Annamalai University: Unit Subject NO

(LABOUR LAWS WITH ADMINISTRATIVE LAW)
(COURSE – I)
110 : LABOUR LAW – I
CONTENTS
PAGE
UNIT SUBJECT
NO
I Historical Development of Labour Law 1
II Factories Act 1948 4
III The Minimum Wages Act 1948 15
IV Payment of Wages Act 1936 30
V Payment of Bonus Act 1965 44
VI The Employees Provident Funds and Miscellaneous Provisions

Act 1952 63
VII The Employees State Insurance Act 1948 68
VIII Maternity Benefit Act 1961 83
IX Fatal Accidents Act, 1855 86
X Workmen’s Compensation Act, 1923 95
XI Trade Union Act 1926 104
Assignment 110
Model Question Paper 111
ANNAMALAI UNIVERSITY
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UNIT – I
HISTORICAL DEVELOPMENT OF LABOUR LAW

STRUCTURE
1.1. Introduction
1.2. History
1.2.1. Ancient Period
1.2.2. Medieval Period
1.2.3. Modern Period
1.3. Doctrine of Laissez Faire
1.4. Legal Terms
1.5. Questions
1.1. INTRODUCTION
The concept of industrial jurisprudence in our country developed only after
independence. Until independence the Government aimed at amelioration of the
conditions of labour and it could hardly be said to be a deal in social justice to
working class. After Independence on the basis of our constitutional aim and by
way of the direction of International Labour organization we have developed
number of measures for the benefit of Labours.
1.2. HISTORY
In the early days men were living in groups. As men lived in groups, there
arose conflict between various groups on several matters. In conflict stronger group
used to destroy the opposite groups. This divided the humanity into groups, that is
one to rule and other to be ruled. This led to growth of slavery in several parts of
the world. After various developments in the relationship created new institution of
master and servant relationship in the society. This relationship of master and
servant can be traced in three periods, that is, in the ancient period, the medieval
period and the modern period.
1.2.1. Ancient Period
In those days the people are classified in two classes namely Haves and Haves
not. Haves became masters and Have nots became Servants. Here the servants sold
their labour as commodity for their livelihood and masters purchased them for
developing their property. The relationship between the master and servant was not
based on agreement between the two. It is purely by status of the master. Here the
servants totally depend on the masters. In this period there was no law to govern
the relationship of master and servant.
1.2.2. Medieval Period
In those period the institution of feudalism of old ages was replaced by
mercantalism and freedom enterprises. This period witnessed the decline of home
handicrafts, the growth of urbanization people moved from villages to town and
city. They have participated in the industrial economy. In those days the
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relationship between master and servant came into being on the basis of
agreement, express or implied under which one promises to pay and the other
promises to serve. The dispute between the people was resolved by way of Contract
Law or Mercantile law. On matters which were not governed by the terms of the
contract, the common law was applied. The common law of master servant treated
the labour as commodity which could be purchased and used by the master to
meet his ends and purposes. The law of contract and common law of master and
servant was a product of individualistic society in the medieval period.
1.2.3. Modern Period
This was the period of technological advancement. During the periods
modernized industries was introduced. Here Industries were no longer domestic
industries they are mass scale production centers. So huge employment was
created in these industries. People also moved towards the developmental activity.
In this period as a part of the Treaty of Verasailies in 1919, the International
Labour organization was formed, emphasizing the fact that universal and lasting
peace could not be achieved unless the working class people of all nations were
united and their exploitation was prevented. These factors had tremendous impact
on individual contracts and the common law and contract law of master and
servant. The post war labour legislation of various nations changed the relationship
of master and servant. These legislation conferred rights of freedom of association,
collective bargaining and collective contracts. Both master and servants treated as
two equal human elements in industry. It is the status which was conferred by the
labour legislation on servant, made him to rise to the status of employee. So both
master and servant has got their individual rights by way of enactment of various
Labour Laws. Therefore the Master and Servant relationship by way of new rights
granted by the Labour laws turns the relation into Employer and employee.
1.3. DOCTRINE OF LAISSEZ FAIRE
The direct meaning of the word ‘laissez faire’ is let the things alone. Laissez
Faire means a state of economy where the individual is free to carry on his
occupation, trade, or business and to conduct himself with the minimum of state
control. He will have full freedom of carrying on any occupation trade or business.
Laissez Faire helps the growth of free and private enterprises without the
intervention of state whatsoever.
It was advocated in the doctrine that free play of self interest was conducive to
maximum individual benefit. It was thought on those days free private enterprises
will look after the needs of the society by supplying consumable goods at lower
costs. The preferences of the consumers are understood by their demand, prices of
the goods are fixed by demand supply mechanism .Demand supply price are inter
related to each other. They guide and control the whole economic activity in the
freedom of enterprise. The laissez faire doctrine has always been principally and
essentially capitalistic in out look and labour has been invariably exploited in this
system.
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It has been found in practice that the Laissez faire has its own evils . First this
doctrine was introduced in United States of America and later it moved to all other
countries in the world. The first opposition for this doctrine was arised in Soviet
Russia and moved to other countries. Then it has been considered that it is not safe
to let the economic system function automatically according conditions of demand
and supply. Therefore it was decided to provide effective system of economy to
deliver goods and to provide welfare legislation for the working people.
1.4. LEGAL TERMS
Laissez faire: Let the things alone.
1.5. TEST QUESTIONS
1) How the master and servant relationship changed into employer and
employee relation?
2) Define the doctrine of Laissez faire?
3) Write an essay on development of Labour Law?

4
UNIT – II
FACTORIES ACT 1948

STRUCTURE
2.1. Introduction
2.2. Definition
2.3. Authorities
2.4. Health Measures
2.5. Safety Measures
2.6. Welfare Measures
2.7. Working Hours
2.8. Working of Young Person
2.9. Leave with Wage
2.10. Special Provision
2.11. Penalties
2.12. Case Laws
2.13. Test Questions
2.1. INTRODUCTION
The provisions for the safety, health and welfare of the workers were generally
found to inadequate and unsatisfactory and even where it was provided, it did not
extend to a large mass of workers not covered by the Act . In view of the large and
growing industrial activities in the country a radical overhauling of the factory law
was called for. Hence the Factories Act 1948 was passed.
2.2. DEFINITION
WORKER
Worker is defined as any person employed directly or through any agency
including a contractor whether for wage or not in any manufacturing process, or in
cleaning the machinery or premises or in other kind of work incidental to or ceased
to connected with the manufacturing process. A watch man can be a worker within
the meaning of the terms as defined in Factories Act only if he can be brought
within the words employed in any other kind of work what so ever incidental to or
connected with the manufacturing process.
A person in order to be a worker within the meaning of Section 2(1) need not
necessarily receive wages. Therefore a person working on any manufacturing
process in a factory is a worker even though he doesn’t receive wages. The persons
employed for only selling the manufactured articles are not covered by the
expression ‘employed’ in the factory even though they happen to occupy room at
the factory for the sake of convenience.
M/S Rohtas Industries Vs Ram Lakhan Singh A.I.R.1978 S.C 849 – A person was
employed on a paper factory for supervising and checking quality and weighment of
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waste papers and rags which are the basic raw materials for the manufacture of
paper. He used to work in the precincts of the factory and in case of necessities to
work inside the factory. He was a factory worker.
M.M.R Khan Vs Union of India AIR 1990 SC 937 – There were several petition by the
workers in canteens run in the different Railway Establishments. The relief claimed
in all petitions was that the workers concerned should be treated as railway
employees and should be extended all service conditions which are available to the
railway employees. In this case supreme court classified the canteen into three
types as follows Statutory canteen one which was created under Section 46 of the
Factories Act.1948. Non statutory recognized canteen. These canteens are run in
the establishment which may or may not governed by the Factories Act which
employ less than 250 employees. However these canteens are established with the
prior approval and recognition of the railway board as per prescribed procedure.
Non Statutory Non recognized canteens which are not approved by management.
Finally it was held the first two type canteen workers are defined as workers and
last type of canteen workers does not come under workers definition.
FACTORY
Section 2(m) defines the word ‘ factory’ means any premises where ten or more
workers are working in which a manufacturing process is being carried on with the
aid of power or where twenty or more workers are working where a manufacturing
process is being carried on without the aid of power, but does not include a mine or
a railway running shed or a hotel, restaurant or eating place.
State of Bombay Vs Ardeshir Hormusji Bhiwandiwala 1956 II L.L.J.26. It was held that
lands in which the process of manufacturing of salt is carried on is a factory.
Seshan Vs Inspector of Factories 1957 (2)L.L.J 493 it was held that merely because
the manager of a factory has taken out license under the Act and had purported to
conform to the requirements of the Act and the rules by submission of half yearly
returns or by putting up a notice of the hours of work or maintenance of registers
would not bring the establishment within the scope of this Act. It has to be
established from circumstances and upon evidence that the factory falls within the
definition under this sub Section and that the workmen employed in such place
came within the definition contained in Section 2(1)
MANUFACTURING PROCESS
A premises would be a factory, if the work carried on there is in the nature of
manufacturing process. According to Sec2(K) of the Factories Act, manufacturing
process means any process for
(i) making, altering, repairing, ornamenting, finishing, packing, oiling
washing cleaning, breaking up , demolishing or other wise treating or
adapting any article or substance with a view for its use, sale, transport,
delivery or disposal or
(ii) pumping oil, water, sewage or any other substance or
(iii) Generating ,transforming or transmitting power or
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(iv) composing types for printing by letterpress, photography other similar

process or bookbinding or
(v) constructing, reconstructing, repairing ships or vessels ;or
(vi) preserving or storing any article in cold storage.
As the definition is wide enough it will include all activities which deal with
various stages in the manufacturing process for giving finishing shape to the goods.
In order to constitute manufacturing process there must be transformation.
V.P.Gopal Rao Vs Assistant public Prosecutor. A.I.R 1970 S.C 66 sun cure tobacco
leaves were subjected to the process of moistening, stripping and packing in the
company’s premises with a view to their use and transport to company’s for
manufacturing cigarettes. More than twenty persons were working. It was held that
manufacturing process was carried on in the premises and the persons employed
were workers and the premises a factory within the meaning of this Act.
2.3. AUTHORITIES
Section 8, of the Act lays down that the state Government may appoint such
persons who possess the prescribed qualification as inspectors. The state
Government may appoint a chief inspector and appoint as many additional chief
inspectors, joint inspectors and Deputy Chief Inspectors as is necessary. Under
Section 8(4). Every District magistrate shall be an inspector for this district. When
District Magistrate acts as inspector under sub Section (4) his act is executive act
and not a judicial act.
Powers of inspector
The inspector accompanied by his assistants may enter any place which is
used or which he has reason to believe is used as a factory. He may examine the
premises, plant and machinery and may require the production of any register or
any other document relating to the factory. He may also take statements of any
person which he may consider necessary for carrying out the purposes of this Act.
But no person shall be compelled to answer any question of give evidence tending
to incriminate himself.
An inspector has also the power to require medical examination of ‘Young
person’ working in the factory and also to take sample of any substance used, or
intended to be used in a factory for the purpose of finding out the substance is
injurious to the health of the workers.
2.4. HEALTH
The Act makes detailed provisions in regard to various matters relating to
health, safety and welfare of the workers. Section 11 to 20 of the Act deal with the
provison ensuring the health of the workers in the conditions under which work is
carried on in the factories. These provisions are summarized as follows
1. Cleanliness: (Section 11)
1) Every factory shall be cleaned every day
2) Every factory shall be washed every week
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3) All inside walls and partitions are painted every period of five years.
4) If they are painted with washable paint it shall be painted every three
years.
5) further all doors and windows frames and other wooden or metallic frame
work and shatters shall be carried out at least once in every period of five
years.
2. Disposal of Waste: (Section 12) – Effective arrangements shall be made in every
factory for the treatment of wastes and effluents due to the manufacturing process
carried on therein so as to render the innocuous and for their disposal. The State
government may make rules prescribing the arrangements to be made in this
regard. It may also require that such arrangements to be made are approved by
such authority as may be prescribed.
3. Ventilation and Temperature: (Section 13) – Effective and suitable provision shall
be made in every factory for securing and maintaining in every work room.
(a) Adequate ventilation by the circulation of fresh air, and
(b) Such temperature as well secure to workers therein reasonable conditions of
comfort and prevent injury to health
4. Dust and fume: (Section 14) – Where dust or fume or impurity of such a nature
as is likely to injurious or offensive to the worker is given off as a result of the
manufacturing process being carried on in a factory, effective measures shall be
taken in the factory for prevention of inhalation or accumulation of dust and fumes
in work rooms.
5. Artificial Humidification (Section 15) In respect of all factories in which the
humidity of the air is artificially increased, the state government may make rules
prescribing standards of humidification.
6. Overcrowding –(Section 16): There shall not be overcrowding in any room of the
factory so as to be injurious to the health of the workers employed therein. There
shall be at least 4.2 cubic meters of space for every worker. Exemption for this
provision may be obtained from the inspector of factory.
7. Lighting: (Section-17): In every part of the factory where the workers are working
or passing there shall be provided and maintained sufficient and suitable lighting,
natural or artificial or both.
8. Drinking water: (Section-18) In every factory, effective arrangements shall be
made to provide and maintain at suitable points conveniently situate for all workers
employed therein a sufficient supply of whole some drinking water. In every factory
wherein more than 250 workers are ordinarily employed, provisions shall be made
for cooling drinking water.
9. Latrine and urinals: (Section 19) – In every factory separate enclosed
accommodation of latrines and urinals of prescribed types for male and female
workers shall be provided for. Such accommodation shall be conveniently situated
and accessible for workers at all times.
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10. Spittoons: (Section 20) – In every factory, they shall be provided a sufficient
number of spittoons in convenient places and they shall be maintained in a clean
and hygienic condition.
2.5. SAFETY
The safety provisions are absolute and obligatory in their character and the
occupier of every factory is bound to follow them. They are contained in Sections 21
to 40.
Fencing of machinery: (Section 21) – In every factory , every dangerous part of
any machinery shall be securely fenced by safeguards of substantial construction
which shall be constantly maintained and kept in position while the parts of
machinery they are in motion or in use.
State of Gujarat Vs Jethalal Ghelabhai Patel (1964) 1 LLJ 389 – It was held the mere
fact that someone else had removed the safeguard, without the knowledge, consent
or connivance of the manager cannot provide any defence.
2. Work on or near machinery in motion: (Section 22)- where in any factory it
becomes necessary to examine any part of machinery while the machinery is in
motion. Such examination shall be made only by specially trained adult male
worker wearing tight fitting cloth, which shall be supplied by the occupier.
3. Employment of young person on dangerous machines: (Section-23) No
young person shall work on any machine to which this Section applies
(i) he has been fully instructed as to dangers arising in connection with
machine and precautions to be observed; and
(ii) he has received sufficient training to work on the machine, or is under
adequate supervision by a person who has a thorough knowledge and
experience of machine
4. Striking gear and devices for cutting off power: (Section 24) - in every factory,
suitable striking gear or other efficient mechanical appliance shall be provided and
maintained and used to move driving belt to and from fast and loose pulleys which
form part of transmission machinery. Driving belts when not in use shall not be
allowed to rest or ride upon the shafting machine. suitable devises for cutting off
power in emergencies from running machine shall be provided and maintained in
every workroom.
5. Self Acting machines (Section.25) No traversing part of a self acting machine in
any factory and no material carried there on shall be allowed to run on its outward
or inward traverse within a distance of 18 inches from any fixed structure which is
not part of the machine.
6. Casing of machinery (Section 26) – If any one sells or hires either directly or as
an agent, any machine which does not comply with provisions of Sec 26 he shall be
punishable with imprisonment up to three months or with fine up to rupees five
hundred or with both. This Section imposes liability on a seller or hirer of
machinery or his agent who sells or lets on hire any machinery driven by power for
use in a factory.
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7. Prohibition of employment of women and children near cotton openers:

(Section 27) – No women or child shall be employed in any part of a factory for
pressing cotton in which a cotton opener is at work. If the feed end and of cotton
opener is in a separated from the delivery end by a partition extending to the roof
women and children may be employed on the side of the partition where the feed
end is situated.
8. Hoists and lifts (Section 28) – In every factory every hoist and lift shall be of good
mechanical construction, sound material and adequate strength and shall be
sufficiently protected by enclosures fitted with gates. It should be properly
maintained and shall thoroughly examined by a competent person at least once in
every six months.
9. Lifting machines, chains, ropes and lifting tackles (Section 29) – in any factory,
cranes and other lifting machinery shall be of good condition. They shall be
thoroughly examined by a competent person at least once in every twelve months.
10. Revolving Machinery: (Section 30) – In every room in a factory in which the
process of grinding is carried , they shall be permanently kept near each machine a
notice indicating the maximum speed of every grindstone speed of the shaft and
spindle and the diameter of the pulley upon such shaft or spindle.
11. Pressure Plant (Section 31) – if in any factory any part of the plant or machinery
in a manufacturing process is operated at a pressure above atmospheric pressure,
effective measure shall be taken to ensure that the safe working pressure of such
part is not exceeded.
12. Floors, stairs, and means of access: (Section 32) – in every factory all floors,
steps stairs, shall be of sound construction and properly maintained. Further they
shall be kept free from obstructions and substances likely to cause person to slip
hand rails shall be provided wherever necessary.
13. Pits, sumps, opening in floors, etc (Section 33) in every factory pits, sumps,
fixed vessels, tanks, openings in the ground or in the floor shall be securely covered
or securely fenced.
14. Excessive Weights: (Section 34) – No person shall be employed in any factory to
lift, carry or move any load so heavy as to likely to cause him injury.
15. Protection of eyes: (Section 35) In every factory, screens or suitable goggles shall
be provided for the protection of persons employed on or in immediate vicinity of
mechanical or other processes which involve any danger of injury to the workers
eye sight.
16. Precautions against dangerous fumes: (Section 36) in any factory no person
shall enter or be permitted to enter any chamber, tank, pipe or other confined
space in which dangerous fumes are likely to be present to such an extents to
involve risk of persons being overcome thereby unless it is provided with a manhole
of adequate size or other effective means.
17. Precautions regarding the use of portable electric light: (Section 36-A). No
portable electric light or any other electric appliance of voltage exceeding twenty
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four volts shall be permitted for use inside any chamber tank or other confined
space in the factory.
18. Precautions against explosive or inflammable dust Gas etc.: (Section 37) –
where any factory any manufacturing process produces dust, gas, fume which is
likely to explode on ignitions all practicable measures shall be taken to prevent any
such explosion.
19. Precaution in case of fire: (Section 38) – Every factory shall be provided with
such means of escape in case of fire, as may be prescribed.
20. Power to require specification of defective parts or tests of stability (Section-39)
if it appears to the inspector that any building, machinery or plant in a factory may
be dangerous to human life or safety, he may ask the occupier or the manager or
both of the factory to furnish drawings, specifications and other particulars to
determine the safety, to carry out the tests in the specified manner.
21. Safety of building and machinery: (Section 40)- if any building or part of
building or machinery or plant in a factory is in such a condition that it is
dangerous to human life or safety, the inspector may serve on the occupier or the
manager in writing specifying the measures which in his opinion shall be adopted
and requiring them to be carried out before a specified date.
22. Safety officers: (Section 40-B) wherein one thousand or more workers are
ordinarily employed in the factory the occupier shall employ such number of safety
officers.
Power to make rules to supplement the above provisions (Section-41) The state
government may make rule requiring the provision in any factory of such further
devices and measures for securing the safety of persons employed therein as it may
deem necessary.
2.6. WELFARE
In the words of Royal Commission, the provision of suitable facilities like
washing facilities for all employees is desirable and here many factories are
deficient. The workers who live in crowded areas have inadequate facilities for
washing and bathing facilities. We recommend that for workers engaged in dirty
processes, the provision for washing place and water should be made obligatory.
Sections 40 to 50 deal with such like facilities for the welfare of the workers.
The various provisions in this regard are as follows.
1) ANNAMALAI UNIVERSITY
Washing Facilities: (Section 42) - in every factory adequate and suitable
facilities for washing for male and female workers shall be provided and
maintained for the use of workers therein.
2) Facilities for storing and drying clothing (Section 43) suitable place for
keeping cloths of working people is to be provided.
3) Facilities for sitting: (Section 44) – In every factory, suitable arrangements
for sitting shall be provided and maintained for all workers who are obliged
to work in a standing position.
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4) First Aid appliance: (Section 45) – In every factory there shall be first aid
boxes or cub boards with prescribed contents. there shall be at least one
such box for every one hundred fifty workers. In Every factory wherein more
than five hundred workers are ordinarily employed, there shall be provided
and maintained an ambulance room containing the prescribed equipment
under the supervision of medical and nursing staff.
5) Canteens: (Section 46) – Any specified factory where in more than two
hundred and fifty workers are ordinarily employed a canteen or canteens
shall be provided and maintained by the occupier for the use of the workers.
6) Shelters rest room and lunch rooms (Section 47) – in every factory wherein
more than one hundred fifty workers are ordinarily employed there shall be
provision for shelters, rest room and suitable lunch room. However any
canteen maintained in accordance with the provisions of sec 46 shall be
regarded as part of this requirement there is no need to keep separate Lunch
room.
7) Crèches: (Section 48)- In every factory wherein more than thirty women
workers are ordinarily employed they shall be provided and maintained a
suitable room for use of children under the age of six years of such women.
8) Welfare officers: (Section 49) – in every factory wherein 500 or more workers
are ordinarily employed the occupier shall employ in the factory such
number of welfare officer as may be prescribed.
9) Power to make rules: (Section 50) The state government may make rules
exempting subject to compliance with such alternative arrangements of the
welfare of workers as may be prescribed.
2.7. WORKING HOURS OF ADULTS
The rules to the regulation of hours of work of adult workers in a factory are as
follows:
1. Weekly hours: (Section 51) – No adult worker shall be required or allowed to work
in a factory for more than forty eight hours in any week.
2. Weekly Holiday (Section 52) – Every adult worker in a factory shall be allowed a
holiday during a week as such no adult worker shall be allowed to work in a factory
on the first day of the week which is Sunday.
3. Compensatory holidays: (Section 53) – where a worker is deprived of any of the
weekly holidays under Section 52 he shall be allowed a compensatory holidays of
equal number to the holidays so lost.
4. Daily hours: (Section 54) – subject to the above rule no adult worker shall be
required or allowed to work in a factory for more than nine hours in any day. But in
order to facilitate the change of shift, this limit may be exceeded. This can, however
be done with the previous approval of the Chief inspector of factories.
5. Intervals for rest: (Section 55) – The periods of work of adult workers in a factory
each day shall be so fixed that no period shall exceed five hours and that no worker
shall work for more than five hours before he had an interval for rest of at least half
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an hour. But the total number of hours worked without an interval should not
exceed six.
7. Spread over: (Section. 56) – The periods of worker, in a factory shall be arranged
that inclusive of this intervals for the rest they shall not spread over more than ten
and a half hours in any day.
8. Night Shift (Section 57) – where a worker in a factory works on a shift which
extends beyond mid night his weekly or compensatory holiday for a whole day shall
mean a period of twenty four consecutive hours beginning, when his shifts ends .
9. Prohibition of overlapping shifts (Section 58) – Work shall not be carried on in
factory by means of system of shifts so arranged that more than one relay of
workers is engaged in work of the same kind at the same time.
10. Over time wages (Section 59) – Where a worker works in a factory for more than
nine hours in any day or more than forty-eight hours in any week, he shall in
respect of overtime work be entitled to wages at the rate of twice his ordinary rate of
wages.
Restriction of Double Employment: (Section 60) – No adult worker shall be
required or allowed to work in any factory on any day on which he has already been
working in any other factory, save in such circumstances as may be prescribed.
11. Notice of periods of work for adult workers : (Section 61) A notice of periods of
work for adult workers shall be displayed and correctly maintained in every factory.
It shall show clearly for every day the periods during which adult workers may be
required to work.
12. Register of adult workers: (Section 62) – The manager of every factory shall
maintain a register of adult workers showing
(a) the name of each adult worker in the factory;
(b) the nature of his work;
(c) the group, if any, in which he is included;
(d) such other particulars as may be prescribed.
The power to make exempting rules and orders was in the hands of State
Government, State Government may make rules that the provisions of Sec 51 to 66
shall not apply to certain definite person. (Sec 64-65)
2.8. EMPLOYMENT OF YOUNG PERSONS
A young person means a person who is either a child or an adolescent person
who has completed his fifteenth year of age but has not completed his eighteen
year.
Adolescent may be allowed to work in a factory if - a certificate of fitness for
such worker is in the custody of the manager of the factory A token giving a
reference to such certificate must be wearied by the adolescent at work
Certificate of fitness (Section 69) – Certificate granted to a young person by a
certifying surgeon after, examining him and ascertaining his fitness for work in a
factory.
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Working hours and notice of period of work of children: (Section 71-72) No

child shall be employed or permitted to work in any factory for more than four and
half hours in any day; and during night shifts.
Register of child Workers (Section 73) : the manager of every factory in which
children are employed shall maintain a register of child workers showing the name
of each worker in the factory, nature of work, the number of his token.
2.9. ANNUAL LEAVE WITH WAGE
Section 78 – 84 provide for the grant of certain period of leave with wages to
workman.
Every worker who has worked for a period of two hundred forty days or more
in a factory during a calendar year eligible for the leave wage as follows
If an adult, one day for every twenty days of work performed by him during the
previous calendar year.
If a young person one day for every fifteen days of work, performed by him
during the previous calendar year.
Total number of days of leave that may be carried forward to a succeeding year
shall not exceed thirty in case of adult and forty days in case of young person.
2.10. SPECIAL PROVISON
Under Section 85 of the Factories Act the State government may extend the
operation of the provisions of this Act to any place wherein manufacturing process
is carried on
Not with standing that the number of persons employed therein is less than
ten and not more than twenty if working without the aid of power. Even where the
persons working are not employed by the owner but are working with the
permission or under agreement with such owner the Act will apply.
Section 85 authorizing the state to issue notification applying the Act to any
place which involves the consequence that the place is deemed factory and the
persons working therein are deemed workers is not discriminatory so as to infringe
Article 14 of the constitution nor does the provision amount to authorizing
imposition of unreasonable restriction upon the fundamental right of the owner of
the factory to carry on his business.
Section 79 clearly applies to workers who work for the full period of
employment during factory hours and it may appear appropriate that the benefit of
annual leave with wages should be extended to persons who do not work for the
hours fixed for the establishment. If Section 79 made applicable by notification
under Section 85, it would apply to those workers only who work for the full period
prescribed under Section 61,71,and 66 (1) of the Factories Act by the employer for
not less than the number of qualifying days.
2.11. PENALTIES
Section 92 of the Factories Act deals with penalty for contravening any
provisions of this Act or rules made there under making the occupier or manager
14
responsible. There is nothing unreasonable for the occupier and the manager of the
factory being made responsible for the observance of the provisos of the Act and the
rules and providing that they shall be guilty of an offence if there is contravention of
any of those provisions. Only by such provisions it would be possible to effectively
enforce the provisions of the Act and the rules. For the first time, in this Section 92
provides for the imposition of sentence imprisonment.
2.12. CASE LAWS
1. Rohtas industries vs Ram Lakhan singh AIR 1978 SC 849.
2. M.M.R.Khan Vs Union of India AIR 1990 SC 930.
3. State of Bombay Vs Ardeshir Hormuji Bhiwandiwalla 1956 II L.L.J.26.
4. V.P.Gopala Rao Vs Assitant Public Prosector AIR 1970 SC 68.
5. State of Gujarat Vs Jethlal Ghelabai Patel 1964.1 l L.LJ 389.
2.13. TEST QUESTIONS
1) Define ‘Factory’ under Factories Act, 1948.
2) Define the term ‘Worker’ under Factories Act 1948.
3) Summarise the provisions of the Factories Act relating to the Health,
Safety and Welfare of the workmen.

15
UNIT – III
THE MINIMUM WAGES ACT 1948

STRUCTURE
3.1. Introduction
3.2. Object
3.2.1. Constitutional Validity
3.3. Salient Features of the Act
3.4. Definition
3.5. Fixation of Minimum Wages
3.6. Machinery for Fixation Minimum Wages
3.7. Miscellaneous
3.8. Case Laws
3.9. Test Questions
3.1. INTRODUCTION
Legislation to promote the welfare of the workers is the Minimum Wages Act.
This act which was enacted in 1948 has its roots in the recommendation adopted
by the International Labour Conference 1928. The object of the Act is to provide for
fixing minimum rates of wages in certain employment and this seems to us to be
clearly directed against exploitation of the ignorant, less organized and less
privileged members of the society by the capitalists. Under the Constitution of India
the state is now expressly directed to endeavor to secure to all workers not only
bare physical subsistence but a living wage and conditions of work ensuing a
decent standard of life and full enjoyment of leisure. The Directive Principles of
State policy merely lays down (Art 43) the foundation for appropriate social
structure in which the Labour will find its place of dignity legitimately due to it in
lieu of its contribution to the progress of national economic prosperity. The Act has
since its enactment been amended on several occasions apparently to make it more
effective in achieving its object which has since secured more firm support from the
Constitution.
The Fair wage Committee, formulated the concepts of living Wage, fair wage
and minimum wage. The Fair wage committee’s report published by the
Government of India has broadly approved.
Living Wage: It is a wage which will enable him to provide his family with all the
material things which are needed for their health and physical well being and will
be enough to enable him to qualify to discharge his duties as a citizen
The living wage should enable the male earner to provide for himself and his
family not merely the bare essentials of food, clothing and shelter, but a measure of
frugal comports including education for the children, protection against ill health,
requirements of essential social needs and a measure of insurance against the
important misfortunes including the old age.
16
Fair Wage: Fair wage is a mean between the living wage and the minimum wage
Subsistence Wage: This is a wage which would be sufficient to cover the bare physical
needs of a worker and his family, that is a rate which has got to be paid to the
worker irrespective of the capacity of the industry to pay.
Statutory Minimum wage: This is the wage, however, is the minimum which is
prescribed by the statue and it may be higher that the bare subsistence or
minimum wage providing for some measure of education, medical requirements
and amenities.
The Fair wage Committee’s Report has been broadly approved by the Supreme
court in Express News Papers (p) Ltd vs Union of India AIR 1958 SC 578.
3.2. OBJECT
The Act provides for fixation of minimum wages by the Central Government for
employment detailed in the schedule of the Act and carried on by or under the
authority of the Central Government, by railway administration or in a relation to a
mine, oil field or major port or any corporation established by a Central Act, and
the State Government for other employments covered by the schedule of the Act.
In Edward Mills Co. Ltd. vs. State of Ajmer 1954 (L.L.J. 686) it was laid down that the
object of this Act is to prevent exploitation of the workers and for this purpose it
aims at fixation of minimum wages which the employer has to pay. The legislature
intended to apply the Act to those industries or localities in which by reason of
causes such as unorganized Labour or absence of machinery for regulation of
wages, the wage paid to workers were in the light of the general level of wages and
subsistence level inadequate.
3.2.1. Constitutional Validity of the Act
In Bijoy Cotton Mill Vs Union of India AIR 1955 S.C 33 dealing with the question of
availability of labour for work at lesser wages than the minimum wage, the
Supreme Court observed as follows “It can scarcely be disputed the securing of
living wages to workers which ensure not only bare physical subsistence but also
maintenance of health and decency is conducive to the general interest of public.
This is one of the Directive Principles of State Policy embodied in Art 43 of our
Constitution. If the labourers are to be secured in the enjoyment of minimum wages
and they are to be secured in the enjoyment of minimum wages and are to be
protected against exploitation by their employers. It is absolutely necessary that
restrictions should be imposed upon their freedom of contract and such restrictions
cannot in sense be said to be unreasonable. On the other hand the employers
cannot be heard to complain if they are compelled to pay minimum wages to their
Labourers even though the Labourers on account of their poverty and helplessness
are willing to work on lesser wages. On the question of constitutional validity it was
held in this case that the restrictions imposed by the Minimum Wages Act, though
they interfere to some extent with the freedom of trade or business guaranteed
under Art 19(1) (g) of our Constitution, are reasonable and being, imposed in the
interest of general public, are protected by the terms of clause (6) of Art 19.
17
The Supreme Court in Crown Aluminum Works Ltd Vs Workers A.I.R. 1958 S.C. 30
has observed that no industry has a right to exist unless it is able to pay its
workmen at least a bare minimum wage. If an employer cannot maintain his
enterprise without cutting down the wages of his employees below a bare
subsistence or minimum wages, he would have no right to conduct his enterprise
on such terms.
In Madhya Pradesh Mineral Industry Association Vs. Regional Labour Commissioner.
(Central) and others 1960 2 L.L.J 254 the Supreme Court has held that the provisions of
the Minimum Wages Act are intended to achieve the object of doing social justice to
workmen employed in the scheduled employments by prescribing minimum rates of
wages for them and so, in construing the said provisions the court should adopt
what is sometimes described as a beneficent rule of constructions. If the relevant
words are capable of two constructions, preference may be given to that
construction which helps to sustain the validity of the impugned notification; but it
is obvious that an occasion for showing preference for one construction rather than
the other can legitimately arise only when two constructions are reasonable or
possible not other wise.
In Hydro (Engineers) Private Ltd. Vs. Their Workmen A.I.R. 1969. S.C 182, the Supreme
Court observes as follows: “The Act contemplates that minimum wage rates must
ensure for him not only his subsistence and that of his family, but also preserve his
efficiency as a work0.man. It should therefore, for the preservation of the workers
and so must provide for some measure of educational, medical requirements and
amenities.
In Unichoyi and others Vs. State of Kerala 1961 (1) L.L.J. 631 it was held that the Act
contemplates that minimum wage rates should be fixed in the scheduled industries
with the dual object of providing sustenance and maintenance of the worker and
his family and preserving his efficiency as a worker. In fixing the minimum wages
as contemplated by the Act, the hardship caused to individual employers or other
inability to meet the burden has not relevance.
3.3. SALIENT FEATURES OF THE ACT
Some of the salient features of the Act are
1) It provides for the fixation of (a) minimum time rate of wages (b) minimum
rate (c) a guaranteed time rate: and (d) overtime rate for different classes of
2)
work for adults and children
The minimum rate consists of a basic rate of wages and a cost of living
allowance. All-inclusive rates
3) Wages shall be paid in cash though, the Government can authorize that
minimum wages be paid wholly or partly in kind.
4) It lays down that the cost of living shall be computed by the competent
authority, in case of Central Government undertakings, the Director Labour
Bureau is the competent authority.
18
5) It empowers the Government to fix the hour of work per day, provide weekly
holiday and payment of overtime wages in regard to scheduled employment
in which minimum rates of wages have been fixed,
6) It provides for appointment of Inspectors, and authorities to hear and decide
claims arising out payment of wages, less than the minimum rates of wages.
3.4. DEFINITION
EMPLOYER
The word employer means any person who employs directly one or more
employees in any scheduled employment in respect of which minimum wages has
been fixed; Employer includes except in sub-Section (3) of Section 2 any person
named under clause (f) of sub-Section (1) of Section 7 of the Factories Act 1948 as
manager or any person or authority appointed in any scheduled employment under
the control of any Government. The term includes any person in any scheduled
employment, under local authority appointed by such authority for supervision and
control of employment, in any other case where there is carried on any scheduled
employment in respect of which minimum wages have been fixed, any person
responsible to the owner for supervision and control of the employees. A managing
agent is an employer, Private engineering contractor engaged on Government
contract work is an employer, drivers of the lorries, which are hired out to him
drivers at agreed rates.
WAGES
Wages means all remuneration capable of being expressed in terms of money
and includes house rent allowance, but does not include the value of house
accommodation, or any other amenity excluded by the Government. It does not
include the contribution by the employer to the Provident Fund or any travelling
concession or any gratuity payable.
SCHEDULE OF EMPLOYMENT
Scheduled employment means an employment specified in the schedule at the
end of this Act or process or any branch of work forming part of such employment.
MINIMUM WAGE
The minimum wage fixed under the Minimum Wages Act, are only what an
employer has to pay, whether the workmen have organized themselves into union
and demanded fair wages or not, whether there has been an award of an Industrial
Tribunal regarding the wages or not. The expression “minimum wages” is not
defined in the Act, presumably because it would not be possible to lay down a
uniform minimum wages for all industries throughout the country, on account of
different and varying conditions prevailing from industry to industry and from one
part of the country to another.
In Sangam Press vs. Workmen A.I.R. 1975 S.C. 2035, the difference between the
minimum wages and fair wages is laid down. In case of fair wages, besides the
principle of industry-cum-region, the company’s capacity to bear the financial
burden must receive due consideration. But mere hopeful observation made in the
directors’ annual report cannot be basis for awarding increased wages because
19
such observations are sometimes made to inspire hope and confidence in

shareholders and they cannot be a substitute for actual audited figures.
3.5. FIXATION OF MINIMUM WAGES
Section 3 provides for the fixation of minimum wages by the Government. Sub-
Section (1) provides that the Government may refrain from fixing the minimum
wages if the workmen employed in respect of a scheduled employment is less than
one thousand employees. Sub-Section (2) provides that the Government may fix a
minimum time rate, a minimum piece rate, a guaranteed time rate and an overtime
rate.
The object of enacting the Act was to ameliorate the conditions of unorganized
labour and to prevent exploitation of labour by management. The bargaining power
of unorganized Labour was weak and therefore there was necessity for fixation of
minimum wages. In the case of those establishment in which industrial disputes
have been raised in respect of rates of wages and they are referred to a tribunal, it
was assumed that the employees had sufficient bargaining power and could agitate
their grievances regarding the fixation of wages, before a Tribunal. In the case to
those industrial establishment which came under category No.1 referred to above
notification issued under the Act should be made inapplicable.
In fixing or revising minimum rates under Section 3(3) different minimum
rates of wages may be fixed for (I) different scheduled employments: (ii) different
classes of work in the same scheduled employment: (iii) adults, adolescents,
children and apprentices: (iv) different localities.
In fixing or revising minimum rates under clause (b) of sub-Section (3) of
Section 3, minimum rates of wages may be fixed by any one or more of the following
wage periods namely (I) by the hour (ii) by the day (iii) by the month and (iv) by
such other wage period as may be prescribed.
In Chandra Bhavan Boarding and Lodging, Bangalore vs. State of Mysore A.I.R. 1970 S.C.
240 it was laid down that fixing different rates of minimum wages for different
industries or in different localities by dividing the State in to several zones will be in
conformity with Section 3 of the scheme of the Act. For the purpose of preventing
exploitation of labour the Government is authorized to take steps to prescribe
minimum rates of wages in the scheduled industries. The Act prescribes minimum
wage rates, which a welfare state assumes every employer must pay before the
employees’ labour.
In Unichoyi vs. State of Kerala A.I.R. 1962 S.C. 12 it was held that the minimum
rates of wages are fixed with the object of providing sustenance and maintenance to
the worker and his family and preserving his efficiency as a worker. The minimum
prescribed is not the economic or the industrial minimum, but contains several
components which take the minimum wage near the level of fair wage and then the
effect of the statutory provision, capacity to pay may no doubt have to be
considered.
20
Section 4 of the Act provides that the minimum rates of wages fixed or revised
may consist of a basic rate of wages and a special allowance at a rate to be adjusted
which is linked with the cost of living index number applicable to the workers. It
may consist of a basic rate of wages with or without cost of living allowance and the
cash value of concession in respect of the commodities supplied at concessional
rates or an all inclusive rate allowing for the basic rate, the cost of living allowance
and the cash value of the concession if any. The special allowance mentioned in
Section 4(1) of the Act is a variable amount forming part of the wages being linked
with cost of living index number.
In fixing the minimum wages the following considerations are irrelevant;(I) the
fact that an employer may find it difficult to carry on his business on the basis of
minimum wages 2) The financial capacity of the employer to pay. 3) The fact of the
employer having incurred losses during the previous year 4) Employer’s difficulties
importing raw materials. 5) The region cum industry principles.
The financial capacity of the employer and the wage scale prevailing
incomparable industries in the region are relevant. Minimum wages must be paid
irrespective of profits, the financial condition of the establishment or the availability
of workmen on lower wages. The minimum wages is independent of the kind of
industry and applies to all alike big or small. It sets the lowest limits below which
wages cannot be allowed to sink.
3.6. MACHINARY FOR FIXATION OF MINIMUM WAGES
Section 5 lays down that infixing the minimum wages or revising the minimum
rates of wages under the Act the Government shall either
1) appoint an advisory committee for fixing the minimum wages or
2) publish its proposal in the Official Gazette
and specify a date not less than two months from the date of notification on which
the proposals, will be considered. Once the Government fixed the minimum rates of
wages it shall come into force on the expiry of three months from the date of its
issue. The exercise of power to fix or revise the minimum wage in sub-Section (2) is
limited only to employments specified in the schedule. Under Section 27 of the Act
appropriate government may add any employment to the schedule.
In Chandra Bhawan Boarding and Lodging Bangalore vs. State of Mysore and another.
A.I.R. 1970. S.C.2042 it was held that the power-conferred upon the Government
under Section 5 is neither arbitrary nor unguided. Therefore sub-Section (1) does
not offend Article 14 of the Constitution. The main object of the Act is to prevent
sweated labour as well as exploitation of unorganized Labour. It proceeds on the
basis that it is the duty of the State to see that at least minimum wages are paid to
employees irrespective of the capacity of the industry or the unit to pay the same. If
the rates prescribed are reasonable, but even if they would adversely affect the
industry or even a small unit as the case may be has no right to exist.
In Bidi Leaves and Tobacco Merchants Association, Gondia vs. State of Bombay A.I.R.
1962 S.C. 486 it was held that the power of the Government to prescribe minimum
21
rates of wages or to revise them does not include power to vary other terms of
contract.
In Y.A Mamarde vs. Authority under the Minimum Wages Act. A.I.R. 1972 S.C 1721. The
minimum wages of unskilled labourers of Nagpur Corporation was fixed in 1951.
By a subsequent notification in 1956 revised rates of minimum wage were fixed but
the word “unskilled labour” was not mentioned in the latter notifications. It was
held that the second notification did not apply to all categories of Labour. It was
confined to skilled Labour.
In Tourist Hotel, Hyderabad Vs State of Andhra Pradesh and another 1975(1) L.L.J. 211 it
was held that a committee appointed under Section 5 of the Act is only an advisory
body and the Government is not bound to accept any of its recommendations.
Consequently, procedural irregularity, if any could not vitiate the final report of the
committee or the decision of the Government fixing the minimum wages.
FORMATION OF COMMITTEE
When Section 5 authorizes the committee to advise, the Government must
supply necessary information to the committee to enable it to tender advise. The
Committee can only counsel and the Government is not bound by the advice. Under
Section 5, the ultimate judge of what should be the minimum rates of wages of the
employees is the Government. It is not the committee. It is not even the Court. It is
the Government, which is responsible to the legislature, if it administers the Act
badly and comes to conclusions, which are open to criticism as not being in the
interest of the employers or the employees. The court is only concerned to enquire
whether a proper consultation did take place.
In Bhiksua Yamasa Kshatria Vs. Sangammer Akola Taluka Bidi Kamgar Union A.I.R. 1963,
S.C. 806; 1962(2) L.L.J 736, it was held that the Government has power to enhance the
rate of wages mentioned in the proposals published. The Government has power to
fix different minimum wages for different industries or in localities.
Section 7 provides for the appointment of an advisory board by the
Government for the purpose of co-coordinating the work of committees and
advising the Government for fixing and revising the minimum rate of wages.
STRUCTURE OF THE COMMITTEE
Section 8 provides for the appointment of Central Advisory Board consisting of
persons nominated by the Government representing the employers and employees
who are equal in number and independent person not exceeding one third of its
total number of members. It advises the Central and State Government in fixing
and revising the minimum rates of wages, co-ordinates the work of Advisory
Boards. The Chairman shall be one of the independent people, appointed by the
Central Government. Section 9 provides. That each of the Committee, sub-
committee and Advisory Board shall consist of nominated persons, who shall be
representing the employees and employers in the scheduled employment equal in
number. The Government shall appoint independent persons not exceeding one-
22
third of the total number of members and shall appoint one of such independent
persons to be the chairman.
The expression “independent person” means a person other than those who
are employer in relation to the scheduled employment and employees in relation to
the scheduled employment in respect of which minimum wages are sought to be
fixed. In Gangadaran Pillai Vs. State of Kerala and others 1968 (I) L.L.J. 390 it was held
there is no infringement of Section 9 by the nomination of Government Officials to
be independent members of the advisory board. The question whether a
Government Officials could be appointed on a board as an independent person has
been set at rest by a decision of the Supreme Court
In the State of Andhra Pradesh Vs. Narayana Velur Beedi Manufacturing Factory and
others 1973 (1) L.L.J. 476, the Court held that the fact that the person nominated to
function as independent member in the committee is a Government Official, is no
bar to such nomination.
Section 9 does not require that the representative of employees should actually
be employees in the employment in question, nor does it require that a person who
has experience or knowledge in one capacity or another of the problems of
employees in a particular industry cannot represent those employees for the
purpose of nomination under Section 9. Similarly, representative of employer need
not be a person engaged for profit in a particular employment.
No procedure has been prescribed in the Act as to the method which the
Advisory Board is to adopt before making its recommendations to the State
Government. It can devise its own procedure and collect some information by
appointment of a sub-committee consisting only of some of its members.
AUTHORITY UNDER THE ACT
Section 19 of the Act authorizes the Government to appoint such person as
inspectors for the purposes of this Act and also defined the local limits within which
the inspectors shall exercise their function. An inspector appointed under this Act
may enter at all reasonable hours. Any premises where employees are employed at
work or workers in any employment where minimum rates of wages have been
fixed, for examining any register or record of wages or notices required to be kept
under this Act. He may examine any person whom he finds in any such premises or
place or employed therein or an employee to whom work is given out of therein. He
may require any person given out work and any out workers to give information
with respect to the names and addresses of the person to, for and from whom the
work is given out or received, and with respect to the payments to be made for the
work.
Such inspector may seize or take copies of register, record of wages of notices,
which is relevant for the purpose of proving an offence under the Act which he has
reason to believe has been committed by an employer.
In Sarpanch Gram Panchayat Vs. Ramgiri A.I.R. 1968 S.C. 222 it was held that
revenue officers appointed as Inspectors are under the administrative control of
23
Commissioner and Collector and they have no powers to give relief under Section
20(2), but have large powers of supervision and control under Section 19.
Section 10 provides that the Government may correct clerical or arithmetical
error in any order fixing the minimum rates of wages or any error arising therein
due to any slip or omission by a notification in the Official Gazette.
Section 11 provides that the Government may authorize the payment of
minimum wages either wholly or partly in kind where it is customary. The
minimum wages payable under this Act shall be paid in cash. The Government may
also authorize the supply of essential commodities at concessional rates. Section 12
lays down where notification under Section 5 is in force, the employer shall pay to
every employer engaged in a scheduled employment under him wages which is not
less than the minimum rate of wages fixed by such notification for that class of
employees in that employment without any deduction. The Section shall not affect
the provisions of the Payment of Wage Act 1936.
WORKING HOURS
Section 13 provides that where the minimum wages have been fixed under the
Act, the Government may fix the number of hours of work in a working day
inclusive of one or more intervals, and may also provide for a day of rest with
remuneration in every period of seven days. The Government may provide for work
done on a rest day at a rate not less than the overtime rate. The provisions of sub-
Section (1) of Section 13 shall apply to the following employees subject to conditions
prescribed.
(a) Employees engaged in urgent work or in any emergency, which could not be
prevented.
(b) Employees engaged in preparatory work or complimentary work, which must
be carried on outside the limits, lay down.
(c) Employees whose employment is intermittent.
(d) Where for technical reasons the work has to be completed by the employees
engaged, before the duty is over.
(e) Employees engaged in work, which could not be carried on except at times
dependent on the irregular action of natural forces.
Under Rule 24 of the Minimum Wages (Tamil Nadu) Rules 1953, the number of
hours, which shall constitute a normal working day, shall be:
a) In the case of adult 9 hours, b) in the case of child 4½ hours and c) in the case of
an adolescent employed in any plantation 6½ hours.
Under Section 14 where an employee works in excess of the number of hours
in working day, he shall be paid for every hour or part of the hour so worked at a
rate fixed by the Government. Rule 26 of the Minimum Wages (Tamil Nadu) Rules
1953 provides that, when a worker works on any day for more than 48 hours in any
week, he shall in respect of overtime work, be entitled to wages: a) in the case of
Agriculture at one and a half times the ordinary rate of wages, (b) in the case of any
scheduled employment, at double the ordinary rate of wages.
24
Section 15 provides that, where an employee to whom the minimum rate of

wages has been fixed under this Act, works on any day for period less than
requisite number of hours in a normal working day, he shall receive wages for a full
normal working day, unless the failure to work and not because the employer
omitted to provide him with work.
The object of the Act is to ensure some sort of industrial peace and harmony
by providing that labour cannot be exploited and must at least be provided with
wages, which are fixed at certain minimum rates. It would go against such a
principle, if the court were to uphold that persons, who can not work for more than
half a day should receive, what others working for a full day to get.
In Pabbojan Tea Co.Ltd. Vs. Deputy Commissioner, Lakhmipur and others 1967 (2)
L.L.J.872 it was held that sub-normal workers are not entitled to full minimum
wages without performance of a normal day’s work.
Section 19 provides that where an employee performs two or more classes of
work to each of which different minimum rate of wages is applicable, the employer
has to pay the minimum rates of wages, which is in force in respect of each such
class.
Section 17 provides, that where a person is employed on a piecework for which
minimum time rates has been fixed, he shall be paid wages at not less than the
minimum time rate.
AUTHORITY UNDER THE ACT TO DECIDE
Section 20 empowers the Government to appoint an authority to hear and
decide: - (I) any claim arising out of payment of less than the minimum rates of
wages:(ii) and work done on such days under clause (b) or (c) of Section 13: (iii) and
claim of wages at the overtime rate, under Section 4, to employees employed.
The following persons may be appointed as an authority to decide the claim:-
(a) any commissioner for workmen’s Compensation, (b) any officer of the Central
Government exercising functions as a labour Commissioner for any region, (c) any
officer of the State Government not below the rank of a Labour commissioner, (d)
any other officer with an experience as a judge at a civil Court or as a stipendiary
magistrate.
The following persons may apply to the authority for a direction a) the
employee himself b) any legal practitioner authorised in writing to act on his behalf,
c) any official of a registered Trade Union authorised in writing to act behalf of the
employee d) any inspector e) any person acting with the permission of the authority.
The Section relates to claims arising out of contravention in the past by the
employer of the statutory obligation, to pay wages imposed upon him by Section 12
(1) of the Act, This Section is concerned with past claims i.e., accrued wages, and
not future claims. When an application under sub Section (2) is made before the
authority, it is for a direction for payment to the employer of certain wages which
the employer was bound by virtue of statutory obligation under Section 12 (1) to
pay and which he failed to pay, Sub-Section (3) deals with directions which the
25
authority can make on an application entertained by it, under sub-Section (2) That
sub-Section provides for directions for the payment not only of the difference
between the wages actually paid and the minimum wages payable, but also of
compensation for non-payment in time by the employer of the statutory wages, The
award of compensation is in the direction of the authority and it cannot exceed ten
times the amount, by which the minimum wages payable, to the employee exceeded
the amount actually paid.
Under Section 20 (3) the Authority has to hear the applicant and the employer
or give them an opportunity of being heard. Though Section 20 (3) provides for a
further inquiry, but this has to be at the discretion of the authority. The nature and
scope of enquiry would depend on the exact controversy raised in the case.
The moment of a person passes out from the category of an employee to that of
a non-employee, which will include an ex-employee, he ceases to be a member of
the class of persons for whom the remedy under Section 20 of the Act has been
enacted. The word employee as defined in Section 2(i) of the Act does not include an
ex-employee and the only person who can maintain an application under Section
20 of the employer on the date on which he presents an application under the
provisions of the Act.
A reading of this Section would no doubt indicate that a claim for minimum
wages can be made by a workman under this Section within a period of six months
as a matter of a right and after the expiry of the period of six months the Authority
has the discretion to admit such an application, if the applicant shows sufficient
cause for the delay. The Minimum wages Act was enacted in the year 1948, but
Section 33C (2) of the Industrial Disputes Act was inserted in the year 1956, and
came into force March 10,1957.
Many High Courts have held that Labour Court under Section 33C (2) of the
Industrial Disputes Act has jurisdiction to entertain an application to enforce a
claim based on a right under the Minimum Wages Act and that language of Section
33 C (2) of the Industrial Disputes Act, is wide enough to include claims based on
rights arising under the Minimum Wages Act.
Though the Supreme Court, ATHANI MUNICIPALITY CASE A.I.R 1969 S.C. 1335 has
left open the question, whether an application under Section 33 C (2) of the
Industrial Disputes Act 1947 can or cannot be entertained by a Labour court, if an
application for the same relief is enterainable by the authority under Section 20 (1)
of the Minimum Wages Act, It has been held, in clear terms, that such of the claims
as could not have been made before the authority under Section 20 of the Minimum
Wages Act can be agitated in an application under Section 33 C (2) of the Industrial
Disputes Act.
In KILARU GOPALA RAO Vs. LABOUR COURT HYDERABAD AND ANOTHER 1977
LIC.40, it was held, that as the workman in that case could not have resorted to the
remedy provided by Section 20 of the Minimum Wages Act at the time, If he filed
26
the application under Section 33 C (2) of the Industrial Disputes Act, that
application was maintainable
Under Section 20 (2) an application for any claim shall be prevented within 6
months, from the date on which minimum wages or other amount become payable.
But any application may be admitted after six months, if the applicant satisfies the
authority, that he had sufficient cause for not making the application within the
prescribed period. The authority functioning under this Act has, in its discretionary
power to condone the delay in presentation of a claim.
That the authority under Section 20 (i) has all the powers of a civil court for
the purpose of: - (a) Taking evidence: (b) enforcing the attendance of witnesses, and
(c) compelling the production of documents. Such authority shall be deemed to be a
Civil Court for all the purposes of Section 195 and chapter XXXV of the Code of
Criminal procedure.
Recovery of the Amount under order of the Authority:
Any amount directed to be paid by the authority may be recovered.
(a) if the authority is a Magistrate, by the authority, as if it were a fine imposed by
the authority as a Magistrate, or
(b) if the authority is not a Magistrate, by any Magistrate to whom the authority
makes application in this behalf, as if it were a fine imposed by such
Magistrate.
In Town Municipal Council. Athani vs. Presiding Officer Labour Court. Hubli A.I.R. 1960
S.C. 1335, it was laid down that the language of the Minimum Wages Act clearly
leads to the inference that this Act is primarily concerned with laying down rules
for fixing rates of minimum wages, over time rates, for payment of work done on a
day of rest. It is not an Act for enforcement of payment of wages for which provision
has been made in the Payment of Wages Act, 1936. The Authority appointed under
Section 29 (i) decides claims, which relate to rates of wages, rates for payment of
work done on days of rest and overtime rates. The purpose of Section 20 (I) is to
ensure that the rates prescribed under Minimum Wages Act are complied with by
the employer in making payments and if any attempt is made to make payments at
a lower rate, the workmen are given the right to invoke the aid of the authority
appointed under Section 20 (i) Section 20 (i) cannot be invoked where the claim of
the workmen is for computation of their benefit at a certain rate for overtime work
and work done on weekly off days and the employer contesting the application does
not raise a dispute in relation to the rates pleaded by the workman, but merely
alleges that no rates at all had been prescribed by the Government
Section 21 provides that a single application may be presented for claims on
behalf of any number of employees employed in the scheduled employment in
respect of which minimum wages have been fixed. The maximum compensation on
any such joint application presented under Section 20(3) shall not exceed ten times
the aggregate amount of such excess or ten rupees per head.
27
Section 21 (2) lays down that the authority appointed under the Act may deal
with any number of applications presented under Section 20 in respect of
employees in the scheduled employments in respect of which minimum wages have
been fixed. Under the rules framed by the Tamil Nadu Government, a single
application on behalf of or in respect of any number of employed persons shall be
entertained only where the employed persons, for whom the single application is
presented belong to the same scheduled employment working under the same
employer.
3.7. MISCELLANEOUS PROVISIONS
Cognizance of Offences & Penalties
Section 18 requires that every employer shall maintain registers and records
containing the particulars of employees employed by him and the work performed
and wages paid to them and other particulars as may be required. Sub-Section (2)
of this Section enjoins that the employer shall exhibit in the factory or workshop
notices containing the prescribed particulars. Rule 22 of the Minimum Wages
(Central) Rules 1950, prescribes the form of notices to be displayed with the
particulars of the minimum rate of wages fixed together with the abstracts of the
Act and the rules made there under.
Section 22 of the Act lays down the penalties for certain offences. Where any
employer pays to any employee less than the minimum rates of wages fixed for that
employee’s class of work, or less than the amount due to him under this Act or
contravenes any rule or order made under Section 13, he shall be punishable with
imprisonment for a period of six months or with a fine of Rs.500 or with both.
Where any compensation has already been awarded against the accused in any
proceeding under Section 20, the court shall take that into consideration while
imposing any fine on an employer for an offence under this Section.
While Section 22 is a special provision prescribing penalties for certain specific
offences, Section 22-A is a general provision prescribing punishment for any
contravention of the provision of the Act by any employer. Under this Section, if any
employer contravenes any provision of the Act or any rule made thereunder he shall
be punishable with fine, which may extend to Five hundred rupees. In Workmen of
The Bombay Port Trust Vs. Trustee of The Port of Bombay A.I.R. 1962 S.C. 481, it
was held that, when the question relates to non-payment of wages for work done on
Sundays which is referred to Industrial Tribunal, the Tribunal cannot allow any
additional payment as penalty under this Section. Section 22 provides that a court
shall not take cognizance of a complaint under Section 22 (2) unless an application
has been presented under Section 29 and the Government sanctioned the
complaint. Such complaint shall be made within one month from the date of
sanction.
Where an offence is committed by companies Section 22-C provides that the
person in charge of and was responsible to the company shall be deemed to be
guilty, unless the person proves that the offences was committed without his
knowledge or he exercised due diligence to prevent the commission of such offence.
28
Section 22D provides that amount of minimum wages payable to an employee or

any other amount due to an employee under the Act or rule or order made there
under shall be deposited, if it could not be paid to the employee due to his death or
his whereabouts is not known to the employer. Any amount deposited by the
employer with the Government is free from all attachment under any decree or
order of any court, obtained personally against the employer.
Section 23 exempts the employer from liability in certain cases and Section 24
bars the civil Court from entertaining any suit for the recovery of wages under this
Act. Where an employer is charged with an offence, he shall by bringing the actual
offender before the court, escape the liability. The employer shall make a complaint
against the person whom he charges the actual offender. The employee must prove
that he has used due diligence to enforce the execution of the Act and the other
person has committed the offence without his knowledge or consent or connivance.
If the employer is able to establish any one of the two offence and the employer
shall be discharged. A civil suit shall in respect of a sum which form the subject
matter of an application under Section 20 is presented by the plaintiff or which has
formed the subject matter of a direction under Section 20 in favour of the plaintiff
or where the amount of wages could have been recovered under Section 20 a civil
suit shall not lie in a court.
Thus any claim arising (i) out of payment of less than the minimum rate of
wages (ii) in respect of payment of remuneration for days of rest or for work done on
such days or (iii) of wages at overtime rates may be entertained only by the
authority under Section 20 of the Act. Any other court has no jurisdiction to
entertain any suit in respect of the above claims. Though Section 24 creates an
express bar in respect of suits for recovery of wages in certain eventualities, the
obvious intention was that a poor employee was not to be driven to file a suit for the
payment of the deficit of his wages, but that he could avail himself of the machinery
provided by the Act. It does not bar the employer from instituting a suit when his
claim is that he has been called upon to pay wages and compensation to persons
who are not governed by the notification under the Minimum Wages Act, 1948.
According to Section 25 any contract or agreement whether made before or
after commencement of this Act shall be null and void in so far as it purports to
reduce the minimum rates of wages fixed under this Act if by such contract an
employee relinquishes or reduces his.
(i) right to a minimum rates or wages; or
(ii) any privilege or concessions accrue to him under this Act
The provisions of the Act are intended to achieve the object of doing social
justice to workmen employed in the scheduled employments by prescribing
minimum rates of wages to them. The object of the Act was to ameliorate the
conditions of Labour in India and prevent their exploitation by the capitalists. It
puts an end to the policy of laissez faire followed so far and introduced for the first
time state intervention and regulation for the benefit of the Labour. The minimum
29
wages fixed under the Minimum Wages Act are only, what an employer has to pay
whether the workmen have organized themselves into a union and demanded fair
wages or not and whether there has been an award of an Industrial Tribunal
regarding the wages or not. However the fixation of minimum wages under the
Minimum Wages Act does not preclude an Industrial Tribunal from adjudication
upon a dispute regarding wages between the workmen and the employer.
3.8. CASE LAWS
1) Edward company Limited Vs State of Ajmeer !954 ILLJ 686
2) Bijoy cotton mills Vs Union of India 1955 SC33
3) Crown Aluminum Works Ltd Vs Workers AIR 1958 SC 30
4) Hydro (Engineers) Pvt Ltd Vs their workmen AIR 1969 SC 182
3.9. TEST QUESTIONS
1) What are the two types machinery provided to fix minimum wages under
Minimum Wages Act, 1948?
2) Define ‘Minimum wage’ under Minimum Wages Act 1948.

30
UNIT – IV
PAYMENT OF WAGES ACT 1936

STURCTURE
4.1. History
4.2. Definition
4.3. Time for Payment of Wages
4.4. Deductions
4.4.1. Fine
4.4.2. Absence of duty
4.4.3. Damages
4.5. Authorities under the Act
4.6. Procedure
4.7. Appeal and Review
4.8. Test Questions
4.1. HISTORY
A spate of Industrial Legislation saw the light of day in the 20th Century. One
of them was the Payment of Wages Act, 1936. In the year 1925, a private bill called
the Weekly payment Bill was for the first time introduced in the Legislative
Assembly to protect wages earned by the workers. An attempt was made to remedy
some of evils viz. delay in payment of wages, non-payment of wages, etc. The bill
was withdrawn on an assurance from the Government that the matter was under
consideration of the Government. Government in 1929 felt the desirability of
regulating the fines. Further the Royal Commission Labour in India recommended
that children should be exempted from paying fine, on account of absence. The
minimum amount of deduction should not exceed half anna in the rupee of the
worker’s earnings. Any deduction, for goods having been damaged should not
exceed its whole price. Imposition of any fine and deduction, which is not
permitted, should be made penal.
The object of the Act is to provide that employed person shall be paid their
wages in particular form and at regular intervals without any unauthorized
deduction. The expression “certain classes of person” denotes that an Act applies to
persons drawing on average less the than one thousand rupees a month. The Act
furnishes a summary remedy for wages earned in an office and not paid. It is penal
Act not an Act of civil nature and the underlying idea is to punish the employers for
non-payment of the employees.
4.2. DEFINITION
FACTORY
Factory means a factory as defined in Section 2(m) of the Factories Act and
includes a saw mill and ginning factory operated by some locomotive power, a
31
railway workshop and a yard used for drying groundnuts, it also includes any
premises where anything is done towards making or finishing an article for sale.
ESTABLISHMENT
The word industrial establishment means any tram way service or Motor
transport service for carrying passenger, goods, air transport service and includes
dock, wharf or jet, mine, quarry or oilfield and plantation.
Wages
The word wages means all remuneration, whether salary, allowances or
otherwise expressed in terms of money, payable to a person employed, and includes
any remuneration payable under any award, settlement, and any remuneration in
respect of overtime work. It includes any additional remuneration like bonus and
apply to all kinds of remuneration, whether arising from a contract, or award of
settlement or under a statute. The amount of retrenchment compensation payable
to the employees under Section 25-E (b) of Industrial Disputes are wages under the
Act. The amount of lay off compensation does not come within the definition of
wages.
Dearness Allowance: The term includes dearness allowances and other allowance
capable of being computed in terms of money. During the Second World due to
sudden rise in prices, dearness allowance was paid to compensate to some extent
the rise in the cost of living. When prices did not fall back to pre-war level and as
they continued to rise, dearness allowance became as important demand as
“wages” and what was originally termed wages came to be called “basic” wages and
demands for dearness allowance were made to neutralize their rise in the cost of
living. Dearness allowance came to be paid in two ways. One was on a flat rate
basis or at a fixed percentage on the actual basic wage and the other method was to
link dearness allowance to the cost of living index.
The question of payment of fair wages to Labour assumed great importance
after independence. Article 43 of the Constitution provide that the state shall
endeavor to secure to all workers “a living wage” and conditions of work ensuring a
decent standard of living
In Gopalan Vs. Angamali chit fund A. I. R 1977, Kerala. 120 it was held that after the
payment of Bonus Act, bonus has become an implied term of employment not
dependent upon the profits and therefore comes under the category of
remuneration. Viewed in this right the wages, as a general term would include
bonus.
It was held, Purshottam Vs. Potadar A.I.R. 1966 S.C. 856 gratuity which may be
payable to an employee by reason of the termination of his employment would fall
under sub-clause (d) of Section 2 (iv) provided, it is shown that it is payable under
any law, contract or instrument.
In Savaraya Textiles Ltd. vs. Alladi Lakshmana Rao & another 1970 L. I. J 703 it was held
that bonus paid voluntarily which did not form one of the terms of employment or
32
was not based on any award or settlement between the parties and was not based
on any order of a court is excluded from the definition of wages.
In Payment of wages Inspector Vs. B.E.S Co. & A.I.R. 1969 S.C. 590 it was held that
where the service of a workman is terminated in consequence of a transfer an
undertaking or due to closure of the establishment any compensation payable to
the workman would be wages under this Act.
In D. P. Kelkar Amainer vs. Ambadas Keshav Bajaj A. I.R. 1971 Bom, 124 the Bombay
High Court, held that the bonus payable under the payment of Bonus Act amounts
to wages within the definition.
TIME FOR PAYMENT OF WAGES:
Where the number of persons employed in a factory or Railway are less than
one thousand, wages shall be paid before the 7th day, in any other Railway, Factory
or industrial establishment, before the expiry of the 10 th day after the last day of
the wage period. Where a person is terminated, wages shall be paid before the
expiry of the second working day after termination. Wages shall be paid on any
working day in current coins or currency or in both, provided the employer after
getting the consent of the employee pay him by cheque or crediting the wages in his
bank account.
It was held in S.R.T. Corporation Vs. Industrial Court (A.I.R 1971 M.P. 54) that
anything agreed to be paid in kind in the circumstances contemplated by the
definition of “wages” is covered by the expression ‘capable of being expressed in
terms, of money” but as required by Section 6. It has to be converted in to money
according to its value and then paid in coins or currency notes. If this course were
adopted there would be no contravention of Section 6 and Section 23 would not
apply unless the contract or agreement forbids such conversion into cash.
DEDUCTION
Section 7(1) of the Act contains a clear mandate, that the wages of an
employed person shall be paid without deduction of any kind, except those
authorized by or under the Act. Explanation brings out the meaning of this
provision clearly by enacting that every payment made by the employed person to
the employer shall be deemed to be a deduction from wages. This Explanation is
obviously designed to eliminate the use of subterfuges by employers by making a
show of payment and then taking the amount back from the worker on another
pretext. Explanation II was inserted by an amendment 1957 to set at rest, a judicial
controversy on the question whether deduction in wages on account of any
punishment imposed was a deduction within the meaning of this Section. The
withholding of increment or promotion, the reduction to a lower post or time scale
or suspension shall not be deemed to be a deduction from wages, where the rules
framed by the employer for imposing any such penalty are in conformity, which is
the requirement of law. If any case covered by the explanation, then the payment of
wages authority will have no jurisdiction to deal with the matter because in that
event it will be a case of there being no deduction.
33
If a particular deduction is not covered by the explanation II then it cannot be

regarded as a case of no deduction, but this alone will not justify the inference that
the deduction was one authorized in law. It is sub-Section (2) of Section 7, which
lays down as to what are authorized deductions. Deduction may be of the following
kinds, namely fines, deduction for absence from duty, deduction for damage to or
loss of goods. Deductions for house accommodation, deduction for recovery of
advances and recovery of loans, deductions of income-tax payable by employed
person, payment to co-operative societies, deduction for payment premium on his
Life Insurance Policy etc. the list of deductions given in Section 7(2) is exhaustive
and no other deduction is permissible. The group of Sections following this Section,
namely 8 to 13 of the Act, lay down the elaborate procedure for making the
deductions. If the deduction has not conformed to the procedure laid down in
Sections 8 to 13 of the Act; the same will not deemed to be authorized and in that
situation the employer shall be deemed to be under the obligation to pay the wages
in full without deductions.
In Eastern Railway vs. Additional District Judge and other 1968 (2) L.L.J, 582 it was held
that Explanation II to Section 7(1) is in the nature of a restriction on the powers of
the payment of wages authority and curtails its jurisdiction in a case where
reduction of rank has been ordered for good and sufficient reason, whenever, there
is valid order reducing a person in rank, then the payment of wages authority
would not have the jurisdiction to hold that there has been a reduction in wages.
This provision does not confer upon the payment of wages authority the jurisdiction
to review the order passed and to form its own conclusion whether or not the
reduction in rank was ordered for good and sufficient reasons. Section 7 does not
limit the period within which the employer should make the deduction for
adjustment of over payment of wages.
In Krishna S Gokavi Vs, Dalphod & Another 1968 2 L. L. J. 80 it was held that, if an
employee claims any deduction, the burden will specifically and clearly lie upon
him to prove that the deduction is of a nature which is capable of falling within the
several clauses of sub-Section (2), of this Section. The Deduction under Section 7(2)
(b) can only be for voluntary absence by an employee. It does not cover absence of
the employee, when he is forced by circumstances created by the employer from the
carrying out his duties.
Section 10(1)A of the Act requires Inter alia the deduction shall not be made
until the employed person has been given an opportunity of showing cause against
the deduction or otherwise than in accordance with such procedure as may be
prescribed for the making of such deductions. The total deduction that may be
made from the wage of any worker shall not exceed 75% of such wages if it is made
towards due to the co-operative societies and in any other case fifty percent of such
wages.
IMPOSTION OF FINES
Section 8, of the Act deals with the imposition of fines. It provides, that fines
may be imposed on any person, as the employer may have specified by notice,
34
under sub-Section (2) of Section 8. A notice specifying the acts or omissions shall
be exhibited in the premises and in every case the employed person must be given
an opportunity of showing cause against the fine. Fine amount shall not exceed 3%
of his wage. The total amount of fine imposed on any worker shall be recovered
within sixty days from the day on which it was imposed, in lump sum and not in
installments. The realization of the fine shall be recorded in a register and it shall
be utilized for purposes, which are beneficial to the person employed in the factory.
The explanation to Section 8 lays down that, where the persons employed are part
of staff, such realization of the fine may be credited to the common fund, which
shall be applied for purpose approved by the authority.
ABSENCE OF DUTY
Clause (b) of Section 7(2) authorizes deductions for absence from duty. Section
9 of the Act lays down, the way such deduction may be made only on account of
absence of employed person from the place or places where he is required to work.
Such absence may be for the whole or any part of the period during which he is
required to work. The proviso to Section 9 covers acting in concert and consequent
absence of more workers than one without due notice and without reasonable
cause.
In Jawahar Mills Limited, Salem, Vs. Tribunal Madras and others 1965. 1, L.L.J. 314, it
was laid down that if ten or more workers acting in concert absent themselves
without due notice and without reasonable cause, such deductions may include
such amount not exceeding his wages for eight days.
In Andhra Pradesh High Court in D. Balia Vs Indian Detaonators Limited 1976 L.I.C.
729 held, that the correct interpretation of the proviso is that the deduction can be
made in accordance with the terms of the proviso, but if there are any rules framed
the deduction can be made only according to the said rule. Principles of natural
justice requires that such notice should be given.
DAMAGES
Clause (c) Section 7(2) authorizes deductions for damage or loss of goods
expressly entrusted to the worker for custody or for loss of money for which he is
required to account, where such damage or loss is directly attributable to his
neglect or default Clause (o) of Section 7 (2) permits deduction for recovery of losses
sustained by a Railway administration on account of any rebates or refunds
incorrectly granted by the employed person, where such loss is directly attributable
to his neglect or default. Section 10 provides that any deduction for damage
caused. The worker must be given an opportunity of showing cause against such
deduction. All such deductions shall be recorded in a register kept separately for
that purpose.
Section 11 deals with deductions for services rendered. Clauses (d) of Section
7(2) authorizes deductions for housing accommodation supplied by the employer or
by the Government or by any housing board or any other authority specified by the
State Government. Clause (e) of Section 7(2) provides, that the deduction may be
made for such amenities and services supplied by the employer. Section 11
35
provides that any deduction under clause (d) or (e) as aforesaid shall not be made
from the wages unless he has accepted the house accommodation, amenity or
services as a term of employment.
Clause (f) of Section 7(2) provides that deduction may be made for recovery of
advances of whatever nature and interest due in respect of an adjustment for
overpayment of wages. The deduction according to Section 12 shall be subject to
the following conditions.
1) Recovery of an advance given after employment. No recovery shall be made
of an advance given for travelling expenses.
2) Recovery of an advance given after employment began.
3) Recovery of advance of wages not already earned shall be subject to the
rules made by the State Government
Section 13 of the Act lays down that deductions for payment to co-operative
societies and insurance schemes under clause (j) and clause (k) of sub-Section (1)
of Section 7 shall be subject to such conditions as the State Government may
impose.
AUTHORITIES UNDER THE ACT
Chapter III of the Payment of Wages Act deals with the Authorities under the
Act. Section 14 of the Act deals with three kinds of Inspectors.
1) Inspector of the factories appointed under Section 8 (1) of the Factories Act.
2) Inspectors appointed by the State Government in respect of all persons
employed in a Railway
3) State Government appointing such other person as inspectors for the
purpose of this Act.
Inspectors may make such enquiry to ascertain whether the provisions of the
Act are being observed. He can enter inspect and search any premises for the
purposes of carrying out the object of this Act. He may supervise the payment of
wages to the workers. He may require the production of any registers or record
maintained in pursuance of this Act. He can also take statement of persons. He
may seize such copies or registers or documents as may be relevant in respect of an
offence committed under this Act by an employer. But no person shall be compelled
under sub-Section (4) of Section 14 to answer any question or make any statement
tending to incriminate himself
Section 15 (1) empowers the State Government to appoint the authority to
hear all claims arising out of deduction from wages or delay in payment of wages.
The person who can be appointed as the authority are: (a) presiding officer of a
Labour Court of Industrial Tribunal (b) Commission of Workmen’s Compensation (c)
any other officer with experience as a judge of civil court or as stipendiary
Magistrate.
An application for the claims can be made where any deduction has been
made from the wages or where any day of wages has been delayed, by an employed
person or by an advocate or any official or a registered trade union or by any
36
inspector under this Act. The amendment made by Act 53 of 1964 clarifies that the
payment of Wages Authority can also decide matters incidental to claims. The time
for presentation of claim applications has been increased.
Section 15, empowers the authority hearing the claim to direct payment of
wages withheld or delayed together with compensation by the employer or other
person responsible for the payment of wages or to the employee for unauthorised
deduction or delay in the payment of wages or payment of penalty by the employee
to the employer or person responsible for payment of wages. There is nothing in
Section 4 which suggests that if the wage period in a particular case exceeds one
month such wage is taken out of the definition of the word ‘wage’ and that the
Payment of Wages Act will not apply.
In Delta Forging Works Vs. Manik Karmakar, 1977. L.I.C.207 it was held that whether
non-payment of wages is an instance of deducted wages’ or ‘delayed wages’ will
depend upon the animus of the employer. If he denies liability to pay the wages in
question in part or whole, it becomes a case of deducted wages, but if he admits his
liability and does not dispute the employee’s right to the same, it is an instance of
delayed wage’s.
First proviso to Section 15(2) indicates two alternatives, namely the date on
which the deduction from wages was made or the date on which the payment of
wages was to be made. The first relates to the ‘deduction of wages, and the second
to the ‘wages delayed’.
In D. R. Jerry vs. Union of India, A.I.R. 1974, S.C. 180 the appellant is a guard in the
Railways was convicted under Section 509 of the Indian Penal Code and the
Railways dismissed him from service. The Supreme Court set aside the conviction
on appeal. Thereafter the appellant filed a writ petition under Article 226 of the
Constitution challenging the dismissal and was reinstated. He was informed that
his wages between the date of dismissal and the date of reinstatement would be
treated as leave due. The limitation under the first part of proviso was held to
commence from the date on which it was decided to treat the period of dismissal as
leave due, without pay, and not from the date of dismissal from service or the date
of reinstatement. Sufficient causes for condoning the delay as contemplated by the
proviso to Section 15(2) is not any cause which in the personal opinion of the
authority is sufficient, but the sufficiency of cause has to be decided by applying
proper legal principles.
The payment of wages authority has no jurisdiction to decide whether the
service of an employee has been rightly or wrongly terminated or whether the
dismissal is lawful or unlawful. Its primary function is to determine what the wages
of the employee and whether there has been a delay in the payment of those wages
or a deduction from those wages. To determine the contract and its terms and the
wages due under the contract, it might become necessary for the authority to
determine whether in the first place, there was an employment or not. If two rival
contracts are in the field then the authority under this Act has no jurisdiction to
decide which of the contract should regulate the rights of the parties.
37
The Supreme Court in D. Coatsta vs. B. C. Patil 1955 (1) L.L.I 363 has held that the
authority set up under Section 15 is indisputably a tribunal or limited jurisdiction
and it cannot determine any controversy which is not within the ambit of those
provisions, it can decide what actually the terms of the contract between the parties
were, that is to determine the actual wages, but the authority has no jurisdiction to
determine the question of potential wages. The doctrine of factum valet cannot be
applied in the sphere of industrial establishment, where the conditions of
employment are either contractual or statutory in so far as a contract has been
supplemented by legislation by the welfare state.
In V.K. GOVINDASWAMI vs. NANJAPPA 1973 (I) L.L.J. 459 it was held that the relief
under Section 15 cannot be granted to an employee unless the court has
jurisdiction to determine the subsisting contract of employment, and therefore is an
incidental question Authority has right to determine under the Act.
The jurisdiction of the authority is limited to all claims arising out of
deductions of wages and delay in the payment of wages only. Where as the
authority cannot determine the contract between the parties. The mere declaration
that the dismissal is wrongful act cannot give jurisdiction to decree, a claim for
wages for that period. There must be an order of reinstatement. Without an order of
reinstatement, the payment of Wages Authority would have no jurisdiction to order
the payment of wages.
In Engineer Stores Depot, Kankinada vs. Payment of Wages Authority, West Bengal and
another, 1977 L.I.C. 1228 it was laid down that if there is a dispute as to which
contract governing the relationship of the parties where two rival contracts are set
up, the Authority has no jurisdiction to determine which is the contract of
agreement between the parties. The Authority has jurisdiction to decide actual
wages and not potential wages claimed by the employees. When a claim is disputed
on grounds which may lead to prolonged inquiry or investigation into complicated
questions of facts and law, it would be presumed to be outside the scope of
summary jurisdiction which the Act contemplates in respect of determination of
wages.
In Sri Ramdas Motor Transport (p) Limited Vs. Authority Under Payment of Wages Act and
others 1968 (2) L. L.J. 500 it was laid down that though the employer has power to
transfer his employees, he cannot reduce their emoluments by using that power to
the detriment of the employees. Any deduction of wages will be unlawful deduction
under Section 8 of the Act and therefore the Authority has jurisdiction of permit a
claim under Section 15.
PROCEDURE
Section 15(3) of the Act lays down the procedure to be followed by the
authority after giving the applicant and the employer an opportunity of being heard
and after necessary enquiry, the Authority may direct the refund of the amount
deducted or the payment of delayed wages to the employed person. The Authority
may direct payment of compensation not exceeding ten times of the amount
deducted. Where the amount deducted or the wages delayed are paid before the
38
disposal of the application, the Authority can direct the payment of such
compensation not exceeding 25 rupees. No direction for the payment of
compensation shall be made in the case of delayed wages, where the delay was due
to bonafide dispute as to the amount payable or the occurrence of an emergency or
the existence of exceptional circumstances, that the person responsible for the
payment of wage was unable to make prompt payment, due to the failure of the
worker to apply for or accept payment.
APPEAL AND REVIEW
A review of these provisions very clearly establishes that the Authority acting
under Section 15 of the Act acts as a court. He is bound to decide judicially the
matter in dispute before him. He has to give his decision or ‘direction’ after hearing
the parties and on the evidence or materials produced before him, according to
certain definite and specified rules of procedure laid dow under the Act as also
supplemented by statutory rules framed thereunder for his guidance and his
decision is subject to appeal to the District Court or in a Presidency town before the
Court of Small causes.
In The Divisional Superintendent. Northern Railway vs. Union of India and Another.
1973(2) L.L.J 596, it was laid down that the payment of wages authority is competent
to go into the matter whether a penalty has been properly imposed or not.
The Madras High Court in Arumugam vs. Jawahar Mills A.I.R 1956. Madras 79 has
held that the expression delayed wages in sub Section (3) can only mean wages
which are admittedly due, but the payment of which has been postponed on some
excuse or the other. Whether refusal to pay wages, rightly or wrongly within the
time allowed by law comes within the expression ‘delay in payment of wages” must
depend upon the facts and circumstance of each case.
In T.S.T Company Limited Vs. Perumal Naidu and another. 1958(1) L.L.J. 58, the same
High Court has held that where a scale of wages is fixed in terms of a contract of
employment according to which any yearly increment is payable, withholding of
such an increment will properly be governed by the provisions of this Section and
therefore such a claim could be regarded as a claim arising out of deduction from
wages or delay in payment of wages.
The proceedings under this Section are to be instituted against only one
person whether, he is the manager or the employer, but not against both. Ignorance
of party’s right cannot constitute sufficient cause for delay in filing the application
and has therefore rightly rejected the application as time barred.
On receipt of any application for claims the Authority shall call upon the
employer and employee by a notice to appear before him. If the employer of his
representative fails to appear on that date, the Authority may dismiss the
application. An application for setting aside the order and rehear the case has to be
made within one month from the date of dismissal.
In Express Newspapers Private Limited Vs. Michael Mark A I R 1963 S.C I. 141 workers
resorted to strike. The management issued a notice that, if the workers did not
return to work by a certain date they will be deemed to have abandoned
39
employment and their names will be removed from the muster rolls. Some names
were actually removed from that date. Standing orders provide for payment of
compensation in case of termination. It was held that the removal of names
amounted to termination of service without notice and the workmen were entitled
to compensation.
In Ganesh vs. District Magistrate A.I.R. 1963 S.C, 355 while reinstating a dismissed
railway servant the railway authority passed an order that the period for which the
railway servant was absent from work should be treated as leave without pay and
that he would not be entitled to any pay for such period. The railway servant
applied under Section 15 for the recovery of wages for the same period it was held
that the railway authority fell within the description of competent authority under
Section 7(2) (h) of the Payment of Wages Act, 1936 and therefore there was no
cause of action for the claim made by the reinstated railway servant.
The industrial Disputes Act 1947 gives a right to workers to apply under
Section 33C(2) of that Act. The Payment of Wages Act also gives a right to claim
arising out of deductions from wages or delay in payment of wages. These are two
concurrent rights, which can exist separately without any apparent difficulty.
In Delhi Transport Corporation vs. D.D. Gupta and another 1918 (1) L.L.J 122 it was held
that a worker may apply under the Payment of Wages Act or the same worker may
apply under Section 33.c (2) of the Industrial Disputes Act 1947. There is no
inconsistency between that two provisions. The Authority under the Payment of
Wages Act will have jurisdiction to deal with the application for a direction for
payment of the amount of bonus, if there be a dispute would not be before the
Payment of Wages Authority and in that event, the dispute as may be covered
under Section 22 of the Bonus Act will have to be referred for adjudication under
the provisions of the Industrial Disputes Act.
The proviso to sub Section (3) of Section 15 prohibits only the making of a
direction for the payment of compensation in the case of delayed wages and does
not prohibit the making of a direction regarding the refund of the amount deducted
or the payment of delayed wages laid down in sub-Section. (3) of this Section. The
proviso does not suggest that all bonafide disputes as to the amount payable are to
be tried by the Civil Courts.
Section 15 sub-Section (4) lays down that, if the Authority hearing the
application is satisfied that the application was either malicious or vexatious it can
direct the person presenting the application to pay a penalty not exceeding Rupees
fifty to the employer or other person responsible for the payment of wages. If on the
other hand the Authority comes to the conclusion that applicant should not have
compelled to file a claim application for recovering his dues, it can direct the
employer or other person responsible of the payment of wages to pay a sum not
exceeding fifty rupees as penalty to the State Government, sub-Section (5) of
Section 15 lays down that any amount directed to be paid may be recovered, if the
Authority is a Magistrate by the Authority itself, as if were a fine imposed by the
Magistrate. If the Authority is not a Magistrate, any Magistrate to whom the
40
Authority made application for recovery of the amount may recover it as if it were a
fine imposed by such Magistrate.
Section 16 sub Section (1) explains the expression “unpaid group” Employed
persons are said to belong to the same unpaid group if they are borne on the same
establishment and deductions have been made from their wages in contravention of
the Act or their wages for the same wage period have remained unpaid after the day
fixed by Section 5. Section 16(2) lays down that a single application may be
presented under Section 15 on behalf of the employed persons belonging to the
same unpaid group. Instead of various workers who belong to the same unpaid
group being compelled to file separate applications and to pay separate court-fees,
the legislature has conferred upon them the facility of presenting a single
application and paying a single court fee. Section 16(3) lays down that if several
application s presented under Section 15 by the employees belonging the same
unpaid group are pending, the Authority can deal with them as if it was a single
application by an unpaid group.
Section 17 deals with appeals. It provides that an appeal against an order of
the authority dismissing either wholly or in part an application made under sub-
Section (2) of Section 15 or a direction made under sub-Section (3) or sub-Section
(4) of Section 15, may be preferred before the Court of Small Causes in a presidency
town and else where the District Court. After the amendment by Act 68 of 1957, an
appeal will now lies even against an order of the Authority dismissing the
application made under sub-Section (2) of Section 15.
Sub Section (1-A) was introduced by the amending Act 68 of 1964. It provides
that a certificate should accompany the memorandum of appeal filed by an
employer to the effect, that the appellant had deposited the amount payable under
the direction of authority. Sub-Sections (3) and (4) provide that where an employer
prefers an appeal, the authority should if directed by the appellate court withhold
payment of any sum in deposit with him pending the decision of the appeal.
In G.N Murthy Vs. Commissioner for Workmen’s Compensation Madras 1954,
2 L.L.J. 715 the Madras High Court has observed that the provision for appeal
against the order of the authority does not contain a provision for grant of stay
when prima facie, the order of the Authority cannot be said to be without
jurisdiction of High Court would not grant stay or quash the proceeding started
before the Magistrate for the recovery of the amount even though an appeal has
been filed against the order of the Authority.
An appeal under Section 17 may be filed by the employer or other person if the
total sum directed to be paid by way of wages and compensation exceeds Rs. 300/-
or imposes on the employer a financial liability exceeding RS. 1000/-. Such an
appeal can be filed by an employed person or an advocate or any official of a
registered trade union, authorized to act on his behalf if the amount of wages
claimed to have been withheld from the worker exceeds Rs.20/- or form the unpaid
group to which the employed person belongs exceeds fifty rupees. Section 17 of the
Act is a self-contained code. In regard to appeals against orders or directions of
41
primary authority, Sub-Section (2) clearly makes an order or direction of the

primary authority final save as provided in sub-Section (1) That means if no appeal
is allowed invoking the right granted under sub-Section (2) the order or direction of
the primary authority is final. There is no provision in the Act attracting to his
proceeding all the provisions of the Civil Procedure code including the right to file
cross objections.
In Union of India Vs. S. P. Natarajan A.I.R 1952 Mad. 808 it has been held
that an appeal by an employer lies under sub-Section (1) (a) of Section 17 if the
total sum directed to be paid by way of wages and compensation on a single
application in respect of claims by unpaid group exceeds Rs.300/-.
The Supreme Court in J.C Jain Vs. R.A. Pathak and Others A.I.R. 1960 S.C.
619 in overruling this decision of the Bombay High Court has held that if a single
application is made on behalf of several employees belonging to the same unpaid
group the test to be applied is not, whether a direction has been issued that the
employer should pay Rs. 300/- or more to each one of the applicants, but the test
clearly is whether a direction has been issued on the said single application calling
upon the employer to pay to the applicants Rs. 300/- or more.
In Prem Narayan Verma vs. D. T. M. Bhusawal 1953 I.L.L.J.334 it was held by
the Bombay High Court that an appeal can be filed against an order of the
authority condoning the delay in filing application for claim.
Section 17 A provides for the conditional attachment of the property of the
employer or other person responsible for payment of wages, which is sufficient to
satisfy the amount payable under the direction. The conditional attachment may be
made.
1) When the application under Section 15 (2) or an appeal under Sections 17
has been filed by the employed person or any official of a registered trade
union or legal practitioner.
2) When the authority or the Court is satisfied that the employer or other
person responsible for the payment of wages is likely to evade payment of
any amount that may be directed to be paid under Section 15 or Section 17.
3) When the authority of the Court is of the opinion that ends of justice would
be defeated by the delay.
In the above cases before an order of attachment is made, the employer or the
person responsible for the payment of wages shall be heard. The Code of Civil
Procedure 1908 relating to attachments before judgment shall apply for any
attachment under sub-Section (1) of Section 17-A, under the Civil Procedure Code
1908 property may be attached pending disposal of application or an appeal, unless
the employer or other person deposits an amount sufficient to satisfy the claim or
gives security for like amount. The authority appointed under Section 15 of the Act
shall be deemed to be a Civil Court under the Code of Civil procedure 1908, for the
purpose of taking evidence enforcing the attendance of witness and compelling the
production of documents:
42
PUNISHMENT
Section 20 makes the contravention of the following provision of the Act by any
person responsible for the payment of wages to an employed person punishable
with a fine of Rs.500.
1) Section 5 (Except sub-Section (4) thereof, (2) Section 7 and 8 thereof (3)
Section 9 and Section 10 except sub-Section (2) thereof (4) Section 11 to
13 both inclusive
2) Sub-Section (2) Section 20 makes contravention of the provisions
mentioned below by any person punishable with a fine of Rs.500/-.
3) Section 4. (II) Section 5(4). (iii) Section 6, (IV) Section 8 (8) (V) Sub-
Section (2) of Section 10 or Section 25:
Section 20, sub-Section 3 provides that where any person required under this
Act to maintain records or registers or to furnish any information fails to maintain
such register or record or refuses or neglects without cause to furnish information
or return refuses to answer or willfully gives a false answer shall be punishable
with a fine which may extend to five hundred rupees.
Where any person under Section 20 sub-Section 4, willfully obstructs an
inspector in the discharge of his duties or refuses or willfully neglects to afford an
Inspector any reasonable facility to enter, inspect, to examine and supervise in
relation to any railway, factory or industrial establishment or willfully refuses to
produce any register or other documents or prevents the doing of anything which
he has reason to believe is likely to prevent any person from appearing before an
inspector, shall be punishable with fine of Rs.500/-. Section 20 sub-Section (5)
provides that for subsequent offence involving contravention of the same provision
he shall convicted to undergo three months imprisonment or with a fine of
Rs.1000/- or with both.
CIVIL SUIT IS BARRED
Under Section 22 a Civil Court is barred from entertaining a suit for the
recovery of wages in so far as the sum so claimed could be recovery by making an
application under Section 15 of this Act. Any interpretation placed on the scope of
sub-Section (d) of this Section should be consistent with the scheme of the Act as a
whole
It was held in Bhagawat Rai Vs. Union of India 1953 D.L.R Nag, 36 that the
jurisdiction of the Civil Court could not be revived by the omission of the workman
to make an application putting therein claims arising out of deductions from the
wages or delay in payment of wages, within the time allowed by law Section 22(d) of
the payment of wages Act, 1936 only prevents a suit for wages. It does not exclude
the jurisdiction of a tribunal setup under Section 7 of the Industrial Disputes Act
1947 to adjudicate upon a claim for payment of wages. It does not exclude any
other proceeding permitted by law to enforce payment.
Section 22-A provides that a suit or prosecution shall not lie against the
Government or any of its officers for anything done in good faith. Section 23
43
prevents an employee from contracting away the rights, which are given to him by
the Act, and that it does not prevent him from entering into an agreement
advantageous or beneficial to him.
In Dinaram Chuiya vs. Divisional Manager A. I. R. 1958 Assam 77 the employer
revised the wage structure of his workmen by increasing the basic wages and
dearness allowance, and deduction of servant’s allowance with the result that total
wages payable to workman before revision were not reduced. It was held that the
mere deduction of servants’ allowance either partial or whole couldn’t be said to
contravene Section 23 of the Act. It was further observed that a contract validly
entered between the employer and employee by which the contract of service has
been modified as regards the amount of wages is not bit by Section 23 of this Act.
This Act confers the following rights: 1) to receive wages. 2) To receive them at the
proper time specified in the Act. 3) To receive them without deduction.
The scheme of the Act is not in sense appears to destroy the freedom of the
parties to substitute one control by another when following the machinery
prescribed by the Act. The employer and the employees may by mutual agreement
change the scale of wages and such agreement does not amount to contracting out
within the purview of Section 22 of the Act.
Section 24 of the Act provides, that the power conferred by the Act upon the
state shall be exercised by the Central Government in relation to railway, air,
transport service, mines and oil fields. Under Section 25 the person responsible for
payment of wages shall display in a factory notice containing such abstracts and of
the rules made thereunder in English and in any other language of the majority of
persons employed in a factory. The intention of the legislature was that the decision
of the authority should become final and conclusive when it awards small wages to
poor humble workers, that is the principles which underlines the whole of the Act
and every Section of it and it is the duty of the court to give effect to that intention
of the legislature.
CASE LAW
1) Express Newspapers Private Limited Vs. Michael Mark A I R 1963.SC 141
2) Jawahar Mills Limited Salem, Vs. Tribunal Madras and others 1965. 1, L.L.J. 314
3) Krishna S Gokavi Vs, Dalphod & Another 1968 2 L. L. J. 80
4) Eastern Railway vs. Additional District Judge and other 1968 (2) L.L.J, 582
1)
TEST QUESTIONS
Define ‘wage period’ under Payment of wages Act, 1936?
2) What are all the permissible deductions allowed under Payment of wages
Act?
3) Who is the authority under the Payment of wages Act?

44
UNIT – V
PAYMENT OF BONUS ACT 1965

STRUCTURE
5.1. Introduction
5.2. History
5.3. Object
5.4. Definition
5.5. Computation of Gross Profits
5.6. Eligibility
5.7. Other Kind of Bonus
5.8. Case Law
5.9. Test Question
5.1. INTRODUCTION
At present bonus is paid to many categories of employees both in public and
private sectors. It is cash payment made to employees in addition to wages. It is not
an exgratia payment. Bonus was first paid in India in the year 1917 by textile
industry, which is known as war bonus. It was an increase in wages allowed owing
to war conditions. Though bonus would mean a gift or gratuitous payment over and
above the normal remuneration, it has acquired a right in industrial law and it can
be claimed either by an agreement with the employer or by adjudication. After the
payment of Bonus Act 1965, it has become a statutory right.
BONUS UNDER THE GENERAL INDUSTRIAL LAW
Two conditions were laid down for justifying the demand for bonus (I) Wages
fall short of the living wage and (2) the industry has made huge profits part of
which are due to the contribution of the workmen. If either or both the conditions
are satisfied the demand for bonus would become an industrial claim.
Discrimination in the payment of bonus only to some Sections of the workmen
has been disapproved by tribunals. However in Burmah Shell Refineries Ltd. Vs.
Their Workmen 1961 L.A.C the Supreme Court, held that if a tribunal being of
opinion that payment of bonus at the same rate will not be fair and may cause
discontent amongst the workers awards bonus at a lower rate to the clerical staff
than to Labour staff there would be no reason for disturbing the award. Where the
workmen accepted an exgratia bonus, it will not deter or stop them from claiming
additional bonus.
5.2. HISTORY
The Labour Appellate Tribunal in Mill Owners Association vs. Rashtriya Mill Mazdoor
Sangh, 1952 L. A. C. 423 observed that bonus could no longer be considered as an
exgratia payment and laid down a formula known as “Full Bench Formula”.
45
FULL BENCH FORMULA

The Formula provided that the following charges shall be deducted from the
gross profit
1) Return on paid up capital at the rate of 6%
2) Return on working capital varying from 2% to 4%
3) Depreciation on a notional basis
4) Rehabilitation
5) Income tax.
If there is any surplus after deducting these charges the workmen would be
entitled to bonus in the surplus on an equitable basis. If there is no surplus no
bonus need be paid on notions of social justice. On the Suggestion of the Supreme
Court in Associated Cement Company’s case, the Bonus Commission was
appointed by the Government of India for fixing the method of computation of
bonus. Based on the recommendations of the commission the Payment of Bonus
Ordinance was promulgated in May 1965. The Parliament later adopted the
ordinance and later it became the Payment of Bonus Act, 1965.
5.3. OBJECT
The object of the Act is to provide payment of bonus to persons employed in
certain establishments on the basis of profits or on the basis of production or
productivity and for matters connected there-with. The scheme of the Act is
fourfold.
1) to impose a liability on an employer to pay bonus to employees in an
establishment
2) to define the principle of payment of bonus according to the prescribed
formula
3) to provide payment of minimum and maximum bonus, linking it with the
scheme of set-off and set on
4) To provide machinery for the enforcement of liability for payment of
bonus.
5) The Act is not retrospective in operation. So where a workman demands
bonus for the year 1963-64, it will have to be calculated on the basis of
the Full Bench Formula mentioned above.
Extent and Applicability of the Act:
The Act is applicable to
1) every factory and to
2) every other establishment in which 20 or more persons are employed on
any day during an accounting year. Once an establishment is governed by
the Act is shall continue to be, so governed even though the number of
employees falls below twenty
3) The Government may extend the provisions of this Act, after giving two
months notice in the Gazette, to any establishment which is a factory
46
employing such number of persons less than 20 as may be specified in the

notification, so however that the number of persons so specified shall in no
case be less than ten.
The Act came into force 25-9-1966. The question was arisen as to whether
bonus will become payable only under the Payment of Bonus Act to the employees
of any establishment for the year 1964-65 or thereafter and the L.A.T. formula will
not apply to any case when the demand for bonus is made for the year 1964-65 or
any subsequent year. This question has arisen in an establishment employing less
then 20 employees and in public sector establishment, which is not a competing
establishment. So where an establishment did not employ more than 20 employees
they were not covered by the Act and as such Section 39 saved the right to bonus
under the L.A.T. formula. When a public sector undertaking was not a competing
establishment the L.A.T. formula. (Full Bench Formula) is applicable for bonus for
the year 1964-65. Three reasons from the basis for these decision (1) The Bonus
Act is not a comprehensive code for the payment of bonus generally (2) The Act
should govern the payment of bonus in establishment to which the Act applies. (3)
The Workmen in establishment not covered by this Act cannot be deprived of their
rights to bonus under the L.A.T formula unless the Act explicitly or impliedly takes
it away. The employees in public sector establishment will not be covered unless
the conditions set out in Sec 20 are fulfilled.
The law in force regarding bonus is expressly saved and the right of workmen
in an establishment not covered by the Act to continue to get bonus under the
L.A.T formula is also expressly saved. The Act is intended to apply only to certain
establishments and that it did not modify or take ways the liability of an
establishment to pay bonus under the L.A.T formula. The Act can be construed
only as a right and a benefit conferred upon a large section of workmen to whom
the minimum bonus of 8.33 percent would be available and cannot in any way be
said to modify or take away the rights of workmen which existed at the time of the
commencement of the Act to have the Full Bench formula applied to their claim for
bonus. Under the proviso to Section 34 even the agreement contemplated by the
subSection will be null and void in so far as it relinquishes the right to receive
minimum bonus under sub-Section (2) of Section 10. The bonus payable under this
Act cannot be the same as the bonus payable under the Industrial Law which is
clear from the fact that whereas bonus is payable only to workmen under the
Industrial Disputes Act, the bonus under this Act is payable to an employee which
would include workmen under Industrial Disputes Act as person doing managerial
administrative or supervisory work getting a salary of more that Rs.500/- and less
than Rs.1000/-.
5.4. DEFINITIONS
ALLOCABLE SURPLUS
Section 2(4) of the Act defines the term “allocable surplus” it means in relation
to an employer, being a company. (Other than a banking company) which has not
made the arrangements prescribed under the Income-tax Act for the declaration
47
and payment within India of the dividends payable out of its profits in accordance
with the provisions of Section. 194 of that Act, sixty-seven percent of the available
surplus in an accounting year and in any other case sixty percent of such available
surplus
EMPLOYEES
Sec.2.(13) of the Act defines an employee as a person employed on a salary not
exceeding Rs.1600 per mensum in any industry to do any skilled or unskilled
manual, supervisory, managerial administrative technical or clerical work for hire
or reward. By ordinance No 8 of 1985 the salary limit has been increased from
Rs.1600/- to Rs.2500/- in 1985, Rs 3,500/- in 1995 and Rs. 5000 later, it includes
a person who is employed regularly for sweeping, though she is a part time worker.
The definition of employee includes a chairman of a company having control over
the affairs of the establishment.
WAGES
The term wages has been defined in sec 2(2) to include all remuneration
capable of being expressed in terms of money and dearness allowance, but does not
include any other allowance which the employee is for the time being entitled or the
value of house accommodation, or any bonus or any retrenchment compensation or
any gratuity or other retirement benefit or any commission payable to the employee.
The definition of wages in Section 2(21) of the Act contains some slight modification
of the definition of the word in the Payment of Wages Act. The clarification that may
be necessary relates to the meaning of the words’ ‘any other allowance which the
employee is for the time being entitled to’ which is not to be included in the term
wages or salary under clause (I) of sub-Section (21) of Section 2. The sub Section
would imply all remuneration payable to an employee in respect of his employment
should be included in the term “wages”, the exclusion of any other allowance can
only mean allowance which is not in respect of his employment, but allowance
which are only amenities like hill allowance, fuel allowance etc. The definition will
not include the value of house accommodation or supply of food grains at
concessional price or any travelling concession or any bonus or any retrenchment
compensation. Special allowance in terms of Sastri’s award and Desai’s award go
with the posts and are not temporary allowance. Consequently the special
allowance payable to bank employee does not come within the scope of the first
exception to salary or wages in Section 2(21).
In Gopalan vs. Angamali Chit Fund A.I.R. 1977. Kerala, 120. It was held that the
definition of wages does not include bonus. That is because for the purposes of the
Act, bonus has to be distinguished from wages and has to be determined in relation
to the wages paid. The fact, bonus is excluded from the definition in sec 2(2)
signifies that but for such exclusion bonus would fall under wages.
ESTABLISHMENT
Section 3, deals with an establishment. “Where an establishment consists of
different departments or undertaking or has branches, whether situate in the same
place or in different places, all such departments or undertakings or branches shall
48
be treated as part of same establishment, for the purpose of computation of bonus

under this Act. The word ‘establishment’ as used in Section 3 indicates that an
establishment may consists of different departments or undertaking and it is
therefore not synonymous with undertaking. The word “undertaking has been
defined by the Supreme Court in a different context in Gymkhana Club Union vs.
Management 1968 I.S.C.R. 712 to mean any business or any work or any project which
one engages in or attempts as an enterprise analogous to business or trade. The
dictionary meaning of establishment as given in Webster’s International Dictionary
included among other things “an institution or place of business with its fixtures
and organized staff as large establishment”. Establishment, therefore means the
whole trading business or manufacturing apparatus with a separate identifiable
existence.
In K.C.P Employees Association vs. K.C.P.Ltd. A.I.R. 1978 S.C. 474 a public limited
company carrying on three business adventures employing workmen on different
terms in three different units When the Bonus Act came into force in 1965, the
workmen of Engineering unit at Madras, which was financially faring ill demanded
bonus on the footing that the three units must be treated as one composite
establishment, and the overall profit bonus must be reckoned under the Act, and
the claim on the basis of single establishment was untenably over ambitious. The
Supreme Court held that the workmen of the Engineering unit could not claim
bonus on the basis of a single establishment and the proviso to Section 3 was
attracted.
Once it is ascertained that a branch, department or a factory is establishment
by itself under the Act Sections 4 to 7 will be applicable in respect of that
establishment by themselves without the impact of connection with other branches,
departments or factories even if they subserve a common cause Gross profits of
such an establishment would have to be calculated in terms of the second schedule
to the Act, by taking the net profit as per profit and loss account and adding thereto
the various amounts therein mentioned and deducting the amount like capital
receipts, profits of and receipts relating to business outside India. The gross profits
to be computed for the purpose of bonus would not be the same as the gross profits
to be computed under the Indian Companies Act or the Income-tax Act.
Where certain new units of an establishment have each been treated
separately and each of them is having a separate balance sheet and profit and loss
account, they cannot be treated as part of that establishment for purposes of
computation bonus.
5.5. COMPUTATION OF GROSS PROFITS:
Sec. 4. The gross profits derived by an employer from an establishment in
respect of any accounting year shall (a) in the case of a banking company, be
calculated in the manner specified in the first schedule, (b) in any other case, be
calculated in the manner specified in the second schedule.
49
COMPUTATION OF AVAILABLE SURPLUS:

Section 4 to 7 of the Act, have to be read along with the first second and third
schedule, for computing the available surplus. The first schedule to the Act deals
with the method of computation of gross profits of banking companies and in any
other case the calculation will have to be made in the manner specified in the
second schedule. The third schedule deals with the deductions to be made in
addition to those specified under Section 6.
Section 5. The available surplus in respect of any accounting year shall be the
gross profits for that year after deducting there from the sums referred to in Section
6.
Provided that the available surplus in respect of the accounting year
commencing on any day in the year 1968 and in respect of every subsequent
accounting year shall be the aggregate of (a) the gross profits for that accounting;
year after deducting there from the sums referred in Section 6, and (b) an amount
equal to the difference between: -
In Indian Oxygen Ltd. vs. Their Workmen 1972. A.S.C 472 it was held in calculating
the allocable surplus the tax concession by way of rebate that employers will get
under the Income tax Act need not be taken into consideration. In Binny Ltd. vs.
Their Workmen 1973. A.S.C. 353, it was held that the working capital cannot
include fixed assets not the capital work in progress as it represents the fund
required for day-to-day running of the company.
In Gannon Dunkery and Co vs. Workmen. 1971. A.S.C. 2567 it was held that
advances made in the course of business transaction, as would form part of
working capital, have to be treated as part of capital assets in the calculation of
available surplus. It was further held that interest earned by the company on loans
advanced on personal security being an extraneous income in which workmen
made no contribution is deductible from gross income, but only after setting off the
interest paid on loans by the company”. In the absence of any clause that income
accruing from trade investment is extraneous income earned from activities in
which workmen made no contribution, the income is not deductible from gross
profit.
The available surplus shall be the gross profit after deducting therefrom the
sums referred to in Section 6. The sum to be deductible from gross profits shall be
depreciation; development rebate, any direct tax, which the employer is liable to
pay, in respect of his income, profit and gain and such further sums as are
specified in the third schedule. In Workmen of National and Grindlays Bank Ltd. Vs. The
National and Grindlays Bank Ltd. 1976 (1) L.L.J. 463 the bank claimed deduction of
depreciation at a higher figure than that appearing in the profit and loss account. It
was held that the burden of proving the depreciation, was on the bank and that
burden has to be discharged by the bank by producing proper and satisfactory
evidence. It was further held that the deprecation in accordance with the method
specified in Section 32(I) of the Income Tax Act has to be done by the Tribunal in
the exercise of the quasi-judicial duty. The determination of depreciation under
50
Section 32 (1) of the Income Tax Act can be taken into account as evidence only if
there is some provision of law which provides to that effect. “it is clear on a plain
and natural reading of the language of Section 6(a), that what is deductible under
that clause is depreciation admissible in accordance with the provisions of sec 32(1)
of the Income-tax Act and not depreciation allowed by the Income-tax officer in
making assessment on the employer. The Industrial Tribunal has to calculate the
amount of depreciation by adopting the method set out in sub-sec (1) of sec 32.
There is nothing in the Income Tax Act or in the Payment of Bonus Act or in any
other provisions of law which attaches presumption of accuracy to the
determination of the Income-tax officer in this matter or invests it with probative or
evidentiary value in the proceeding before the Industrial Tribunal. The workers who
are sought to be bound by the determination of the Income tax officer. The
possibility cannot be ruled out that the determination made by the Income-tax
officer may be wrong and he might have made a bonafide mistake in arriving at the
figure of depreciation. Therefore the certificate issued by the Income-tax officer is
not admissible in evidence to prove the depreciation admissible under Sec. 32(1).
In Jayna Time Industries (P) Ltd. Vs. Industrial Tribunal and others. 1975 (2)
L.L.J 436 it was laid down that, while computing the surplus of a particular year an
employer is entitled to deduct depreciation as also development rebate of that year
and deduct further the arrears of depreciation and business losses of earlier years.
But the development rebate of earlier years is not admissible.
FORMULA
As already mentioned in computing the available surplus the following sums
are deductible from gross profit. They are
1) depreciation
2) development rebate and
3) Direct taxes. If there is a discrepancy in different statement of accounts with
regard to particular item and the employer fails to explain the difference
should be totaled up with the gross profits. The employer can deduct his tax
liability without deducting the amount of bonus, he would be liable to pay
from and out of the amount computed under Section 4 and 6.
Where the interest accrued to the company out of the statutory investments
included in the statements of net profits for the purpose of calculating the
remuneration of the managing agents the same can be treated as available surplus.
In Workmen vs. Dunlop Rubber Co. 1973 A.S.C. 2394 it was held that commission
received by Indian Subsidiary from parent company incorporated in a foreign
country on sales effected by the latter through Indian High Commission located
there or no orders received by it directly from the Indian importers as well as
royalties received out of sales made by the parent company to the foreign countries
can be deducted while computing available surplus. While computing the surplus
of a particular year an employer is entitled to deduct depreciation as also
development rebate of that year and deduct further the arrears of depreciation and
business losses of earlier years. But the development rebate of earlier years is not
51
admissible. In Indian Cable Co vs. Workmen 1972 A.S.C. 2915 it was held that
amount provided for doubtful debts is not deductible from gross profits.
Where a claim for rehabilitation grant is made adivisors should be works out
only after estimating correctly life of machinery and while calculating the grant the
depreciation reserve must be deducted even if it is not available as a liquid asset. In
the allocation of surplus between company and workmen Court cannot take into
account bonus paid to officers of the same rate as awarded to workmen under the
industrial dispute. In the absence of any specific agreement officers cannot claim
bonus on the same basis as workmen. In calculating income-tax deductible in
working out the gross profit, the bonus which would be, payable under the Act
should not be taken into account.
In Workmen vs. Management S.E. Supply Co 1973. A.S.C. 2765, it was held
that any amount in the hands of the undertaking liable to be returned to the
consumers as rebate cannot be taken into account in computing the gross profits of
the undertaking. It has to be deducted before profit could be computed for payment
of bonus. Payable bonus should not be subtracted from gross profits.
In allocating the available surplus between the company and the workmen it
will be equitable if roughly 60 percent of the surplus is distributed as bonus to the
workmen and the company is left with the remaining 40 percent. The company will
get in addition to this 40 percent the benefit of income tax rebate on the 60 percent
bonus payable to the workmen.
In U.P. Electric Supply vs. The Workmen 1971 A.S.C. 2521 it was held that
even if full profits are not received due to the inefficiency in the working of the
industry or by reason of the use of defective machinery and the Labour is deprived
of a share thereof the tribunal adjudicating on the question of bonus payable for a
particular year cannot add back to the gross profits, the amount of profit loss
through the inefficiency or negligence of the employers.
Section 7 of the Act deals with calculation of direct tax payable by the
employer. In calculating such tax, account shall not be taken of any loss incurred
during the previous accounting year, any arrears of depreciation which the
employer is entitled to add, to the amount of the allowance for depreciation and any
exemption conferred on the employer under Section 84 of the Income tax Act.
Section 7 of the Act provides that matters extraneous to the working of the
establishment in the particular year were not to be taken into account although
they could not be ignored under the Income-tax Act for computing the tax liability.
Section 7 (e) indicates in unmistakable terms that the rebate or relief in the
payment of any direct tax in order to fall within the purview of this clause must
satisfy two conditions viz. (1) that it must be a rebate or relief allowed under any
law for the time being in force relating to direct taxes or under the relevant annual
Finance Act and further (2) that it must be relief or rebate for the development of
any industry.
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5.6. ELIGIBILITY
On the principle, that bonus is paid on the profit of a particular year, bonus
can be claimed only for workers who have had a hand in earning the profit of that
year. So all workmen who have in work during the whole or part of the year would
be entitled to bonus. Under Section 8 every employee who has not worked at least
thirty days in the accounting year is not entitle to bonus.
DISQUALIFICATION
Under Section 9 of this Act an employee is disqualified from receiving the
bonus, if he is dismissed from service for fraud or riotous or violent behavior inside
the premises or for theft, misappropriation or sabotage of any property of the
establishment.
QUANTUM OF BONUS
Section 10 of the Act dealing with minimum bonus is extracted below. “subject
to the other provision of this Act every employer shall be bound to pay to every
employee in respect of the accounting year commencing on any day in the year
1965 and in respect of every subsequent accounting year.
MINIMUM BONUS
A minimum bonus which shall be 8.33 percent of the salary or wage earned by
the employee during the accounting year or one hundred rupees whichever is
higher whether or not the employer has any allocable surplus in the accounting
year.
Provided that, where an employee has not completed fifteen years of age at the
beginning of the accounting year, the provisions of this Section shall have effect in
relation such employee as if for the words “one hundred rupees” the words sixty
rupees” were substituted.
As the quantum of bonus payable under Act and under the L.A.T. formula it
was left to a large extent to the discretion of the tribunal after taking into
consideration as to what part of the available surplus was to be distributed as
bonus is defined under sec.2 (4) as 60% of the available surplus in the case of
foreign companies. Whereas under the L.A.T formula no bonus was payable if there
was no available surplus under Sec. 10 of the Act a minimum bonus of 8.33% of
the annual salary or wages earned by the employee or Rs.100 in the case of adults
or Rs.60 in the case of persons below 15 years age is payable whether there are
profits in the accounting year or not.
In Jalan Trading co. (P) Ltd. vs. D.M.Aney and another 1979 (1) L.L.J. 162 the
constitutional validity of Sec. 10 was unsuccessfully challenged. The restriction
imposed by the Bonus Act in compelling the employer to pay the statutory
minimum bonus even in years where there has been a loss sustained by the
management is reasonable or in public interest within the meaning of Articles 19(6)
and 302. The payment of bonus, being in implementation of Articles 39 and 43 of
the Constitution is reasonable. The payment of the minimum bonus is subject to
the provisions of Sections 8 and 13 which means that only employees who have
worked for not less than 30 days in the accounting year would alone be entitled to
53
the minimum bonus. The statutory minimum bonus of 8.33 shall be payable
whether there are profits in the accounting year or not, After the Act coming into
force bonus has become an implied term of employment not dependent upon the
profits. Employees are entitled to festival bonus only if there is an implied
agreement or it is paid as customary bonus.
MAXIMUM BONUS
Section 11 of the Act dealing with the maximum bonus is extracted below.
Where in respect of any accounting year referred to in Section 10, the allocable
surplus exceeds the amount of minimum bonus payable to the employee under that
Section, the employer shall in lieu of such minimum, be bound to pay to every
employee in respect of that accounting year bonus which shall be an amount in
proportion to the accounting year subject to a maximum of 20% of such salary or
wage.
In computing the allocable surplus under this Section the amount set on or
the amount setoff under the provision of Section 15 shall be taken into account in
accordance with the provision of that Section.
Section 12 provides, the mode of calculation of bonus with respect to certain
employees. Where the salary of an employee exceeds Rs.3,500 the bonus payable
shall be calculated as if his salary or wage were Rs.3,500 P.M. although officers
drawing salary between Rs.1600 and Rs.3500 per month are employees under
Section 2 (13) and eligible for bonus still for the purpose of calculating the bonus
payable under Sections 10 & 11 such officers salary will be take at the maximum of
Rs. 3,500/- p.m. and he will eligible for bonus calculated on that basis. When he is
paid over and above this bonus any exgratia amount to make up for the loss
occasioned by the ceiling introduced by the Act. The amount paid as exgratia
cannot be considered to be an expenditure debited directly to reserve such amount
can, therefore, be added back to the gross profits of the employer for purposes of
working out the available surplus.
Section 13 provides for proportionate deduction in bonus, where an employer
has not worked for all the working days in any accounting year, in respect of
seasonal employees “the words” working days in any accounting year in Sec 13
means only those days of the year during which seasonal employee is actually
allowed to work. It does not mean all the days of the year except holidays.
Set On and Set Off of Allocable Surplus: Section –2 sub-Section (4) defines the
words allocable surplus. Allocable surplus means in relation to an employer, being
a company other than a banking company which has not made the arrangement
prescribed under the Income-tax Act, for the declaration and payment within India
of the dividends payable out of its profit in accordance with the provisions of
Section 4 of that Act, 67 percent of such available surplus in any other case 60% of
such available surplus.
Under Section 15, if in an accounting year the allocable surplus exceeds the
amount of bonus payable to the employee under Section 10 the excess shall subject
54
to a limit of 20 per cent of the total salary or wage of the employees be carried
forward for being set on in the succeeding accounting year. It will be utilized for
paying the bonus as illustrated in the fourth schedule to this Act. If there is no
allocable surplus in a year or the allocable surplus in respect of that year falls short
of the amount of bonus payable under, Section 10 and there on sufficient amount
carried forward and set on under sub-Section (1) which could be utilized for paying
the bonus then the amount necessary for paying the bonus shall be carried forward
for being set off in the next accounting year.
In Workmen, N.G.Bank Vs N.G.Bank A.I.R. 1976.S.C.611 it was held that it is clear
from the scheme of the Act and the context in which Section .15 (1) occurs,
following closely upon Section 4 to that the basic condition for the applicability of
Section 15 (1) is that bonus is computed in accordance with the formula provided
in the Act. As a result of such computation, if it is found that the allocable surplus
is more than sufficient to cover the maximum bonus payable under the Act and
where such is the case the sub-Section provides that the excess, over the amount of
maximum bonus shall to the extent of 20 percent of the total wage or salary be
carried forward and set on in the succeeding year. The sub-Section can have no
application where no computation is made under the Act and bonus is paid not in
accordance with the statutory formula, but on an adhoc basis.
Section 16, provides that the employees of a new establishment shall be paid
bonus in accordance with the provisions of sub-Section 1-A, 1-B and 1-C. In the
first five years in which the employer sells the goods produced by him or renders
service bonus shall be payable in respect of the accounting year in which the
employers derive profit-Such bonus shall be calculated without applying the
provisions of Section 15. For the sixth accounting year set on and set off shall be
made taking into account the excess or deficiency if any of the allocable surplus set
on and set off in respect of the fifth and sixth accounting years. For the seventh
accounting year set on or set off shall be made taking into account the excess or
deficiency of the allocable surplus, set on or set off in respect of the fifth, sixth and
seventh accounting years. From the eighth year following the accounting year in
which the employer sells the goods manufactured by him. Section 15 shall apply in
relation to such establishment.
As establishment not may be newly set up. It may be an existing establishment
of which merely the ownership has changed. But the new owner may not
necessarily be the successor in interest of the old in respect of the business carried
on in the establishment. One may acquire the ownership of an establishment with
out taking over the business as growing concern and becoming a successor-in-
interest in respect of it. An establishment which is used for the purpose of carrying
on trade, business or undertaking may change hands and pass from one owner to
another. The workers operating this apparatus and working in it may change; new
workers may take the place of old or come as additional workers When the
ownership of the establishment which is nothing but another name for this
apparatus is transferred from one person to another, the establishment in the
55
hands of the transferee. Now though the transferee may become the owner of the
establishment he would not necessarily be a successor in interest of the transferor
in respect of the business carried on in the establishment. The question as to
whether he can be held to be a successor-in –interest of the transferor would
depend on consideration of several relevant facts.
5.7. OTHER KIND BONUS
Under Section 17 where an employer has paid any puja bonus or other
customary bonus to an employee before the date on which it becomes payable the
employer is entitled to adjust the customary or interim bonus against the bonus
payable to the employees under the Act.
In C.I.W.T. Corporation Vs. Their Workmen A.I.R. 1976 S.C. 1939 it was held that the
Bonus Act is a complete code on the subject of profit based bonus, but is silent on
other kinds of bonus such as one oriented on custom. Thus the Act as it stood in
1965 does not bar claims to customary bonus or those based on condition of
service.
Statutory bonus is profit bonus. Nevertheless there is a provision for avoidance
of unduly heavy burden under different heads of bonus. For this reason Section 17
provides that where an employer has paid any Puja bonus or other customary
bonus, so paid from the amount of bonus payable by it under the Act. If the
Customary bonus is thus recognized statutorily and if in any instance it happens to
be much higher than the bonus payable under Act, there is no provision totally
cutting of the customary bonus. The provision for deduction in Section 17 indicates
the independent existence of customary bonus although to some extent its
quantum is adjustable towards statutory bonus.
In Mumbai Kamagar Sabha Vs Adbul Bhai A.I.R. 1976 S.C.1455 it was held that the
Bonus Act seeks to provide for the payment of bonus to persons employed in
certain establishment not in all establishments, Customary bonus does not require
calculation of profits and available surplus because it is a payment founded on long
usage and justified often by spending of festivals and Act given no guidance to fix
the quantum of festival bonus nor does it expressly wish such as usage.
Section 13 provides for deduction of amounts from the bonus payable under
the Act, Where the employer is guilty of misconduct causing financial loss to the
employer, the employer may deduct the amount of loss from the amount of bonus
payable to the employee under this Act, for the accounting year and pay the
balance to the employee. Bonus shall be paid in cash where there is a dispute
before the authority under Section 22 within a month from the date of the award or
the settlement comes into operation. In any other case it must be paid within eight
months from the close of the accounting year. The Government may extend the
time for payment of bonus beyond the period of eight months for sufficient reasons.
In BINNY LTD Vs WORKMEN A.I.R. 1973 S.C. 353 it was laid down that “the claim
for bonus can be made only after the close of the accounting year and in
accordance with the provisions of the Act. The gross profits can be calculated only
56
at the end of the accounting year and the available and allocable surplus can also
be worked out only at the end of the accounting year. There is no question of
employer computing the gross profit available and allocable surplus in the middle of
an accounting year or at any time before the close of the relevant accounting year”,
The direction given by the Tribunal making it obligatory on the management of a
textile mill to make a half-yearly payment of bonus, apart from being opposed to the
scheme of the Act, also runs counter to the provisions of Section 19. An employer
may voluntarily pay the amount during the accounting year by way of part bonus
with he is entitled to take into account and adjust when making final payment at
the close of the accounting year. It is one thing to say that the employer can make
voluntary payment, but it is a different thing for the Tribunal to give a direction to
that effect. Therefore the mere fact to give a direction to that effect. Therefore the
mere fact that the management has been making payments on previous occasion
every half yearly, does not confer a right on the employee thereof to have such
payments by way of bonus in the same manner even after the Act came into force.
Section 20 of the Act lays down that the provisions of the Act shall apply to an
establishment in the public sector which sells any goods or renders any service and
the income from such sale or services or both is not less than 20 per cent of the
gross income of the establishment in the public sector.
In Orissa Transport Co Vs. The Workmen A.I.R. 1967 S.C. 2224 at the time of
hearing the parties have entered into a settlement regarding the payment of bonus
for the years 1963-64 and 1964-65. The company and workmen also agreed
regarding certain deduction to be made from the amount of bonus. It was also
agreed that the question as to whether Section 20 of the Act would be applicable to
the above mentioned company shall remain open and may be agitated in the
references, which were pending before the Tribunal for the years subsequent to
1964-65. It was held that the settlement in respect of payment of bonus for the year
1964-65 will not involve by implication a decision on the point that the above
mentioned company is governed by Section 20 of the Payment of Bonus Act.
Section 21 deals with recovery of bonus due from an employer to an employee
under a settlement or an award or an agreement. The employee or on his death his
assignee or heirs may apply to the appropriate Government and on it being satisfied
shall issue certificate for that amount to the collector who shall proceed to recover
the same in the same manner as an arrears of land revenue. Every application shall
be made within one year from the date on which the money become due unless the
Government entertains an application after the period of one year, after it being
satisfied that the applicant has sufficient cause for making the application within
one year. In Junior Labour Inspector (Central) Jobalpur Vs. The Authority Under
the Payment of Wages Act, And Others 1979 LIC 317; L.L.J. 511 (M.P) it was laid
down that the mode of recovery prescribed under this Section shall be available
only if the bonus sought to be recovered is “under a settlement or an award or an
agreement” it will not apply to recover of bonus which is payable under the Act.
57
Section 22 of the Act lays down that in case of disputes between the employer
and employee relating to the payment of bonus or with respect to the application of
this Act to a public sector establishment the dispute shall be deemed to be an
Industrial dispute under the Industrial Disputes Act 1947. In case of reference
under Section 22 of this Act the Authority under the Payment of Wages act will
have no jurisdiction to proceed under the Payment of wages Act. But where there is
no dispute the Authority can proceed under Section 15 of the Payment of Wages
Act. It is not every dispute between employer and employee, which would be
covered by Section 22.
Section 23 to 25 deals generally with the balance sheet and accounts of
employers and the powers of the Industrial Tribunal when a dispute is referred as
to the bonus payable under the Act. As far as companies and corporations are
concerned the tribunal may presume the accuracy of the balance sheet and profit
and loss account and there is no necessity of such statements by the filing of an
affidavit or by any other mode and it is only when the Tribunal is satisfied that the
statements and particulars contained in the balance sheet of profit and loss
account are not accurate then it can take such steps as it thinks necessary to find
out the accuracy. The tribunal is also given powers in the case of companies and
corporation to call for clarification relating to any items in the balance sheet and
profit and loss account after satisfying that it is necessary and such direction has
to be complied with by the company or corporation.
In Metal Box Company’s Case 1969 (1) L.L.J. 785 it was laid down that the
presumption of accuracy is allowed only to the balance sheet and the profit and
loss account of companies, no such presumption is provided for the Act to Auditor’s
Certificates.
In I.L.C. Manufactures vs. Workmen A.I.R. 1972 S.C. 343 the Supreme Court
held that under Section 23 there is a presumption about accuracy or balance
sheets and profit and loss accounts of corporations and companies and when the
accuracy of the particulars contained in these documents have not been challenged
in a case, reliance will have to be placed thereon.
In Premier Printers Coimbatore vs. Labour Court Coimbatore and Others 36
F.J.R. 118 it was laid down that, if the workmen contend that a particular sum
shown in the trading and profit and loss account addable to the net profit under
any of the provisions of the second schedule, the burden is on the workmen to
establish the same and invite the Tribunal to add back that amount.
In Malabar Metals & Alloys (P) LTD Vs. State of Kerala and others, 1973 (1)
L.L.J. 487 it was held that it is only when the Tribunal is Satisfied that the
statements and particulars contained in the balance sheet and profit and loss
account are not accurate it may take such steps as it thinks fit to find out the
accuracy of such statements.
Section 25 provides that in the case of banking companies when the accounts
are produced the Tribunal cannot permit any trade union or employee to question
58
the correctness of such accounts and all that the Tribunal can do is to permit the
trade union to obtain from the banking company such information as is necessary
for verifying the amount of bonus due under the Act. At the same time the trade
union or employees cannot obtain information which the banking company is not
compelled to furnish under Section 34 A of the Banking Companies Act, 1949.
In other cases as long as the accounts of an employer have been audited by an
auditor duly qualified to act as auditors of companies and they are produced before
the Tribunal, then the provisions contained in Section 23. Applicable to companies
and corporation would apply. But where the account is found necessary. The
tribunal is given the power to direct the employer to get accounts audited within
specified time and if the employer fails to get his accounts audited then the tribunal
has power to get the accounts by such auditor as it thinks fit without prejudice to
prosecution of the employer under Section 28 for failure to have the accounts
audited, as per directions of Tribunals.
Section 26 makes it obligatory on the employer to maintain such registers or
records as may be prescribed under the Act. Section 27 provides for the
appointment of Inspectors who may require an employer to furnish information as
may be necessary and enter any establishment or premises and require any person
found in charge there of to produce books and registers for his examination, the
purpose of ascertaining whether the provisions of the Act have been complied with
or not.
If any person contravenes any of the provisions of the Act or fails to comply
with the directions or requisitions Section 29 lays down that he shall be punishable
with imprisonment of six months or with fine of Rs.1000 or with both. Where an
offence is committed by the company, every person who was in charge of the
company shall be liable to be proceeded against and punished accordingly unless
he proves that the offence was committed without his knowledge or that he
exercised due diligence to prevent the commission of such offence.
Section 31A deals with special provision with respect to payment of bonus
linked with production or productivity. Into two separate clauses, the legislature
has made its intention clear that all agreements or settlements entered into before
or after 25-9-1975. Would attract the Section if they fall within its terms. If the
agreement is for payment of annual bonus linked with production or productivity in
lieu of bonus based on profits payable under the Payment of Bonus Act 1965, the
parties will be governed by the agreement subject to the proviso to 31-A. if the
agreement falls outside the Section, the claim has to be considered and determined
under the Act. Under the proviso to Section 31-A an agreement to relinquish the
minimum bonus under-Section (2A) to Section 10 is void and the employees are not
entitled to receive bonus in excess of 20 percent of the salary or wage earned by
them during the accounting year.
Non-Applicability of the Act to certain establishments and Employees
Apart from the Act not applying to establishments other than factories
employing less than 20 employees and to the restricted application to new
59
industries under Section 16, and under Section 20 the Act will not apply to
employees in public sector establishments except as provided in the Act and also to
employees of several establishments under Section 32. Establishment in public
sector has been defined in sub-Section (16) of Section 2 of the Act as “an
establishment owned, controlled or managed by a Government company as defined
in Section 617 of the Companies Act 1956, a corporation in which not less than 40
percent of its capital is held by the Government or the Reserve Bank of India or
Corporation owned by the Government”
As far as Section 20 is concerned the principle for non applicability is that of
monopoly if it is competing to some extent with the private sector industries then
the Act is to apply and once the Act is applicable thereafter it is to continue to apply
even if in any subsequent year it becomes monopolistic. The following classes of
employees are not covered by this Act: (1) Employees of Life Insurance Corporation
of India (ii) Seamen as defined in clause (42) of Section 3 of the Merchant Shipping
Act 1958. (iii) Employees registered or listed under any scheme made under the
Dock Workers (Regulation of Employment) Act 1948 and employed by registered or
listed employers. (iv) Employees of an establishment departmentally run by the
Central or State Government or by a local authority (v) Employees employed by the
Indian Red Cross Society, Universities and other educational institutions and
hospitals, Chambers of Commerce and social welfare institutions established not
for the purpose of profit. (Vi) Employees employed through contractors on building
operations. (vii) Employees employed by the Reserve Bank of India and certain
other corporations like the Industrial Finance Corporation the Deposit Insurance
Corporation, and the Agricultural Refinance Corporation, the Unit Trust of India,
and the Industrial Development Bank of India.
The Act is not to apply where the employees have, before the 25th May 1965
entered into an agreement or settlement with their employers for payment of annual
bonus linked with production or productivity in lieu of bonus on profits or who may
have entered or may enter after that date into any agreement or settlement with
their employers for payment under the Act. In both the cases the non-application of
the Act is restricted to the period for which such agreement or settlement is in
operation.
In WORKMEN BATA SHOE Co., Vs BATA Co., A.I.R. 1972 S.C. 1436 a general bonus
was payable to the workmen at the end of each quarter under an agreement dated
30-8-1962, which was to be in force till 31-12-1965. The workmen raised a dispute
for a claim for bonus under the Payment of Bonus Act for the year 1964 in addition
to that paid to them under the agreement. The company pleaded Section 32 as a
bar to such a claim. It was held that the claim of the workmen was barred by the
agreement by virtue of Section 32. It was also held that having regard to all the
antecedent circumstances and agreements the payment under the agreement was
payment of bonus linked with the production or productivity and was made in lieu
of bonus based on profits. The payment of general bonus though made quarterly
was an annual bonus within Section 32. The essential test of annual bonus is that
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the payment should ensure throughout the year and it should also be continued
from year to year.
In order to in invoke the bar under Section 32 of the Act the employer must
establish that (I) there is an existing operative agreement or settlement entered into
prior to 29-5-1965; (ii) that it is one for payment of annul bonus (iii) the payment of
bonus was linked with production and productivity and the payment was in lieu of
bonus based on profits.
In S. S. SANDHU vs. FERTILIZER CORPORATION OF INDIA A.I.R 1974 S.C. 1967 a
Government company made ex-gratia payment to its workmen in the past. With
effect from 1-4-1965 the company introduced a production bonus scheme. On 2-
12-1965 the Central Cabinet took decision that competitive public sector
undertaking which had made ex-gratia payments to their workmen in the past
should continue to make that payment. The corporation offered the workmen the
option of either accepting the cabinet decision or the production bonus scheme and
the workmen opted in favor of the cabinet decision. The statutory bonus of 4%
payable according to the Bonus Act for the year 1965-66 came to 14.6 days basic
wages plus dearness allowance. As the production, for the year was less than the
attainable production, no production bonus was strictly payable to the workmen,
but the management with a view to preserve industrial peace and harmony decided
to pay a minimum 3% production bonus which came to only 11 days basic wages
plus dearness allowance. This coupled with the statutory bonus of 4% aggregated
to 25.6 days wages which fell short of the amount representing 30 days wages paid
to the workmen in the past years. The management decided to give additional 4
days wages as advance production bonus to be adjusted as and when the total
bonus payable to the worker exceeds 30 days wages in future. A dispute arose as to
the payment of ex-gratia bonus. The workers claimed that the production bonus
scheme did not detract from the ex-gratia payment of bonus, which they were
entitled to receive according to the cabinet decision. The matter was referred to the
tribunal. After the appeal to the Supreme Court was over the corporation computed
the arrears after adjusting the bonus paid in 1964-65 and1965-66 and paid the
balance together with interest. The workers claimed that they were entitled to
receive ex-gratia payment of bonus in addition to the statutory bonus making up to
the aggregate 30 days wages unaffected by the production bonus scheme. It was
held that the amounts payable by way of bonus for the year 1964-65 and 1965-66
were fully paid and their claim for the payment of any further amount was
unjustified. The performance bonus was paid ex-gratia.
Further the workers were given the choice between bonus payable according to
the cabinet decision and statutory bonus plus production bonus according to the
scheme. Since the workmen opted in favour of cabinet decision they could not claim
production bonus in addition. The amount of production bonus was accordingly
liable to be taken into account in computing the bonus payable to them under the
cabinet decision. In Mumbai Kamgar Sabha vs. Abdulbhai A.I.R. 1976 S.C. 1455 it was held
that Section 34-A old Section 34) only emphasizes the importance of the obligation
61
of the employer in every case. To pay the statutory bonus. This Section does not
destroy the survival of other types of bonus other than that provided by the Bonus
Act.
Section 36 provides that the Government may exempt certain establishment
from the operation of the Act having regard to the financial position and other
relevant circumstances of the establishment. The Section has been held to be
constitutionally valid. It has been further held that bonus now has the character of
a right to share in the surplus profits; and the liability to pay has become a
statutory obligation imposed by the Payment of Bonus Act. With regard to Section
36 of that Act the Supreme Court observed that the said Section amounts to
conditional legislation and whether in a given case, power has been properly
exercised by the Government would have to be considered when that occasion
arises.
The powers under Section 36 are a quasi-judicial power, which has to be
exercised by the Government justly and fairly by means of a speaking order. In
Fashion Electric Dry Cleaners Vs. Government of Andhra Pradesh and another
1977, 2. L.L.J. 81 it was held that Section 36 of the Bonus Act Contemplates the
exercise of discretion, which is guided and limited by the provision itself; in
exercising that power the Government must have regard to the financial position
and other relevant circumstances relating to the establishment in question; and
that since the order is bound to affect the civil rights of the parties the Government
must pass a speaking order giving its reason for the same. In Mahalakshmi Textile Mill
Ltd. Madurai vs. Government of Madras 1969 (2) L.L.J. 33 it was laid down that it would be
the duty of the Government to take into account the financial position and other
relevant circumstances of the establishment should be stayed or not. The rights of
the parties are involved by a decision of the Government under Section 36 of the
Act. If it decides to grant exemption from payment of minimum bonus, the Labour
would be affected adversely and it refuses to act in deserving cases the
management would be affected. In such a situation it is the duty of the Government
to consider the financial positions and other relevant circumstances of any
establishment and come to its conclusion giving reasons for it.
The Payment Bonus Act is a piece of social security legislation, granting a
minimum bonus of 8.33 percent. As this Act is beneficial to workers in general it is
applicable in addition to Acts like the Industrial Disputes Act and not in derogation
of the other enactments.
5.7. CASE LAW
1) The Labour Appellate Tribunal in Mill Owners Association vs. Rashtriya Mill
Mazdoor Sangh, 1952 L. A. C. 423.
2) Jayna Time Industries (P) Ltd. Vs. Industrial Tribunal and others. 1975 (2)
L.L.J 436.
3) Mumbai Kamgar Sabha vs. Abdulbhai A.I.R. 1976 S.C. 1455
62
4) Mahalakshmi Textile Mill Ltd. Madurai vs. Government of Madras 1969 (2)
L.L.J. 33.
5.8. T EST QUESTIONS
1) When and how the employees are entitled for Bonus under the payment of
Bonus Act? When they are disqualified?
2) What are the special features of the Bonus Act 1965?
3) What is meant by Full Bench Formula?

63
UNIT – VI
THE EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS

PROVISIONS ACT 1952
Structure
6.1. Introduction
6.2. Object
6.3. Definition
6.4. Employee Provident Fund Scheme
6.5. Authority Under the Act
6.6. Mode of Recovery from the Employer
6.7. Offences by Company
6.8. Various Pension Scheme
6.9. Case Law
6.1. INTRODUCTION
This is a beneficial legislation enacted as a measure of social legislation and
should be construed liberally so as to confer benefit on the employees to the
maximum extent.
6.2. OBJECT
The object of the act is that all the employees of an establishment or factory
engaged in any industry specified in Schedule I or industries to which the
provisions of the Act are applicable should make provision for provident fund. The
Act 1952 envisages a much broader scheme conferring a larger benefit of provident
fund and family pension scheme on the employees. This Act was amended from
time to time. The unit for purposes of the application of the act was considered to
be factory, but as a result of amendment which came into force from 28th December
1956 the unit in one way became an establishment, though it was by implication
provided that what was meant by establishment was a factory
6.3. DEFINITION
1. EMPLOYEE
Any person employed for wages for any kind of work in or in connection with
the work of the establishment regardless of the place where he worked in
connection with the employers establishment would be an employee with in the
meaning of the Act.
6.4. EMPLOYEE’S PROVIDENT FUND SCHEME
Two distinct powers are conferred on the Central Government by Section 5 (1)
namely (i) to frame a scheme and (ii) to specify to which factories the scheme shall
apply. Both these powers can be exercised through the medium of a single
notification. Further the factories to which the scheme shall apply may be specified
64
in the scheme itself. The scheme shall apply to employees or any class of
establishment as specified in it. After the framing of the Provident fund Scheme as
soon as possible a fund shall be established in accordance with the provisions of
this Act and scheme. The fund shall vest with the Central Board constituted under
Section 5A to be administrated by it. Chapter I,II and III of the Employees Provident
Funds Scheme framed under the Act came into force immediately in the year 1952
and the other provisos thereafter as specified by the Government.
Under Section 6 the contribution paid to the fund by the employer shall 10%
of the basic wages and allowances and the contribution payable by the employees
shall be equal to the employer’s contribution. The Scheme provides for a large
contribution not exceeding 10% of the basic pay and dearness allowance, if the
employee desires. The employees provident fund scheme provides that the employer
shall in the first instance pay both the contribution payable by himself and also on
behalf of the member employed by him. Dearness allowance will include the cash
value of any food concession allowed to the employee. Retaining allowance is
allowance payable to the employee during the period when the establishment is not
working for retaining his services.
The amount of members contribution paid by the employer shall
notwithstanding the provision in the employees provident fund scheme or any law
or the time being in force be recoverable by means of deductions from the wages of
the member
In Bihar State Electricity Board Vs Their workmen AIR 1976 S C 251 problem
arose with reference to the application of state Electricity Board employees
Provident Fund scheme. The reference in appeal was whether the Employees
Provident Fund Act, 1952 should be extended to additional categories of workmen.
The Supreme Court directed the Tribunal to consider the matter a fresh in the light
of the following observation. The Board is a public service institution not expected
of the board to bear additional burden in the matter of provident fund, whether
same consideration that applied in the case of private commercial concern s
difficult questions in a view in the statutory obligations laid on the board under the
Electricity Act 1943. If the industry is in stable condition and burden of provident
fund and gratuity does and result loss, that burden will have to be borne by the
employer, like the burden of wage structure in the interest of social justice.
PROCEDURE FOR ENQUIRY
Section 7A of the Act prescribe a wholesome procedure for conducting inquiry
for the purpose of determining the amount due from the employer under any
provisions of the Act, and the scheme or the Family Pension scheme or the
Insurance scheme.
Under Section 8A recovery of money payable by an employer in respect of an
employee employed by or through a contractor may be recovered from the
contractor.
65
Section 11 provides for priority of payment of contribution over other debt’s

where employer is adjudicated insolvent or where the employer being company is
wound up according to clause any contribution payable to fund insurance fund
should be first paid.
6.5. AUTHORITY UNDER THE ACT
The Board trustees called Central Board shall be constituted under Section 5A
of the Act consisting of the following persons
(a) A Chairman
(b) Not more than five persons from among the Central government officials
(c) Not more than 15 persons representing State & Central Government
(d) Six persons representing the employers to which the scheme applies
(e) Six persons representing the employees to which the scheme applies.
All this persons appointed by the Central government. The Central
Government may constitute a board of trustees for any state after consulting the
state and such state board shall exercise such powers as are assigned to it from
time to time.
Central provident fund commissioner or any of his subordinates may
determine the amount due from an employer under the Act. Where the liability is a
condition precedent to any order made under Section 7-A of the act. The officers
conducting the inquiry shall have the powers of civil court for enforcing the
attendance of any person, for requiring the discovery and production and issuing
commissions for the examination of witnesses. An order made under this Section
shall be final and shall not be questioned in any court of law.
6.6. MODE OF RECOVERY OF MONEY DUE FROM EMPLOYER
Any amount due from the employer in respect of any contribution payable to
the fund or the insurance fund, or damages recoverable under Section 14b or
accumulations in any provident fund standing to the credit of an employee may be
recovered as an arrears of land revenue.
Attachment
The amount standing to the credit of any member in the fund or any exempted
employee cannot be assigned or charged and it is not liable to attachment under
any decree or order of any court. A similar protection is available to the family
pension
6.7. OFFENCES BY COMPANIES
The inspectors appointed for inquiring into the correctness of any information
furnished in connection with this Act and to ascertain whether the provisions of the
Act or any scheme have been complied with.
The Act also prescribes the penalties for contravening the provisions of the Act.
If the accused found guilty shall be punished with imprisonment of six months or
with field of Rs 2000/= or with both.
66
Section 14 –A provides that, if any offence is committed, the liability rests

upon every person who at the time of the offence was committed was in charge of
and was responsible to the company for the conduct of business as well as on the
company.
However in the following cases they were not liable.
(i) if the offence was committed without his knowledge
(ii) that he exercised all due diligence to prevent the commission of it.
Under Section 14-A Imprisonment of one year or a fine of Rs 4000/= may be
imposed as enhanced punishment for second conviction under this Act. Further an
employer is liable to pay damages if he has made default in payment of contribution
NON APPLICABILITY OF THE ACT
The provisions of the Act are inapplicable to establishment which do not
employ twenty or more persons to work there in for a period of one year The Act
shall not apply to any establishment registered under the Co operative societies Act,
employing less than 50 persons without aid of power and is inapplicable to any
establishment employing 50 or more persons until the expiry of three years from
date on which the establishments was set up. The object here is to allow the
establishment for sufficient time to acquire stability to enable it to contribute
towards the provident fund scheme.
The Central Government may exempt any establishment from cooperation of
the Act taking into consideration the financial position or other circumstances.
6.8. VARIOUS PENSION SCHEMES
EMPLOYEES FAMILY PENSION SCHEME
The Central government may by notification in the official gazette frame a
scheme to be called the employees family pension scheme for the purpose of
providing family pension and life assurance benefits to the employees of any
establishment or class of establishments. The family pension scheme may provide
for all or any of the matters specified in schedule III of the Act.
The employees to whom the family pension scheme shall apply
The contribution by the central government to the family pension fund and the
manner in which such contribution is to be made.
The manner in which the accounts of the Family pension fund shall be kept
and the investment of the money belonging to the family pension fund.
The nomination of a person to receive the assurance amount due to the
employee after his death and the cancellation or variation of such nomination.
The registers and records to be maintained in respect of employee, the form or
design of any identity card token.
THE SCALES OF FAMILY PENSION AND THE ASSURANCE AMOUNT
The mode of disbursement of family pension and the arrangement to be
entered into with such disbursing agencies as may be specified for the purpose.
Any other matter which is to be provided for in the family pension scheme.
67
FAMILY PENSION FUND

After framing of the family pension scheme Family pension fund will be
established. The family pension fund will vest in and be administered by the central
government. The amount due to an employee or his nominees in the case of death
of employee is not attachable under any law or by an order of court.
EMPLOYEES DEPOSIT LINKED INSURANCE SCHEME
The Central Government by notification in the official gazette, frame a scheme
to be called the employees Deposit linked insurance Scheme for the purpose of
providing life insurance benefits to the employees of any establishment or call of
establishment. The insurance scheme may provide for all or any of the matters
specified in schedule VI of the Act. It contains following matters.
The manner in which the accounts of the insurance fund shall be kept and
investment of moneys belonging to insurance fund as may be determined by the
central government.
The employees or class of employees who shall be covered by the insurance
scheme.
The nominations of a person to receive the insurance amount due to the
employee after his death and the cancellation or variation of such nomination.
The registers and records to be maintained in respect of employees , the form
and designs of Identity card.
The Insurance fund will vest in the central Board and be administered by it in
such manner as may be specified in the insurance scheme. Any amount due to an
employee or his nominee in the case of death of the employee is not attachable
under any law by an order of any court.
6.9. CASE LAWS
Bihar State Electricity Board Vs Their workmen AIR 1976 S C 251
1) Write about various pension schemes provided under the Provident Fund
Act 1956?
2) State the powers and functions of the authorities under the Act?

68
UNIT – VII
THE EMPLOYEES STATE INSURANCE ACT 1948

STRUCTURE
7.1. Introduction
7.2. Historical Development
7.3. Object of the Act
7.4. Constitution of Corporation
7.5. Constitution of Standing Corporation
7.6. Medical Benefit Council
7.7. Benefits
7.7.1. Sickness Benefit
7.7.2. Maternity benefit
7.7.3. Disablement benefit
7.7.4. Dependent benefit
7.7.5. Medical Benefit
7.8. Test Questions
7.1. INTRODUCTION
According to National Commission on Labour, the Government of India
introduced in Central Legislature the Workmen’s Insurance Bill in November 1946,
which was passed eighteen months later as the Employee’s State Insurance Act,
1948. It was designed to provide cash benefits in the case of sickness, maternity
and employment injury, and payment in the form of pension of the dependants of
workers who dies of employment injury and medical benefit to workers. It
introduced the contributory principle to cover these contingencies, provided
protection against sickness, replaced lump-sum payments by pension in the case of
dependants’ benefit and placed the liability for claims on a statutory organization.
Because of the vastness of the country and the considerable preparatory work
involved such as provision of building, equipment and personnel, the scheme could
not be implemented throughout the country simultaneously. A plan for its phased
extension to different places was drawn up. Transitory provisions which require
payment of special contribution by all employers had to be introduced to meet the
objection of the employers in covered areas, that the ESI levy would affect their
competitive position adversely. The contribution of employers in implemented areas
was fixed at a rate higher than that for employers in non-implemented areas. The
scheme came into operation in Kanpur and Delhi on February 24, 1952.
7.2. HISTORICAL DEVELOPMENT
Employees’ State Insurance Act, 1948 has been enacted on the basis of two
conventions and on Recommendations of the International Labour Organization
adopted in the year 1927. It has also its origin for the Industrial Accident
Insurance Law relating to the workers of Britain. The Government of India
69
considered the problem of sickness insurance of the industrial workers in the year
1928, but at the time it could not ratify the aforesaid I.L.O conventions of 1927.
Subsequently Royal Commission on Labour also considered the problem of
sickness insurance, but it could not suggest any scheme of sickness insurance of
the industrial workers. Ultimately the Government of India appointed a Committee
under the Chairmanship of Prof. B. P. Adarkar to draft a Bill on the subject of
Health Insurance for the Industrial Workers in the Year 1944. The Report of the
Committee was placed before the Standing Committee in March 1945.
Subsequently the experts of International Labour Organization reviewed this
Report, namely, Mr. Stack and Mr. Rao and they suggested to extend the scope of
insurance scheme to some more categories of workers.
7.3. OBJECT OF THE ACT
The Employees’ State Insurance Act is a social security legislation and was
enacted to ameliorate various risks and contingencies sustained by workers while
serving in a factory or establishment. It is thus entitled to promote the general
welfare of the worker. Hence the enactment demands a liberal interpretation in
order to achieve the legislative purpose and object.
The Employees’ State Insurance Act and the scheme framed there under
constitute an important social security programme and protection to industrial
workers and their families who are exposed to the risks of sickness, employment,
injury, occupational diseases and in the case of female employees to maternity.
The ambit and the scope of the Act was well highlighted by the Court in the
case of Shibu Metal Works V. Reg. Director, E.S.I. Corporation (1982) Lab I.C 755
(H.C.) wherein it was observed, that the Employees’ State Insurance Act is such a
beneficent Labour legislation which has to be literally construed. A strained
construction, which brings the owners or employers within the ambit of employees,
should be avoided, because object of this Act is to provide for certain benefits only
to the employees and its purpose is not to confer these benefits on the owners or
occupiers of the factory or the establishment.
DEFINITION
Recently, the E.S.I. Act was amended in the year 1989, bringing various
changes. Some of the important amendments, which are brought into force with
effect from 20th October 1989, are as follows:
DEPENDENT
“Dependent” means any of the following relatives of a deceased insured person,
namely:
(i) a widow, a minor legitimate or adopted son, an unmarried legitimate or
adopted daughter;
a) a widowed mother;
(ii) If wholly dependent on the earnings of the insured person at the time of
his death, a legitimate or adopted son or daughter, who has attained the
age of eighteen years and who is infirm;
70
(iii) If wholly or in part dependent on the earnings of the insured person at the
time of his death,
(a) a parent other than a widowed mother,
(b) a minor illegitimate son, an unmarried illegitimate daughter or a
daughter legitimate or adopted or illegitimate if married and a minor or
if widowed and a minor,
(c) a minor brother or an unmarried sister or a widowed sister if a minor a
widowed daughter-in-law
(d) A minor child of a pre-deceased son.
(e) A minor child of a pre-deceased daughter where no parent of the child
is alive, or
(f) A paternal grand-parent if no parent of the insured person is alive;
EMPLOYEE
“Employee means any person employed for wages in or in connection with of a
factory or establishment to which this Act applies and-
(i) who is directly employed by the principal employer on any work of, or
incidental or preliminary to or connected with the work of, the factory or
establishment or elsewhere; or
(ii) Who is employed by or through an immediate employer on the premises of
the factory or establishment or under the supervision of the principal
employer or his agent on work, which is ordinarily part of the work of the
factory or establishment or which is preliminary to the work carried on in
or incidental to the purpose of the factory or establishment; or
(iii) Whose services are temporarily lent or let on hire to the principal employer
by the person with whom the person (whose services are so lent or let on
hire) has entered into a contract of service; and includes any person
employed for wages on any work connected with the administration of a
factory or establishment or any part, department or branch thereof or with
the purchase of raw materials for, or the distribution or sale of the
products of, the factory or establishment; or any person engaged as an
apprentice, not being an apprentice engaged under the Apprentices Act,
1961 (52 of 1961), or under the standing orders of the establishment; but
does not include-
(a) Any member of the Indian Naval, Military or Air forces; or
(b) Any person so employed whose wages (excluding remuneration for over
timework) exceed (such wages as may be prescribed by the Central
Government) a month.
Provided that an employee whose wages excluding remuneration for overtime
work exceed such wages as may be prescribed by the Central Government a month
at any time after and not before the beginning of the contribution period, shall
continue to be an employee until the end of that period;
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FAMILY
“Family” means all or any of the following relatives of an insured person,
namely:
1) a spouse;
2) a minor legitimate or adopted child dependent upon the insured person;
3) a child who is wholly dependent on the earnings of the insured person and
who is-
(a) receiving education, till he or she attains the age of twenty-one years,
(b) an unmarried daughter;
4) a child who is infirm by reason of any physical or mental abnormally or
injury and is wholly dependant on the earnings of the insured person, so
long as the infirmity continues;
5) dependant parents;
FACTORY
“Factory” means any premises including the precinct thereof-
(a) Where on ten or more persons are employed or were employed for wages on
any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on with the aid of power or is
ordinarily so carried on, or
(b) Where on twenty or more persons are employed or were employed for wages on
any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on without the aid of power or is
ordinarily so carried on, but does not include a mine subject to the operation
of the Mines Act, 1952 (35 of 1952) or a railway running shed;
WAGES
“Wages” means all remuneration paid or payable in cash to an employee, if the
terms of the contract of employment, express or implied, were fulfilled and includes
any payment to an employee in respect of any period of authorized leave, lock-out,
strike which is not illegal or layoff and other additional remuneration, if any, paid
at intervals not exceeding two months, but
(a) any contribution paid by the employer to any pension fund or provident fund,
or under this Act;
(b) any travelling allowance or the value of any travelling concession;
(c) any sum paid to the person employed to defray special expenses entitled on
him by the nature of his employment; or
(d) any gratuity payable on discharge;
WAGE PERIOD
(23) “Wage period” in relation to an employee means the period in respect of
which wages are ordinarily payable to him whether in terms of the contract of
employment, express or implied or otherwise;
72
7.4. CONSTITUTION OF CORPORATION:

The Corporation shall consist of the following members, namely
(a) a Chairman to be appointed by the Central Government
(b) A Vice-Chairman to be appointed by the Central Government.
(c) Not more than five persons to be appointed by the Central Government
(d) One person each representing each of the States in which this Act is in force to
be appointed by the State Government concerned.
(e) One person to be appointed by the Central Government to represent the Union
territories.
(f) Ten persons representing employers to be appointed by the Central
Government in consultation with such organizations of employers as may be
recognized for the purpose by the Central Government in consultation with
such organizations of employers as may be recognized for the purpose by the
Central Government.
(g) Ten persons representing employees to be appointed by the Central
Government in consultation with such organizations of employees as may be
recognized for the purpose by the Central Government
(h) Two persons representing the medical profession to be appointed by the
Central Government in Consultation with such organizations of medical
practitioners as may be recognized for the purpose by the Central Government.
(i) Three members of parliament of whom two shall be members of the House of
the People (Lok Sabha) and one shall be a member of the Council of States
(Rajya Sabha) elected respectively by the members of the Council of States;
and
(j) the Director-General or the Corporation, ex-officio
7.5. CONSTITUTION OF STANDING COMMITTEE:
A Standing Committee of the Corporation shall be constituted from among its
members, consisting of-
a) a Chairman appointed by the Central Government;
b) Three members of the Corporation appointed by the Central Government.
bb) three members of the Corporation representing such three State
Governments thereon as the Central Government may by notification in the Official
Gazette, specify
c) Eight members elected by the Corporation as follows :
(i) Three members from among the members of the Corporation
representing employers.
(ii) Three members from among the members of the Corporation
representing employees;
(iii) One member from among the members of the Corporation representing
the medical profession; and
73
(iv) One member form among the members of the Corporation elected by
the Parliament.
d) The Director–General of the Corporation, ex-officio.
7.6. MEDICAL BENEFIT COUNCIL
(1) The Central Government shall constitute a Medical Benefit Council
consisting of The Director-General of Health Services, Ex-officio as Chairman;
(a) a Deputy Director- General of Health Services to be appointed by the Central
Government
(b) the Medical Commissioner of the Corporation, ex-officio;
(c) one member each representing each of the states other than Union
Territories in which this Act is in Force to be appointed by the State
Government concerned;
(d) three members representing employees to be appointed by the Central
Government in consultation with such organizations of employers as may be
recognized for the purpose by the Central Government;
(e) three members representing employers to be appointed by the Central
Government in consultation with such organizations of employees as may be
recognized for the purpose by the Central Government; and
(f) three members, of whom not less than one shall be a woman, representing
the medical profession, to be(appointed) by the Central Government in
consultation with such organizations of medical practitioners as may be
recognized for the purpose by the Central Government
2. Save as otherwise expressly provided in this Act, the term of office of a
member of the Medical Benefit Council, other than a member referred to in any of
the Clauses (a) to (d) of sub-Section (1). Shall be four years from the date on which
his (appointment) is notified:
Provided that a member of the Medical Benefit Council shall, notwithstanding
the expiry of the said period of four years continue to hold office until the
appointment of his successor is notified.
3. A member of the Medical Benefit Council referred to in clause (b) and (d) of
sub-Section (1) shall hold office during the pleasure of the Government appointing
him.
Principal Officers
The Central Government may, in consultation with the Corporation, appoint
a Director General and a Financial Commissioner.
2) The Director-General shall be the Chief Executive Officer of the Corporation.
3) The Director General and the Financial Commissioner shall be whole-time
officers of the Corporation and shall not undertake any work unconnected
with their office without the sanction of the Central Government and of the
Corporation.
74
4) The Director General and the Financial Commissioner shall hold office for
such period, not exceeding five years, as may be specified in the order
appointing him. An outgoing Director General or the Financial
Commissioner shall be eligible for re-appointment if he is otherwise
qualified.
5) The Director General and the Financial Commissioner shall receive such
salary and allowances as may be prescribed by the Central Government.
6) A person shall be disqualified from being appointed as or for being the
Director General or the Financial Commissioner if he is subject to any of the
disqualifications specified in Section13.
7) The Director General may at any time remove the Director General or the
Financial Commissioner from the office and shall do so if such removal is
recommended by a resolution of the Corporation passed at a special meeting
called for the purpose and supported by the votes of not less than two-thirds
of the total strength of the Corporation.
Employees’ State Insurance Fund
1) All contributions paid under this Act and all other moneys received on behalf
of the Corporation shall be paid into a fund called the Employees’ State
Insurance Fund which shall be held and administered by the Corporation for
the purposes of this Act.
2) The Corporations may accept grants, donations and gifts from the Central
and State Government, local authority, or any individual or body whether
incorporated or not, for all or any of the purposes of this Act.
3) Subject to the other provisions contained in this Act and to any rules or
regulations made in this behalf, all money accruing or payable to the said
Fund shall be paid into the Reserve Bank of India or such other bank as
may be approved by the Central Government to the credit of an account
styled the Account of the Employees’ State insurance Fund.
4) Such account shall be operated on by such officers as may be authorized by
the Standing Committee with the approval of the corporation.
Contributions
1) The Contributions payable under this Act in respect of an employee shall
comprise contribution payable by the employer (hereinafter referred to as the
employer’s contribution) and contribution payable by the employee
(hereinafter referred to as the employees’ contribution) and shall be paid to
the Corporation
2) The contributions shall be paid at such rates as may be prescribed by the
Central Government:
3) Provided that the rates so prescribed shall not be more than the rates which
were in force immediately before the commencement of the Employees; State
insurance (Amendment) Act, 1989 (29 of 1989).
75
4) The wage period in relation to an employee shall be the unit in respect of

which all contributions shall be payable under this Act.
5) The contributions payable in respect of each wage period shall ordinarily fall
due on the last day of the wage period, and where an employee is employed
for part of the wage period, or is employed under two or more employers
during the same wage period, the contributions shall fall due on such days
as may be specified in the regulations.
6) If any contribution payable under this Act is not paid by the principal
employer on the date on which such contribution has become due, he shall
be liable to pay simple interest at the rate of twelve per cent, per annum or
at such higher rate as may be specified in the regulations till the date of its
actual payment:
Provided that higher interests specified in the regulations shall not exceed the
lending rate of interest charged by any scheduled bank.
(b) Any interest recoverable under clause (A) may be recovered as an arrear of
land revenue or under Section 45 C to Section 45-I.
7.7. BENEFITS
1) Subject to the provisions of this Act, the insured persons, their dependants
or the persons hereinafter mentioned, as the case may be, shall be entitled
to the following benefits, namely
(a) Periodical payments to any insured person in case of his sickness
certified by a duly appointed medical practitioner or by any other
person possessing such qualifications and experience as the
Corporation may, by regulations specify in this behalf hereinafter
referred to as sickness benefit.
(b) Periodical payments to any insured woman in case of confinement or
miscarriage or sickness arising out of pregnancy, confinement,
premature birth of child or miscarriage, such woman being certified to
be eligible for such payments by an authority specified in this behalf by
the regulations hereinafter referred to as maternity benefits.
(c) Periodical payments to any insured person suffering from disablement
as a result of an employment injury sustained as an employee under
this Act and certified to be eligible for such payments by an authority
specified in this behalf by the regulations hereinafter referred to as
disablement benefit.
(d) Periodical payments to such dependants of an insured person who dies
as result of an employment injury sustained as an employee under this
Act, as are entitled to compensation under this Act hereinafter referred
to as dependants’ benefit.
(e) Medical treatment for and attendance on insured persons hereinafter
referred to as medical benefit; and
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(f) Payment to the oldest surviving member of the family of an insured

person who has died, towards the expenditure on the funeral of the
deceased insured person, or, where the insured person did not have a
family or was not living with his family at the time of his death, to the
person who actually incurs the expenditure on the funeral of the
deceased insured person to be known as funeral expenses
Provided that the amount of such payment shall not exceed such amount as
may be prescribed by the Central Government and the claim for such payment
shall be made within three months of the death of the insured person or with in
such extended period as the Corporation or any office or authority authorized by
it in this behalf may allow.
2) The Corporation may, at the request of the appropriate Government, and
subject to such conditions as may be laid down in the regulations, extend
the medical benefits to the family of an insured person
7.7.1. Sickness Benefit:
The qualification of a person to claim sickness benefit, the conditions subject
to which such benefit may be given, the rates and period thereof shall be such as
may be prescribed by the Central Government.
7.7.2. Maternity Benefit:
The qualification of an insured woman to claim maternity benefit, the
conditions subject to which such benefit may be given, the rates and period thereof
shall be such as may be prescribed by the Central Government.
7.7.3. Disablement Benefit:
Subject to the Provisions of this Act:
(a) a person who sustains temporary disablement for not less than three days
excluding the day of accident shall be entitled to periodical payment at such
rates and for such periods and subject to such conditions as may be
prescribed by the Central Government.
(b) a person who sustains permanent disablement, whether total or partial,
shall be entitled to periodical payment at such rates and for such periods
and subject to such conditions as may be prescribed by the Central
Government.
PRESUMPTION AS TO ACCIDENT ARISING IN COURSE OF EMPLOYMENT
For the purposes of this Act, an accident in the course of an insured person’s
employment shall be presumed, in the absence of evidence to the contrary, also to
have arisen out of that employment.
ACCIDENTS HAPPENING WHILE ACTING IN BREACH OF REGULATIONS ETC
An accident shall be deemed to arise out of and in the course of an insured
person’s employment notwithstanding that, he is at the time of the accident acting
in contravention of the provisions of any law applicable to him, or of any orders
given by or on behalf of his employer or that he is acting without instructions from
his employer, if
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(a) the accident would have been deemed so to have arisen had the act not been
done in contravention as aforesaid or without instruction from his employer,
as the case may be; and
(b) The act is done for the purpose of and in connection with the employer’s
trade of business.
ACCIDENTS HAPPENING WHILE TRAVELLING IN EMPLOYERS’ TRANSPORT
1) An accident happening while an insured person is with the express or
implied permission of his employer, traveling as a passenger by any vehicle
to or from his place of work shall, notwithstanding that he is under no
obligation to his employer to travel by that vehicle, be deemed to arise out
of and in the course of his employment, if-
(a) The accident would have been deemed so to have arisen had he been
under such obligations; and
(b) At the time of the accident, the vehicle
(i) is being operated by or on behalf of his employer or some other
person by whom it is provided in pursuance of arrangements
made with his employer; and
(ii) is not being operated in the ordinary course of public
transport service.
2) In this Section “vehicle” includes a vessel and an aircraft.
ACCIDENTS HAPPENING WHILE MEETING EMERGENCY
An accident happening to an insured person in or about any premises at
which he is for the time being employed for the purpose of his employer’s trade or
business shall be deemed to arise out and in course of his employment, if it
happens while he is taking steps on an actual or supposed emergency at those
premises, to rescue, secure or protect persons who are, or thought to be or possibly
to be, injured or imperiled, or to avert or minimize serious damages to property.
7.7.4. Dependants’ Benefit
1) if an insured person dies as result of an employment injury sustained as an
employee under this Act (Whether or not he was in receipt of any periodical
payment of temporary disablement in respect of the injury), dependant’s
benefit shall be payable at such rates and for periods and subject to such
conditions as may be prescribed by the Central Government to his
dependants specified in (sub-clause (I), sub-clause (ia) and sub-clause(ii) of
clause(6-A) of Section 2.
2) In case the insured person dies without leaving behind him the dependants
as aforesaid, the dependent’s benefit shall be paid to the other dependant of
the deceased at such rates and for such periods and subject to such
conditions as may be prescribed by the Central Government.
Bar against receiving or recovery of compensation or damages under any other
law; an insured person or his dependants shall not be entitled to receive or recover,
whether from the employer of the insured person or from any other person, any
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compensation or damages under the Workman’s Compensation Act, 1923 (8 of

1923) or any other law for the time being in force or otherwise, in respect of an
employment injury sustained by the insured person as an employee under this Act.
Determination of question of disablement: Any Question-
(a) whether the relevant accident has resulted in permanent disablement; or
(b) whether the extent of loss earning capacity can be assessed provisionally or
finally; or
(c) whether the assessment of the proportion of the loss of earning capacity is
provisional or final; or
(d) in the case of provisional assessment, as the period for which such
assessment shall hold good, shall be determined by a medical board
constituted in accordance with the provisions of the regulations and any
such question shall hereafter be referred to as the “disablement question”
7.7.5. Medical Benefit
1) An insured person or where such medical benefit is extended to his
family a member of his family whose condition requires medical
treatment and attendance shall be entitled to receive medical benefit.
2) Such medical benefit may be given either in form of out patient treatment
and attendance in a hospital or dispensary, clinic or other institution or
by visits to the home of the insured person or treatment as in-patient in
a hospital or other institution.
3) A person shall be entitled to medical benefit during any period for which
contributions are payable in respect of him or in which he is qualified to
claim sickness benefit or maternity benefit or is in receipt of such
disablement benefit as does not disentitle him to medical benefit under
the regulations;
Provided that a person in respect of whom contribution ceases to be payable
under this Act may be allowed medical benefit for such period and of such nature
as may be provided under the regulations.
Provided further that an insured person who ceases to be in insurable
employment on account of permanent disablement shall continue, subject to
payment of contribution and such other conditions as may be prescribed by the
Central Government, to receive medical benefit till the date on which he would have
vacated the employment on attaining the age of superannuation had he not
sustained such permanent disablement:
Provided also that an insured person, who has attained the age of
superannuation, his spouse shall be eligible to receive medical benefits subject to
payment of contribution and such other conditions as may be prescribed by the
Central Government.
Explanation- in this Section, “superannuation”, in relation to an insured
person, means the attainment by that person of such age as is fixed in the contract
of conditions of service as the age of the attainment of which he shall vacate the
79
insurable employment or the age of sixty years where no such age is fixed and the
person is no more in the insurable employment.
SCALE OF MEDICAL BENEFIT
1) An insured person and where such medical benefit is extended to his family
shall be entitled to receive medical benefit only of such kind and on such
scale as may be provided by the State Government or by the Corporation,
and an insured person or, not have a right to claim any medical treatment
except such as is provided by the dispensary, hospital, clinic or other
institution to which he or his family is allotted, or as may be provided by the
regulations.
2) Nothing in this Act shall entitle an insured person and where such medical
benefit is extended to his family reimbursement from the Corporation of any
expenses incurred in respect of any medical treatment, except as may be
provided by the regulations.
Benefit not assignable or attachable
1) The right to receive any payment under this Act shall not be transferable or
assignable.
2) No each benefit payable under this Act shall be liable to attachment or sale
in execution of any decree or order of any court.
Bar of benefits under other enactments: when a person is entitled to any of the
benefits provided by this Act, he shall not be entitled to receive any similar benefit
admissible under the provision of any other enactment.
Persons not to commute cash benefits: Save as may be provided in the
regulations, no person shall be entitled to commute for a lump sum any
disablement benefit admissible under this Act.
Recipients of sickness or disablement benefit or disablement benefit other than
benefit granted on permanent disablement
(a) Shall remain under medical treatment at a dispensary, hospital, clinic, or
other institution provided under this Act, and shall carry out the instructions
given by the medical officer or medical attendant in-charge thereof.
(b) Shall not while under treatment do anything which might retard or prejudice
his chances of recovery.
(c) Shall not leave the area in which medical treatment provided by this Act is
being given, without the permission of the medical officer, medical attendant
or such other authority as may be specified in this behalf by the regulations;
and
(d) Shall allow himself to be examined by any duty appointed medical officer or
other person authorized by the Corporation in this behalf.
Benefits not to be combined
1) An insured shall not be entitled to receive for the same period-
(a) Both sickness benefit and maternity benefit; or
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(b) Both sickness benefit and disablement benefit for temporary

disablement
(c) Both maternity benefit and disablement benefit for temporary
disablement
2) Where a person is entitled to more than one of the benefits mentioned in
sub-Section (1), he should be entitled to choose which benefit he shall
receive.
Liability of owner or occupier of factories, etc., for excessive sickness benefits:
(1) where the Corporation considers that the incidence of sickness among insured
persons is excessive by reasons of-
(i) In unsanitary working conditions in a factory or establishment or the
neglect of the owner or occupier of the factory or establishment to observe
any health regulations enjoined on him by or under any enactment or,
(ii) In sanitary conditions of any tenements or lodgings occupied by insured
persons and such in sanitary conditions are attributable to the neglect of
the owner of the tenements or lodgings to observe any health regulations
enjoined on him by or under any enactments,
The corporation may send to the owner or occupier of the factory or
establishment or to the owner of the tenement or lodgings, as the case may be, a
claim for the payment of the amount of the extra expenditure incurred by the
Corporation as sickness benefit; and if the claim is not settled by agreement, the
corporation may refer the matter, with a statement in support of its claim, to the
appropriate Government.
2) If the appropriate Government is of opinion that a prima facie case for
inquiry is disclosed, it may appoint a competent person to hold and inquiry into the
matter.
3) If upon such inquiry it is proved to the satisfaction of the person or persons
holding the inquiry that the excess in incidence of sickness among the insured
persons is due to the default or neglect of the owner or occupier of the factory or
establishment or the owner of tenements or lodgings, as the case may be, the said
person or persons shall determine the amount of the extra expenditure incurred as
sickness benefit and the person or persons by whom the whole or any part of such
amount shall be paid to the Corporation.
4) A determination under sub-Section (3) may be enforced as if it were a decree
for payment of money passed in a suit by a Civil Court
5) For the purposes of this Section. “Owner” of tenements or lodging shall
include any agent of the owner and any person who is entitled to collect the rent of
the tenement or lodging as a lessee of the owner.
Constitution of Employees’ Insurance Court:
1) The State Government shall, by notification in the Official Gazette,
constitute an Employees’ Insurance Court for such local area as may be
specified in the notification.
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2) The Court shall consist of such number of judges, as the State Government
may think fit.
3) Any person who is or has been a judicial officer or is a legal practitioner of
five years’ standing shall be qualified to be a Judge.
4) The State Government may appoint the same Court for two or more local
areas or two or more courts for the same local area.
5) Where more than one Court has been appointed for the same local area, the
State Government may be general or special order regulate the distribution
of business.
Matters to be decided by the Employees’ Insurance Court
I. if any question or dispute arises as to-
(a) whether any person is an employee within the meaning of this Act or whether
he is liable to pay the employee’s contribution, or
(b) the rate of wages or average daily wages of an employee for the purposes of
this Act, or
(c) the rate of contribution payable by a principal employer in respect of any
employee, or
(d) the person who is or was the principal employer in respect of any employee, or
(e) the right of any person to any benefit and as to the amount and duration
thereof, or
ee) any direction issued by the Corporation under Section 55A on a review of any
payment of dependants’ benefits, or
(f) Any other matter which is in dispute between a principal employer and the
Corporation, or between a principal employer and an immediate employer, or
between a person and the Corporation or between an employee and a principal
or immediate employer, in respect of any contribution or benefit or other dues
payable or recoverable under this Act, or any other matter required to be or
which may be decided by the Employees’ Insurance Court Under this Act.
Such question or dispute subject to the provisions of sub-Section (2A) shall be
decided by the Employees’ Insurance Court in accordance with the provisions of
this Act.
(2) Subject to the provisions of sub-Section (2A), the Employees’ insurance
Court shall decide the following claims namely:
(a) claim for the recovery of contribution from the principal employer
(b) Claim by a principal employer to recover contributions from any immediate
employer.
(c) Claim against a principal employer under Section (68)
(d) Claim under Section (70) for the recovery of the value or amount of the
benefits received by a person when he is not lawfully entitled thereto; and
(e) If any claim for the recovery of any benefit admissible under this Act
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(2A) if in any proceedings before the Employees’ Insurance Court a

disablement question arises and the decision of a medical board or a medical
appeal tribunal has not been obtained on the same and the decision of such
question is necessary for the determination of the claim or question before the
Employees’ Insurance Court, the Court shall direct the Corporation to have the
question decided by this Act and shall thereafter proceed with the determination of
the claim or question before it in accordance with the decision of the medical board
or the medical appeal tribunal, as the case may be, except where an appeal has
been filed before the Employees’ Insurance Court under sub-Section (2) of Section
54A in which case the Employees’ Insurance Court may itself determine all the
issues arising before it.
(2B) No matter is in dispute between a principal employer and the Corporation
in respect of any contribution or any other dues shall be raised by the principal
employer in the Employees’ Insurance Court unless he has deposited with the
Court fifty per cent of the amount due from him as claimed by the Corporation.
Provided that the Court may, for reasons to be recorded in writing, waive or
reduce the amount to be deposited under this sub-Section.
(3) No Civil Court shall have jurisdiction to decide or deal with any question or
dispute as aforesaid or to adjudicate on any liability which by or under this Act is
to be decided by a medical board, or by a medical appeal tribunal or by the
Employees’ Insurance Court.
Misuse of Benefits: if the Central Government is satisfied that the benefits
under this Act are being misused by insured persons in a factory or establishment,
that Government may, by order, published in the official Gazette, disentitle such
persons from such of the benefits as it thinks fit:
Provided that no such order shall be passed unless a reasonable opportunity
of being heard is given to the concerned factory or establishment, insured persons
and the trade unions registered under the Trade Unions Act, 1926 having members
in the factory or establishment.
7.8. TEST QUESTIONS
1) Write about various benefits provided under Employers State insurance Act?
2) What is the structure of Standing Committee?
3) Define the powers of the ESI court?
ANNAMALAI UNIVERSITY 
83
UNIT – VIII
MATERNITY BENEFIT ACT 1961

STRUCTURE
8.1. Introduction
8.2. Application
8.3. Conditions for Payment of Maternity Benefit
8.4. Other Benefits
8.5. Authority Under the Act
8.6. Test Questions
8.1. INTRODUCTION
This Act was passed to regulate the employment of women in certain
establishments for certain periods before and after child birth and to provide for
maternity benefit and certain other benefits. By way of this Act the working women
have come in for a great deal of protection. The Maternity Benefit Act 1961 was
passed by the Central Legislature as a measure of Social Justice to woman workers
employed in the industry. Prior to the enactment of the present Maternity Benefit
Act, the maternity benefit legislation was framed and administrated in almost all
the states from 1930 onwards conferring maternity benefit on women workers, But
these enactments were neither uniform in their application nor comprehensive in
their scope. In order to regularise the benefits provided to working women The
Central Government Enacted this Maternity Benefit Act 1961
8.2. APPLICATION
The Act is applicable to every establishment which is a factory mine or
plantation including Government establishments and to every establishments
where in persons are employed for the exhibition of equestrian, acrobatic and other
performances. The Act being a piece of social legislation prohibits the employment
of women during specified period before and after delivery. It also provides for
maternity leave and payment of certain monetary benefits to be paid for women
workers during the period.
MATERNITY BENEFIT
Section 5.1: Maternity Benefit is a payment to a woman at the rate of the
average daily wages for the period of her delivery and for the six weeks immediately
preceeding and including the day of her delivery and for the six weeks immediately
following that day
Subject to the provisions of the Act, every women shall be entitled to and her
employer shall be liable for, the payment of maternity benefit.
8.3. CONDITIONS FOR PAYMENT OF MATERNITY BENEFIT
Maternity Benefit Act provides benefit to the woman worker at the rate of
average daily wages for the period of her actual absence immediately preceeding
and including the day of her delivery and for six weeks immediately following the
day.
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The following conditions must be fulfilled before maternity benefit becomes

payable to a woman worker in an establishment.
She must have actually worked in an establishment of the employer, for a
period of not less than Eighty days in twelve months immediately preceding the
date of her expected delivery. For the purpose of calculating the days on which she
has actually worked in the establishment, the days of lay off during the period of
twelve months immediately preceding the date of expected delivery shall be taken
into account.
BENEFITS
The maximum period for which she shall be entitled to maternity benefit shall
be twelve weeks, Six weeks up to and six weeks after the day of her delivery. If she
dies during this period, the maternity benefit shall be payable only for the days up
to and including the day of her death. Where she dies during her delivery or during
the period of six weeks immediately following the date of her delivery leaving behind
in either case the child, the employer shall be liable for payment of maternity
benefit for the entire period of six weeks immediately following the day of her
delivery. If the child also dies during the period of six weeks immediately following
the day of delivery, the employer shall be liable for the payment of maternity benefit
for the days up to and including the day of the death of the child.
MODE OF PAYMENT
Amount of maternity benefit for the period preceding the date of the expected
delivery of the women shall be paid in advance by the employer to her on
production of such proof as may be prescribed that she is pregnant. The amount
due for the subsequent period shall be paid by the employer to the women within
forty eight hours of production of proof, that the woman has delivered a child. If the
woman dies before receiving the maternity benefit, the employer shall pay such
benefit amount to the person nominated by the woman. In case no nominee was
appointed then it is to paid to her representative.
PAYMENT OF MEDICAL BONUS
Every women entitled to maternity benefit under the Act will also be entitled to
receive from her employer a medical bonus of two hundred and fifty rupees.
LEAVE WITH WAGES FOR TUBECTOMY OPERATION
In order to control the population growth a woman who under go tubectomy
operation shall on production of such proof as may be prescribed, be entitled to
leave with wages at the rate of maternity benefit for a period of four weeks
immediately following the day of her tubectomy.
8.4. OTHER BENEFITS
A woman suffering from illness arising out of pregnancy, delivery, premature
birth of a child or miscarriage will on the production of such proof as may be
prescribed, be entitled to a further period of leave with wages at the rate of
maternity benefit for maximum period of one month, in addition to the period of
absence allowed to her under the Act.
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Nursing Breaks
Every women delivered of a child who returns to duty after such delivery will,
In addition to the interval for rest allowed to her, be allowed in the course of her
daily work two breaks of the prescribed duration for nursing the child until the
child attains the age of fifteen months.
EMPLOYERS DUTY
An employer will have no right to give any notice of discharge or dismissal or
alteration of service condition to her when a woman employee is on maternity leave
or absence. However if the dismissal is warranted for any prescribed gross
misconduct, the employer may by order in writing communicate the same to the
woman and deprive her of the maternity benefit or medical bonus or both. She can
appeal against the order of deprivation within sixty days from the date on which the
order was communicated to her, to the prescribed authority. The decision of the
authority will be final
FORFEITURE OF MATERNITY BENEFIT
If a woman works in any establishment after she has been permitted by her
employer to absent herself under the provisions of Sec 6 for an period during such
authorized absence. She shall forfeit her claim to the maternity benefit for such
period.
8.5. AUTHORITY UNDER THE ACT
The appropriate Government may appoint by notification in the official gazette
such officer as it thinks fit after defining their local limit may appoint inspectors.
Such inspector may enter any premises where woman are employed for the purpose
of examining any registers, records and notices. He may examine any person
employed in the establishment, but cannot compel any person to answer any
question which tends to incriminate himself. He may require the employer to give
all necessary information. He may take copies of any registers or records. Any
woman claiming the maternity benefit or any person claiming the payment due
after her death shall make complaint to the inspector, when it has been withheld
improperly. After enquiry the inspector may direct the payment if he is satisfied
that payment has been withheld wrongfully. Any amount payable under Section 17
shall be recoverable as an arrear of land revenue.
8.6. TEST QUESTION
1) Bring out the extent of protection given to a pregnant woman under the
Maternity Benefit Act?

86
UNIT – IX
FATAL ACCIDENTS ACT, 1855

STRUCTURE
9.1. Introduction
9.2. Object of the Act
9.3. Applicability
9.4. Scheme of the Act
9.5. Test Questions
9.1. INTRODUCTION
An Act to provide compensation to families for loss occasioned by the death of
a person caused by actionable wrong. Whereas no action or suit is now
maintainable in any court against a person who by his wrongful act, neglect or
default, may have caused the death of another person, and it is oftentimes right
and expedient that the wrong-doer in such cases should be answerable in damages
for the injury so caused by him.
According to the preamble of the Act it is clear that the law as it existed in
India before the passing of the Indian Fatal Accidents Act, precluded any person
from suing for damages by reason of death having been caused to another party.
That law was considered to be unjust and so was abrogated by the Act. If we read
the Preamble of the English Fatal Accidents Act, 1846, which is more popularly
called Lord Campbell’s Act, it will at once become clear that the Indian Act has
copied it verbatim. The preamble to the English Fatal Accident Act, read as follows:
“No action at law is now maintainable against a person, who by his wrongful
act, neglect or default may have caused the death of another person, and it is
oftentimes right and expedient that the wrong-doer in such case should be
amenable in damages for the injury so caused by him.”
Common Law before the making of the Act. Under the Common Law of
England the death of person did not afford a cause of action for damages in Tort. At
Common Law it was always cheaper to kill than to maim. This was due to fact that,
on the one hand, any right of action which the injured person might have had as
the result of injury died with him, which aspect of the Common Law rule is
exemplified by the maxim ‘actio personal is moriturcum persona’; that no person
has such a right in the life of another as to entitle him to claim for reimbursement
for the injury occasioned to him by another’s death caused by the wrongful act of
the wrong-doer. This portion of the rule of Common Law is based upon the dictum
of Lard Ellen borough in Baker v. Bolton. In that case the husband was the
plaintiff. Both the plaintiff and his wife were passengers on an omnibus. The
omnibus overturned by the negligence of the defendants. “whereby the plaintiff
himself was much bruised, and his wife was so severely hurt that she died about a
month after.” The plaintiff husband sued for damages for his own injuries and put
forward a claim for damages for the loss of her society and for his mental sufferings
87
resulting on her death. The plaintiff was allowed for compensation for his own
injuries and for the loss of his wife’s society up to the moment of her death, but
nothing for such loss after that event. It was laid down at NISI PRIUS by Lord Ellen
borough that—
“In a civil court the death of a human being could not complained of as an
injury; and in this case the damages as to the plaintiff’s wife must stop with the
period of her existence.”
According to the preamble to the Indian before the passing of the Fatal
Accidents Act (XIII of 1855), precluded any person from suing for damages by
reason of death having been caused to another party. That law was considered to
be unjust and so, like England, America and Canada was abrogated by the Act. The
rule of law as modified by the Indian Fatal Accidents Act is substantially the same
as the Rule of English Common Law modified by Lord Campbell’s Act, 1846. The
Fatal Accidents Act enacts an exception on the rule ‘actio personal is moritur cum
persona’.
PREAMBLE
whereas it is expedient to enable executors, administrators or representatives
in certain cases to sue and be sued in respect of certain wrongs which, according to
the present law, do not survive to or against such executors, administrators or
representatives; it is enacted as follows;
1) Executors may sue and be sued in certain cases for wrongs committed in
lifetime of deceased. Executors, administrators or representatives of any
person deceased may maintain an action, for any wrong committed in the
lifetime of such person, for which wrong an action might have been
maintained by such person, or as such wrong shall have been committed
within one year before his death and the damages when covered, shall be
part of the personal estate of such person; and further an action may be
maintained against the executors or administrators or heirs of
representatives of any person deceased for any wrong committed by him in
his lifetime for which he would have been subject to an action, so as such
wrong shall have been committed within one year before such person’s death
and the damages to be recovered in such action shall, if recovered against
an executor or administrator bound to administer according to the English
law, be payable in like order of administration as the simple contract debts
of such person.
2) Death of either party not to abate suit. - Proviso. No action commenced
under the provisions of this Act shall abate by reason of the death of either
party, but the same may be continued by or against the executors,
administrators or representatives of the party deceased; provided that, in
any case in which any such actions shall be continued against the
executors, administrators or representatives of the deceased party, such
executors, administrators or representatives may set up a want of assets as
88
a defence to the action, either wholly or in part, in the same manner if the
action had been originally commenced against them.
9.2. OBJECT OF THE ACT
The intention of the Legislature in enacting the Fatal Accidents Act, 1855 was
to provide compensation to families for loss occasioned by the death of a person
caused by actionable wrong, that is to say, if “actionable wrong” the death they
could get compensation from the wrong-doer consequently, the wrong –doer could
be answerable in damages for the injury caused by his ‘wrongful act’, which caused
the death to the person entitled to put forward a claim under the provisions of the
Act.
The Fatal Accidents Act, XII of 1855, is initially intended to provide to the
executors, Administrators or representatives of a person whose death has been
caused by the wrongful Act, neglect, or default of another persons, resulting from
the death to the deceased’s children or other relations mentioned in the first
Section of the Act.
The second Section of the Statute also permits the executor, administrator or
representatives to insert in their action brought for the aforesaid purpose a claim
for “any pecuniary loss to the estate of the deceased occasioned by such wrongful
act, neglect or default”. The law contemplates two sorts of damages. One is the
pecuniary loss to the deceased resulting from the accident; the other is the
pecuniary loss sustained by the member of his family through his death. The action
for the latter is brought by the legal representatives, not for the benefit of estate but
as the trustees for the relations, beneficiaries entitled while the damages for loss
caused to the estate are claimed on behalf of the estate and, when recovered, form
part of the assets of the estate, Secretary of State v. Gokul Chand, 1925 AIR Lah
636.
9.4. APPLICABILITY AND SCOPE
The remedy provided by the Act, could not be confined to an action for the
injury caused to the deceased and in respect of which he could have maintained an
action in case, he had survived, but the intention of the Legislature was to provide
an independent remedy by way of compensation for loss suffered by the family of
the deceased. The wrongful act by which death is caused is clearly an “actionable
wrong”. The right given by the act to the family to obtain compensation for such an
actionable wrong is quite independent of the right, which the deceased would have
had in case he had survived-it can be exercised “notwithstanding the death of the
person injured”. The action contemplated by the Act is an action for the benefit of
the wife and the children of the deceased.
9.5. SCHEME OF THE ACT
Besides preamble, the enactment of the Fatal Accidents Act. 1855 contains
only four Sections. Section 1-A of the Act is divided into three paragraphs. The first
paragraph confers a new right and provides that, whenever the death of a person
shall be caused by the wrongful act, neglect or default, and the act is such as
would (if death had not ensued) have entitled the party injured to maintain an
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action and recover damages in respect thereof, the party who would have been
liable, if death had not ensued, shall be liable to an action or suit or damages
notwithstanding the death of the person injured, and although the death shall have
been caused under such circumstances as amount in law to felony or other crime.
This statutory enactment has the effect of removing the protective umbrella thrown
by the maxim “actio personal is moritur cum persona” and makes the tortfeasor
whose wrongful act has caused death liable in damages. The second paragraph of
that Section says that every such action or suit shall be for the benefit of the wife,
husband, parent, and child, if any, of the person whose death shall have been so
caused and shall be brought by and in the name of the executor, administrator or
representative of the person deceased. The third paragraph then provides that in
every such action, the Court may give such damages as it may think proportional to
the loss resulting from such death to the parties respectively for whom and for
whose benefit such action shall be brought and the amount so recovered after
deducting all costs and expenses including the cost not recovered from the
defendant shall be divided amongst the before mentioned parties or any of them in
such shares as the Court by its judgment or decree shall direct. Section 2 of the
Act, which is in the nature of a proviso, says that not more than one action or suit
shall be brought for and in respect of the same subject of complaint. It is further
provided that in any such action or suits the executor, administrator or
representative of the decreased may insert a claim for, and recover any pecuniary
loss to the estate of the deceased occasioned by such wrongful act, neglect or
default which sum when recovered shall be deemed part of the assets of the estate
of the deceased. It is lastly provided by Section 3 that the plaint in any such action
or suit shall give particulars of the persons or person for whom or on whose behalf
such action or suit shall be brought and the nature of the claim in respect of which
damages shall be sought to be recovered. It is clear on a plain reading of these
provisions that the Act makes provisions for two distinct kinds of damages. Under
Section 1-A, the damages are recoverable for the loss occasioned to the defendants
of the deceased by his death, while under Section 2 the damages are awardable for
the pecuniary loss resulting to the estate of the deceased.
Section 4 of the Act is designed to serve as an interpretation clause and
interprets the word “person”, parent”, and “child”
The Act, although brought on the statute book with effect from the March 27,
1855 has not undergone any change. To quote the words of Krishna Iyer (thereafter
Judge of the Supreme Court) in P.B. Kadar v. Thatchamma, the Act is a trifle
archaic in form and in somewhat obsolescent in content. Under Indian Act, which
largely modeled on the English Statute of 1846, brothers and sisters are not
entitled to rank as dependants although in England, the mother country (of the
Statute), by Section 2 of the Act Fatal Accidents Act, 1959, brother, sister, uncle
and aunt of the deceased and the issues of the such relatives have been inducted in
to the area of the statutory dependency. The other progressive amendments to the
English Statute also have not been copied in our country.
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Legal Representative’s Suits Act- The fatal Accident Act 1855 is a born a twin
along with the Legal Representative suits Act of 1855. The latter is rather elderly,
since the latter is Act XII of 1855 whereas the former is Act XIII of 1855. Both of
them have come into force the same day, namely 27th March 1855.
Act No. XII of 1855 was enacted to enable executors, administrators of
representatives to sue and be sued for certain wrongs (which according to the
existing law did not survive) causing pecuniary loss to the estate of deceased person
where action might have been maintained by such person of compensation for such
wrong during his lifetime. Again by Section 306 of the Succession Act, the right to
prosecute any action or proceeding existing in favor of a person at the time of the
decease is made to survive to his executors or administrators except causes of
action for personal injuries not causing the death of the party. A plain reading of
this Section undoubtedly shows that the cause of action regarding to this executors
or administrators, the maxim action personalis moritur cum personal
notwithstanding.
Section 1-A. Suit for compensation to the family of a person for loss
occasioned to it by his death by actionable wrong. Whenever the death of a person
shall be caused by the wrongful act, neglect or default and the act is such as would
(if death had not caused) have entitled the party injured to maintain an action and
recover damages in respect thereof, the party who would have been liable if death
had not ensued, shall be liable to an action or suit for damages, notwithstanding
the death of the person injured, and although the death shall have been caused
under such circumstances as amount in law to felony or other crime.
Every such action or suit shall be for the benefit of the wife, husband, parent
and child, if any, of the person whose death shall have been so caused and shall be
brought by and in the name of the executor, administrator or representative of the
person deceased.
And in every such action the court may give such damages as it may think
proportionate to the loss resulting from such death to the parties respectively, for
whom and for whose benefit such action shall be brought; and the amount and so
recovered, after deducting all costs and expenses, including the cost not recovered
from the defendant, shall be divided amongst the before-mentioned parties, or any
of them, in such shares as the court by its judgment or decree shall direct.
Section 2. Not more than one suit to be brought. Provided always that not
more than one action or suit shall be brought for, and in respect of the same
subject matter of complaint:
Claim for loss to estate may be added. Provided that in any such action or suit,
the executor, administrator or representative of the deceased insert a claim for and
recover pecuniary loss to the estate of the deceased occasioned by such wrongful
act, neglect or default, which sum when recovered, shall be deemed part of the
assets of the estate of the deceased.
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Section 3. Plaint shall deliver particulars, etc., the plaint in any such action or
suit shall give particulars of the persons or person for whom, or on whose behalf,
such action or suit shall be brought and of the nature of the claim in respect of
which damages shall be sought to be recovered.
Interpretation Clause. – The following words and expressions are intended to
have the meaning thereby assigned to them respectively, so far as such meanings
are not excluded by the context or by the nature of the subject matter; that is to
say, the word “person” shall apply to bodies politic and corporate; and the word
”parent” shall include father and mother and grandmother; and the word “child”
shall include son and daughter and grandson and grand daughter, and step-son
and step-daughter.
Section 1-A and Section 2. - The liability under Section 1-A and Section 2 are
distinct, different and independent. Under Section 1-A damage are recoverable for
the benefit of persons, mentioned therein as loss sustained by them, while under
Section 2, damages are awarded for the re coupment of the pecuniary loss to the
estate of the deceased as a result of the accident. The two claims are based upon
different causes of action and the claimants would be entitled to recover
compensation separately under both the heads. If, however, the person as entitled
to compensation under Section 2, there cannot be duplication of the same claim
and the compensation awarded under Section 2 for the loss of the estate of the
deceased will be taken into account in the calculation of the compensation payable
to the claimants under Section 1-A.
Section 1-A and Section 4. – Section 1-A contemplates that a suit can be
maintained for the benefit of the wife, husband, parent and child. In Section 4,
word parent is interpreted to include father and mother and grandfather and
grandmother.
Thus, the mother of the deceased victim to a fatal accident can maintain a suit
without necessarily joining the father as party to the suit and though the brother
and sister of the deceased have no locus standi, yet their joinder in the suit along
with the other does not affect the maintainability of the suit.
Condition precedent to the action. - Although the claim and cause of action
conferred by Section 1-A of the Act, on the personal representatives or dependants
are entirely different from that which the deceased person would have had, yet for
its valid exercise by the dependants or representatives it is a condition precedent
that the death of the deceased must have been caused under such circumstances
as would have entitled the deceased to sue if he had not died. The words in Section
1-a of the Act “(if death had not ensued) have entitled the party injured to maintain
an action”, make it abundantly clear that aforesaid “new right of action” can only be
availed of be the dependants of the deceased when the deceased himself might
immediately before his death have maintained an action had he survived the
injuries. The test of the enforceability of the action is to be taken at the moment of
the death, “with the idea fictionally that death has not taken place”. If at the
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moment of death the right of action of the deceased is barred, e.g. by accord and
satisfaction, by the operation of the statute of limitation, by a contract depriving
himself of the right to claim damages, the dependants right is also barred. Again
the damages awarded to the dependants will be proportionately reduced if the
injury causing the death of the deceased was the result of his contributory
negligence. However, the dependents right under this Section is not affected where
the deceased has made a contract which, while limiting the amount which he can
recover, leaves him a cause of action, because the deceased at the time his death
could have sued for some damages. They can also sue for their own and quite
different damages. Thus, the deceased may, by his acts, deprive his dependants
entirely of their remedy, but he cannot bar their remedy in part.
Bar against the maintainability of second action. Section 2 of the Indian Fatal
Accidents Act (which is similar to Seciton3 of the English Fatal Accidents Act)
inserted in the Act as proviso to Section 1-A provides that not more than one action
or suit shall be brought for and in respect of the same subject matter of the
complaint, although the right recognized by the Act for the beneficiaries is a distinct
right for damages in each one of them. There is no joint right and the parties are
entitled to relief severally in respect of the same cause of action which is
enforceable at the suit of all or anyone of them suing for himself and the rest. But
only one suit is allowed to enforce the claim of all the persons beneficially entitled,
it being provided that the rights of each and every one of them shall be adjudged
and adjusted by the court in such suit. Second paragraph of Section 1-A says that
every such action shall be brought for the benefit of wife, husband, parent or child
and if the Court is pleased to grant a damages, they may be proportioned among
the aforesaid persons according to the less resulting to each of hem by the death of
the deceased.
It is therefore, clear that every one of the persons entitled to the benefit of
damages has to be mentioned in the plaint for no separate action can be brought by
any one of them later on.
“In assessing the damages under Section 1 (now 1-A) courts should take into
account only the net money equalent of the services rendered by the deceased to
the beneficiaries and should not include any solatium for the mental distress or
shock. All such accidents are necessarily heartening and the present case in
particularly so; but courts cannot award sentimental damages. In certain
circumstances potential income can be taken into account, but it should be the
increase that is reasonably likely in the immediate future, and not a remote and
speculative possibility. For example, if the deceased is actually undergoing a course
of training and would certainly have completed it, the increased income possibly
after the completion can be considered. But even if the court finds that the
deceased is generally speaking a person of promise; it cannot assess the damages
on the assumption that the promise might be realized.
“The third principle is that the courts should at the first instance fix the
annual money equivalent of the dead man’s earning capacity from the date given by
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the plaintiff. Vague generalities and mere assertions will not do. If the dead man
was actually fetching money into the family, evidence should be give on how much
brought in during a particular period before the accident. If he was merely
rendering service the monetary value of the service should be assessed by finding
out from the plaintiff’s evidence, how much would have to be paid to replace service
of the similar kind and of the same quality. If, for example, the dead man had been
managing a business without any payment, the evidence should show how much
would have to be paid to an outsider doing the same management. From some such
data the annual value of the dead man’s earning can be calculated.
“The net value should be extracted from this after deducting his personal
maintenance charges.
“Fourthly, this will have to be multiplied by a factor equal to the expectation of
the service. No general rule in this regard has been laid down for the very simple
reason that the expectation of life and rendering of the service varies with the age,
health of the worker, the nature of the work itself and the uncontrollable factor in
life that can be called acts of God. The expectation factor should therefore be fixed
in a liberal manner, but at the same time bearing in mind the vicissitudes of
human life.
Finally, the net annual equivalent of the bread-winning capacity should be
multiplied by the expectation factor; after correcting for interest. In other words, the
damages should be that amount which if invested securely, will be able to buy the
beneficiaries an annuity equal to the net annual value of the dead man’s services,
for a period during which he could be expected to render them, bearing in mind the
ups and down of human life.”
Basis of damages under Section 2. of the Act, a claim for any pecuniary loss to
the estate of the deceased, occasioned by any wrongful act, neglect or default,
which caused the death of the deceased, can be made. The damages claimable
under this head for the pecuniary loss do not arise on account of death or as a
consequence of the death of the deceased, but due to the pecuniary loss resulting
from the wrongful act, neglect or default and as a consequence of such act or
default. As such, loss of personal assets belonging to the deceased and loss of
earnings prior to and up to the moment of death must be included in the item of
losses to the estate. Similarly, any loss caused to the profession or business of the
deceased on account of the incapacity to attend it, as a result of such wrongful act
or default is a loss to the estate, which can be claimed by the deceased in his
lifetime, and, by his representatives if he died. Generally, the damages recoverable
under this head also include the amount of money, which has been expended for
the medical and funeral expenses. As the damages claimed under this head by the
representatives of the deceased are those for the loss to the estate which could have
been recovered by the deceased had he survived the accident, the damages under
Section 2 will include damages claimable by the deceased such as damages for
physical suffering and mental agony and for the loss of expectation of life.
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Loss of expectation of life-assessment of damages for shortening of life has

been a controversial and horny problem. The assessment of damages under Section
1-A although requires various factors to be taken into consideration does not
prevent any problems of perplexity. But the second proviso to Section 2 of the Act
which introduces into the task the assessment of damages for loss to the estate of
the deceased due to diminution of expectation of life had, it is not easy to assess
the value of life to a deceased individual by a post-mortem estimate. Life is in
valueless and cannot be equated to the coins of the realm. In cases of children of
tender years who are cut off from life before anything is known about their talents,
capacity or intelligence, the assessment of damages suffered by them for the
premature termination of their lives cannot be made on any settled principles of law
and must, therefore, to a very large extent, be a matter of conjecture and guess
work.
Distinction between damages claimed under Sections 1-A and 2 – claims
under the two Sections are distinct and independent. Under Section 2 the right of
action is for the benefit deceased’s estate while under Section 1-A the right of action
is for the benefit of deceased’s dependants.
Duplication of damages. - It was already been stated that the nature of the
cause action under Section1-A is different from that under Section 2 and the
persons entitled to under benefit under the one Section may be different from those
entitled under the other. In such cases there can be no overlapping or duplication
of damages. But it might happen that the same person is entitled to benefit under
both the Section. The question then rises whether he can claim damages twice over
for the same wrong, once under Section1-A and again under Section 2.
The Fatal Accidents Act was preceded by another Act styled as the Legal-
Representative Suits Act, 1855 (Act No.12 of 1855) which authorises the executors,
administrators or representatives to sue for certain wrongs occasioning pecuniary
loss to the estate of the deceased where an action might have been maintained by
such person for compensation in such wrong in his lifetime. By virtue of the proviso
to Section 2 of the Fatal Accidents Act. Such a claim can be inserted in the suit
brought for the benefit of the dependents and any sum recovered thereby shall be
declared part of the assets of the estate of the deceased.
9.6. TEST QUESTION
1)
Bring out the various protection given to a workmen under Fatal Accidents
Act?

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UNIT – X
WORKMEN’S COMPENSATION ACT, 1923

STRUCTURE
10.1. Introduction
10.2. Recent Amendments
10.3. Employers Liability Compensation
10.4. Arising Out of and in the course of Employment
10.5. Method of Calculating Wages
10.6. Distribution of Compensation
10.7. Allocation among Dependants
10.8. Compensation not to be Assigned, Attached or Charged
10.9. Occasions where Employer has disclaimed the Liability
10.10. Case Law
10.1. INTRODUCTION
At common law, workmen’s claim could be allowed only if he was able to
establish some negligence or breach of duty on the part of the employer as the sole
cause of the accident resulting in the injury, but it was not easy to prove either of
those torts, first because the courts, hesitating perhaps to saddle the growing
industries with too much liability to the employer, were apt to construe the duties
of the employer very narrowly and secondly, because in the majority of cases, the
employer had ceased to be a human individual and come to be a limited company
which it was difficult to find guilty of a tort. Apart from these hurdles in the way of
proof, the workman had also to contend against the bar of contributory negligence
which meant that if there was some negligence on his part which had contributed
to the occurrence of the accident with wholly or to such an extent that it was not
possible to determine whether his or the employer’s negligence had been the
decisive cause, he could not recover. There was, again, the doctrine of common
employment or “the fellow-servants rule” as it is called in America. It mean that
there was always an implied term in a contract of service that the servant agreed to
accept the risk of injury from the negligence of a fellow servant, and consequently,
when such negligence was the cause of the injury, he could not claim damages
from the master. The results of these limitations was that an injured workman or,
in the case of fatality, his dependants could rarely recover damages at common law,
even if they were able to carry on an expensive litigation’s upto the end, which
again was not an easy matter. In the state of the conditions under which workmen
were being compelled to work by their insensitive employers and the inadequacy of
the relief available to them for injuries a reaction against the doctrine of the laissez
faire inevitably set in and comprehensive series of Labour legislation came
gradually to be enacted with a view to liberating the workers from their
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helplessness against the power of the men who owned the factories and
establishment where they worked.
They Workmen Compensation Act provide speedier, simpler, cheaper and more
efficient machinery for the determination and payment of compensation to the
workmen. Judicial and quasi-judicial officers should, therefore, not repeat matters
of procedure so rigidly as to deprive the citizens of the advantages and benefits of
this beneficial legislation on unsubstantial and technical grounds. It is of utmost
importance that no construction on provisions relating to procedure should
sacrifice the rights of poor workmen due to technical mistakes, omissions or
inaccuracies.
In “Guthi Devi Vs Pine Chemical Ltd. (1989) Lab IC 2310, it was held that “The
Act was enacted with the object of realization that a Legislation was necessary for
the achievement of the ideals of “Social Security” of the workmen employed in the
Industry and dealt with the subject of protecting their hardships arising from
accidents. That Act assumes a greater importance after the nation committed itself
to the ideals incorporated in the Constitution of India particularly in the preamble
for achieving socialistic society in the country. The general approach of the
authorities under the Act should, therefore, be ordinary to award compensation to
the workman who sustains injuries arising out of and in the course of employment.
10.2. IMPORTANT AMENDMENTS
The Workmen’s compensation (Amendment) Act, 1984 (46 of 2000) deleted the
wage limit altogether, amended Section 4 and substituted new Schedule III and
Schedule IV.
The Delegated Legislation Provisions (Amendment) Act, 1985 added sub-
Section (3) in Section 32.
10.3. EMPLOYER’S LIABILITY FOR COMPENSATION
1) If, personal injury is caused to a workman by accident arising out of and in
the course of his employment, his employer shall be liable to pay
compensation in accordance with the provisions of this Chapter:
Provided that the employer shall not be so liable —
(a) in respect of any injury which does not result the total or partial disablement
of the workman for a period exceeding three days.
(b) In respect of any injury not resulting in death, caused by an accident which
(I)
is directly attributable to —
The workman having been at the time thereof under the influence of drink
or drugs, or
(II) The wilful disobedience of the workman to an order expressly given, or to a
rule expressly framed, for the purpose of securing the safety of workman, or
(III) The wilful removal or disregard by the workman of any safety guard or other
device which he know to have been provided for the purpose of securing the
safety of workmen.
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2) If a workman employed in any employment specific in Part A in Schedule III

contacts any disease specified therein as an occupational disease peculiar to
that employment, or if a workman, whilst in the service of an employer in
whose service he has been employed for a continuous period of not less six
months which period shall not include a period of service under any other
employer in the same kind of employment in any employment specified
therein as an occupational disease peculiar to that employment, or if a
workman whilst in the service of one or more employers in any employment
specified in Part C of Schedule III for such continuous period as the Central
Government may specify in respect therein as an occupational disease
peculiar to that employment, the contracting of the disease shall be deemed
to that employment, the contracting of the disease to be an injury by
accident within the meaning of this Section, and unless the contrary is
proved, the accident shall be deemed to have arisen out of, and in the course
of, the employment:
Provide that if it is proved—
(a) That a workman whilst in the service of one or more employers in any
employment specified in Part C of Schedule III has contracted a disease
specified therein as an occupational disease peculiar to that employment
during a continuous period in which the less than the period specified under
the sub-Section.
(b) That the disease has arisen out of and in the course of the employment;
The contracting of such disease shall be deemed to be an injury by accident
within the meaning of the Section:
Provided further that if it is proved that a workman who having served any
employer in any employment specified in Part B of Schedule III or who having
served under this sub-Section for that employment and he has after the cessation
of such service contracted any disease specified in the said Part B or the said Part
C, as the case may be, as an occupational disease peculiar to the employment and
that such disease shall be deemed to be an injury by accident within the meaning
of the Section.
(2-A) If a workman employed in any employment specified in Part C of
Schedule III contracts any occupational disease peculiar to the employment, the
contracting whereof is deemed to be an injury by accident within the meaning of
this Section, and such employment was under more than one employer, all such
employer shall be liable for the payment of the compensation in such proportion as
the Commissioner may, in the circumstance deem just.
3) The State Government in the case of employment specified in Part A and
Part B Schedule III, and the Central Government in the case of employments
specified in Part C of that Schedule, after giving, notification in to the Official
Gazette, not less than three months’ notice of its intention so to do, may, by
a like notification, add any description of employment to the employment so
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added the disease which shall be deemed for the purposes of this Section to
be occupational the provisions of sub-Section (2) shall apply, as if such
diseases had been declared by this Act to be occupational disease peculiar to
those employments).
4) Save as provided by (sub-Section) (2), (2-A) and (3), no compensation shall
be payable to a workman in respect of any disease unless the disease is
directly attributable to a specific injury by accident arising out of and in the
course of his employment.
5) Nothing herein contained shall be deemed to confer any right to
compensation on a workman in respect of any injury if he has instituted in a
suit Civil for a damages in respect of the injury against the employer or any
other person; and no suit for damages shall be maintainable by a workman
in any court of law in respect of any injury—
(a) If he has instituted a claim to compensation in respect of the injury
before a commissioner; or
(b) If an agreement has been come between the workman and his employer
providing for the payment of compensation in respect of the injury in
accordance with the provisions of this act.
10.4. ARISING OUT OF AND IN THE COURSE OF EMPLOYMENT
The expression “arising out of suggests the cause of accident and the
expression in the course of points to the place and circumstances under which the
accident takes place and the time when it occurred. A casual connection or
association between the injury by accident and employment is necessary. The onus
is on the claimant to prove that accident arose out of and in the course of
employment. The employment should have given rise to circumstances injury by
accident. But a direct connection between the injury caused by an accident and the
employment of the workman is not always essential. Arising out of the employment
does not mean that personal injury must have resulted from the mere nature of
employment and not limited to cases where the personal injury is referable to the
duties, which the workman has to discharge. The words ‘arising out of employment’
are understood to mean that during the course of the employment, injury has
resulted from some risk incidental to the duties of the service which unless engaged
in the duty owning to the master it is reasonable to believe the workman would not
otherwise have suffered. There must be a causal relationship between the accident
and the employment. If the accident had occurred on account of a risk, which is an
incident of the employment, the claim for compensation must succeed unless of
course the workman has exposed himself to do an added peril by his own
imprudence. “This expression applies to employment as such, to its nature, its
conditions, its obligations and its incidents and if by reason, of any of these, a
workman is brought within the zone of danger and so injured or killer, the Act
would apply. The employee must show that he was at the time of injury engaged in
the employer’s business or in furthering that business and was not doing
something for his own benefit or accommodation. The question that should be
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considered is whether the workmen was required or expected to do the thing, which
resulted in the accident though he might have imprudently or disobediently, does
the same. In other words, it was the act which resulted in the injury so outside the
scope of the duties, with which this, the workman was entrusted by his employer as
to say that the accident did not arise out of his employment.
In the course of employment refers to the period of employment and the place
of work. It is neither limited to the period of actual Labour nor includes acts
necessitated by the workmen’s employment. “Another important question”, as
pointed out by Francis H. Bohlen, “is how far a servant is entitled to go outside his
appointed sphere in obedience to the orders of a superior. Of course, if such
superior has the power to fix the spheres of Labour for the workman, a workman,
by obeying them, merely passes into a new “course of employment”, but even if he
has not, it seems that the servant is justified if he honestly believes that such
superior is authorized to employ him. An injury received within reasonable limits of
time and space, such as while satisfying thirst or bodily needs, taking food or drink
is to be regarded as injury received in the course of employment.
It has been held in “Ravuri Kotayya v. Dasari Negavardhanamma” that
following principles can be applied in order to determine whether an accident has
arisen out of and in the course of employment of the workman or not;
1) That the workman was in fact employed on, or performing the duties of his
employment at the time of accident;
2) That the accident occurred at or about the place where he was performing
these duties. Or where the performance of these duties required him to be
present;
3) That the immediate, act which led to or resulted in the accident had some
form of casual relation with the performance of these duties, and such
casual connection could be held to exist if the immediate act which led to
the accident is not so remote from the sphere of his duties or the
performance thereof, as to be regarded as something foreign to them.
10.5. METHOD OF CALCULATING WAGES
In this Act and for the purposes thereof the expression “monthly wages” mean
the amount of wages deemed to be payable for a month’s service whether the wages
are payable by the month or by whatever other period of piece rates, and calculated
as follows, namely:
(a) Where the workman has, during a continuous period of not less than twelve
months immediately preceding the accident, been in the service of the
employment that is liable to pay compensation, the monthly wages of the
workman shall be one-twelfth of the total wages which have fallen due for
payment to him by the employer in the last twelve months of that period;
(b) Where the whole of the continuous period of service immediately preceding
the accident during which the workman was in the service of the employer
who is liable to pay the compensation was less than one month, the monthly
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wages of the workman shall be the average monthly amount which, during
the twelve months immediately preceding the accident, was being earned by
a workman employed on the same work by the same employer, or if there
was no workman employed, by a workman employed on similar work in the
locality.
(c) In other cases including cases in which it is not possible for want of
necessary information to calculate the monthly wages earned in respect of
the last continuous period of service immediately preceding the accident from
the employer who is liable to pay compensation, divided by the number of
days comprising such period.
(d) Explanation: A Period of service a shall, for the purposes this (Section), be
deemed to be continuous which has not been interrupted by a period of
absence from work exceeding fourteen days.
10.6. DISTRIBUTION OF COMPENSATION
1) No payment of compensation in respect of workman whose injury has
resulted in death, and no payment of a lump sum as compensation to a
woman or a person under a legal disability, shall be made otherwise than
by deposit with the Commissioner, and no such payment made directly by
an employer shall be deemed to be a payment of compensation:
Provided that, in the case of a deceased workman, an employer may make
to any dependant advances on account of compensation not exceeding an
aggregate of one hundred rupees, and so much of such aggregate as does
not exceed the compensation payable to the dependant shall be deducted
by the Commissioner from such compensation paid to the employer.
2) Any other sum amounting to not less than ten rupees which is payable as
compensation may be deposited with the Commissioner on behalf of the
person entitled thereto.
3) The receipt of the Commissioner shall be a sufficient discharge in respect
of any compensation deposited with him.
4) on the deposit of any money under sub-Section(1), (as compensation in
respect of a deceased workman) the Commissioner shall deduct there from
the actual cost of the workmen’s funeral expenses, and pay the same to the
person by whom such expenses were incurred, and shall, if he thinks
necessary, cause notice to be published or to be served on each dependant
in such manner as he thinks fit, calling upon the dependants to appear
before him on such as he may fix or determining the distribution of the
compensation. If the commissioner is satisfied after any inquiry, which he
may deem necessary, that no dependant exists, he shall repay the balance
of the money to the employer, by whom it was paid. The Commissioner
shall, on application by the employer, furnish a statement showing in
detail in disbursements made.
101
5) Compensation deposited in respect of a deceased workman shall, subject to

any deduction made under sub-Section (4), be apportioned among the
dependants of the deceased workman or any of them in such proportion as
the Commissioner thinks fit, or may in the discretion of the Commissioner,
be allotted to any one dependant.
6) Where any compensation deposited with the Commissioner is payable to
person, the Commissioner shall, if the person to whom the compensation is
payable is not a woman or a person under a legal disability, and in other
cases pay the money to the person entitled thereto.
7) Where any lump sum deposited with the Commissioner is payable to a
woman or a person under a legal disability, such sum may be invested,
applied or otherwise dealt with for the benefit of the woman, or of such
person during his disability in such manner as the Commissioner may
direct and where a half monthly payment is payable to any person under a
legal disability, the commissioner may, of his own motion or on an
application made to him in this behalf, order that the payment be made
during the disability to any dependant of the workman or to any other
person, whom the Commissioner thinks best fitted to provide for the
welfare of the workman.
8) Where, an application made to him in this behalf or otherwise, the
Commissioner is satisfied that, on account of neglect of children on the
part of a parent or on account of the variation of the circumstances of any
dependant or for any other sufficient cause, as compensation or as to the
distribution of any sum paid as compensation or as to the manner in
which any sum payable to an such dependant is to be invested, applied or
otherwise dealt with ought to be varied, the Commissioner may make such
orders for the variation of the former order as he thinks just in the
circumstances of case:
Provided that no such order prejudicial to any person shall be made unless
such person has been given an opportunity of showing cause why the order
should not be made, or shall be made in any case in which it would involve
the repayment by a dependant of any sum already paid to him.
9) Where the Commissioner varies any order under sub-Section (8) by reason
of the fact that payment of compensation to any person has been obtained
by fraud, impersonation or other improper means, any amount so paid to
on behalf of such person may be recovered in the Section 31.
Compensation to be paid only through Commissioner. The Section deals with
the distribution and disbursement of compensation and specifically prohibits direct
payment of compensation in cases of death of workman and in cases where
payment is to be made to women or persons under any legal disability. In such
cases, payments must be made deposit with the Commissioner. Direct payments in
such cases shall not be deemed to be payments of compensation at all.
102
The reason is that the Commissioner is expected to safeguard the interests of

all the dependents of a deceased workman, which include several relatives of a
deceased workman who may not be heirs under the law applicable to him. Hence
the payment of compensation amount by the employer to the widow of the deceased
otherwise than by depositing the amount with the Commissioner is not a sufficient
discharge and the Commissioner can take proceedings against the employer for
recovery of the sum directed to be deposited.
The provisions of Section 8 are mandatory in nature. Direct payment of
compensation to the dependant cannot be deemed to be a payment of
compensation even if it is assumed that the amount was paid. The Commissioner
has no jurisdiction to embark on an enquiry about the truth of the employer’s
assertion that the amount was paid directly.
10.7. ALLOCATION OF COMPENSATION AMONG DEPENDANTS
Under Section 2(d), a widow is a dependant who is in all circumstances
entitled to a payment of compensation. The parents and minor brothers are entitled
such payment only if they were wholly or in part dependant for their a maintenance
on the workman at the time of his death. In connection with the share in the
compensation that a widow must be paid, the Commissioner for compensation
would have ordinarily to bear in mind her age and whether by reason of a
remarriage which might have taken place or may take place, her share should not
be much in excess of that payable to a dependant father or mother or a minor
brother. Claims of all parties would have to be considered in the light of the above
definition of dependant father or mother or a minor brother. Claims of all parties
would have to be considered in the light of the above definition of ‘dependant’ and
the ordinary circumstances in which the concerned parties provision for payment of
compensation to the dependants is of the nature of an indemnity for the amount of
maintenance which deceased person might have provided to the dependants if he
had. The question, which under the circumstances arises before the Commissioner
when allocating and/or distributing the compensation fixed, would be to ascertain
the amount of maintenance that would have been to the concerned parties by the
deceased workman. In that connection, the relevant facts would be
(i) the status of the family of the deceased and his dependants;
(ii) in the case of a widow the possibility of a remarriage in which case the
workman would altogether cease to pay any money;
(iii) ANNAMALAI UNIVERSITY
the circumstance of the parents and the minor brothers and to what extent
they were provided maintenance by the deceased during his lifetime. For
arriving at a reasonable decision on the question of allocation and
distribution of compensation, the commissioner would have to record
evidence clarifying the above factors. Where the Commissioner completely
failed to see that the mother and minor brothers of the deceased were
entitled to payment of separate compensation and to notice all the relevant
matter whilst making allocation and/or distribution of the compensation
103
amount, the directions given by him for allocation and distribution were set
aside and he was directed to proceed to decide the same.
10.8. COMPENSATION NOT TO BE ASSIGNED, ATTACHED OR CHARGED
Section 9 of the Act provided by this Act, no lump-sum or half-monthly
payment payable under this Act shall in any way be capable of being assigned or
charged or be liable to attachment or pass to any person other than the workman
by operation of law, nor shall any claim be set off against the same.
The provision is intended to safeguard the interest of the workman who are
entitled to compensation under the provisions of Act. His amount of compensation
whether payable as a lump sum or by way of half-monthly installments cannot be
assigned, or charged or liable to attachment or pass to any person other than the
workman in any way. No claim can be set off against the same. Thus the provisions
makes it imperative that the amount of compensation is to be paid to the workman
entitled for it without any delay or difficulties. The dependents of a deceased
workman have statutory right, to receive the compensation incase of death of the
workman concerned.
10.9. OCCASIONS WHERE EMPLOYERS HAS DISCLAIMED THE LIABILITY
Section 10-A lays down that where the employer has disclaimed the liability,
the Commissioner, after such enquiry as he may think fit, may inform the
dependants of the deceased workman that it is open to the dependants to prefer a
claim for compensation and may give them such contemplates that when a contest
has arisen before the Commissioner, the procedure to be followed is that the
dependants will be given an opportunity to prefer a claim for compensation, upon
which the matter will proceed according to various Sections mentioned in this Act.
Once, the liability is denied, the application has to be heard as one under Section
22 of the Act and thereafter the Compensation Officer acts as a Civil Court in
deciding the application.
Where an application for compensation had been made, though purportedly
under Section 10-A, and the employer filed his objections beyond the period of
thirty days from the date of service of the notice issued by the Commissioner, it was
held that the Commissioner was right in taking the view that the application was
not one under Section 10-A and that the employer could not be non-suited merely
on the ground that he had not filed his statement within thirty days after the
service of the notice.
10.10. CASE LAW
1) Gunthi Devi Vs Pine chemical Ltd (1989) Lab I.C 2310
10.11. TEST QUESTION
1) ‘An employer is liable to pay compensation only for those accidents arising
out of and in the course of employment’- Explain

104
UNIT – XI
TRADE UNION ACT 1926

STRUCTURE
11.1. Introduction
11.2. Object
11.3. Definition
11.4. Registration of Trade Union
11.4.1. Application of Registration
11.4.2. Particulars to be furnished
11.4.3. Rules
11.4.4. Certificate of Registration.
11.5. Benefits for Registration of Trade Union
11.6. Funds
11.6.1. General Fund
11.6.2. Political Fund.
11.7. Cancellation of Registration
11.1. INTRODUCTION
The growth of Trade Union Movement can be traced back to the year 1890. In
the year 1920, the Madras High court in a suit field by Binny & company Limited
against the Textile Labour Union granted an injunction restraining the union
officials from inducing the workers to break of their contract of employment by not
returning to their work. So the bill was moved and the Trade Union Act Passed in
1926. The Act was amended in 1929 providing for appeal against the decision of the
registrar refusing to register a Trade union or withdrawing the registration. This Act
was again amended in 1947 for providing compulsory recognitions of the trade
unions by the employer. These provisions relating to recognition have not been put
into operation so far.
11.2. OBJECT
The object of a trade union has been succinctly stated by the Supreme Court
in Swedishi Industries Limited vs Its Workmen A.I.R 1960 S.C 1258 ‘Collective
bargaining for securing improvement on matters like basic bay, dearness allowance,
bonus, provident fund and gratuity, leave and holidays is the primary object of a
trade union and when the demands like these are put forward and there after a
strike is resorted to in attempt to induce the Management to agree to the demands
or at least open the negotiation, the strike must be considered to be justified’.
Therefore trade union are essential for safeguarding the rights of labour when there
is struggle between the labour and managerial and the interests of the two are in
105
conflict, the trade unions are required to sort in out. The Trade Union Act, 1926
makes proviso for three important groups of matters. They are
1) Conditions governing the registration of trade union
2) Obligation to which a trade union is subject after registration and
3) Rights and privileges accorded to registered trade union.
The act provides for the registration of trade unions and instructions respects
of defined the law relating to registered trade unions. A trade union which makes
the necessary application will on compliance with certain stated conditions
designed to ensure that the trade union is bona fide trade union and that adequate
safeguards are provided for the rights of its members be entitled to registration. The
trade union and its members will thereupon receive protection in certain cases in
respect of both civil and criminal liability. No restrictions is placed upon the
objective which a registered trade union may pursue, but the expenditure of its
fund must be limited to specified trade union purposes. Registration not
compulsory. The legal position of trade unions which do not get registered will
remain unaffected by the Act.
11.3. DEFINITION
A Trade union is defined by the Webbs ‘As a continuous association of wage
earners for the purpose of maintaining the conditions of their lives.’
As per the Trade union Act Section - ‘Any combination whether temporary or
permanent, formed primarily for the purpose of regulating the relations between
workman and employers or between workman and workman, or between employers
and employers or for imposing restrictive conditions on the conduct of any trade or
business, and includes any federation of two or more trade unions’
11.4. REGISTRATION OF TRADE UNION
Any seven or more workmen or employees or persons engaged in any trade or
business or industry may form a trade union. They may form the trade union
regardless of that fact they are employed under different employers. Any seven or
more numbers of a Trade Union may, by subscribing their names to the rules of the
trade union and by otherwise complying with the provisions of this Act with respect
to registration, apply for registration of the Trade union under this Act.
Provided that Trade unions of workman shall be registered unless at least ten
per cent, or one hundred of the workmen, which ever is less, engaged or employed
in the establishment or industry with which it is concessed are the members of
such Trade which as the date of making of application for Registration.
Provided further that no trade union of workmen shall be registered unless it
has on the date of making application not less than seven person as its members,
who are workmen engaged or employed in the establishment or industry with which
it is connected.
106
11.4.1. Application for registration

The application for registration of a trade union should be made by any seven
or more members of a trade union to the registrar of trade unions appointed by the
appropriate government for the registration of trade union.
11.4.2. Particulars to be Furnished
Every application for registration should accompany a copy of the rules of the
trade union and a statement containing the following particulars.
(a) The names ,occupation and addresses of the members making the
application
(b) The name of the trade union and the address of its head office and
(c) The titles, names, ages, addresses and occupation of the office bearers of the
trade union.
If the trade union has been in existence for more than one year before making
an application for its registration it must also furnish a general statement of the
assets and liabilities of the trade union in such a form as prescribed
11.4.3. Rules
Section 6 provides that no union can be registered unless its constitution
provides for the following items namely
1) The name of the trade union
2) The whole of the objects for which the trade union has been established
3) The whole of the purposes for which the general funds of a trade union shall
be applicable, all of which purposes shall be purposes to which funds are
lawfully applicable under this Act.
4) The maintenance of a list of the members of the trade union and adequate
facilities for the inspection thereof by the office bearers and members of the
trade union.
5) The admission of ordinary members who shall be persons actually engaged
or employed in an industry with which the trade union is connected and
also the admission of the number of honorary or temporary members as
office bearers required under Section 22 of form the executive of the trade
union.
6) The payment of a subscription by members of the trade union which shall be
not less than twenty five paise per month per member.
The conditions under which any member shall be entitled to any benefit
assured by the rules and under which any fined or forfeiture may be
imposed on the members.
8) The manner in which the rules shall be amended, varied or rescinded
9) The manner in which the members of the executive and the other office
bearers of the trade union shall be appointed and removed.
10) The safe custody of funds of the trade union and annual audit in such a
manner as may be prescribed of the accounts thereof.
107
11) The manner in which the trade union may be dissolved.

12) The existence of the aforesaid matters in the rules is a condition precedent
for the registration of trade union.,
11.4.4. Certificate of Registration
The registrar on being satisfied with the particulars furnished by the trade
union will register the trade union by entering in a register maintained for the
purpose. The Registrar on registering a trade union will issue a certificate of
registration in the prescribed form. The certificate of registration of the trade union
will be the conclusive evidence that the trade union has been duly registered under
the act.
11.5. BENEFITS OF REGISTRATION OF TRADE UNION
The Trade union Act 1926 does not make the registration of a trade union
compulsory.
The registered trade union becomes a person in law. A registered trade union
will not be liable in any suit in respect of tortious act. office bearers or members of
Registered trade union are immune from civil liability in respect of any act done in
contemplation or furtherance of trade dispute to which a member of trade union is
a party. Office bearers or members of a trade union will not liable to punishment for
any criminal conspiracy Sec. 120-B of I.P.C in respect of any agreement made
between the members for the purpose of furthering of any object of the trade union
The Trade Union Act does not prescribe any time limit for the grant or refusal
of registrations. In ACC Rajanka Lime Stone Quarries Mazdoor Union V Registrar of
Trade Unions Government of Bihar, AIR, 1958, Pat, 475 the court directed the
Registrar of Trade unions to perform the Statutory duties imposed on him under
Section 7 & 8 and deal with the application of the Trade union according to law at
an early date. Latter the National Commission on Labour has suggested 30 days
excluding times which the union takes in answering queries from the Registrar.
11.6. FUNDS OF TRADE UNION
The Act in Section 15 and 16 regulates the purposed for which trade union
funds may be constituted and spent. There are two types of fund, they are
1.General Fund
2.Political fund
11.6.1. General Fund
Section 15 specifies the purposes for which the general fund of registered trade
union will be lawfully spent
1) The payment of salaries ,allowances and expenses to office bearers of the
trade union
2) The payment of expenses for the administration of the trade union including
audit
3) The prosecution or defense of any legal proceedings to which the trade union
or any member thereof is a party
108
4) The conduct of trade disputes on behalf of the trade union or any member
thereof
5) The compensation of members for loss arising out of trade disputes
6) Allowances to members or their dependants on account of death, old age,
sickness, accidents or unemployment of such members
7) Undertaking liability under policies of assurance on the lives of members or
under policies insuring members against sickness accident or
unemployment
8) The provision of educational social or religious benefits for members or
dependants of members.
9) The up keeping of and periodical publishing of journal for the Trade union
If the general fund of registered trade union is spent other than the afore said
purposes it would be deemed that the trade union has spent the general fund for
unlawful purpose.
11.6.2. Political Fund
The Act in Section 16 permits registered trade unions to constitute separate
fund for political purposes. The fund must be constituted from the contributions
separately levied for or made to that fund.
The object of the political fund
1) The payment of any expenses incurred either directly or indirectly by a
candidate or prospective candidate for election as member of legislative body
or any local authority
2) The holding of any meeting or the distribution of any literature of documents
in support of any such candidate or prospective candidate or
3) The maintenance of any person who is a member of legislative body or of any
local authority
4) The registration of electors, the selection of candidate for any legislative body
or local authority.
5) The holding of political meetings of any kind or the distribution of political
literature or political document of any kind.
The political fund of trade union must be raised from voluntary contributions
of member and others. No member can be compelled to contribute to the political
fund of a registered trade union. A member who does not contribute to the political
fund of registered trade union cannot be excluded from any benefits of the trade
union. However be excluded in relation to the control or management of the said
fund by reason of that he is not contributing to the said fund.
11.7. CANCELLATION OF REGISTRATION
A certificate of registration may be withdrawn or cancelled by the registrar if he
is satisfied
1) That the certificate has been obtained by fraud or mistake.
2) That the trade union has ceased to exist
109
3) That the trade union has willfully and after notice from the registrar
contravened any provisions of Act.
4) That the trade union has rescinded any important rule which is necessary
for giving and keeping the registration of the trade union continuously
Before cancelling or withdrawing registration on any of the grounds afore said
the trade union should be given two months previous notice in writing specifying
the ground on which the certificate of registration is proposed to withdrawn or
cancelled by the registrar. The power of the Registrar in this regard is Quasi
Judicial nature. Two months notice is mandatory condition.. if no such notice is
given any proceedings for cancellation of registration is illegal and without
jurisdiction.
In case of cancellation or withdrawal of the registration which was done on the
basis of voluntary submission by the trade union no such notice is necessary.
Re-Registration: There is no provision in the Act for Re registration of Trade
union whose registration has been cancelled. The national Commission on Labour,
therefore recommend that the Trade union Act should provide that any application
for re registration from a union should not be entertained within six months. of the
date of cancellation of Registrations. in view of this recommendation the industrial
Relations Bill 1978 and The Trade union (Amendment) Bil1982 have provided for re
registration of a Trade union.
Registered Trade union A person in law. Every registered trade union will be a
body corporate by the name under which it is registered and will have perpetual
succession and common seal with power to acquire and hold both movable and
immovable property. It can enter into any contract and sue and be sued by the said
name. It is a mandatory duty of a registered trade union to send annual returns to
the registrar. on or before such date as may be prescribed in this respect any
executive member, office bearer or any member of a trade union who is bound
submit annual returns commits any default in furnishing them will be punished
with fine which may extend to five rupees
In the case of continuing default he will be punished with an additional fine
which may extend five rupees for each week. The aggregate will not however exceed
fifty rupees.
11.7. CASE LAWS
ACC Rajanka Lime Stone Quarries Mazdoor Union V Registrar of
Trade Unions Government of Bihar AIR 1958 Pat 475.
1) State the procedure for registration of a trade union under the Trade unions
Act can two or more trade unions be amalgamated? If so what is the
procedure?

110
ASSIGNMENT
(COURSE – I)
Answer the following Questions.
1) State the rules provided for contribution to the Employees Provident Fund
by the employee enhance his contribution.
2) Who are the dependent’s under the Employees State Insurance Act?
Describe the medical benefit available to the dependents.
3) Explain with illustration the expression in the course of employment used in
the Workmen’s Compensation Act?
4) Explain the salient features of the Maternity Benefit Act, 1961?
5) Explain the applicability of the payment of Bonus Act, 1965?
6) Write short notes on any two of the following.
a) Occupational disease as defined in the Workmen’s Compensation Act.
b) Dissolution of a registered Trade Union.
c) Employer’s Liability Act.

111
DIPLOMA EXAMINATION 2001

(COURSE – I)
MAXIMUM: 100 Marks
Answer any SIX questions
All questions carry equal marks
7) Write a note on the evolution of the concepts of master and servant giving
place to employer and employee relationship?
8) Describe the procedure of appointment of inspectors under Factories Act,
1948, What are their duties and powers ?
9) What defenses are available to an employer against a claim for compensation
made by a workman under the Workman’s Compensation Act, 1923?
10) State the rules as to contributions as provided in the Employees State
Insurance Act 1948?
11) What are the rules as to payment and recovery of contributions by an
employer?
12) What are the maternity benefits available to women workers under the
Maternity Benefit Act 1961?
13) On whom does the responsibility for payment of wages lie under the
Payment wages Act 1936? State the rules regarding fixation of wage periods.
14) What is the object of the Minimum wages Act 1948?
15) What are the privileges of registered trade union?
16) Write short notes on any TWO of the following:
(a) Central Advisory Board
(b) Nomination
(c) Medical Benefit
(d) Notional Extension


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(LABOUR LAWS WITH ADMINISTRATIVE LAW)

I Historical Development of Labour Law 1

II Factories Act 1948 4

III The Minimum Wages Act 1948 15

IV Payment of Wages Act 1936 30

V Payment of Bonus Act 1965 44

VI The Employees Provident Funds and Miscellaneous Provisions

VII The Employees State Insurance Act 1948 68

VIII Maternity Benefit Act 1961 83

IX Fatal Accidents Act, 1855 86

X Workmen’s Compensation Act, 1923 95

XI Trade Union Act 1926 104

Model Question Paper 111

HISTORICAL DEVELOPMENT OF LABOUR LAW

FACTORIES ACT 1948

(iv) composing types for printing by letterpress, photography other similar

7. Prohibition of employment of women and children near cotton openers:

Working hours and notice of period of work of children: (Section 71-72) No

THE MINIMUM WAGES ACT 1948

such observations are sometimes made to inspire hope and confidence in

Section 15 provides that, where an employee to whom the minimum rate of

Section 22D provides that amount of minimum wages payable to an employee or

PAYMENT OF WAGES ACT 1936

If a particular deduction is not covered by the explanation II then it cannot be

primary authority, Sub-Section (2) clearly makes an order or direction of the

PAYMENT OF BONUS ACT 1965

FULL BENCH FORMULA

employing such number of persons less than 20 as may be specified in the

be treated as part of same establishment, for the purpose of computation of bonus

COMPUTATION OF AVAILABLE SURPLUS:

THE EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS

Section 11 provides for priority of payment of contribution over other debt’s

Section 14 –A provides that, if any offence is committed, the liability rests

FAMILY PENSION FUND

THE EMPLOYEES STATE INSURANCE ACT 1948

7.4. CONSTITUTION OF CORPORATION:

4) The wage period in relation to an employee shall be the unit in respect of

(f) Payment to the oldest surviving member of the family of an insured

compensation or damages under the Workman’s Compensation Act, 1923 (8 of

(b) Both sickness benefit and disablement benefit for temporary

(2A) if in any proceedings before the Employees’ Insurance Court a

MATERNITY BENEFIT ACT 1961

The following conditions must be fulfilled before maternity benefit becomes

FATAL ACCIDENTS ACT, 1855

Loss of expectation of life-assessment of damages for shortening of life has

WORKMEN’S COMPENSATION ACT, 1923

2) If a workman employed in any employment specific in Part A in Schedule III

5) Compensation deposited in respect of a deceased workman shall, subject to

The reason is that the Commissioner is expected to safeguard the interests of

TRADE UNION ACT 1926

11.4.1. Application for registration

11) The manner in which the trade union may be dissolved.

DIPLOMA EXAMINATION 2001

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