any piece of clothing that shows too much skin.
T-shirts are rarely appropriate for workplace environment - particularly the ones that
have controversial messages written on them.
IF a person has to ask himself if their clothing is work-appropriate, then probably it
A worker should avoid wearing any type of athletic wear in the office and if they
have a Pilates class or tennis match after work, they should pack their clothes to
change into.
July, 2013 - 38



Damages reduced to 5%
when delay was not
In the appeal filed before the Employees
Provident Fund Appellate Tribunal, the appellant
has challenged the order dated 10.04.2012, passed
by the EPF Authority under section 14-B of the
Act, on account of delayed remittance of PF dues
on the ground that the EPF Authority has calculated
the amount of damages in a very mechanical fashion
without considering the fact that the delay on the
part of the petitioner was not deliberate but due to
financial crisis.
The Appellate Tribunal observed that section
14-B does not mandate that damages must follow
in the event of every default as the Act uses the
words may recover. Such an intention on the
part of the legislature is not decipherable from
section 85B of the Act. This section confers a
discretion upon the EPF Authority to impose
damages and not in the manner as prescribed under
the Scheme, not exceeding the amount of arrears.
Liability of damages does not arise automatically.
It requires application of mind by the deciding
authority and the merits of each case are to be
considered avoiding resorting to arithmetical
calculations following any straight jacket formula.
The power to impose damages under section
14-B is a judicial power to impose damages not
exceeding the amount of arrears within the ceiling,
imposed by the Statute. Exercise of discretion
must be for sound and objective considerations.
Regulation 32A, under which a graded scale for
imposition of damages has been provided, cannot
be regarded as a rigid or inflexible prescription but
guide and channelize the exercise of discretion.
Similarly, regulation 32B structures the exercise
of the discretion to reduce or waive the imposition
of damages. Neither regulation 32A nor regulation


32B can be regarded as inflexible. Default on the

part of the appellant would attract actions under
sections 14-B of the Act for levy of damages. But
while levying damages, due consideration is
required to be given to the situation which led to
default in remittance of dues by the employer and
the reasons for such delay. Delayed payment of
contribution does not ipso facto invite levy of
damages if the employer has furnished sufficient
cause thereof. The order passed by the EPF
Authority contains no elaboration or the manner in
which damages have been quantified in accordance
with the schedule. Adjudicating authority is not
bound to act mechanically in applying the
uppermost limit of the table.
The officer, conducting enquiry, has not
followed the law in correct perspective. There is
no finding that the appellant has willfully and
deliberately withheld the PF contribution. Hence,
reasonable damages @ 5% per annum from the
date of impugned order. Appeal is disposed of
M/s. Lakshmi Shanmuga Spinning Mills Ltd. vs. RPFC, Trichy
ATA No. 385(13) 2012 decided on 11.3.2013

Minimum wages can be

split for provident fund
The appellant filed an appeal before the
Employees Provident Fund Appellate Tribunal,
questioning the order dated 27.10.2011, passed
by the EPF Authority under section 7-A of the Act,
on the ground that dues have been determined only
on the basis of minimum wages fixed by the State
Government which is illegal.
The EPF Appellate Tribunal observed that the
impugned order has been passed on the basis of
the case of M/s. Gujarat Cypromet Ltd. vs. APFC,
(2005) 1 LLJ 484 wherein it was held that the
July, 2013 - 39




contribution should be made on basic wages.

Accordingly, it is not the intention of the Legislature
to demand contribution on the minimum wages.
This issue has been settled by the Division Bench
of Punjab & Haryana High Court in the case of
APFC, Gurgaon vs. M/s. G4S Security Services
(India) Ltd. & Anr., 2011 LLR 316 wherein it has
been held that EPF Tribunal has rightly held that
the provident fund contributions are not necessarily
to be paid on the wages which are fixed under the
Minimum Wages Act since the basic wages as
defined under the EPF Act and the wages as defined
under the Minimum Wages Act are different. The
employer can split the minimum wages into
allowances like house rent, the conveyance and
washing allowance etc. which would not attract
PF contribution. Accordingly, the dues determined
in the impugned order are not in consonance with
the definition of basic wages as defined under
section 2(b) of the Act. Hence, impugned order is
not sustainable and set aside. The appeal is allowed.

and the appellant is liable to pay contributions at

the enhanced rates.

M/s. KRIT Life Sciences Ltd. vs. APFC, Kochi

ATA No. 152(7) 2012 decided on 8.4.2013

Assessment of dues
based on inspector
report - to be quashed

Nuns rendering divine

services - not
employees to be
covered under the Act
In an appeal, filed before the Employees
Provident Fund Appellate Tribunal, the appellant
has challenged the order dated 9.12.2010, passed
by the EPF Authority under section 7-A of the Act,
thereby assessing the PF dues on enhanced rate of
12% considering the strength of employees more
than 20 in the hospital of the appellant, which is
The EPF Appellate Tribunal observed that
there are 9 employees and 7 medical officers in
the hospital of the appellant. Apart from them, the
nuns are rendering services but without any
remuneration. EPF Authority has concluded that
the nuns are employees under the Act and the
appellant is liable to pay contributions @ 12%. If
nuns are included in the strength of employment
of the appellant, the number of employees exceeds
July, 2013 - 40

Section 2(f) of the Act defines the expression

employee. As per definition, as given in this
section, the necessary ingredient of a person to be
an employee is that the person should have been
employed for wages. Nuns are not being paid any
wages. Nuns are devoted to active services of
mankind, meditation, living under vows of poverty,
chastity and obedience. There is no finding of the
EPF Authority that the nuns are getting the prices
for their labour/services. Nuns are not appointed
by the hospital of the appellant. Therefore, such
nuns cannot be called as employees of the hospital.
Their status is distinct from paid employees. Nuns
are rendering some sort of voluntary services for
the mankind which cannot be compensated for
money. Hence, the impugned order of the EPF
Authority is not sustainable. Appeal is allowed.
M/s. Maria Theresa Hospital vs. APFC, Kochi
ATA No. 101(7) 2011 decided on 4.4.2013

The appellant filed an appeal before the

Employees Provident Fund Appellate Tribunal,
questioning the order dated 13.7.2012, passed
by the EPF Authority under section 7-A of the Act,
on the ground that dues have been determined only
on the basis of deposition made by the Enforcement
Officer which is illegal.
The EPF Appellate Tribunal observed that
section 7-A of the Employees Provident Fund and
Miscellaneous Provisions Act, 1952 enjoins that
the EPF Authority should make an enquiry
independently without being influenced by the
report of the Enforcement Officer. It is also
expected from the EPF Authority to give detailed
reasoning regarding submissions made by the
employer and the Enforcement Officer. It is seen
that the EPF Authority has not done any enquiry to
ascertain the facts that the eligible employees are
deprived of their right of enrollment under the Act.
The report of Inspector is not binding on the EPF



Authority. But the responsibility is cast upon the

EPF Authority to conduct a fair enquiry without
being influenced by the report of the Inspector.
Hence, the impugned order is not legally sustainable
and quashed. The appeal is allowed.
M/s. Pardi Creations (P) Ltd. vs. APFC, Vapi
ATA No. 802(5) 2012 decided on 14.5.2013

Damages levied for

delay in payment not to
be interfered
The appellant filed an appeal before the
Employees Provident Fund Appellate Tribunal,
challenging the order dated 28.10.2009, passed
by the EPF Authority under section 14-B of the
Act, on the ground that delayed remittance of EPF
contribution was not wilful attracting imposition
of damages.
The EPF Appellate Tribunal observed that it
is a settled position of law that the provisions of
section 14-B of the Employees Provident Funds
and Miscellaneous Provisions Act, 1952 being penal
provision should be construed strictly. No doubt
that the relevant provision of the Act would not
lead to the conclusion that penalty must be levied
in all situations. Such an intention on the part of
the legislature is not decipherable from section 14B of the Act. When the statutory authority has
discretionary jurisdiction to levy penal damages by
reason of an enabling provision, the same cannot
be construed as imperative. Even otherwise an
endeavour should be made to construe such penal
provisions as discretionary, under the statute to be
mandatory in character.
A perusal of the impugned order indicates that
the appellant had taken a plea to this effect but he
could not establish that it had acted bona fidely
and sincerely while remitting the PF dues. No
cogent reason has been given by the appellant to
establish that there was no malice or malafide
intentions on his part in remitting the dues in time.
Merely by taking a plea that there was no willful
default in delaying the remittance, it cannot be
assumed that the appellant had acted bona fidely


and sincerely in remittance of PF dues without

defeating the provisions of the Act. Accordingly,
the appellant is liable to pay damages imposed in
accordance with the laid down procedure. There
is no infirmity in the impugned order. Hence, appeal
is dismissed.
M/s. Visvas Promoters (P) Ltd. vs. RPFC, Madurai
ATA No. 792(13) 2009, decided on 4.3.2013

Determination of money
by non-application of
mind - untenable
In an appeal filed before the Employees
Provident Fund Appellate Tribunal, the appellant
has challenged the order dated 05.03.2009, passed
by the EPF Authority under section 7-A of the Act,
thereby assessing the PF dues on the basis of
report of the Enforcement Officer and records
submitted by the establishment whereas the factual
position is that the EPF Authority has neither taken
into account a sum of Rs.7,76,137/- paid towards
settlement of the claims of 6 employees nor
discussed the records submitted by the employer
during the enquiry which is illegal.
The EPF Appellate Tribunal observed that
section 7-A of the Employees Provident Funds
and Miscellaneous Provisions Act, 1952 enjoins
that the EPF Authority should make an inquiry
independently without being influenced by the
report of the Enforcement Officer. It is also
expected from the EPF Authority to give detailed
reasoning regarding submissions made by the
employer and the Enforcement Officer. These
aspects are lacking in the impugned order. The
impugned order has been passed by the EPF
Authority without application of judicial mind.
Hence, the impugned order is set aside. Matter is
remanded back to the EPF Authority to conduct a
fresh enquiry into the matter and to pass a detailed
and reasoned order after affording appropriate
opportunity to the employer. Appeal is disposed
of accordingly.
M/s. Tobu Enterprises Ltd. vs. RPFC, Delhi
ATA No. 233(4) 2009, decided on 1.4.2013
July, 2013 - 41



Irked by the capricious tendencies by the

powers that be, the Supreme Court of India has ruled
in now well-known police reform case that the officers
of certain posts should be appointed for fixed-period
of time. They should not be tossed around as per the
whims of their bosses as it hampers the
administration and has demoralizing effect on the
officers. Although the judgment has not been fully
implemented by the government for one reason or
the other and perhaps our police force still continues
to be one of the most corrupt and un-innovative of
the world, yet it has brought about very salubrious
effect on the pattern of appointment of some of the
most important bureaucratic posts in the country like
those of the Cabinet Secretary, CBI Director etc. In
fact, in our country some posts are considered as
plum because they are rewarding and are often used
to make illegal earnings and some are known as
punishment posts but there are many posts which
are known as parking lots. Those who are sent to
parking lots are usually await or buy their time for the
more coveted or higher appointments. Efficient and
honest officers, generally, suffer in this odious game
of musical chairs.
Employees Provident Fund Organization is one
of the largest provident fund organizations in the
world in terms of members and volume of financial
transactions that it has been carrying on. Apart from
it, this welfare scheme came into existence in the
very first term of the parliamentary democracy as per
the directive principles of state policy of the
constitution of India. This organization runs three
schemes viz, Employees Provident Fund scheme,
Employees Deposit Linked Insurance Scheme and
Employees Pension Scheme. The Employees
Provident Fund Organisation manages Rs.5, 80,247
crores for its 6.15 crore members. For all these
reasons, this organization assumes a great deal of
importance. However, the treatment that is meted
out to it scares every well-meaning person. This
organization is also obligated upon to instil
confidence among enormously large number of
employees. Therefore, millions of workers, who are
covered under the umbrella of this organization feel
cheated when they get short shrift from the
The governmental apathy towards this massive
organization can be gauged from the fact that in the
last four years nine different bosses have been thrust
over it. It may be interesting to note that the
Employees Provident Fund Organisation is almost
July, 2013 - 42


ten times bigger than the financial behemoth like the

UTI. Everybody who has any concern with the EPFO
will vouchsafe that it is crying for radical reforms in
its functioning in view of the changed social and
economic circumstances. But who will do it when
nobody is given time to think over the changes and
translate them into realty? Anyway, after quite a long
dithering the Cabinet Committee of appointments
has chosen Krishna Kumar Jalan, an IAS officer as
the new Central Provident Fund Commissioner. He
is the ninth person to hold the office after 2009. It
may sound strange but it is a fact that five out of nine

Central Provident Fund

Commissioner in 4 years

K Chandramouli
Uday Kumar Verma
SK Srivastava
Samirendra Chatterjee
Ravi Mathur
RC Mishra
Ravi Mathur
Anil Swarup
Krishan Kumar Jalan

Tenure (Month)

CPFCs could not remain in the office even for two

months. The average tenure of nine CPFCs has been
just over six months.
According to a newspaper report, the average
term of the CPFCs during the NDA regime was 25
months. The CPFC is the person who has to take the
crucial decisions with regard to the changes which
are to be introduced. Here the intention is not to
make any comparison between the NDA and the
UPA regimes but the incidents compel to draw the
distinctions. Immediately after the coronation of the
UPA in 2004, the then CPFC Ajai Singh, who was in
the midst of carrying certain ambitious projects to
improve the archaic processes was ordered to go
on leave by the then Labour Minister Sis Ram Ola
resulting into the quite burial of those projects.
Needless to say, that EPFO is the novel welfare
scheme and this type of scheme is finding its takers
in countries like the USA where the working class is
demanding for the pre-funded social security scheme
and the federal government is groaning under the



Q. We have small business employing about

70 persons operating at minimal profits. After
every 3-4 months some or the other employee
standup and ask for salary increase. If salary is
not increased, there is every possibility of his
leaving the company. Is it not blackmail by
employee? How should I come out of this problem?
Harish Chawla
A. The problem which you have narrated relates
to culture and policies of the organisation established
over a period of time by the management knowingly
or unknowingly. There cannot be one solution of your
problem. It is a case of demand and supply and
patience of management. Big organisations struggle
with such situation in a different way. In small
organisation the visibility of management is very
much available to the employee. It appears that your
organisation has not worked on training of workers
towards building a culture of responsibility and
discipline where employee feels a part of
management. However, one day you have to take a
call. You have to decide what you want. Would you
like to continue like this and succumb every day
before the demands of employees and carry on
business on stretcher or want to fight once for all,
come what may? It appears that employees have
take you for granted and understood your weakness
that you have no substitute of them.
I suggest develop a pool of employees, have
good practices, build a culture of responsibility down
the level, give them their due and show the outdoor
to the employees who intend to raise unreasonable
demands before management. In this process there
may be a situation where you may have to lose the
business due to absence of employees but be
prepared to face that situation once. Make
corrections in the process. Take tough stand with
reasonableness; single out them by identifying such
bad elements.
Q. When we engage an employee, next step
comes of induction and orientation. Many
organsiations take it very casually and finish it off
by making them aware of rules and regulations. I
think new employee should be helped learning


about culture and making him integrated with the

organisation. How management can help in this
process? I seek your expert advice. Jyoti Rathi
A. When you talk about helping new employee
in learning about the culture so that he can easily be
integrated, first, it is essential to know what
organisation culture is. It is sum of values and rituals
which serve as a glue to integrate the employees of
the organisation. Management should help
employee in identifying the characteristics of
organisation culture and developing compatibility
with values of the employee. Small differences
between values of the employee and organisation
can be patched up, but if the differences are wide,
management should understand it as early as
possible and make the way-out of employee. If you
insist such employee to stay, there are all
possibilities that he will leave the organisation at
first available opportunity and the stay of the
employee in the organisation will be a total lose to
the management. The right culture enables
employees to be pro-active and collaborative and
the wrong culture will create limitations for all
involved. By this way you can help employee
integrating himself with the organisation culture. He
must learn to understand how things move, what
behaviour is accepted and what is not to be done.
Q. It is normally felt that performance
appraisal process does not work in a way far from
subjectivity. Inconsistency and subjectivity are
two identified blocks which make this process
controversial. How you can define a successful
performance appraisal process? Bhavna Reddy
A. It is said that successful performance
appraisal should be free from subjectivity. Personal
attitudes towards an employee should be kept apart
from the process. But this is all better said than done.
Subjectivity cannot be fully eliminated from the
process. After all it is human emotion. Personal likedislike of seniors play important role in the process.
You cannot accept from any person to act like a robot
and assess mechanically. I think if a manager
intelligently sets clear guidelines on competencies
or skills that the team member should demonstrate,
July, 2013 - 43





Our assets walk out of the door each evening. We have to make sure that
they come back the next morning. Performance leads to recognition.
Recognition brings respect. Respect enhances power.
Humility and grace in ones moments of power enhances
dignity of an organization. Progress is often equal to the
difference between mind and mindset. I want Infosys to be a
place where people of different genders, nationalities, races
and religious beliefs work together in an environment of intense
competition but utmost harmony, courtesy and dignity to add
more and more value to our customers day after day.
Leadership is about making people say, I will walk on water for you. It is
about creating a worthy dream and helping people achieve it.
N.R. Narayana Murthy, Chairman Infosys
it should be termed as successful performance
appraisal. Secondly, if manager engages himself in
situations for timely addressing the performance
challenges and correct in-appropriate behaviour of
team members, it should be said that the
performance appraisal process is successful.
In spite of personal like-dislike, manager should
not lack in fairness and make biased opinion against
the team member contrary to documents and general
perception of other employees about that team
member. To make it successful, it is always better to
keep a listing of records on the employees
performance throughout the year. This will help
during follow-up meetings and serve as a guideline
to both the employee and the manager in identifying
areas of improvement and skills, the employee
currently performance based on objectives of
To maintain the integrity of the complete
process, managers must incorporate specific
behaviours observed and share complete appraisal
method with subordinates. Inconsistencies in the
performance appraisal process occur when
managers do not properly document observed
Q. You have vast experience of managing
people and guiding organisations. You must have
also confronted with good and bad teams in the
organisation. By your experience what can be the

few principles of highly effective teams?

Naggapa R.
A. I take your question in different way. It is not
the team which is good or bad, effective or ineffective.
It is only one or two persons or some time the leader
who makes the team effective or ineffective.
Sometimes, individual traits of one person or of the
leader bring bad name to the team. In my experience
the only principle the make a difference is the one
which you know by heart, swear by, and live by that.
Many teams operate without clear metrics and thus
make decisions which ultimately disappoint them. I
think team should assign a tangible value to every
deliverable and validate projection by keeping a track
as work goes on. In this manner even a single
member will not inflate the value and can be easily
identified if does so. This may help team leader to
make corrections.
Second principle of effective team is that leader
should keep all team communications, facts and
status reports highly visible. No member should be
kept in dark about any process or communication. It
helps members developing trust among each-other
which ultimately increase efficiency of the team.
Leader should avoid private communications on
team work. Last one which I feel helps making team
effective is to create interdependence. No one wins
unless everyone wins. It fosters insights, flexibility
and resilience. Develop a feeling among all team
members to adopt these principles voluntarily.

Readers are welcome to ask for solutions of their work place HR Problems to Labour Law Reporter or
directly to Mr. Anil Kaushik through his e-mail at : OR
(Mob.: 09829133699)
July, 2013 - 44