3.

2 Part I- Registration of TU
The Registrar of TU gives it certain immunity from civil and criminal situations.

1. u/s: 3, every appropriate govt. shall appoint a Registrar Of TU for each state. Appropriate'
govt. under cl(1) means State Govt. Under cl (2), it necessary Additional or Deputy Registrar
may be appointed & shall work as per the directions and direct control of Registrar. The local
limits/jurisdiction of the Additional or Deputy Registrar & Registrar shall also be provided by
state Govt.

The powers, functions, jurisdiction & appointment of Additional & Deputy is under direct
Control of Registrar with consultation & approval by appropriate govt. cl.(3).

2. u/s.4(i), mode of registration is given. 7 or more members may apply for registration by
giving complete details on the date of application there must be 7or more members. Later,
after submission of applicath & before registration, the no. may come down. But on date
of application, there MUST be 7 more members. This has been adopted from the UK &
USA.

Employers can also have their own TU. For this too, the minimum number is 7 membersu/s.
4(2), between date of application and date of registration Some of the applicants, but not
more than 1/2 of applicants cease to be members of TU.

All Escorts Employees Union v. State of Haryana.-Section 9A was inserted because the TU
must be having a representative character. In 1969, the first National Commission on labour
recommended insertion of S.9A in TUAct. It was then included by 2001 Amendment.
3. S.5 provides for application for registration, along with a copy of rules of TU& a
statement containing details of members, details of TU, office-bearers of TU.

The purpose of TU is to be conferred with some rights & privileges under Part III.
4. S.6, every TU must frame their own rules. Although standard rules given by state
Government must be applied, other rules may also be added. The rules are wrt. name of TU
whole of objects of TU, purposes for which general fund is used, maintenance of list of
members & facility for inspection, members of executive body, details of election, Inspection
of TU wrt admission of ordinary members who shall be persons working in the
industry etc.
In Triloknath Tripathi v. Allahabad Bench, court held these rules are mandatory for
registration & without specifying all these matters in the rules, registration cannot take place

Ind. Oxygen Ltd. v. their Workmen, the SC held that

(a) changing procedure for alterations of rules as given by the State Government

(b) making amendment to rule w/o following procedure given in rules of State
Government

are illegal acts & therefore invalid.

5. S.7 deals with power of Registrar to call for further particulars & require
alteration of name of TU.

U/S.7(1), the Registrar must satisfy himself with the compliance of application with
s.5 & S.6. If is not complied with, he may send the application back for correction or
reject it.

u/s.7(2), if the name proposed by the TU is identical to an existing TU, the

Registrar mayborder the Tu to alter the name. Only when the Registrar issatisfied, TV
is registered.
 Alteration Rules

INDIAN OIL LTD. Vs. THEIR WORKMEN S.C laid down that the T.U cannot alter
its constitution or rules without following the procedure laid down U/the rules &
the T.U Act & it cannot extend its membership to the workers working in other
establishments

In B.S.V Hemanth Rao v. Deputy Registrar of TU The Hyd. Allwyn works union
amended its rules appointing its president of the union to acts as election officer &
empowering him to nominate all office bearers, where as this power was vested with
the general body of the T.U and even though these amended were register with the
registrar. the court held the amendments as contrary to the letter & spirit of the T.U
hence invalid

Further Particulars

In M. KondalRao Vs. Registrar, Trade Union, it has been observed that the powers
of Registrar to call for further information for satisfying himself about compliance
with Sec 5 of matter connected with it are limited to the provisions of Sec 7 of the Act
and Sec 5 and sec 6 would show that he could not be supplied information form any
other source except the Union. He cannot call for further information from Deputy
Commissioner.

In Tata Workers Union Vs. State of Jharkhand, 2002 Lab.L.C. 1525] it has been
held that the registrar cannot intervene in the matters of holding election of the office-
bearers of the registered trade union. If the name of the trade union proposed to be
registered is identical or the same name of another registered trade union , the
registrar is empowered under sec 7 to require the applicant to change the proposed
name of the trade union. The registrar shall refuse the registration of the union until
such alteration in the name of the union is effected

6. u/s. 8. The Registrar may register the TU only after being satisfied of the
application u/s. 5, 6, 7. He shall registex it-by entering & maintaining the records in a
register.

In The Registrar North Eastern Railway Employer Union v. R.T.U. On being

satisfied that the T.U has complied with all the requirements of this Act then he can
register it. It has been observed that THE Registrar while discharging the duties under
sec 8 or under sec 28 of the Trade Unions Act 1926, has the administrative function
and not quasi-judicial function in which the parties can lead evidence. Hence, the
registrar is free to hold a summary enquiry to satisfy himself to effect any change.
The registrar was not holding a quasi-judicial inquiry as he was discharging an
administrative duty.
7. U/S. 9, upon registration the Registrar shall issue Certificate of Registration which
shall be conclusive Proof of registration. The TU will then have right and privileges.

8. u/s. 10,cancellation of registration may be done by Registrar on

(a) application by TU or

(b) if certificate is obtained by fraud or mistake, or TU ceased to exist etc.

 The Registrar must verify the truth of the application by conducting enquiry &
collecting evidence etc. only upon satisfaction, it & cancelled, within 2-month
notice. If it is u/s. 9A, a one-months notice is issued by the Registrar for ascertaining
the rule of 10% or 100 workers - before cancellation of registration.

TATA Electric Companies Guild v. Registrar of Trade Unions, 1994 In this case the
court held that for a registrar to cancel the registration, willful neglect of the notice is
a must. If the trade union sends the account statement upon notice of the registrar, the
registrar cannot cancel the registration on the ground that the account statement was
not filed earlier

Coromandel Cement Factory Employees Union v. Deputy Registrar of Trade

Unions and Deputy Registrar of Trade Unions and Deputy Commissioner of
Labour, Kurnool In it has been held that cancellation of Registration without giving
second show-cause notice and without giving opportunity to represent the case is
liable to set aside

In Radheshyam Singh v. BATA Mazdoor Union, 1977 It has been held that in
absence of a prior notice, any proceeding for cancellation or withdrawl of
registration is illegal and without jurisdiction.

In Mysore Iron and Steel Works Labour Assn. v. Commissioner of labour it has
been held that the withdrawal or cancellation of the registration must be preceded by
the requisite notice as well as an opportunity to show cause against the proposed
action.

In Registrar of Trade Unions v. M.Marriswamy 1974 It has been held that ‘mistake’
may be ground for withdrawal or cancellation of registration of a trade union,
provided the mistake is on the part of the union and not registrar himself

Recognized Trade Union

There is no specific provision for the recognition of the trade unions under the Trade Unions
Act, 1926. Hence, recognition is a matter of discretion in the hands of the employer.
Provisions for the recognition of trade unions were included in the Trade Union
(Amendment) Act, 1947, but the act has not been implemented. The Trade Union Bill, 1950
also provided for recognition of trade union (based on the largest membership among the
existing trade unions), but the bill lapsed due to dissolution of parliament.
Recognition of Trade Union:
Recognition means the expressed recognition of a registered trade union by an employer or
by an employers association for the purposes of collective bargaining.
Recognition is different from registration.
Recognition is provided to that union which comprises of more than 50 percent of
the employees in that establishment as its members.
It is the employer and only the employer, who awards recognition to one or more
unions, or refuses such recognition.

Types of Recognition
1. Voluntary Trade Union Recognition : When an employer voluntarily recognizes a
trade union without using any legal procedures.

2. Statutory Trade Union Recognition: If an employer and trade union do not come
to a voluntary recognition agreement, a trade union can make an application for
statutory recognition.
This only applies where the employer, together with any associated employers, employs 21 or more
workers

u/s.28F, rights of a recognised TU are provided:

a) Exec. the body of TU can negotiate with employer wrt. Condition of employment,
employment & non-employment. Employer shall mandatorily grant interviews & negotiate

b) Employer is expected to come to a conclusion/settlement within 3 months, unless there is

change in circumstances. Change should be communicated for extension to Registrar / Exec
body.

c) Employer shall display settlement/outcome at conspicuous places.

u/s.28G, the employer / Registrar may write to Labour Court to withdraw recognition on
the following grounds:

a) TU committed unfair labour practice, within 3 months to date of

application b) failed to submit returns u/s. 28 J

c) TU ceased to be representative of workmen u/s 26 D(b). The Labour Court will

then serve notice to TU, employer and Registrar & conduct an enquiry. If it finds the
application is true. It will withdraw the recognition of TU OR if it is false, it will
dismiss the application. The said order shall be communicated to TU, employer
Registrar etc.

If the TU is NOT recognised, the employer is NOT bound to negotiate with the
TU.

u/s. 28 H, if the recognition is not granted or withdrawn upon expiry of 6 months from order,
TU may again apply for recognition.

u/s. 28 I, recognised TU must submit returns in prescribed form.

Conditions for Recognition

● All ordinary members are workmen employed in the same industry or in

industries closely allied to or connected with another;
● It is representative of all workmen employed by the employer in that industry or
those industries;
● Its rules do not provide for the exclusion from membership of any class of workmen
● Its rules provide for the procedure for declaring a strike ;
● Its rules provide that a meeting of its executive shall be held at least once in
every 6 months
● It is a registered trade union and that it has complied will all the provisions of
the Trade unions
● (amendment) Act, 1947

Methods of Recognition
 1. Membership Verification
2. Check-off
3. Secret Ballot
4. Code of Discipline

U/S.13,Powers of TU once registered and incorporated, it shall be a body

corporate with:

a) Body corporate with

name b) perpetual

succession

c) Common seal

d) power to acquire & hold movable& immovable

property. e) to contract

f) sue & be sued.

u/s. 14, the following acts do not apply to a

TU. a) societies Registrar Act, 1860

b). The Co-operative societies Act,

1912. C). Companies Act, 1956

Registered Trade Union

The main object of the Trade Unions Act, 1926 is to provide machinery for registration and
regulation of Trade Unions. Although registration of a trade union is not mandatory, it is advisable
to register the trade unions as the registered trade unions are entitled to get several benefits,
immunities and protection under the act. There are specific rights and privileges conferred on the
members of the registered trade unions. The members of the registered trade unions are entitled to
get protection, immunity and certain exceptions from some civil and criminal liabilities. A trade
union can only be registered under the Trade Unions Act, 1926, and cannot be registered under any
other act including the Societies Registration Act or the Co-operative Societies Act or the Indian
Companies Act.

3.3 Part II- Rights and Liabilities of a Registered

TU A Registered Trade Union has the right to:

1. spend the general fund for payment of salaries, 'allowances and expenses to its office-
bearers, prosecution or defense , of any legal proceedings for securing or protecting
any rights of trade union, conduct of trade disputes, compensation to members for any
loss arising from trade disputes, provision of educational, social, or religious benefits
for members, publication bf periodicals on labour matters, issue of or undertaking of
liability under policies of assurance on the lives of members or policies of members
against sickness, accident or unemployment, contribution to any cause intended to
benefit workmen in general upto 25% of the gross income accrued to the fund, and
 any other object notified by the appropriate Government; (Sec. 15)
2. constitute a separate political fund for the promotion of civic and political interests of.
members Contribution to this fund is, however, not obligatory for the members, or a
condition for becoming a member of the union. The political fund can be used for
setting up candidates and meeting their election expenses, holding elections and
political meetings and maintenance of members elected to the Parliament or State
Assembly or any local authority; (Sec. 16)
3. claim protection from being prosecuted under sub-section (2) of Sec. 120B of the
Indian Penal Code for bona-fide trade union activities under Sec. 17 of the Act. The
protection provided to the members and office-bearers of the Trade Union is partial in
the sense that the immunity is available only in respect of agreements made between
the members for the purpose of furthering any legitimate objective of the trade union
as provided under section 15 of the Act. If the agreement is the agreement to do an act
which is an offence, no immunity can be claimed in certain cases; (Sec. 17, 18)
4. Sec. 18 of the Trade Union Act deals with immunity from Civil Proceedings. A
person is liable in torts for deliberately bringing out a breach of contract of
employment between the employer and employee. But a registered trade union, its
members or office-bearers are protected from being sued for inducing a person to
break his contract of employment or for interfering with the trade, business or
employment of some other person provided such inducement is in contemplation or
furtherance of trade disputes.
5. change its name with the consent of two-third of the total number of its members
under intimation to the Registrar of Trade Unions. The change takes effect from the
date it is registered by the Registrar; (Sec. 23, 25) and amalgamate the union with any
other union by recording votes of at least 50% of the members, of which 60% must
be in favour of
 amalgamation. This must be intimated to the Registrar, as it can, take effect after
he registers it. (Sec 24,25)

The TU is constituted to protect the rights of the members. It is to protect the interests of its
workmen.

In R. Kulkarni v. Bombay (1951)it has been observed that sec 15(d) of the Trade Union Act,
1926 renders lawful, the expenditure of money belonging to a trade union for the conduct of a
trade dispute but it does not make it obligatory upon a trade union to expand any portion of
its general fund for such a purpose.

In Mario Raposo vs. H.M. Bhandarker (1994), it has been held that purchase of shaeres by
trade union in the UTI is an attempt towards profit making and carries with it an odour of
speculation and is against the provisions of Sec 15 of the Trade Unions Act.

In National Union of General and Muncipal Workers vs. Gillian, (1946), it was held that
the union funds may not be used to bring legal proceedings of personal or partisan character,
but a libel action for injury to its population may be brought in its registered name and the
costs paid out of its funds.

Trade Union Funds

Registered Trade Union raise their fund

through, a) General Funds.

b) Separate Funds

a) S.15 entails the objects on which the general fund may be spent.But it cannot be
spent beyond these objects, unless it is in the rules approved by Registrar either from
inception or after amendment.

Objects u/s. 15:

a) payment of salaries etc. to office bearers of TU

b) expenses of administration of Tu & audit of accounts.

c) prosecution/defence expenses of legal proceedings for protection of rights of

its members. It may be one member or more. If it is a single worker (sponsoring the
cause of
 the worker) it may be sponsored even if he is not a member. This may be decided
by voting on whether to support Don-member or not.

d) u/s. 3, 4, 5 of ID Act, negotiation etc. is conducted and TU represents the

workman.
The expenses in this is also from general fund

e) financing/ compensating members for loss arising out of trade disputes.

f) allowances to members & their dependants for death,medical expenses etc.The ESI
Act provides for these. The TU can go beyond the Heads in ESI Act.

g) Insurance of members

h) payment of education / religious expenses of members

etc. i) Expenses of a perodical publication.

j) any other activities in furtherance of TU objectives.but shall not exceed 1/4th of

the gross income of TU

k) Any other purpose notified by state/Central Govt.

S.16 deals with the constitution of political funds. The purpose is promotion of civic &
political welfare of the members. The contribution may be by outsider & members.of The
Trade Union Act has made suitable provisions for the constitution of a separate fund for
political purposes. The Act empowers a registered Trade Union to constitute a separate fund
from contribution separately levied for that fund. Out of this fund payments maybe made for
the promotion of the political interest of its members in order to promote the political
objects. But the general funds should not be utilized for political purpose

u/s.16(2), the objects include:

a) payment of expenses incurred by a candidate for the elections to legislative body

contested.
The candidature of member of TU or the outsider or any outsider may be sponsored

b) expenses in the distribution of publication of any Literature for supporting such

candidate. c) maintenance of any person who is member of legislative

d) registration of electors.

e) holding of political meetings.

u/s. 16 (3), no member is required/ compelled to contribute to the political fund and his
membership cannot be questioned or rights violated on this ground.
Immunities of Registered Trade Unions
S. 17 & S.18 are the most important provisions of the Act. They are derived from
theBuckingham & Karnataka mills v. B.P Wadia case .

S.17 states that office-bearers, members of TU are immune from criminal

conspiracy in trade disputes u/s 120 B (2) IPC.
a) S.120 A IPC deals with crl. Conspiracy

1. Agreements to commit a crime

2. Agreement to commit certain torts

3. Agreements to obstruct or prevent the course of justice

4. Agreements to do acts contrary to public morality and decency.

S. 120 B defines the punishments. Immunity does NOT extend to the severe punishment u/s.
120 B (1), extending to 2yrs.

b) Immunity is only u/s. 120B(2).

The conditions are

• must be a registered TU

• The members wish to do a legal activity (lawful) in furtherance of the TU objectives.

• If the activity is NOT lawful OR the activity is beyond objectives of TU Act, the immunity
does not apply.

Jay engineering Ltd. V State of West Bengal, [AIR 1968 cal. 407] It has been held that “a
concerted movement by workmen by gathering together either outside the industrial
establishment or inside within the working hours is permissible when it is peaceful and does
not violate the provisions of law. But when such gathering is unlawful or commits an offence,
then the immunity is lost. Thus, when it resorts to unlawful confinement of persons, criminal
trespass or where it becomes violent and indulges in criminal force or criminal assault or
mischief to persons or property or molestation or intimidation, the immunity can no longer be
claimed.

Binny Mills Case:- In this case it was observed that the first legal hitch that thwarted the T.U
movement was charge criminal conspiracy against the formation of T.U and their action was
considered in restraint of trade. In case if any strike was conducted it was treated as illegal &
was held responsible for the loss of production. U.K was the 1 st country to grant relief. This
immunity is subjected to conditions & limited to certain extent. 120 – B of I.P.C protects only
against punishment which is less than 2 years, and is applicable to offences where
punishment is for 6 months of imprisonment. For enjoying immunity the section
prescribes that agreement
between the members of a T.U should only be for the purpose carrying out its legitimate &
lawful activities as per sec15 of the Trade Union Act.

In Indian Bank v Federation of Indian Bank employees Union [(1982)IILLJ 123 (Mad.)],
the Indian Bank prayed for an interim injunction against the Union restraining them from
holding any meeting or staging any demonstration or resorting to any other similar form of
irregular action within the premises of the plaintiff Bank and within a radius of 50 meteres of
the premises and obstructing the people to enter. The Court rejected the plea by observing
that it would not be proper to interfere that trade unions always indulge only in violent
activities and they do not hold peaceful demonstration

In West India Steel Company Ltd. v. Azeez A trade union leader obstructed work inside the
factory for 5 hrs while protesting against the deputation of a workman to work another
section. It was held that while in a factory, the worker must submit to the instructions given
by his superiors. A trade union leader has no immunity against disobeying the orders. A trade
union leader or any worker does not have any right by law to share managerial
responsibilities. A trade union can espouse the cause of workers through legal ways but
officials of a trade union cannot direct other workers individually or in general about how to
do their work. They do not have the right to ask a worker to stop his work or otherwise
obstruct the work of the establishment. An employer may deal with a person causing
obstruction in work effectively.

S. 18 deals with immunity from civil suit, u/s.18, no civil suit shall be maintained
against TU, its executive body & members, for activities in furtherance of the objectives of
TV. This includes:

a) inducing a person to break a contract of employment.

b) Interference with trade, business or employment of the members' workers.

c)interference with the right of some other person to dispose of his/her capital or his/her
labour as they will.

But no member /workman can be compelled to do anything. He/She can only be requested.

P. Mukundan And Others v. Mohan Kandy Pavithran 1992 It was held that strike per se is
not an actionable wrong. Further, it was held that the trade union, its officers, and its
members are immune against legal proceedings linked with the strike of workmen by the
provisions of section 18

In Rohtas Industries state Union v. State of Bihar (1991) The question was when is the
strike known to be legal or illegal ?

A legal/illegal strike has its consequences for the workmen, S.24 provides conditions of a
legal strike.
In this case, the employees' strike was adjudged as illegal. The quest was whether immunity
u/s. 18 applies to illegal strike for tortious liability etc. The HC stated that the employer shall
NOT have civil remedies against the employees. Thus immunity u/s. 18 shall apply even for
illegal strikes u/s. 24 of ID Act.

Similar was held in Indian Express Newspaper v. Nagarajan It was held that the immunity
applies even to illegal strikes provided it is within rules of TU, But NOT to violent strikes
causing physical damage. Here, in violent strike, the immunity does not apply (1988- Del. c)

Jay Engineering Works Ltd. And vs State Of West Bengal And Ors- It was stated that
purpose of S.17 & 18 was to give immunity only to requests and settlement efforts of TU.
But the moment their activities become violent & constitute offences under the IPC, the
immunity does not apply.

Simpson & Group Companies Workers & Staff Union v. AMCO Batteries Ltd 1992 In this
case it was held that physical obstruction of movement of management officials, contractors,
goods, or vehicles carrying raw materials, is not a trade union right or a fundamental right
under Art 19.
• Immunity under section 18 cannot be claimed for such activities. Right to picket is a
very intangible right and it extends only up to the right of free movement of others. The
methods of persuasion are limited to oral and visual and do not include physical obstruction
of vehicles or persons

In the leading case of Sri Ram Visa Services Ltd. V. Simpson and Group Company’s Union
(1979) it has been held that “immunity under sec 18 legitimates rights of labour to strike.
Labour can pursue agitation so long as it does not indulge in acts, unlawful and tortuous acts.
When labour assures that there will be no violence or unlawful and tortuous acts, cessation of
work by the labour cannot be interfered with by the Court” The Court further held that “ it is
not within the purview of this Court to prevent or interfere with the legitimate rights of the
labour to pursue their agitation by means of a strike, so long as it does not indulge in acts,
unlawful and tortuous”

In Standard Chartered Bank v. Hindustan Engg. & General Mazdoor Union, 2002, it has
been observed that immunity is provided to the registered trade union from being sued by
way of civil suit under sec 18. In respect of any act done in contemplation on furtherance of a
trade dispute to which a member of the trade union is a party on the ground only that such act
induces some other person to break a contract of employment or that it is in interference with
the trade, business or employment of some other person or with the right of some other
person to dispute of his capital or of his labour as he wills.

In U.P Rajya Setu Nigam Sanyukut Karamchari sangh. V. U.P. State Bridge Corporation,
Lucknow, [2000], it has been held that the Act has not provided that period of illegal strike
would be treated case a period of unauthorised absence or relationship of ‘employer and
employee’ would cease

In Federation of Western India Cine Employees v. Filmnagar (P) ltd. (1981) it was held
that a federation of cine employees were within their rights in issuing a letter to the members
of Filmalaya (P) Ltd. In the interests of solidarity of workmen supporting their demands the
employees were asked to not to report for any shooting work in that studio
3.8 Part IV- Collective Bargaining & Trade Disputes:
"Collective Bargaining is a process in which the representatives of a labour organization &
the representatives of business organization meet and attempt to negotiate a contract or
agreement, which specifies the nature of employee-employer union relationship".

● 'collective' - group
● 'bargaining' proposals and counter proposals
● Process involve discussions and negotiations
● To reconcile their conflict interests

Collective bargaining is a process of negotiating between management and workers

represented by their representatives for determining mutually agreed terms and conditions of
work which protect the interest of both workers and the management

It helps for settlement of issues and prevention of industrial disputes

Collective Bargaining (CB) is an agreement between TU & Employer for settlement of one
or more disputes. CB is the process of settlement of disputes relating to employment
between:

a) TU & employer

b) Group of employers &

TU c) Group of TU &

employer

d) Group of Tu & Group of employer.

UK, Australia,New Zealand & USA, CB is the only method used to settle trade disputes.
India is still at the nascent stage of CB.

The 2nd & 4th 5-yr plan in India tried to encourage

Objects of Collective Bargaining in India

1. To harmonise labour relations, promote industrial peace by creating equality of bargaining

power between the workmen and the capital.

2. To satisfy both employees and employers by way of adjustment and compromise by

following the principle ‘give-and- take’ and by bringing the parties together
Essential Features

1. the terms and conditions of employment are determined jointly.

2. the employer-employee relationship is a precondition for collective bargaining.
3. Requires the determination of terms andconditions of employment through
negotiations and encourages the process of ‘give and take’.
4. The agreement arrived at during the course of bargaining may relate to a
number of subjects of the terms of employment and working conditions or to only a
single issue.
5. State too has an active role in regulating various aspects of collective
bargaining. 6. Its nature is adaptable and dynamic

Characteristics of Collective Bargaining

1. Bipartite Process
2. Continuous Process
3. Collective Process
4. Dynamic Process
5. Complementary Process

Importance of Collective Bargaining

● Higher wages,
● Liberal allowances,
● Fringe benefits,
● Economic security,
● Improved working conditions by shorter hours of work,
● Better terms and conditions of employment, and
● Superior physical working conditions

In Sangathan v. Liberty Footwear Co(1990) A technique by which disputes as to conditions

of employment are resolved amicably, by agreement, rather than by coercion. The dispute is
settled peacefully and voluntarily, although reluctantly, between labour and management

Prerequisites of collective Bargaining

● Strong bargaining agent

● Responsible management
● Mutual trust and faith between management and trade union
● Mutual recognition of their rights and responsibilities
● Reliance on facts rather than on emotions Faithful interpretation

Scope of Collective Bargaining

include clauses regarding wage, working hours, rest period, holidays

Essential Conditions for Successful Bargaining

1. Freedom of Association

2. Recognition of Trade

Union 3. Stability of Trade

Union

4. Conducive Socio-Economic & Political

Environment 5. Willingness to Give & Take

6. Problem Solving Attitude

7. Prohibition of Unfair Labour Practices

Collective Bargaining Process

1. Preparation
2. Discussion
3. Proposal
4. Bargaining: Direct negotiation between the parties With the help of the arbitrator,
conciliator, or a mediator. By the settlements that have been concluded by the parties
when a dispute is pending before Labour court or Industrial Tribunal.

Matters which regulate STANDARDS OF EMPLOYMENT

● Wages, Bonus & other Allowances

● Work Hours & Rest Intervals
● Leave Facilities & Annual Holidays
● Seniority & Promotions
● Discharge & Dismissal
● Retirement Benefits etc.
● Matters which regulate

Matters which regulate RELATIONS BETWEEN PARTIES

● Rights & Obligations of parties

● Procedure for Joint Consultation
● Prohibition of strikes and lock-outs during period of agreement
● Determining procedure for new agreements Grievance Redressal Mechanism etc.

Constitutional Provisions:
 ● Article 43-A
● Article 19(1) (c)
● First five year plan
● Second five year plan
● Third five year plan
● Fourth five year plan and
● fifth five year plan

Advantages

● Achieves harmonious labour management

● relations, cost effective and efficient.
● Stabilising effect on society.
● Industrial peace leading to industrial growth.
● Democratic setup.
● Avoids unnecessary litigation.
● Elastic, dynamic, flexible, mutually cooperative process.
● creates social justice and social change.

Disadvantages

● influence of power and politics

● weak party has to yield to the
● economically strong party and workers
● are generally the losers
● Failure leads to strike or lock-out

Alll India Bank Employers' Assoc. v. National Industrial Tribunal (1961)-

Question was whether CB is a fundamental right or not u/s. 19(1) (c)i.e.right to

form associations & unions.

The answer is NO & Such a liberal interpretation cannot be given, otherwise, right to strike to
all associated rights will become FR. This cannot be provided & therefore, CB is NOT FR.

In 1921, 1975, India signed a few ILO Convention. It did not sign 1981 (154 Convention)
& 1949 Convention wrt. CB. Since, it was not signed, CB is not justiciable & enforceable in
court.
Current position of Collective Bargaining in India:

a) The ID Act, 1947 was passed to settle trade disputes.S.3 to S.7B provided the process /
dispute settlement machinery.S.10A was inserted to include voluntary arbitration. through
ADR. Here u/s. 10A, CB can be brought In.

b) u/s 10A ID Act. the employer or TU or employee may choose voluntary arbitration &
settle the dispute through CB. But due to the litigating mindset of India, CB has not gone
forward in India & not developed.

For CB, some agreements may be entered into:

a) direct agreement between employer & TU wrt. a single

dispute. b) a conciliator may be appointed

c) application to Labour Court to refer to S.10A.

d) application to labour Court/Industrial Tribunal for settlement through consent award

where both parties agree to terms & conditions.

CB is still only optional in India & thus it has not developed in India. If CB were made
mandatory. It would have developed. Further, since recogning of TU under ChapterIII A is a
dead letter of law, it was a big setback to promote CB.

Although the TU have the right to negotiate, the employers are NOT mandated or required to
negotiate with TU.This is the drawback of not recognising TU as compulsion is put on
employer to negotiate
4.3.4. S. 2(j) defines industry
Meaning of Industry (S.2(j)):
any systematic activity carried on by co-operation between an employer and his
workmen whether such work- men are employed by such employee directly or by
or through any agency including a contractor for the production, supply or
distribution of goods or services with a view to satisfy human wants or wishes with
a motive to make any gain or profit; not merely spiritual or religious.
"Industry means any business, trade, undertaking, manufacturing or calling of
employers & includes any calling, service, employment, handicraft or industrial
occupation or avocation of workmen:

Any activity is deemed to be an industry if it is:

•undertaken for the production and distribution of goods or services for a
common purpose;
•organized in a manner in which trade or business is usually organized;
•carried on with the collective and co-operative effort of the employer and
the employees.
The essential features of industry are:
•The activity must concern the production or distribution of goods or services
•It must be to serve others but not to oneself;
•It must involve co-operative efforts between employer and employee and
between capital and labour;
 •It must be done as a commercial transaction; and it must not be in the
exercise of purely governmental functions.

Gajendra Gadkar J. in State of Bombay v. Bombay Hospital Mazdoor Sabha

(AIR1960SC) defined 'undertaking' for the first time. He laid down certain principles
to define an undertaking This was "Dominant Nature test” later called as 'Triple Test
or Test' in Bangalore water supply case by Krishna Jyer J.
An Undertaking is:
● an activity taken up on a regular basis
● systematic activity for rendering services or products and distribution of goods
● to serve the larger human community at large
● with the harmonious relationship of employer & employees
These principles were later adopted by Krishna Iyer J. and developed into the 'Triple
Test' and 'Dominant Nature Test', in Bangalore Water Supply Case.

Gajendra Gadkar J. defined undertaking as "an activity systematically or habitually

undertaken for the production or distribution of goods or for the rendering of material
services to the community at large or a part of such community with the help of
employees."

The evolution of meaning of industry has evolved through Judicial interpretation.

Bangalore Water supply v. A. Rajappa (AIR 1978C), is most imp. case which forms
the foundation of the I.DAct. It was a 7-judge bench (highest in labour cose) headed
bh Krishna Iyer J.
Till date, a larger bench has not been constituted to examine labour issues & it is valid
even today.Later an amendment was proposed to S.2(j) but it was not brought into
force & Bangalore Case holds good till date.

Bangalore Water supply v. A. Rajappa (AIR 1978C)

This case brought out the Triple Test & Dominant Nature Test.

The Triple Test includes

a) systematic Activity - this implies a certain amt. of regularity and regular activities
conducted.Systematic activity involves planning, organising & regularly conducting
the activity. The activity must be performed through cooperation between employer
& employee. The purpose of this activity is production/ distribution of goods or
rendering services, for the satisfaction of wants & needs of the human community.

b)Organized by Cooperation between employer & employee - the relation of

employer-employee must be there. The employer may be Govt. or pvt.
individual/legal person.
c)Purpose of such organisation/relationship between employer and employee must be
for production of goods or Services for satisfaction of human wants & wishes - Thus,
it may be for:
i) production of goods ii) Rendering services for the human community.
If ALL these three elements are present. It falls within the ambit of S.2(j) acc.
to Krishna Iyer J. in Bangalore Water supply (BWS) case

Eg: a shop is governed by both I.D.A & Shops & Establishments Act which
both go hand in hand.

The implication of this definition is that almost all activities would fall within
ambit of industry. This gives a very wide & inclusive definition. By laying this
definition, Krishna Iyer J. has brought almost all activities within ambit of
industry:

Exceptions (not in ambit of industry acc to this case):

a) spiritual or religious services or services geared to Celestial bliss

Eg: making, on a large scale, prasad or food.It includes material services & things.
Eg: Temple, Mosque, Ashrams etc.

b) Absence of profit motive or gainful objective is NOT relevant. Irrespective of

probit/non-profit motive & public, joint, pvt. or other sector(nature of venture) is
irrelevant Eg: Educational institutes, Hospitals etc.which operate on non-profit
objective & rennder free services are also Industry.
Thus, profit motive & nature of venture to irrelevant.

c) The true focus of this functional & decisive test is the nature of activity with spcl.
emphasis on employer-employee relations (Dominant nature rest). If the organisation
is a trade or business, it does not cease to be one because of philanthropy animating
the undertaking.
This philanthropic activity is Irrelevant. (eg: presence of CSR activities does not
render the activity outside the definition of industry).

Eg: An NGO brought all stray cows together and through charitable sources,
started feed the cows in Bombay.
The cows started giving excess milk & the NGO Started selling the milk &
made a huge recurring profits. The question was whether this was an industry
or not?
The NGO contended that the motive was not profits & they were forced to sell
the excess milk. Under the triple test, profit motive is an irrelevant
consideration and it was held to be an industry by the Court in this case.
(Bombay Panirapole Bhuleshwar v. The Workmen-AIR 1971 SC) & Once
an activity is an 'industry', it comes in ambit of ID Act and all other labour
legislations. The rights, dispute resolution & other provisions under labour
legislations shall apply & the activity shall come under 'organised sector by
virtue of being an industry u/s2(j).
 d) But, departments which undertake welfare or economic activities by the Govt. or
statutory bodies, even departments discharging sovereign functions, if separable
constitute industry under sec 2(j).

Dominant Nature Test:

This states that the main purpose of the activity must be looked into while deciding whether it
is an industry within the meaning of S.2(j) or not.
Sometimes, along with the main purpose, other minimal ancillary activities may be indulged
into such ancillary activities must be minimal & must not overtake the main activity.
Certain establishments render services free of cost with a simple service motive. eg:
Gurukuls are exempted from the definition of industry, similarly Doctors rendering free
medical services in a village on a weekly/monthly basis may be exempted from S.2(j).
Similarly, legal aid services by lawyer is a pro-bono work which is not within S.2(j)

Exception to industry:

a) Gurukuls, doctors, lawyers giving free services

etc. b) Purely sovereign functions discharged by
Govt.
c) In departments of Govt. discharging sovereign functions. if there are units which are
industries & they are substantially severable, then they can be considered to come within,
S2(j). An enterprise which is part of sovereign function of Govt. is not an industry
d) purely religious, charitable & sovereign activities are excluded.
e)A restricted category of professions, clubs, co-operatives which are not based on employee
relationship are not “industries”.
f)small research labs
g)Pious & altruistic mission not based on master – servant relationship are not
“industries” h)Free legal services run by lawyers voluntarily
i) Free medical centres
j) Free services provided by astramites

Any NGO which earns ANY profit is industry and only if it runs on purely charitable
contributions, it may be excluded.

Cases Overruled

1. The Hospital Mazdoor Sabha case came first,In cases that came in later such as Mgmt. of
Safdarjung Hospital v Kuldip Singh, NUC Employees v. Industrial Tribunal etc. overruled
the Hospital Mazdoor sabha case.

2. Later by the BWS case, all cases overruling Hospital Mazdoor sabha case were overruled
and the ratio of Hospital Mazdoor Sabha case was reiterated.
Is municipal Corp. an Industry?

D.N. Banerjee v. .P.R. Mukherjee - The municipality had a case against it by P.C. Mitra &
P.N. Ghose in an Industrial Tribunal and the Tribunal reinstated them. The content before SC
was that municipality is a part of State Govt., discharging a sovereign function and thus, not
an industry u/s 2(j) The municipal corporation claimed it was not an industry & the Industrial
Tribunal does not have authority over the matter.The SC laid down a novel explanation It
stated that nothing in the ID Act prevents a municipal corporation from being within s.2(j)

Definition not confined to trade or business or activities analogous to trade or

business.Definition not confined to trade or business or activities analogous to trade
or business.

Neither capital investment nor profit motive is required in an 'occupation" or

"avocation” u/s. 2(j), in terms of undertaking.Thus, municipal corp. & other public
utility services such as railways, telephones, water & electricity supply etc. are not
prevented from being included u/s2(j) and thus they are an industry u/s2(j)

Nagpur Corporation v. employees (1960 SC)- The SC explained even in activities

analogous to a trade or business, Sovereign function is a primary inalienable function of the
state such as legislative power, administration of law & Judicial power. The functions of
municipal corporations are therefore analogous to trade & service and the capital investment
or profit motive is irrelevant and the employees are entitled to benefit under the ID Act.
Octroi is a tax collected by the State Govt. In Abdul sahir Khan v. Municipal Council
Bhandara (1970) the judiciary was of the opinion that an octroi is a sovereign function as
collection of taxes is an inalienable sovereign function & thus, NOT industry.

A Fire Brigade maintained by Municipal Corporation. is a service and it is an undertaking &

therefore an industry u/s.2(j) This was held in the Workmen of Fire Brigade section of the
Municipal Committee Faridabad v. K. Gosain (970)

Is Hospital an industry?

There have been a no. of conflicting judgments starting from Hospital Mazdoor Sabha
Case to BWS Case

State of Bombay v. Hospital Mazdoor Sabha - The first case where Gajendra Gadkar J.
defined undertaking & laid foundation of Triple Test which was later developed by Krishna
Iyer J. in BWS Case. The Writ in this case was filed by the registered TU Hospital Mazdoor
Sabha. The Govt contested that Hospital is NOT an industry & thus,the writ does not lie.
The Sc held that the Hospital was an undertaking u/s2(j) and profit motive was
immaterial. It was a systematic activity, with organisation of employer & employee and it
was for the purpose of rendering services to the human community.

Mgmt. of Safdarjung Hospital Delhi v. Kuldip Singh (1970 SC) Wrongly overruled the
Hospital Mazdoor Sabha Case. In this case it was held that Kurji Hospital & Safdarjung
hospital are not
part of S.2(j). They carried on work of training, researching & treatment, most
importantly of TB. The sc while overruling Hospital mazdoor Sabha Case & held hospital is
not industry us.2(j).

Dhanrajgiri Hospital v. Workmen (1975-SC)- The Hospital was only for training nurses
with limited beds in the hospital. There was no economic activity. The sc held that it & NOT
an industry and over-ruled Hospital Mazdoor Sabha case.

The BWS Case reiterated the Hospital Mazdoor Sabba case and overruled any case which
did not comply with Mazdoor Sabha case. It laid down triple test and dominant nature test
and thus, hospital was part of industry as defined us 2(j)

Keraleeya Ayurveda Samajam Hospital v. Workmen (1979-SC)

The activities were divided into different departments and the court held it was industry as it
fell squarely in triple test

Mgmt of Hospitals, Orissa v. Their workmen (1971 SC)- The Govt. was running this
hospital as a department of Government. The SC held as it's a government function it is not
an industry u/s. 2(j).
Now with BWs case, this was overruled too

Is Educational Institution an Industry?

The distinction lies in cases before & after Hospital Mazdoor Sabha Case and BWS case. The
period from 1960 (Mazdoor Sabha) to 1978 (BWS case) is most important & most cases were
overruled where it didn't comply with the Mazdoor Sabha Case (even for judgments before
1960).

University of Delhi v. Ram Nath (1983-Sc)- The case was regarding termination of bus
services (thereby employment of drivers) for women students of the University. The
contention was that u/s. 25 F of ID Act the drivers were retrenched (retrenchment is removal
of employee due to surplus employees). The ID Tribunal ruled in favour of allowing
retrenchment while compensating the drivers & this was challenged by University on the
ground that University is not an industry. The SC held that the imparting of education is a
mission & vocation rather than trade, business or profession and therefore not industry
u/s2(j). This was later overruled by Bws Case.

S. Brahmo Samaj Education society v. WB College Employees' Association. (1960-Cal

HC) No reference was made to Mazdoor Sabha Case. The Cal. HC held that the definition of
industry is changing with time. In some institutes, the service is based on higher intellectual
capacity & absence of profit motive. This itself merely does not bring it or exclude it from the
definition of industry. The Cal. HC stated it is a matter of evidence and evaluation but NO
CONCLUSION was given.
Osmania University v. Industrial Tribunal Hyderabad (1960-A.P HC)-The HC held purpose
of University is solely providing education & concept of profit, workmen, employee etc. does
not arise and it is NOT industry.

Sumer chand vs. Labour Court, Ambala (1992)High court of Punjab held that Kurukshetra
University is an industry & carpenter employed in the university is a workman within the
definition of workmen U/Sec.2 (k) of the I.D Act, 1947

Principal, Doongar College, Dinker vs. Om Prakash A Govt. college run & maintained by
the Govt. of Rajasthan was held to be an ‘industry’ U/S2 (j) & closes IV employee as
workmen

Ahmedabad Textile Industry's Research Association v. state of Bombay (1961-SC) -

Although it was a research institute on textile, its sole motive/ idea was to increase business
in textile. It was held as an industry u/s. 2(j). Thus, the intellectual motive was distinguished
from purely commercial motive.

The BWS Case overruled all of these cases and today, educational institutions fall within
ambit of industry u/s-2 (J).

Is Departments of the Govt an industry?

State of Rajasthan v. Ganeshi lal (2008-SC)- The labour Court held that Law Dept of Govt.
is an industry & same was upheld by HC. The SC held that it is not an industry and the lower
courts did not justify as to why it would be industry. However, this case was stated by
SC to NOT be a precedent in law & to be judged on facts of each case.

Is Club an industry?

Cricket Club of India v. Bombay Labour Union (1969-SC) The club was a self service &
non-proprietary institution catering services with around 397 employees which was paid for
by the members using catering. The SC held it NOT as industry u/s. 2(j). This was overruled.

Madras Gymkhana Club Employees' Union V.. Mgmt (1968 SC)- This was a members club
& NOT proprietary and therefore was held not to be an industry u/s. 2(j). It was held that the
club was a member’s self serving institution and not an industry but it was overruled by
Bangalore water supply case. It was held that both cricket club and Madras Gymkhana club
would now be an industry because they fulfill the triple test.
Both are systematically organized with the cooperation of employer & employee for
distribution of service to satisfy human wishes.

After the BWS Case, both the above cases are over-ruled & now the club comes under
the definition of industry.

Is Solicitor's Firm & lawyer's officer an Industry?

N.N.U.C. Employees v. Industrial Tribunal (1962-SC)- The main purpose was to advise the
client & all other work was ancillary. The Sc held that it is NOT industry with the BWS
case, this was overruled and the firm is now within the definition of industry.

Is Co-operative Society a industry?

Shri Mahila Gruha Udyog (Lijjat Papad Kendra) Amaravathi vs. Ratan mala D. Koken.
Petitioner contended that “mahila gram udyog is not an industry as it is not a
commercial establishment but a society registered U/societies registration Act but court
rejecting the contention held that the activity of papad making is definitely an activity of
trade business& hence it does not cease to be an industry nor is excluded from the def. of
“industry” U/Sec.2 (j)

Other Bodies:
A co-operative milk society, an oil Distribution company, Chamber of Commerce, Partner
Firms of Accountants, Registered Association of cloth Merchants, business of loading &
unloading goods, a Book Shop, Hair Cutting Salon, Railways, pharmacy, dock labour Board
are all industry up 2(j) after BWS Case.

In Mahamadhaka Temple Gajika v. Manager(1994) Where the Jain temple was held to be
not an industry, the SC in the facts and circumstances of the case awarded compensation to
the workman.

Workmen I.S. Institution v. I.S.I. (1976 SC)- The Indian standards Institution (ISI) is
for certifying a number of goods and products. The dispute of workmen was referred to
Tribunal & Govt.contended ISI is not industry. The SC held that according to the triple test,
ISI was an industry.

Amended Definition of Industry u/s2(j):

After the 1978 BWS case, the parliament in 1982 brought in a new definition of industry.
This definition. was entirely similar to the triple test & dominant nature test but expressly
excluded:
a) Agricultural
operations b)
Hospitals
c) Educational
institution d)
Charitable institute
e) Khadi or village
industries f) Govt dept.
g) Domestic
service h)
Profession
i)Co-operative society or clubs etc.
 This amended def. was passed but NOT brought into force and lapsed in the parliament. Even
today the prev. def stands and BWS Case remains.
Sec.2 A - Individual Dispute & Individual Dispute:
A dispute or cause not espoused by a TU can be taken up by the Tribunal in certain cases. It
is not mandatory for a workman to be part of a to neither is it mandatory for a TU to espouse
the cause of an individual member/non member

Where an employer discharges, dismisses, retrenches or Where otherwise terminates the

services of individual workman, any dispute arising out of this between workman &
employer is deemed to be an industrial dispute and it is immaterial whether such cause
is espoused by a TU or not.The workman may refer the application to the Tribunal.
The individual dispute u/s. 2 A must mandatorily file an application before the Conciliation
officer u/s.4 In case this conciliation fails, before expiry of 45 days he/she may file an
application before the Labour Court or Industrial Tribunal.

There is scope of appeal against the decision of the Court / Tribunal.

Workmen of Indian Express Newspapers v. Mgmt.Of Indian Express Newspapers (1970-

SC)- The cause of 2 retrenched workmen was espoused by an outside TU (which was not
related to Indian Exp.). The sc held that this is allowed and their cause may be espoused by
an outside TU as well.

Industrial Dispute

Industrial Dispute is defined under Section

2(k) of the Industrial Dispute Act, 1847. "Industrial dispute means any dispute or difference
between employers and employers, or between employers and workmen, or between
workmen and workmen, which is connected with the employment or non employment or the
terms of employment or with the conditions of labor, of any persons.

To constitute Industrial Dispute following elements are to be satisfied

1) A dispute Between Employers and employers or employer and workman or workman

and workman

(2) The Dispute should be connected with employment or non employment or terms of
employment or conditions of labor of any person

(3) The Dispute may be in relation to any workmen or any other person in whom they are
interested as a body

Workmen of Minakshi Mill Ltd. v. Minakshi Mills Ltd 1992

Since the expression "industrial dispute" as defined in Sec. 2(k) of the Ac covers a dispute
connected with non-employment of any person and Sec. 1 of the Act empowers the
appropriate Government to make a reference in case where an "industrial dispute" is
apprehended.

M/s. Loe and Cold Storage Co. Pvt Ltd. Vrs. State of U.P 1996 .
If a Labour Court after considering the entire evidence before it gives a findin that the
applicant is a workmen, the High Court will not be justified i disturbing that finding and take
a different view and in case if the High Cou does so, the Supreme Court will interfere with
the High Court's order

Tata Chemicals Ltd vs Its Workmen Dispute between employer and minority Union
also covered u/s 2(k)

Newspaper Ltd vs. UP State Industrial Tribunal, 1960 It is settled law before any dispute
between an employer and his workmen ca be said to be an industrial dispute under the Act, it
must be sponsored by substantial number of workmen. In other words, it is only a collective
disput that can constitute an industrial dispute. Even non-recognized an unregistered unions
may raise an industrial dispute. The Key point is th dispute being raised by a substantial
number of workmen.
When An Individual Dispute Becomes An Industrial Dispute
Before insertion of Section 2-A of the Act an individual dispute could not per se be an
industrial dispute, but it could become one if taken up by the Trade Union or a number of
workmen. The Supreme Court and majority of Industrial Tribunals held that, a dispute raised
by a dismissed employee would not be treated as an industrial dispute, unless it is supported
by a trade union or by a body or Section of workman.

For an individual dispute to be declared as an Industrial Dispute, the following conditions

are to be satisfied:

1. A body of workmen (trade Union ) or a considerable number of workmen,

are found to have made common cause with the individual workman;
2. That the dispute (individual dispute) was taken up or sponsored by the
workmen as a body (trade union) or by a considerable Section of them before
the date of reference.

Bombay Union of Journalists vs. The Hindu: A person working in ‘The Hindu, Madras’ was
terminated for claiming as full time employee. The Bombay Union of Journalist raised the
dispute. It was found that, there were ten employees of which seven in administrative side
and only three in journalism side. Of these three, only two were the members of the union.
Therefore, the Supreme Court held that the Bombay Union of Journalists is not competent to
raise this dispute. Even if it had raised, it could not have become an industrial dispute.

Workmen of Indian Express Newspapers Ltd. vs. Management Indian Express

Newspapers: A dispute relating to two workmen of Indian Express Newspapers Ltd, was
espoused by the Delhi Union of Journalists which was an outside union. About 25 percent of
the working journalists of the Indian Express were members of that union. But there was no
union of the journalists of the
Indian Express. It was held that the Delhi Union of Journalists could be said to have a
representative character Qua the working journalists employed Indian Express and the
dispute was thus transformed into an industrial dispute.

Thus, an individual dispute to fall within the definition of industrial dispute, it must be
sponsored by the Trade Union of the workmen or if there is no trade union, it must be
sponsored by the majority of the workmen or it must comply with the requirements of
Section 2-A of the Industrial Disputes Act, 1947.

Section 2-A provides that “where any employer discharges, dismisses, retrenches or
otherwise terminated the services of any individual workman, any dispute or difference
between that workman and his employer connected with, or arising out of such discharge,
dismissal, retrenchment or termination shall be deemed to be an industrial dispute,
notwithstanding that no other workman nor any union of workmen, is a party to the dispute.”

● Any workman may make an application directly to the labour court or

Industrial Tribunal for adjudication of such dispute after the expiry of 3 months
when an application was made before the conciliation officer. This has been
done to prevent inordinate delay.
● The said application however should be made within 3 years of the
date of dismissal, discharge, retrenchment or termination of service.
● The court shall proceed to hear the matter as if it was referred to it U/S 10 of
the ID Act.

In State of Bihar vs. kripa Shankar Jaiswal it was held that Section 2A does not declare all
individual disputes to be industrial disputes. It is only when a dispute is connected with a
discharged, dismissed retrenched or terminated workman that it shall be treated as an
industrial dispute. If the dispute or difference is connected with some other matter e.g.
payment of bonus/ gratuity etc. then it would have to satisfy the test laid down in judicial
decisions. Thus only a collective dispute could constitute an industrial dispute but collective
dispute does not mean that the dispute should either be sponsored by a recognized union or
that all or majority of the workmen of an industrial establishment should be parties to it. ()

In Express Newspapers (Private) Ltd. Vs. First Labour Court, West Bengal & Others it was
held that: A dispute is an industrial dispute even where it is sponsored by a union which is
not registered but the Trade Union must not be on unconnected with the employer or the
industry concerned.

Where an individual dispute is espoused by union the question of the employee being a
member of the union when the cause arose is immaterial. Those taking up the cause of
the aggrieved
workman must be in the same employment i.e., there must be community of interest when the
act complained against happened and not when the dispute was referred to.

Layoff implies temporary removal of an employee from the organization due to

circumstances beyond the control of the employer. It may last for an indefinite period. But
the employee is not terminated permanently and is expected to be called back in future.
The purpose of layoff is to reduce the financial burden on the organization when the human
resources cannot be utilized profitably

The lay-off is a peculiar situation which is a burden on the employer. Here, the Employer
wishes to employ all workmen but fails to do so for the following reasons.
a) shortage of coal, power or raw
materials b) accumulation of stocks
e) breakdown of
machinery d) Natural
calamity
e) Any other connected reason (ejusdem Generis)
These are conditions beyond the power of employer.The explanation mandates that the
employees name must be on the 'muster roll' (similar to attendance sheet)
Under of the Industrial Disputes Act, 1947,layoff is defined as ―the failure, refusal or
inability of an employer, on account of shortage of coal, power or raw materials or
accumulation of stocks or breakdown of machinery or by any other reason, to give
employment to a workman whose name appears on the muster rolls of his industrial
establishment and who has not been retrenchedǁ.

Layoff is restored in cyclical and seasonal industries. In mines workers are laid off due to
excess of inflammable gas, flood, fire and explosion.

Sec 25A to 25 E deals with layoff

•25A- Application
•25B- Continuous Service (authorised leave, legal strike, illness, accident)
•25 C- Right of workmen laid off
•25 D-duty of an employer
•25 E- workmen not entitled to compensation
4.2.1 Sec. 2(Q): Strike:
strike means cessation of work, by a body of persons employed in any industry acting in
combinath OR a concerted refusal or a refusal under a common understanding of any no. of
persons.who are or have been employed to continue work or to accept employment.
Thus, the purpose of strike is stoppage of work so as to ensure the employer concedes to their
demands.
Duration is NOT a criteria for evaluating whether it is a strike or not. The types of strike
include General Strike, Slow down Strike, sit down strike etc.

Essentials of strike

1. Cessation of work
Cessation of the work in the industry is the essential element for the strike. Cessation of work
means the work of the industry has been stopped. Even if the period for the stoppage is only
half-hour still it will fall in the definition of a strike if the other requirements of the definition
are fulfilled. In Standard Vacuum Oil Co Modras v. Gunaseelam(1954(2) LLJ 1956).The
Court held that there was no "cessation of work" or concerted refusal to work & the action of
the employees to apply for casual leave did not amount to strike.

2. Cessation of work in combination by a group of employed persons in the industry

Cessation of work in combination by a group of employed persons in the industry.The
stoppage of work must be with the common intention of the employees and that too in
defiance of the authority of employers.

3. The strikers must have been acting in combination;

4. The strikers must be working in any establishment which can be called industry
within the meaning of Section 2(j); or

5. There must be a concerted refusal; or

6. Refusal under a common understanding of any number of persons who are or have
been so employed to continue to work or to accept employment;

7. They must stop work for some demands relating to employment, non-employment or
the terms of employment or the conditions of labor of the workmen

Buckingham and Carnatic Co. Ltd Vs. their workmen The Supreme Court held that if the
employees do not stay away from work in pursuance of common intention, it will be not
recognized as Strike.

The different Kinds/ types of strike:

a) General Strike is where the workmen join together, stay away from work deprived the
employer of labour for that day. They may be any duration, for a shorter duration, it may be
called Token strike and for a longer period of time, it may have higher chances of being
illegal.
Primary strikes

b) Stay-in Strike or Sit down-Strike is where the worker comes to their duty office, occupies
the premises but refuses to work. The best example is Bank Employees. refusing to do any
transaction. This strike is construed very seriously under law & the workmen may be
convicted for criminal trespass.

c) In a Go-Slow strike, the workmen do not cease the work, rather they reduce the speed of
production & thus reduce the productivity of the employer's undertaking. Although this does
not strike within the strict meaning of the Act, this is serious misconduct. In Japan, the
workmen increase the production many fold and the Stock is left with the employer & raw
material is exhausted quickly. The employer thus suffers massive losses

d) Tools Down, Pen Down Strike : Here the strikers lay down their tools in case of
factory workers , office workers lay down their pens,

e)Stay Away Strikes: In this strike workmen stay away from the work place. They
organize rallies, demonstrations, etc.

f)Token or Protest Strikes : It is of very short duration and is in nature of signal for the
danger ahead. In this strike workers do not work for an hour or a day.

g)Lightening or Wild cat strike : In this strike, the strike is done without any prior notice or
with a shortest notice.

h)Work to rule : In this strike, the strikers undertake the work according to rules or job
description.

i)Picketing : It is an act of protesting by the workmen in front of the premises of the employer

j)Boycott: It aims at disrupting the normal functioning of the enterprise.

k)Gherao : It is a physical blockade of a target either by encirclement, intended to block

from and to a particular office, workshop etc

Secondary Strike
l) sympathetic strike is where the workmen themselves do not have any demands and only
go on strike to support the other workmen on strike in solidarity. This is usually for 1 day.

m)Other Strikes : These strikes are in the form of general, particular, political and bandhs.

The Punjab and Haryana High Court in case of Matchwell Electricity Board of India vs.
Chief Commissioner held that the justifiability of strike has no direct relation to the question
of its legality and illegality. It has to be viewed from the stand point of their exhausting all
other legitimate means open to them for getting their demands fulfilled.
As regards the wages to the workers during strike period was concerned, the Supreme Court
in Charakulum Tea Estate vs. Their Workmen held that in case of strike which is legal and
justified, the workmen will be entitled to full wages for the strike period

The Supreme Court in Statesmen Ltd. vs. Their Workman held that if the strike is illegal or
unjustified strikers will not be entitled to the wages for the period unless considerate
circumstances constraint a different cause.

The Supreme Court observed that if there is strike by workmen it does not indicate, even
when strike is illegal, that they have abandoned their employment. However, for illegal
strike, the employer can take disciplinary action and dismiss the striking workmen.
4.2.2 Sec. 2(1): Lock-Out:
Lock-out is the antithesis of Strike. Lock-out is the closure of the workplace or suspension of
work and refusal by the employer to continue to employ any number of persons employed by
him.He can coerce the workmen to come down from their demands

Essentials of Lock-out

1) Closing of the
industry 2)
Suspension of work
3) Refusal by the employer to continue to employ any number of workmen employed in
the industry.

The coercion and retaliation are the main elements of the Lock-out which must be used by
the employer. The mere suspension of the work without accompanied by an intention to
retaliate will not amount to Lock-out. If the employer of the industry shut down the work
because the raw material, or the fuel or any necessary material is not present, it will not
amount to Lock-out.

Lock-out's validity is also u/s.22 to 24, for public-utility services or non-public utility services
to decide legal or illegal lock-out.
In illegal lock-out, there is reinstatement of workmen and may get compensation and back-
wages.

4.2.3 Sec 2(oo): Retrenchment:

Definition and Explanation
The ordinary meaning of Retrenchment is that business itself is continuing though a portion
of staff or labour force is discharged as surplusage. In the Industrial Disputes Act, 1947,
Section 2(00) defines retrenchment. The essential points that can be gathered from the
definition in the statute are as follows:

1. Retrenchment is the termination of a workman for any reason whatsoever, otherwise than
as a form of punishment, given as a means of disciplinary action.
2. Retrenchment does not include the
following: a.Voluntary retirement of
the workman
b.Retirement of the workman on reaching an age of superannuation as stipulated in
the contract of employment
c.termination of service due to non-renewal of the contract of employment on the
contract's expiry, or the contract being terminated.
a. Termination of the service of a workman on the ground of continued ill health.

New Haven Steel Ball Corpn., Ltd v. Ram Narayan Kera Yadav, 1998 it has been observed
that it is well settled principle in industrial law that it is within the managerial discretion to
organise and rearrange its business in the manner he considers best. So long as that is done
bonafide, it is not competent of the authorities to question its propriety. If the scheme for
such reorganisation results in surplusage of employees, no employer is expected to carry the
burden of such economic dead weight and retrenchment has to be accepted as inevitable.

Essentials of retrenchment
● There must be termination of services of a workman by the employer.
● The termination of service must be on the ground of surplus labour.
● The service which is terminated must have been capable of being continued.
● The termination of service may be for any reason whatsoever but it should not be
actuated by any motive of victimization or any unfair labour practice.
● The termination of service must be of surplus labour or staff in a continuing industry.
● The termination of service must not fall within the exclusion clause of the definition.
Termination of service of the workmen must be for proper reasons such as for
economy, rationalisation in industry, installation of a new labour, saving machinery or
any other industrial or trade reasons.
Essential conditions to be fulfilled prior to retrenchment Section 25F
In Delhi cloth & gen. Mills vs. Shambunath No workmen who has put in continuous service
for not less than 1 year should be retrenched by the employer unless below conditions are
followed:

1. The workman has to be given one month written notice, which includes the reasons for
retrenchment, or the workman has been paid in lieu of such notice, wages for the period of
the notice

2. The workman has to be paid, at the time of retrenchment, compensation equal to the
average pay of fifteen days [for every completed year of continuous service

3. The notice is also to be served on the appropriate Government.

S.M. Nilajkar and Ors. vs. Telecom District Manager, Karnataka

In this case the Court held that termination of service of workman engaged in a
scheme or project may not amount to retrenchment subject to the following conditions being
satisfied:
(i) that the workman was employed in a project or scheme of temporary duration;
(ii) the employment was on a contract, and not as a daily-wager which provided inter
alia that the employment shall come to an end on the expiry of the scheme or project;
and (iii) the employment came to an end simultaneously with the termination of the
scheme or project and consistently with the terms of the contract.
(iv) the workman ought to have been apprised or made aware of the above said
terms by the employer at the commencement of employment
4.2.4 Closure S.2(cc)
There was no provision of closure in The Industrial Disputes Act 1947. The law of closure
was inserted in 1957 in the view of the Supreme Court judgement in case of Hariprasad Shiv
Shankar Shukla v. A.D. Diwelker. Subsequently, over the number of years, this law has
undergone a series of amendments from time to time and then finally consolidated in its final
form in 1982.
The Act defines "closure" as
Closure means the permanent closing down of a place of employment or part thereof.
Condition Precedent to Closure
● Sixty days notice to Government if number of persons employed are fifty or more.
● In the case of 100 or more workmen, prior approval of Appropriate
Government is necessary
Inland Steam Navigation Works Union vs. Union of India
The Supreme court held that in the eye of law if an undertaking is closed down on account of
– Unavoidable circumstances beyond the control of the employer and every
workman who has been in service for more than ten years in that undertaking
immediately before such closure, shall be entitled to notice and compensation in
accordance with the provision of Section 25F as if the workman has been retrenched.

Kalinga Tubes Ltd vs. Their Workmen the Kalinga Tubes Ltd.
Financial difficulties cannot be deemed to be the reason for closing down an industrial
undertaking. Therefore, if an application is made by the workmen or by the union before a
Labor
Court , it has to examine the claims of each of these workmen and award
compensation accordingly.

J.K. Synthetics vs. Rajasthan Trade Union Kendra 2000 In the case of Industrial
establishments employing 100 or more workmen, prior approval of Appropriate Government
is necessary. The employer has to apply, for prior permission at least ninety days before the
date on which the intended closure is to become effective. He has to state clearly the reasons
for the intended closure of the undertaking. A copy of the application shall also be served
simultaneously on the representatives of the workmen in the prescribed manner

Authorities under Industrial Dispute Act,1947

The Act has created nine authorities, which can be broadly classified and studied under the
following six heads:

I. Bipartite Bodies
Works Committee [Section – 3]

II. Dispute Settlement Authorities (two

tier) Conciliation Officer [Section
– 4] Board of Conciliation [Section
– 5]
III. Grievance Settlement Authority [Section – 9 C]

IV. Investigating Authorities

Courts of Enquiry [Section – 6]

V. Arbitration Authorities
Voluntary Arbitration [Section –10A]

VI. Adjudicating Authorities (Three

tier) Labor Courts [Section – 7]
Industrial Tribunals [Section –
7A] National Tribunal [Section
– 7B]

1 S.3 provides for the Works Commission.

The duty is to preserve a good atmosphere at the workplace & preserve amity. It
emphasizes the common Interest of employers & workmen. Where any difference
arises, it tries to patch up the dispute by recognising area of common interest between
employer & workmen.

If there are 100 or more workmen in a particular establishment, the work committee
must be a permanent body (this is as per Amendment), for less than 100 workmen, the
works commission can be constituted as & when need arises. Prior to this amendment,
it was constituted as & when dispute arose. Today, it is a permanent body if 100 or
more workmen have been employed.

The commission consists of equal no. of workmen & employers actually engaged &
working in establishment. (i.e. 2 workmen : 2 employers). Thus, equal representatives
of workmen & employers is imp.
The workmen so chosen as representative must be from a registered TU. If more than
one TU is registered,
a) Employer may choose to allow one rep. from each
TU OR
b) Employers may give fixed no. & the TU must decide amongst themselves as to
who shall represent.
The workmen representatives are usually members of the Executive Body of
registered TU actually working in /employed in that industry.

The number of representatives decided based on the size of the industry and depends
on case to case basis. Sometimes, where there are a number of registered TU &
unregistered TU as well, one representative from registered TU & one representative
from all of the unregistered TU may also be allowed to be part of the works
Commission.
Metal Box of India Co. Ltd v Workmen (1952)
“Primary object of works committee is to look after the welfare and interest of
the workmen, to ascertain the grievances in an amicable manner.
recommendations of the Works Committee are of value.
 In North Brook Jute Co. Ltd. vs. Workmen
In this case the Supreme Court observed that the works committee:
● was not intended to replace or supersede the union for the purpose of
collective bargaining;
● was not authorized to consider real or substantial changes in the
conditions of service;
● is only to remove friction that might arise between the workmen and the
management in day to day work; and
● cannot make an alteration in conditionsDissolution of the Committee
● A works committee can be dissolved by the concerned officer or authority
under Rule 57 of the Industrial Disputes (Central) Rules, 1957 on the
following situations:
● If the committee has not been constituted in accordance with the rules,
namely, Rules 38 to 57; or
● if not less than two-third of the representatives of the workmen in the
Committee failed to attend three consecutive meetings of the Committee,
without any reasonable justification; or
● if the committee has ceased to function for any other reason.

2 S.4 deals with conciliation officer (CO).

Conciliation is the “practice by which the services of a neutral party are used in a
dispute as a means of helping the disputing parties to reduce the extent of their
differences and to arrive at an amicable settlement of agreed solution.”
The Industrial Disputes Act, 1947 provides for “Conciliation Officer or A Board of
Conciliation”.

The CO is appointed by notification by appropriate Government for the purpose

of mediating & settling the industrial disputes.
The number of CO depends on the number of establishments in the area. It may be
as: a) One or more CO for a designated area & all establishment therein.
b) one or more CO for certain establishments.
c) one or more CO for a single large establishment.
The CO is appointed through official Gazette & the jurisdiction is defined therein.
The purpose is to mediate & settle the Industrial disputes. There can also be one
permanent CO for a particular large establishment.

The Conciliation Officer is given the powers of a civil court, whereby he is

authorised to call the witness the parties on oath.

3 S.5, the Board of Conciliation(BoC)

● The appropriate Government constitutes a Board of conciliation for promoting the

settlement of an industrial dispute

● The Board consists of a Chairman, independent person unconnected with the dispute
and two or four other members, as the appropriate government thinks fit
 ● The other members shall be persons appointed in equal number to represent the
parties to the dispute

● The person appointed to represent a party shall be appointed on the recommendation

of the party

● The appropriate Government appoints a fit person as it thinks, if any party fails to
make a recommendation within a prescribed period

● The chairman must be entirely & strictly independent from the industry. The
members shall be equal representatives of workmen & employers (as in works
comm.)
●
● Although the Chairman is preferred to be present, the BoC may discharge it's duty if
minimum quorum is obtained & Chairman/members are absent. If the Chairman or
any member ceases to be part of BoCC (as notified by appropriate Govt.) the BoC
shall not act till the Chairman/member is replaced by Gazette Notification.

● The BoC is a permanent body & it is for every industry.

4 S.6 Court of Inquiry

● The Court of Inquiry u/s. 6 is a very peculiar body. In case of an industrial dispute,
the matter may be before the Labour Court or Industrial Tribunal. Sometimes, the
Labour Court or Industrial Tribunal may require some information about a dispute.
● The purpose u/s.6 is to gather information surrounding an industrial disputeIt does not
have any other powers to adjudicate, mediate etc.
● The appropriate Government constitutes the Court of Inquiry u/s. 6 when necessary
i.e. when an industrial dispute has arisen or when there is a reasonable apprehension
that a large scale and dispute might arise. The Court may consist of one or more
independent persons. Once the report is submitted, the Court is dissolved & for
another dispute another Court must be constituted.
● The Court of Inquiry can act under a prescribed quorum; even at the absence of
Chairman, if his service is ceased, the court shall not act until a new chairman has
been appointed.
● All members of the court shall be deemed to be public servants under Sec 21 of
the Indian penal code 1860
● It has same powers as civil court and every inquiry by a court shall be deemed to be
judicial proceeding
● The court has the right to appoint one or more persons having special knowledge of
the matter of the dispute as an advisor.
● If any matter is pending before the Court of Inquiry ONLY, the workmen are free to
go on strike & the employer may go on lock-out or dismiss, discharge, punish
workmen etc. at such time.
● This is because while the dispute is pending before the Labour Court, Industrial
Tribunal, Works Committee, CO,BoC, etc u/s.22, 23, etc., the workmen going on
strike etc. is an
 illegal strike. Only when it is pending before a court of Inquiry ONLY & not any
other body, it is allowed that such acts by workmen or employer are done.
● Thus, it is NOT necessary that the Court of Inquiry be constituted after the dispute is
placed before any body it may be constituted even when there is a mere apprehension
of a dispute arising.

5 S.7 Labour Courts S.7

The appropriate government may constitute one or more labour Courts in an area by
Gazette Notification which will also state its jurisdiction, members of court etc. After
constituting one labour court, the appropriate Government may also constitute a
second labour court if the number of disputes are more in the area.

There are 3 schedules in the ID Act. The Labour Court Covers matters under the
second schedule.

Function of Labour Court:

a) adjudication of industrial dispute in matter under Second
Schedule b) Other funct under the Act

The second schedule deals with:

a) The validity & legality of orders passed by Employer in standing
Orders. b) The legality of strike / lockout.
c) Application & interpretation of standing
orders. d) Discharge/ dismissal of workmen &
allied matters.
e) withdrawal of concession/ benefit which is
customary f) All matters other than those reserved
for industrial

6 S.7A Industrial Tribunal(S.7 A)

The Industrial Tribunal was the first tribunal constituted in India. Some Courts render
it a judicial body & some called it a quasi-judicial body. As per administration law, it
is a quasi-judicial body.

The Industrial Tribunal is a permanent body. It is constituted by the appropriate

Government. Its jurisdiction extends to ANY matter in Second or third schedule. Thus
Second schedule under Industrial Tribunal & Labour Court both.

The qualification is:

a) Judge of HC
by Judge of Dist. Court
c) Deputy Chief labour Commissioner.

No person shall be appointed as office of a presiding officer if:

● He is not an independent person.
● He has attained the age of 65 years.
 Issues that come under Industrial Tribunal
● Wages, including the period and mode of payment.
● Compensatory and other allowances.
● Hours of work and rest periods.
● Leave with wages and holidays.
● Bonus, profit sharing, provident fund, and gratuity.
● Classification by grades.
● Rules of discipline.
● Rationalization.
● Retrenchment of employees and closure of an establishment or undertaking.
● Any other matter that can be prescribed

7 S.7B- National Tribunal (S.7-B):

If the Industrial Tribunal ceases to be in existence, there can be no appeal
against its order.
National Tribunal NOT a permanent body. It is constituted by Central Government
when it deems necessary by Gazette Notification when a dispute arises involving:
a) Questions of national Importance
b) wrt. industrial establishments in more than one State.
Qualifications
The Central Govt may constitute a one or more National Tribunal under the
Act. It consists of only one person as presiding officer who must be a judge
of H.C. The Central Govt. may appoint 2 assessors to advise him.

The disqualifications are: (sec.

7c) a) He must be independent
person b) Must not be over 65
yrs. of age
The awards of National Tribunals are final orders. On the grounds u/s7c presiding
officer may be removed by Central Govt.

Jurisdiction of the National Tribunal

● No Labor Court or Tribunal shall adjudicate any matter, which is under
adjudication before the National Tribunal.
● If the matter under adjudication before the National Tribunal is pending before
a Labor Court or Tribunal, such proceeding shall be deemed to have been
quashed.
● Appropriate Government cannot refer the matter under adjudication before the
National Tribunal to any Labor Court or Tribunal during the pendency in the
National Tribunal
8 S .10A : Voluntary reference of disputes to arbitration

● If the parties to the dispute refer the dispute to arbitration the appropriate
Government. may appoint the arbitrator, by reference to the Government. The
arbitrator may be the labour Courts,Industrial Tribunal, National Tribunal.

● An ‘arbitration’ is a reference to the decision of one or more persons called

arbitrators either with or without an umpire, of a particular matter in difference
between the parties.
●
 ● Voluntary arbitration is a process in which the disputing parties show willingness to
go to a third party and voluntarily submit to his decision.

● Section 10A enables employers and employees to voluntarily refer their disputes
to arbitration by a written agreement.

● Strict adherence to these provisions is a condition precedent for passing a valid award.
The reference will not be competent if the dispute which is existing or apprehended is
not an ‘industrial dispute ‘at all.

● Dispute cannot be validly referred to a tribunal, labor court or national tribunal for
adjudication after an industrial dispute has been referred to an arbitrator under section
10A. Section 10A enables employers and employees to voluntarily refer their
disputes to arbitration by a written agreement.

● The arbitrator (labour Courts, National Tribunal) shall follow the procedure under
A&C Act, 1996. u/s. 10, the LC, IT or National Tribunal applies the CPC & u/s. 10A,
it applies to the A & C Act.

● u/s10A (1-A), if the parties agree that they themselves wish to appoint an arbitrator
(other than Labour Courts, Industrial Tribunal or National Tribunal), and where there
is an even no. of arbitrators, an umpire may be appointed as per the arbitration
agreement.

● The parties can enter into an arbitration agreement which must be in the prescribed
form.

● Name of the arbitrator must be specified to the appropriate government, a copy of the
arbitration agreement should be forwarded which shall be published in the official
gazette.

● Non-publication of the arbitration agreement under section 10A (3) would be fatal to
the arbitration award.

● On reference to more than one arbitrator, each one of them must act personally, as
if he were the sole arbitrator. If one refuses, the others cannot make a valid award.

● Whenever the arbitration agreement requires that there shall be 3 arbitrators the
award of any two is then binding.

● The arbitrator can follow his own procedure, however with the rules of natural justice.

In 1973, the SC noted in Rohtas Industries Ltd v Rohtas Industries Staff Union (1976) that
the meaning of laws change over the course of time and since the decision in Engineering
Mazdoor Sabha, the powers of the arbitrator have expanded and could now affect even those
who weren’t parties to the dispute. It was observed that, “it is legitimate to regard such an
arbitrator now as part of the methodology of the sovereign’s dispensation of justice, thus
falling within the rainbow of statutory tribunals amenable to judicial review.”
This position was further affirmed in Gujarat Steel Tubes vs Gujarat Steel Tubes Mazdoor
Sabha (1980), when the SC held that an Industrial Arbitrator has powers of a tribunal under
Section 11A of the IDA, as the functions performed by both arbitrator and tribunal are the
same, i.e. they act as a seat of justice. The SC considered the socio-economic conditions of
the country and stated that the judiciary cannot keep their hands folded when injustice will be
caused by reading the law exactly as stated in the legislation.

Certification of Standing Order

7.S.4 deals with Conditions of Certification of Standing Orders. The first condition is
compliance with Model Standing Orders & second is inclusion of all heads of model
Standing Order & no omission.
 ● The provisions of the standing orders cover all the matters set out in the
Schedule which are applicable to the industrial establishment, and
● The standing orders are in conformity with the provisions of the Act.
● The duty of the Certifying Officer or appellate authority is to adjudicate upon
the fairness or reasonableness of the provisions of any standing orders.

8. S.5 deals with certification of Standing Orders. 5 copies are sent to 5 parties as mentioned
above. The Certifying Officer then gives notice to invite objection from workmen & TU to
the contents of the draft Standing Order. All objections go through the TU & must be
submitted within 15 days of the notice date.

● On receipt of the draft, the certifying officer shall forward a( Form 2) copy to
the trade union, or to the workmen requiring objections if any,
● the workmen may desire to make to the draft standing orders to be submitted
by him within 15 days from the receipt of the notice.
● Then the certifying officer shall decide whether or not any modification or
addition to the draft is necessary to render it certifiable under the Act and shall
make an order in writing.
● The Certifying Officer shall there upon certify the draft standing orders and
shall send within 7 days copies of the certified standing orders to the employer
and to the trade union or representative of the workmen.

Functions of A Certifying Officer

● Adjudicate upon the ‘fairness & reasonableness’ of the S.O
● Verification of draft S.O & prove that S.O are competent for certification
● In Shahadana Saharampur Light Railway co. Vs. S.S. Railway Workers Union
● Whether S.O are in conformity with model S.O
● Whether they are fair & reasonable. Further held that the question of reasonableness
& fairness of the modification has been left by the legislature to the authorities
under the Act & S.C would not be justified in interfering with the conclusions of the
authorities under the Act, unless an important principle of industrial law requiring
elucidation is involved

Modification of Standing Order

● Section 10(1) of the Act bars the modification of finally certified Standing Orders
before expiry of six months from the date of commencement or last modifications.
● However, on an agreement between the employer and workmen or a trade union or
other representative body of the workmen Standing Orders may be modified.
● A certified copy of that agreement shall be filed along with the application.
Moreover, such application shall be accompanied by five copies of the modifications
proposed to be made.

Persons Eligible to apply for Modification of S.O

The following persons are eligible to apply for modification on satisfaction of the
stipulated conditions:
● Employer;
● The workmen
● A trade union; and other representative body of the workmen.
● Other representative body of the workmen

Conditions for Modification of Standing Orders

A change of circumstances has occurred; OR
Experience of the working of the standing orders last certified results any
inconvenience, hard-ship or anomaly; etc, or
Some fact lost sight of at the time of certification;
The applicant feels that the modification will be more beneficial.
In Management S.S Light Railway Co. v S.S Railway Workers Union.

Disciplinary Proceedings & Domestic Enquiry:

Steps to Disciplinary Enquiry
1. Complaint
2. Preliminary Enquiry
3. Filing Chargesheet
4. Appointment Enquiry
Officer 5. Suspension of
Pending Enquiry 6. Notice of
Enquiry
7. Employees
Hearing 8.
Examination of Witness
9. Report on Enquiry

Misconduct
1. Misconduct is certain acts & omissions on part of the employer or workmen which is
breach of any duty, obligation or assignment arising under or flowing from any law or
contract of employment or service rules or standing orders, settlements or awards or improper
conduct or wrongful behaviour is a misconduct. Standing
Order must define each and every act/omission which amounts to misconduct, New
amendments to add misconduct is also permissible.Misconduct literally means wrong
conduct or improper conduct. It is an act done wilfully with a wrong intention and as applied
to professional people, it includes unprofessional acts, even though such acts are not
inherently wrongful.
In State of Punjab v. Ram Singh [ IR 1992], It has been stated that the term ‘misconduct’
may involve moral turpitude, it must be improper or wrong behaviour, wilful in character,
forbidden act, a transgression of established and definite rule of action or Code of Conduct
but not mere error of judgment, carelessness or negligence in performance of the duty, the act
complained of bears forbidden quality or character.
Types of Misconduct:
A.Minor Misconduct: Following acts or omission on the part of the employer amounts to
minor misconduct:
● Late Coming
● Absence from duty without leaves for period of less than six days
● Loitering/Gossiping in department during working hours
● Failure to wear tight clothes/ specified uniform
● Negligence of duties or neglect of work

PENALTIES FOR MINOR MISCONDUCT

● Warning letter
● fine
● Passing adverse entry in service records,
● Recovery of loss of goods for which the concerned workman is accountable,

Recovery from wages of the whole or part of any loss caused by the workman through
negligence.

B. Major/Gross Misconduct: Following acts or omission on the part of the employer amounts
to major misconduct:
● Habitual absenteeism without leave for more than 10 consecutive days or over
staying the sanctioned leave without sufficient grounds.
● Theft, fraud or dishonesty in connection with the employer's business or property.
● Taking or giving bribes or any illegal gratification.
● Habitual breach of any standing order or any law applicable to establishment.
Collection without the permission of the manager or any money within the premises
of establishment.
● Going on legal strike or abetting, inciting, instigation.
● Willful slowing down in performance in work or instigation there of.
● Willful insubordination or disobedience of any lawful and reasonable order of a
superior.
 ● Engaging in trade within the premises of establishment. Drunkenness, Riotous,
Disorderly or indecent behavior on the premises of the establishment.
● Commission of any acts subversive of discipline or rude behavior on the premises
of the establishment.

● Habitual neglect of work or habitual negligence. Canvassing for union membership

or collection of union funds within the premises of the establishment.
● Willful damage to work in process or any property of the establishment. Holding
meetings inside the premises of establishment without the permission of the
manager.
● Disclosing to any unauthorized person any information in regard to the processes of
the establishment.
● Gambling within the premises of establishment.
● Smoking or spitting on the premises of the establishment, where it is prohibited.
● Failure to observe safety instructions notified by the employer or interference with
the safety devices.
● Distributing or exhibiting within the premises of establishment and bills,
pamphlets and posters.
● Refusal to accept a charge sheet order or other communication served in
accordance with the standing orders.
● Unauthorized possession of lethal weapons in the establishment.

PENALTIES FOR MAJOR MISCONDUCT

The following penalties may be imposed for good and sufficient reasons if an employee found guilty of
major misconduct :

● Warning or censure,
● Withholding of increment,
● Fine,
● Stopping promotion,
● Demotion,
● Suspension,
● Discharge, dismissal,
● Vacation of company quarter or any other punishment which the manager may deem fit

▪ As soon as a complaint is received, it should be

seen whether it is worth dealing with chargesheeting the employee and conducting
a domestic
enquiry or not.
▪ Preliminary enquiry is done with a view to decide whether there is adequate material
for proceeding with a domestic enquiry.
▪ Domestic enquiry starts the moment a chargesheet is issued and preliminary
enquiry ends with the issue of charge sheet.
▪ If the matter is obvious enough, the domestic enquiry can start with the
issue of charge-sheet.▪ Preliminary enquiry is not an essential step.
▪ Domestic enquiry aims at determining whether charges are established or not
 ▪ Conclusions of preliminary enquiry lead to framing of charge-sheet
▪ Preliminary enquiry is not subject to any rules

2.Standing Order must also give procedure wrt. misconduct, Disciplinary Proceedings &
Domestic Enquiry

3. Domestic Enquiry is a part of Disciplinary Proceedings. The Disciplinary Proceedings

commences from the moment be complaint is made & ends when the decision is given.
Domestic Enquiry is for collection of evidence and thus forms part of Disciplinary
Proceedings.

4. The first step is raising complaints of misconduct by the complainant. If it is

against a workman the employer conducts Disciplinary Proceedings & Domestic Enquiry

Disciplinary Action
Why Indiscipline?
● Ignorance of rules
● Physical/ mental incapability
● Absence of proper training
● Discontented workmen
● Misguidance by Trade Union leaders
● Absence of standard policies of handling discipline
● Uncongenial working condition Procedures for taking action
● Standing Orders framed under the Industrial
● Employment (Standing Orders) Act, 1946 to be followed.
● Ensure principle of natural justice.
● Serving Charge sheet
● Holding of Domestic Enquiry
● Serving Show Cause Notice
● Order of punishment

Sequential Order of Action

1. Examination of complaints
 2. Preliminary Enquiry/Investigation
3. Drafting and issue of charge-sheet
Memo. 4. Minor penalty proceedings
5. Major penalty
proceedings 6. Inquiry
proceedings

Stages of Disciplinary Proceedings:

a) Complaint is raised regarding misconduct & it is brought to knowledge (by another
unofficial person) and notice (by official complaint) of the employer.
Thus, knowledge & information is unofficial & notice is official & mandates
Employer to:
b) Conduct prima facie enquiry
to ascertain there is any substance in the complaint or whether it is frivolous or
not.The Employer thus gathers information & decides whether to dismiss the
complaint or take it forward as Domestic Enquiry.
• If the complaint is from many sources, the Employer may forego preliminary
enquiry & it is discretion of Employer in any case whether to conduct preliminary
enquiry or not. Avadh Narain Singh v. Addl. Superintendent of Police HC
stated if there is ample evidence on record, preliminary enquiry may be foregone
and it is discretion of employer. Even if he does not do it, it does not vitiate the
decision and it is not violative of Natural Justice Principle.

c) Chargesheet.
This chargesheet is a legal document. which gives details of the alleged
misconduct. It is different from charge
sheet under CrPC. All information. pertaining to misconduct must be in
the chargesheet.

d) Serving chargesheet on delinquent employee.

● The charge-sheet framed should be served personally with Acknowledgement

● As stated in the Standing Orders
● Serve the charge sheet personally against signature on the duplicate copy/ delivery
book
● If absent/ on leave/ under suspension, paste it on the wall of the residence of the
delinquent By Registered Post
● Displaying in the Notice Board of the company
● Publishing in the regional newspaper

Consideration of Explanation after the notice is served

 After a charge-sheet has been served, within the specified time for reply, how he
may react?
● Admitting the charges and requesting for mercy Denying the charges and
requesting for an enquiry OR
● Not submitting any explanation at all OR
● Giving an ambiguous or obscure reply.

e) Reply with reasons defending himself by the delinquent employee.

• If the employer is satisfied with this reply, it is his discretion to drop the
charges & cease Disciplinary Process. If not, he may initiate Domestic Enquiry.
• If an employee accepts the chargesheet, there is no point of Domestic
Enquiry & Disciplinary Proceedings.
• The further proceedings of Domestic Enquiry & Disciplinary Proceedings must be
in Standing Orders specifically.

f) Domestic Enquiry:

To highlight the procedure for a fair and proper domestic enquiry as per requirements
of law.
In today's context no employer can discharge or dismiss a delinquent workman even
for a serious misconduct without following an elaborate procedure for taking
disciplinary action.
It is only when the workmen is found guilty of the charge in an enquiry conducted as
per the principal of natural justice, that the employer after following procedure can
punish him as per the company's standing orders.

Notice for the enquiry

After consideration of the explanation of the charge-sheeted employee or when no

reply is received with-in the specified time limit, the management should issue an
office order appointing an enquiry officer or an enquiry committee, to hold the
enquiry of the charge-sheet.

Who can be an enquiry officer ?

He can be an official of the company or even an outsider, but care should be taken to
appoint only such a person who is neither a witness nor personally connected or
interested in the matter

Ex-parte Domestic Enquiry (where employee fails to reply to the charge sheet
served on him & he fails to appear before DE etc.) are allowed. Sometimes, the
employer may even give second or third notice to appear, and yet employee fails to
appear, ex-parte Domestic Enquiry is possible.
 • Ex-parte Domestic Enquiry have to be according to Natural Justice Principle & if
this is not done, the Domestic Enquiry is vitiated. The normal procedure of collecting
evidence, examining witnesses etc. must be adhered to otherwise Domestic Enquiry is
vitiated.
• Procedure for conducting Domestic Enquiry:

1. If the delinquent employee fails to appear before Domestic Enquiry because

he is arrested for a criminal-case levied against him in an unconnected
criminal case, the
ex-parte Domestic Enquiry is conducted.

2. All Natural Justice Principle must be followed in Domestic Enquiry.

Telco v. State - If an employee is arrested as an independent criminal. case, ex-

parte Domestic Enquiry goes on.

Natural Justice Principle in Domestic Enquiry:

a) Audi alteram
partem b) Rule
against bias
c) Witness cannot be judge
d) Recording Evidence to opposite
party e) Giving evidence to opposite
party
f) Independent Enquiry officer is appointed in
Domestic Enquiry if requested by Delinquent Employee orComplainant
g) translator/ Interpreter appointed in Domestic Enquiry wherever there is
difference of language. This appointment does NOT vitiate Domestic Enquiry.
h) The Enquiry Officer must prepare a report (decision) with reasons and not
personal opinion. The reasons are based on facts & evidence placed before him.

Suspension Pending Enquiry

● This is required when management considers that his physical presence
might endanger the safety of other workmen or if it is apprehended that
he might intimidate (Scare) others or tamper with the evidence. In such
case subsistence allowance should be paid as per law.

Chargesheet.
This chargesheet is a legal document. which gives details of the alleged
misconduct. It is different from charge
sheet under CrPC. All information. pertaining to misconduct must be in
the chargesheet.
● Memorandum of charges
● Statement of allegations of misconduct/ omission/ negligence
● No particular format prescribed for charge sheet in any Labour
enactment
● The object is to give the employee exact idea of the misconduct
committed by him so that he may get reasonable opportunity to defend.
● It is advisable to obtain a written complaint before issuing a charge-
sheet and as far a possible conduct a preliminary enquiry.
● The charge-sheet should be drafted in a clear and unambiguous
 language.
● Wherever possible, the relevant clause of the company's standing
orders should be mentioned.
● If the charges are related to a incident, the date, time, place of
occurrence should be mentioned.
● The charge sheet framed should be signed by the disciplinary authority.
● If the charge sheet is vague, whole enquiry will be vitiated.

Requisites of Charge sheet/Guidelines for chargesheet

● It should contain complete picture of misconduct
● It should state that the act of commission or omission resulting in
misconduct is violation of a particular clause of standing order
● Language to be as per Standing Orders or as required by the delinquent
● Enclose a list of witnesses in support of the charges
● It should contain complete picture of misconduct
● It should state that the act of commission or omission resulting in
● misconduct is violation of a particular clause of standing order
● Language to be as per Standing Orders or as required by the delinquent
● Enclose a list of witnesses in support of charges
● Charges leveled should be specifically stated- avoid etc...etc.'/ other'/
'any'/ some people' like expressions.
● Time of misconduct should be exact- avoid 'around' time.
● The amount misappropriated should be specific sum and not around'.
 ● Person manhandled should be Mr./Ms. X and not some one'.
● Charge sheet for using offending language should contain the exact
word used.

Basic features of Chargesheet/Guidelines for Chargesheet

● it must specify the charges in the clearest possible language with full
particulars;
● the facts must disclose the misconduct;
● the language used in the charge-sheet must be precise, clear and
unambiguous; and
● it must be drawn in a clear and unambiguous language mentioning the
charges and all other necessary particulars specifically and precisely:
As far as possible, it should be precisely mentioned in the Charge-
sheet as to under which rule or clause, the charges constitute acts of
misconduct so as to enable the employee as to which rules are
applicable to him in this context
● The Charge-sheet must be signed by the competent authority so as to
avoid facing a situation where the Charge-sheet is made invalid
because it is signed by incompetent authority
● Whenever it is necessary to give the time of an incident in the charge-
sheet then the word, “about” must be mentioned;
● It must also be seen that there is no misdescription of any charge;
● In case of disobedience, the order disobeyed must be mentioned;
● In case of theft, full particulars of the goods stolen must be given;
G.V. Kant v. Gundoor Dist. Mills union-where The chargesheet is vague, it
vitiates Disciplinary Proceedings.
Madras - Bangalore Transport Co. Case - Changes can be made in the
chargesheet, previous one is cancelled and new one is served.

Checklist for preparation of Chargesheet

a) Date of charge sheet.

b) Correct Name and Card No./Employee No. of delinquent
employee. c) Specify date of incident.
d) Description of incident.
e) Reproduce the language in verbatim if there are words of abuse,
defamation or threat
f) Give reference of relevant rules as Conduct, Discipline and Appeal
Rules. g) Specify within how much time and to whom the reply should be
submitted. h) Check the authority competent to issue the Charge-Sheet
i) Decide whether an employee is to be kept under suspension or
not. j) Decide whom to send the copies of Chargesheet
 In Birichh Bhuan and others v. State of Bihar (1963) it was held that a
charge is not to be regarded as an abstract accusation in respect of commission
or omission of a person in violation of law. When the charge is for striking
work in contravention of the provisions of law then the provision which is said
to have been contravened must be mentioned in the charge-sheet, otherwise
the charge-sheet would be vague.

Time For Reply to Chargesheet

● A reasonable period of time or time as stipulated in the Conduct,
Discipline & Appeal Rules, but not less than 48 hours from the receipt of the
Chargesheet.
● If the Charge-sheeted employee requests for extension of time, such
request(s) may be considered on its own merits.

WHO SIGNS THE CHARGE-SHEET

● Unless it is delegated otherwise, Disciplinary Authority is the Competent
Authority to sign Charge-sheet.
● The appointing authority has got the power to issue or frame the charge-sheet.
● Framing of the charge-sheet, holding of enquiry, notice to show cause, are
all steps to be taken by the disciplinary authority.

Domestic Enquiry:
To highlight the procedure for a fair and proper domestic enquiry as per requirements
of law.
In today's context no employer can discharge or dismiss a delinquent workman even
for a serious misconduct without following an elaborate procedure for taking
disciplinary action.
It is only when the workmen is found guilty of the charge in an enquiry conducted as
per the principal of natural justice, that the employer after following procedure can
punish him as per the company's standing orders.

● Follow rules laid down in Standing Orders

● Purpose of domestic enquiry -
Provide delinquent an opportunity to defend the charges

Provide employer an opportunity to evaluate the situation and decide the

penalty to be imposed

Notice for the enquiry

After consideration of the explanation of the charge-sheeted employee or when no

reply is received with-in the specified time limit, the management should issue an
office order
 appointing an enquiry officer or an enquiry committee, to hold the enquiry of the
charge-sheet.

Who can be an enquiry officer ?

He can be an official of the company or even an outsider, but care should be taken to
appoint only such a person who is neither a witness nor personally connected or
interested in the matter

Natural Justice Principle in Domestic Enquiry:

a) Audi alteram
partem b) Rule
against bias
c) Witness cannot be judge
d) Recording Evidence to opposite
party e) Giving evidence to opposite
party
f) Independent Enquiry officer is appointed in Domestic Enquiry if requested
by Delinquent Employee orComplainant
g) translator/ Interpreter appointed in Domestic Enquiry wherever there is
difference of language. This appointment does NOT vitiate Domestic Enquiry.
h) The Enquiry Officer must prepare a report (decision) with reasons and not
personal opinion. The reasons are based on facts & evidence placed before him.

A. Notice of Enquiry to be served

● Notice to show the Date and Time of enquiry

● Venue of holding enquiry
● Name of the Enquiry Officer
● Notice to be served in the same manner as followed to serve chargesheet
● Workman shall have right to appoint a Defense Helper
● When a legally trained person represents management in enquiry,workman shall
also be allowed to be represented by lawyer (Hindustan Teleprinters Ltd Vs Mr.
Rajan Isaac.)

Essential Ingredients Of Enquiry

▪ Existence of definite charges;
▪ Adducing of evidence through enquiry;
▪ Giving a reasonable opportunity of being heard in respect of the charges;
▪ Conduction of enquiry is to be held into the charges which have
been communicated to the delinquent workman and the penalty is to be
inflicted on the basis of the result of the enquiry;
▪ The evidence adduced during the enquiry serves the dual purpose of
establishing the charges and determining the penalty

B. Recording the Evidences

 In Mahindra and Mahindra Ltd. Vs Sunil Yeshwant Pandit and another the court
held that the following are the essentials for recording of evidence:
● Question Answer pattern may be followed.
● Statement of Management to be taken first.
● Cross examination by employee/helper.
● Take signature of the concemed on record.
● Examine and cross examine witnesses.
● Object/ Disallow irrelevant questions.
● Not mandatory that procedure laid down in the Code of Criminal Procedure,
1973 or the Evidence Act, 1872 to be followed.

C. Show Cause Notice

● Before punishment is initiated a Show Cause Notice highlighting the charges,

findings of the enquiry and possible penalty imposed on the delinquent shall
also be served calling on him to show cause 'why action including discharge or
(even dismissal) shall not be taken against the delinquent.

● Though serving of such notice will not make the process of enquiry invalid(as
decided in S. Shenbagaraj Vs Additional Commissioner of Industries And
Commerce, Chepauk and others.), it is advisable to give the employee a final
opportunity before punishment is inflicted.

● Enquiry report to be furnished to the employee

D. Order of Punishment

● Principles of natural justice to be followed

●
● Punishment should not violate section 73 of the ESI Act notice of dismissal or
discharge given to an employee during the period the employee is in receipt of
sickness, maternity or other benefit shall be invalid.
●
● Order issued without holding a domestic enquiry or after holding a defective
enquiry will not stand since Labour Court/ Tribunal can interfere with such
order as provided u/s 11A of the Industrial Disputes Act, 1947.

Minimum Wages Act

Procedure for Fixing and Revising Minimum Wages
Fixing Of Minimum Rates Of Wages (Sec.3)

The minimum rates of wages will be reviewed/ revised, for every five years, by the
appropriate govt.
Appropriate govt. can add any employment, to the schedule(part-I or part – II), wherein
one thousand or more employees are found working

Minimum rates of wages (sec.4)

1. Basic + Special Allowance (Which varies with the cost of living index).
2. Basic + Cash value of concessional supply of materials like food, clothes, etc.
3. An all inclusive rate which includes Basic + Cost of living Allowance + Cash value
of concessional supply of materials.

The policy formulation regarding minimum wage happens only after due deliberation on
the following:

1. The minimum wages must be in compliance with the cost of living index of
the employees.
2. The basic wage rate with or without the cost of living allowance along with
the authorised cash value of concessions pertaining to the supply of
essential basic commodities at subsidized rates.
3. Comprehensive basic wage rate will include the cash value of the concessions,
cost of living and the basic rate.

Procedure for fixing and revising minimum wages

1. Minimum rates of wages in respect of any scheduled employment can be fixed or
revised by the appropriate Government in either of two methods:
a. (a) It shall appoint as many committees and sub-committees as it considers
necessary to hold enquiries and advise it in respect of such fixation or
revision, as the case may be.
b. (b) it shall, by notification in the Official Gazette, publish its proposal for the
information of the persons likely to be affected thereby, and specify a date, not
less than two months from the date of notification , of which the proposal will
be taken into consideration.

2. After considering the advice of the committee or committees or all representations

received by it before the date specified in the notification, the appropriate
Government, by notification in the official Gazette, shall fix or revise the minimum
rates of wages in respect of each scheduled employment.
3. The fixation or revision shall come into force on the expiry of three months from the
date of issue of notification, unless otherwise directed. Where the appropriate
Government proposes to revise the minimum rates of wages by notification it shall
also consult the Advisory Board appointed under Sec. 7 of the Act. Before the
Government fixes the revised minimum rates of wages it shall take into
consideration representation received by it.

4. Time must be specified for making representation.

5. Consultation with the Advisory Board is obligatory for revision of minimum wages
and not initial fixation.

6. The conferment of discretion on the Government to use either of the two procedures
for fixation of minimum wages cannot be held to be violative of Art. 14 of the
Constitution as per Chandra Bhavan Boarding & Lodging, Bangalore V. State of
Mysore, 1968.

7. A committee appointed under Sec. 5 is only an advisory body. The Government is not
bound to accept its recommendation in every case. Further. any irregularity in the
constitution of the committee or the procedure adopted by it cannot affect the validity
of the notification issued by the Appropriate Government under Sec. 5 (i) (b). If no
advice is given by the committee, or if in-adequate advice is given, Sec. 5 does not
deprive the appropriate Government of its power and duty to fix or revise the
minimum rates of wages.

8. According to Section 5 of the Act, in fixing or revising minimum rate of wages in

respect of any scheduled employment for the first time, the Appropriate Government
can follow the two methods viz,:

A. Committee Method
The Appropriate Government may appoint as many committees and subcommittees as
it considers necessary to hold enquiries and advise it in respect of such fixation or
revision as the case may be.
After considering the advice of the committee or committees, the Appropriate
Government, by notification in the Official Gazette, fixes or revises the minimum rate
of wages.

Constitution of Boards

1. Advisory Boards
Section 7 of the Act, empowers the Appropriate Government to appoint an Advisory
Board for the purpose of:
Coordinating the work of committees and sub-committees appointed under Section 5;
and Advising the Appropriate Government in the matter of fixing and revising
minimum rates of wages
 The Board would consist of:
● Persons to be nominated by the Central Government representing employers
and employees in the scheduled employments in equal numbers; and
● Independent persons not exceeding one-third of its total number of members;
one of such independent persons shall be appointed as the Chairman of the
Board by the Central Government.

Sec 19- Powers/Rights of Inspectors(Same for all the acts)

● Entering in the premises in any scheduled employmentExamining of any register,
record of wages or notices required to be kept or exhibited for inspection;
● Examine employee;
● Seize or take copies of register, record or wages or notices or portions as he may
consider relevant in respect of an offence under the Act which he has reason to
believe has been committed by an employer; and
● Exercise such other powers as may be prescribe

Payment of Wages
Wages
9.6 S.2 (vi) of the Act, the term “Wages” means any remuneration or sum:

● payable under any award or settlement between the parties or order of the court;
● in respect of overtime work or holidays or any leave period; or
● any additional remuneration payable under the terms of employment
(whether called bonus, or by any other name);
● which by reason of termination of the employment of the person employed
is payable under any law, contract or instrument which provides for the
payment of such sum, whether with or without deductions, but does not
provide for the time with which the payment is to be made;
● to which the person employed is entitled under any scheme framed under any
law.

but does not include

(1) any bonus

(1) the value of any house-accommodation or of the supply of light water medical
attendance or other amenity or any service excluded from the computation of wages
by a general or special order of the State Government;

(2) any contribution paid by the employer to any pension or provident fund and
the interest which may have accrued thereon;

(3) any travelling allowance or the value of any travelling concession;

(4) any sum paid to the employed person to defray special expenses entailed on
him by the nature of his employment; or

(5) any gratuity payable on the termination of employment

Types of Wages
Minimum wages is of 3
types: a) Living wages

Living wages are defined as wages which are consistent to provide certain facilities as
well as some basic necessities to the employee. So, it means that wage level is
satisfactory to provide for the basic necessities and such niceties that are advised
necessary for the betterment of the employee as well as his family in accordance with
his social status.

Thus, living ages has been defined as follows:

The living wage should enable the male earner to provide himself and his family not
merely the basic essentials of food, clothing and shelter but a measure of frugal
comfort including education for the children, protection against ill-health, requirement
of essential social needs and measures of insurance against old age.

Article 43 of the Constitution of India states that the state shall endeavour to secure by
suitable legislation or economic organisation or in any other way to all workers,
agricultural, industrial or otherwise work, a living wage, conditions of work ensuring
decent standard of life and full enjoyment of leisure and social and cultural
opportunities. So, the government of India has adopted as one of the directives of the
principle of state policy to ensure living wages.

Living wage is a wage sufficient to ensure the workman food, shelter, clothing,
frugal comfort, provision for evil days etc. as regard for the skill of an artisan, if he is
one.

Thus, Living wages does not mean to fulfill only the basic necessities of life to
employees such as food ,shelter and clothing, but also it includes for some comforts,
leisure and amenities estimated by current human standards such as health, education
of children, travelling, old age, recreation and social needs etc.

b) fair wages
Fair wage means something more than the minimum wages. It is a mean between the
minimum wage and the living wage. So, the lower limit of the fair wage must surely
be the minimum wage whereas the upper limit is the fair wage which is the capacity
of the industry to pay further comparisons definitely with the average payment of
the same work in other occupations or trades which requires the same amount of
ability. Basically, it is the economic position and its future prospects on which fair
wage depends.
 Further, there are certain factors like minimum wages, capacity of the industry to pay,
level of national income and its distribution, productivity of labour, the place of the
industry in the economy of the country and prevailing wage rates in the same or
similar occupations in the same or neighbouring localities on which fair wage
depends.

Fair wages mean the remuneration which is paid to the workers for the jobs requiring
equal efficiency, difficulty and pains.

c) Minimum wages
The limit minimum wage (MW) is the lower limit of fair wage
The upper limit of fair wages is the lower limit of the living
wage. Hydro Engg. Pvt. Ltd. v. The Workmen (1969-SC) -
Minimum Wage takes into a/c the
following a) Cost of essential
commodities in the area b) Cost of
living at the time.
This is acc. to the basic needs of humans such as food, clothing etc. as measured in
cost of Living Index No. 2400 Calories of food for a day and 18 Mtr. of cloth for a
year is the bare minimum.
It is also to be noted that wages are not just for the worker alone but also his family
members as consuming units. In India, workers and 3 consuming units are considered.
(total: 4)

Minimum Wage differs from time to time & area to area & according to cost of
Living Index number as at the time of computation.
The Minimum Wages keep the worker & his consuming units (Food @ 2400 calories
per person) (cloth - 18 yard per annum per person) (housing- min. lowest housing area
and 15% spent on fuel, lighting etc). This was given by Aykroyd.

In Hydro Engg. Case, the Sc held Minimum Wages must be revised in accordance
with Cost of living Index fluctuations. Otherwise, there is no utility of Minimum
Wages

The 2400 Cal-per day was laid down wrt. The avg. male's activities in India per day
based on climatic conditions. This 2400 cal was computed by Govt. of India.
If the employer cannot pay the Minimum Wages, the Court has laid down that the
industry must be shut down & such person cannot be an employer. The wages paid
should be above the minimum limit of Minimum Wages and the actual amount cannot
touch the minimum limit at all.
Minimum Wages have upper & lower limits. Actual amount paid can NOT touch the
lower limit & it must always be above it.
The employers contended that Fundamental Right to carry on trade etc. was
violated by mandating the payment of Minimum Wages. This was discussed by
courts. Fair wage also has an upper & lower limit. It takes into account:
a) Industry / Region
b) financial condition of company.
 SAFL Works v. State Ind. Court Nagpur (1978) The Court held that the employer's
argument of expenses incurred & other payments etc. differ from case to case basis.
The paying capacity of industry must be considered to fix fair wages. It also
includes Dearness Allowance, incremento, fitment etc. which shall all depend on
paying capacity of company including scale of Wages etc. Dearness Allowance
increases when the Cost of Living Index increases.

Fitment means nutrition (a little above 2400 Cal.) for the health of the workmen

Living wages usually do not have an upper limit. The living wages are with a lower
limit similar to the upper limit of fair wages.
The fair Wage Committee, 1949 defined living Wages. The male earning member
must be able to include education, health insurance, recreation, provision for old age,
protection against unforeseeable events etc. In addition to the basics of food,
clothing & & shelter.

9.6.1 Section 7: Authorised Deduction

1. Fines (Section 8): Conditions to be fulfilled for imposing fine:
•Fines can be imposed on any employee only if he had acted or omitted to
act where he has to act.
•Any person who has not attained his fifteenth year of age is barred
from imposition of fine.
•It must be approved by the state Govt.

•Notice Board of fines must be displayed in the work premises

•Give opportunity to employee to show the cause against the imposing fine
•Amount of fine must be 3% of his wage
•Fine should not imposed on any employee who is under 15 year
•Fine imposed one time only
•Fine should not recovered in installments
•Fine should be recovered in 60 days
•Imposed on the day act or omission made by the employee
•It is credited to the common fund and utilized for the benefit of the employees.

2. Deductions for absence from duty (section 9)

● It must be deducted by employer for one day or for any period –
 ● It Should not exceed a sum which bears the same relationship to the wage
payable in respect of the wage period as this period of absence does not to
such wage period –
● Employee refuses to work without proper reason when he is present for the
work place must be deemed to be absent from duty –
○ If 10 or more persons together absent for the duty without notice
and without any reasonable cause

3. Deductions for damage to or loss of goods entrusted for custody or for loss of
money which is directly attributable to his neglect or default (section 10)
● Section 10 of the Act authorizes the employer to deduct wages if the worker
neglectfully or willfully damages or cause loss of goods expressly entrusted to
the employee for custody.
● The employer has the right to deduct the amount whatever he has incurred
loss. Conditionally the damage or loss should have happened due to the
worker‟s neglect or default.
● Give opportunity to explain reason or cause for damage or loss happened
● Deduction amount must not be exceed than value or amount of damage or loss
● All deductions and realization must be recorded in a register

4. Deduction for house accommodation where state Government authorizes (Section 11).
● As per Section 11 of the Act, if the employee accepts the house-
accommodation amenity or services, deductions for such service shall not
exceed an amount equivalent to the value of the house-accommodation
amenity or service supplied.

5. Deductions for amenities and services which are authorized by State Government
(Section 11A).

6. Deductions for recovery of advances or, for adjustment of overpayment of

wages(Section 12).
● As per Section 12, recovery of an advance of money given before
employment has to be made from the first payment of wages but no
recovery can be made of such advances given for traveling-expenses;
● recovery of advances of wages not already earned shall be subject to any
rules of State Government.

7. Deductions for Recovery of Loans

● Section 12-A of the Act authorizes deductions made for the recovery of
loans granted during course of employment.

8. Deductions of income-tax payable by the employed person;

● Income tax payable by the employed person can be deducted from wages to
him by the employer and the amount is recovered in 12 months
employment.
9. Deductions required to be made by order of a Court or other authority competent to
make such order;
● Deduction required to be made by order of the court or other authority
competent to make such order may be made from the wages of employed
person.

10. Deductions for subscriptions to and for repayment of advances form any provident
fund.

11. Deductions for payment to cooperative societies approved by the State Government
or to a scheme of insurance maintained by the Indian Post Office. (Section 13).
● Deduction For the payment of his contribution to any fund constituted
by employer or registered trade union for the welfare of employed
person or his family or both and it is approved by State Govt. or
prescribed officer
● Deduction for payment of the fees payable by him for membership of
registered trade Union. All above deduction made with the written
authorization of the employed person

12. Deductions made with the written authorization of the person employed for payment
of any premium to the LIC for the purchase of securities of Central or State
Government or for the saving scheme of any such government. (Section 13).
● It must be approved by State Govt. or prescribed officer
● Deduction made with written authorization of employed person.
● Deduction made as per condition given by the State Govt.
● Any premium on life insurance policy or for other purchases of securities of
Govt. of India or State Govt

13. Deduction for contributions to any insurance scheme framed by the Central
Government for the benefit of its employees;
● The employer has an authority to made deduction for the payment of
insurance premium or fidelity bond may be effected from wages.

14. Deductions made with the written authorization of the employed person, for
contribution a. to the Prime Minister‟s National Relief Fund; or
b. to such other Fund as the Central government may, by notification in the Official
Gazette, specify. (Section 7(2)).

● With the authorization of employed person the deduction can be effected

towards contribution
9.6.2 Limitation on Deductions

● In case where such deductions are wholly or partly made for payment to co –
operative societies 75% of such wages and
● In any other case 50% of such wages

Payment of Bonus (PBA) Act:

Concept of Bonus
The payment of Bonus Act, 1965 used to deal with bonus paid to workers.Bonus can be
termed as a cash payment that is made to the employees in addition to wages.

New English Dictionary defines it as “A boon or gift over and above what is normally due
as remuneration to the receiver and which is, holy to the good.”

Bonus is paid by Employer as a mark of gratitude to the employee. This was a previous
concept. Gratuity is where the employee has a spotless record & it is paid by Employer as
gratitude.

After WWII, the Bombay Mills Asso. For the first time announced one months' wages as
bonus so that the workers do not starve due to increased prices of essential commodities'
prices. Bonus was paid in 1920, 1921 & 1922, When it was not paid in 1923, in 1924 the
workers' went on strike. The Bonus Dispute Committee was appointed in feb. 1924 & it was
stated that it was not a mandatory prov. & only an ex-gratia payment given out of gratitude.
Later in the 1950s, in Rashtriya Mill Mazdoor sangh v. Mills. Association. (Bombay) - The
Court held bonus is not ex-gratia payment & it is a share in profits

Muir Mills Ltd. v. Suti Miu Mazdoor Union (1955-SC). Here, it was also held that bonus is
deferred wages then it must be given priority over dividends. It is not deferred wages since
bonus is paid after all other Liabilities & dividends are paid & cleared.

Sri Meenakshi Mills v. Their workmen (1958 sc) - SC laid down 2 points:
• Bonus is NOT a gratuitous payment & NEITHER a deferred wages.
• Bonus is an entitlement of worker as a share in profits which is earned due to their hard
work

10.1 FULL BENCH FORMULA

In Mill Owners Association vs. Rashtriya Mill Mazdoor Sangh, (1952) LAC 423

The Labor Appellate Tribunal observed that bonus could no longer be considered as an ex-
gratia payment and laid down a formula known as “Full Bench Formula”.
It is based on the principle of equity that since both labor and capital contributed to the
earnings of industrial concerns, it was only fair that labor should get some benefit if there was
a surplus left after meeting prior and necessary charges.
The formula provided that the following prior charges should be deducted from the gross
profit of an enterprise:
● Return on paid up capital generally at the rate of six percent;
● Return on working capital varying from two to four percent;
● Depreciation worked out on a notional basis;
● Rehabilitation; and
● Income tax.
If after deduction of these prior charges, surplus was left over the workmen would be
entitled to a share in the surplus on an equitable basis. In absence of any surplus, however,
there would be no question of payment of bonus on general notions of social justice.
● The Balance, if any was called “available surplus”.
● Gross Profits (-) Prior Charges = Available Surplus.
● The Tribunal awarded bonus equivalent to 4 ½ months basic wages after adopting the
formula.
Prior charges are 4 charges which are deducted in priority as follows:

a) depreciation as per the rate given by Income Tax

Act. b) reserve for rehabilitation
c) return on paid-up capital at any rates less than
6%. d) return on working capital at any rate less
than 6%

The full bench formula was accepted and followed all over the country by Industrial
Tribunals in awarding bonus, though demands for its revision continued to be made from
time to time. The main point on which this revision was sought was centered around the
provision relating to “Reserve for rehabilitation”

It was later challenged in 2 cases, on the basis of reserve for rehabilitation. The cases in
which this formula was challenged are:

Associated Cement Co. Ltd. v. Its Workmen

Here it was challenged since for deduction (a), (c), (d) there is an upper limit but for reserve
for rehabilitation there is no upper limit and the employer arbitrarily made a huge deduction
under this head.
In Ahmedabad Miscellaneous Industries Workers Union v. Ahmedabad Electricity Co. Ltd.
also the same content was raised

Eligibility and Disqualification of Bonus

10.2 ELIGIBILITY FOR BONUS

Every employee receiving salary or wages up to RS. 10,000 p.m. and engaged in any kind of
work whether skilled, unskilled, managerial, supervisory etc. is entitled to bonus for every
accounting year if he has worked for at least 30 working days in that year

10.3 SALARY LIMIT

Where the salary or wages of an employee exceeds Rs. 10,000 per month, the bonus payable
to such employee shall be calculated as if his salary or wages were Rs. 10,000 per month.
Salary or Wages " means all remuneration (other than remuneration in respect of over-time
work, which would, be payable to an employee in respect of his employment or of work done
in such employment and includes dearness allowance, but does not include,-
(i) any other allowance which the employee is for the time being entitled to;
(ii) the value of any house accommodation or of supply of light, water, medical
attendance or other amenity or of any service or of any concessional supply of
food grains or other articles;
(iii) any travelling concession.
(iv) any bonus (including incentive, production and attendance bonus).
(v) any contribution paid or payable by the employer to any pension fund or
provident fund or for the benefit of the employee.
(vi) any retrenchment compensation or any gratuity or other retirement benefit
payable to the employee or any ex gratuity payment made to him.
(vii) any commission payable to the employee

GOPALAN VS. ANGAMALI CHIT FUND.

It was pointed out that it is true that the definition of wages does not include bonus, but that it
is because for the purpose of the Act bonus has to be distinguished from wages and has to be
determined in relation to the wages paid to the employees. The fact that bonus is specifically
excluded from the definition of wages itself signifies that but for such exclusive bonus would
fall under “wages”.

10.4 COMPUTATION OF NUMBER OF WORKING DAYS Sec. 14

deemed working days in any accounting year :

(a)He has been laid off under an
agreement (b)He has been on leave with
salary or wages;
(c) He has been absent due to temporary disablement caused by accident arising out of and in
the course of his employment, and
(d) the employee has been on maternity leave with salary or wages, during the accounting year.

10.5 DISQUALIFICATION FOR PAYMENT OF BONUS u/s. 9

An employee shall be disqualified from receiving bonus if he is dismissed from service

for,- 1. Fraud; or
2. Riotous or
3. Violent behavior while on the premises of the
establishment; or 4. Theft, or
5. Misappropriation or sabotage of any property of the establishment.

10.6 DEDUCTION OF CERTAIN AMOUNTS

FROM BONUS PAYABLE UNDER THE ACT
Where in any accounting year, an employee is found guilty of misconduct causing financial
loss to the employer, then, the employer can deduct the amount of loss from the amount of
bonus payable by him in respect of that accounting year only and the employee shall be
entitled to receive the balance, if any.

10.7 MINIMUM & MAXIMUM BONUS PAYABLE Sec. 10 & Sec. 11

The minimum bonus required to pay even if he suffers losses during the accounting
year or there is no allocable surplus is 8.33 % of the salary during the accounting year,
or
Rs. 100 in case of employees above 15 years and Rs 60 in case of employees below 15 years,
whichever is higher

If in an accounting year, the employer should pay bonus in proportion to the salary or wages
earned by the employee in that accounting year subject to a maximum of 20% of salary
or wages.

AVAILABLE SURPLUS
“Available surplus” means the available surplus computed as per Section 5. According to
Section 5, the available surplus in respect of any accounting year is the gross profit for that
year after deducting therefrom the sum referred to in Section 6 and adding certain
amounts.As per Section 6 of the Payment of Bonus Act, 1965, the following deductions are to
be made from the ‘gross profit

● Amount of depreciation admissible.

● Amount of the development rebate or the development allowance or the investment
allowance admissible as deductions from the income.
● Direct Tax payable as per Section 7.
● Sums which have been specified in the Third Schedule of the Act.
● Besides making the above deductions from the gross profit, the difference between the
 following amounts has to be added to the gross profit :
● Direct Tax computed according to Section 7 in respect of the gross profit for
the immediately preceding accounting year and
● Direct Tax computed according to Section 7 in respect of gross profit which is
reduced by the amount of bonus, for the immediately preceding accounting year.
Thus, Available surplus = Gross Profit — Certain Deductions Amounts + Certain

Available Surplus = Gross Profit – Depreciation - Development allowance

Calculate the gross profit in the manner specified in First Schedule, in case of a banking
company, or Second Schedule, in any other case.
CALCULATION OF AVAILABLE SURPLUS
Available Surplus = Gross Profit
1.) - Depreciation admissible u/s 32 of the Income tax
Act 2.) - Development allowance
3.) -Direct taxes payable for the accounting
year 4.) -Sums specified in the Third
Schedule
5.) + Direct Taxes in respect of gross profits for the immediately preceding
accounting year
6.) – Direct Taxes in respect of such gross profits as reduced by the amount of bonus,
for the immediately preceding accounting year.

Indian Oxygen Ltd vs. Their Workmen, AIR 1972 SC 471.

It was held that in calculating the allocable surplus the tax concession by way of
rebate that an employer will get under Income-tax Act on the bonus for fund to be
payable, need not be taken into consideration.

ALLOCABLE SURPLUS
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 and payment
within India of the dividends payable out of its profits in accordance with the provisions of
Section 194 of that Act, 67% of the available surplus in an accounting year.

Allocable Surplus = 60% of Available Surplus. The bonus is to be paid out of the allocable
surplus. The allocable surplus so computed is distributed amongst the employees in
proportion to salary or wages received by them during the relevant accounting year.
In case of a foreign company, the allocable surplus is 67 percent of the available surplus and
in other cases it is 60 percent
Distinction between Allocable Surplus and Available Surplus : The term ‘allocable’
surplus is defined in Section 2 (4) of the payment of Bonus Act, 1965. It is the workers share
in the available surplus. Available surplus means the available surplus computed under
Section 5 of the Act.According to Section 5, the available surplus in respect of any
accounting year shall be the gross profit for that year after deducting from it certain prior
changes as mentioned in Section 6.

SET ON
(Sec. 15 is a recommendation of the High-Power Bonus Commission.)

Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus
payable to the employees, then, the excess shall, subject to a limit of 20% of the total salary
or wages of the employees employed in the establishment in that accounting year, be carried
forward for being set on in the succeeding accounting year and so on up to and inclusive of
the fourth accounting year to be utilised for the purpose of payment of bonus.

SET OFF
Where for any accounting year, there is no available surplus or the allocable surplus in
respect of that year falls short of the amount of minimum bonus payable to the employees,
and there is no amount or sufficient amount carried forward and set on which could be
utilised for the purpose of payment of the minimum bonus, then such minimum amount or
the deficiency, as the case may be, shall be carried forward for being set off in the succeeding
accounting year and so on up to and inclusive of the fourth accounting year.
SET ON & SET OFF
In calculating bonus for the succeeding accounting year, the amount of set on or set
off carried forward from the earliest accounting year shall first be taken into account.
The allocable surplus so computed is distributed amongst the employees in proportion
to salary or wages received by them during the relevant accounting year.

Employee Compensation Act, 1923

3.S.2 (d) Dependant

Dependent includes certain categories of relatives of the deceased employee. Similar to
Class I, Class II heirs etc. in the Hindu Law of Succession, the categories of dependants
include the following:
a) First Category: A widow, minor legitimate or adopted son, an unmarried
legitimate or adopted daughter or a widowed mother
b) Second Category: A son or daughter who has attained 18 yrs. of age and who
is an infirm, wholly dependent on the earnings of the employee at the time of his
death.
c) Third category: If wholly or in part dependant on the earnings of the employee at
the time of his death:
(1) A widower
(2) A parent other than a widowed mother
(3) A minor illegitimate son, an unmarried illegitimate daughter or a daughter
legitimate or illegitimate or adopted if married and a minor or it widowed
and a minor.
 (4) A minor brother or an unmarried sister or a widowed sister if a
minor (5) A widowed daughter-in-law
(6) A minor child of a predeceased son
(7) A minor child of a predeceased daughter where no parent of child is
alive (8) A paternal grandparent if no parent of the employee is alive.
A married daughter who is a major cannot be a dependen

Test Of Determining Disablement

● Earning is not the same as earning capacity.
● There is difference between earning of a person and his capacity to earn.
● Rise in earning may be because of various factors and rise in wages is not decisive of
no loss of earning capacity.
● Loss of physical capacity or physical incapacity
● General Manager G.R.P. Railways, Bombay VS. Shankar, 1999 NAG.A railway
servant working on A-I post lost one eye and two teeth as a result of collision between
two engines. He was declared by the Medical Officer as unfit for A-I and B jobs
but fit for C-2 job because of his defective vision. Class C-2 job was offered to him
by the railway administration. He refused the offer and claimed compensation on the
basis of total disablement. It was held that, the workman was entitled to compensation
not on the basis of total but partial disablement.
Defenses of Employer
1. Doctrine of assumed risk;
The employer can argue that the employee took the risk upon himself (Violenti non
fit injuria). The regular work of the employee was obviously dangerous. Where the
employee was asked to undertake a dangerous operation outside his ordinary duties
and he voluntarily accepted it, the employer had a good defence. The defence was
not tenable where the employer was being sued for the breach of a statutory duty

2. Doctrine of contributory negligence;

Under this line of defense, the employer could say that the injury was caused entirely
due to the workman’s fault. A defense of contributory negligence also arose if, in
addition to
 the employer’s negligence, the injured employee was himself negligent and the
injury was the result of both the causes
a) Eg: An employee is cut by a rusted iron piece and the employer gives basic first-aid.
Then, after coming back to work, the employee neglected the injury. The employee
then develops tetanus in the entire body and dies. Here, the death is due to the
contributory negligence of the employee and the employer cannot be held liable.
b) Here, where an employee fails to take reasonable care and neglects the safety
measures or procedures etc., the plea of contributory negligence may be raised by the
employer and the employer shall not be held liable in case of contributory negligence.

3. Doctrine of common employment and fellow servants’ responsibility;

The employer can contend that the workman knew at the time of employment that he
was exposed to the risk of injury because of the negligence on the part of his fellow-
workmen also; Employee was supposed to have contracted on the term that, as
between himself and his master, would run that risk; and The employer was not liable
to pay damages in respect of injuries arising from the carelessness of fellow workmen
4. Doctrine that Fatal Injury /“personal claim comes to an end with the help of
either party”;
The “Personal claim comes to an end with the death of either party”. This line of
defense pertained to fatal accidents. As the claim of a workman was based on the
personal negligence of his employer, the employer argued that “personal claim
comes to an end with the death of either party” (Actio personalis moritur cum
persona)

5. Doctrine of unknown person’s responsibility.

ARISING ‘OUT OF’ AND ‘IN THE COURSE

OF’ EMPLOYMENT
Accident and the injury therefrom sustained, must either be “arising out of” and “in
course of employment”.
The three tests for determining whether an accident arose out of employment are :

1. At the time of injury workman must have been engaged in the business of the
employer and must not be doing something for his personal benefit;
2. That accident occurred at the place where he was performing his duties; and
3. Injury must have resulted from some risk incidental to the duties of the service, or
inherent in the nature or condition of employment.
There must be a causal connection between the injury and the accident and the work
done;
The onus is upon the applicant to show that it was the work and the resulting strain
which contributed to or aggravated the injury;
It is not necessary that the workman must be actually working at the time of his death
or that death must occur while he was working or had just ceased to work; and
The evidence showing greater probability satisfying a reasonable man that the work
contributed to personal injury is enough for the workman to be entitled.
If the accident involves a risk common to all humanity and did not involve any
peculiar or exceptional danger resulting from the nature of the employment or where
the accident was the result of an added peril to which the workman by his own
conduct exposed himself, which peril was not involved in the normal performance of
the duties of his employment, then the employer will not be liable.
A. ARISING OUT OF refers to the casual connection between accident and
employment, and the IN THE COURSE OF refers to the time of occurrence of the
accident. It is possible that an accident may arise out of employment but may occur during
the course of employment, or that it may occur in the course of employment but does not
arise out of employment.
State of Rajasthan v. Ram Prasad and Another (2001) The employee died due to
natural lightening while working at the site. It was held by the Supreme Court that in
order that an employee may succeed in his claim for compensation it is no doubt true
that the accident must have casual connection with the employment and rise out of it
but if the employee is injured as a result of natural force of lightening though it in
itself has no connection with employment.
Trustees Port of Bombay VS. Yamuna Bai, 1952, In this case, a bomb placed in the
premises of a work shop by some unknown person exploded and caused injury to a
workman. It was held that the workman was not responsible for placing of the bomb,
and the injury due to its explosion was caused at the time and place at which he was
employed, therefore the injury was the result of an accident arising of his
employment. The rule is that if a particular accident would not have happened to a
workmen had he not been employed to work in the particular place and condition, it
would be accident arising out of the employment.
National Iron and Steel Co. Ltd. V Yamuna Bai, In this case a boy was employed by
the appellant in a tea shop and it was part of his duty to take tea from the shop which
was situated outside the factory gate to various persons working in the factory. One
day when the boy was coming out of the factory after serving the tea to the workers
he passed through a violent mob of factory workers who were leaving the factory.
This mob attacked the police and police had to fire upon the mob in selfdefence.
Unfortunately, the boy was severely wounded by a bullet injury and died the
following day in the hospital. The mother of the boy claimed compensation. It was
held that the accident arose and death occurred e in the course of employment and
death occurred because of the risk to which he was exposed by the nature of his
employment.

B. ARISING ‘IN THE COURSE OF’ EMPLOYMENT

Circumstances which becomes difficult to prove whether the accident arose in the
course of employment or not:
Interruptions in the course of employment, for example, power failure,
The gap between the arrival time and scheduled time for the commencement
of work, as also between the departure time and the scheduled time for ending
work and time spent in traveling to and from work.

Sakina Bibi V. Gujarat State Road Transport Corp: All movements of workmen
from one place to another whether within the premises or outside the premises in
connection with the employment. Tea break, lunch break, break for rest etc If the
employer provides transport to and fro from house and place of work, the journey or
transit period comesunder in the course of employment
An Accident does not arise out of employment in the Following Case:
1. If the workman does something different from the work actually
assigned to him. This is commonly known as performing ‘arrogated
duties’. However the accident is said to arise out of employment if
the workman
 does another person’s work on the orders of a superior whose orders
he is required to obey.
2. If the workman is doing something which is not required by or
incidental to his normal duties and which is done for his own personal
purposes.
3. If the workman indulges in rashness as distinct from mere
carelessness. 4. If the workman meets an accident from a danger
which he shares in
common with persons not in the same employment.
5. If the workman is injured as a result of his state of health like an
injury sustained by an epileptic during his fit.
6. If the workman receives an injury entirely due to his drunken
condition, except in cases of fatal accidents;
7. If the workman is injured on being assaulted while he is at work.

Payment of Compensation to Contract Labour

The principal employer is liable to pay compensation to contract labour in the same
manner as his departmental labour. He is entitled to be indemnified by the contractor.
The principal employer shall not however be liable to pay any interest and penalty
leviable under the Act
11.11 liability for compensation
Sec. 3 deals with employer’s liability for compensation and it is a limited
liability. There are few conditions under Sec.3 (1):

a) Personal injury occurred

Injury is usually understood in the sense of bodily injury. However, it
is not sufficient to include only physical injury. Personal injury covers
physical injury and also psychological injury, nervous shock, mental
strain etc.
Indian News Chronical v. Mrs. Lazaraus (AIR 1961)- The employee
was an electrician by occupation. His employment required him to go
into a cooling room with very low temperature and immediately go
into the heating room with very high temperature and enter these two
rooms constantly in short intervals to maintain temperature. As a result
of this, he was attacked by pneumonia and he dies in 5 days. His
mother, the respondent in this case, claimed compensation stating that
he got pneumonia only due to his employment. The court held that
personal injury does not only mean bodily injury but also includes
psychological injury, nervous shock, mental stress etc.

b) Injury caused by accident

Accident is any mishap or event which is unanticipated, untoward incident etc.
in the context of EC Act, it is not only considering the person who caused it
and the person who suffered through the accident. The main point is that the
workman would not have suffered the accident, had he not been there in
that particular place at that particular time. The reason why he was there is
because of the employment. Thus, the employment was the reason he suffered
the accident and the employer is liable to pay compensation.
The important aspect is ‘arising out of and in course of employment’. ‘Arising
out of’ refers to the cause or reason of the accident. The ‘in course of’ means
the place and circumstances under which the accident takes place and the
time when it has occurred. There must be casual connection between the
 ‘arising out of (cause)’ and ‘in course of employment’.

c) Accident must have arisen out of and in course of employment

The burden of proof shall lie on the claimant to prove this connection that the
accident has arisen out of and in course of employment in order to claim
compensation.
State of Rajasthan v. Ram Prasad and Another (2001-SC)- The employee
was a lady Shrimati Geeta, she was working inside the premises in an open
yard. At this time, while working, natural lightning struck her and she died on
the spot. The husband made a claim for compensation. Here, there is a direct
connection between the “employment”, “accident caused” and the “resulting
injury/death”. Hence, the employer was liable to pay compensation.
R. B. Moondra & Co. v. Mst. Bhanwari - The petrol tanker business was
being run by Moondra and Co. for carrying petrol from the source to various
petrol pumps. Bhanwari was a driver for the tanker. Bhanwari reported to the
employer that the tanker was leaking petrol. The employer asked him to
remove all the petrol and half fill the tank with water. Once this was done, the
employer asked him to get inside the tank to find out where the leak was.
Since it was dark inside the tanker, the driver switched on his lighter inside the
tank and immediately the tanker caught fire and exploded, he died on the spot.
The court held that the employee might have done some small negligence by
carelessly lighting the lighter, however, it was purely arising out of and in
course of employment and thus, the employer was made liable to pay.
Trustees Port of Bombay v. Yamunabai - The employees were working in a
workshop, and someone from outside placed a bomb inside the workshop, and
the bomb exploded and the employee was injured due to this. It was a clear
case where the employer was held liable to pay compensation. The court held
that only because of the employment, the employees were working on that day
at that time. Thus, it was purely arising out of and in course of employment.
Smt. Koduri v. Polongi Atchamma - A quarry is a small mine site. The
employee was to upload quarry material from the quarry site into the lorry,
then sit on top of the lorry when it was fully loaded and then, go to the place
where it had to be downloaded, download the material, then sit in the lorry and
come back to the original place for uploading again. One day, while sitting on
top of the lorry, he tried to get up and break a branch to hit a rabbit running
nearby, in this process, he slipped and fell on the tracks and was crushed to
death. His wife made a claim for compensation. Here, the court held that it
was completely beyond the scope of the employment and outside the
instructions of his employer, even though being in the lorry is part of
employment. The court held that the employer is not liable to pay
compensation.
National Iron and Steel Co. Ltd. v. Manorama (AIR 1953 Cal.) – A small
boy (before child labour act) was employed to carry and serve tea
continuously to the employees by crossing the road to get across to the
company. One day, the workers were outside the company on a Strike and
shouting slogans etc. The boy was still carrying tea and serving the work.
Some workers became unruly and the police were called. The police started
firing bullets into the air. One of the bullets that went into the air returned and
struck this little boy and he died on the spot. The mother of the boy claimed
compensation since it was arising out of and in course of employment. The
court held that the employer must pay compensation since it was purely
arising out of and in the course of employment and the boy would not have
been there unless it was for the employment.
 Bai Shakri v. New Manekchowk mills Co. Ltd . (1961) – The mills used to
manufacture cloth and the mill was working in a shift system. The employee’s
shift was at 3 PM. The employee came early and went to meet a friend in
another department and then he reported back to his own department at 3:20
PM. Here he suffered a heart attack, he was shifted to a hospital. Later, he
resigned from the employment and later on he died. The claim was made on
the employer stating that it was arising out of and in course of employment.
This case is very important since it laid down a few guidelines. It was held
that:
a) There must be a causal connection between the injury, the accident and
the work done in course of employment. It should not be a very remote
connection.
b) The onus is upon the applicant to show that it was the work and the
resulting strain which contributed to or aggravate the injury. The
burden of proof shall lie on the applicant.
c) The employee need not actually working when the injury occurs. He
might even be on holiday or might have resigned.
d) If there is evidence to show that the injury/death is as a consequence of
the employment and the stress and strain of employment results in
aggravation of injury or death, then if the reasonable prudent man is
able to draw the connection between the injury/death and
employment, then the employer is made liable.

d) Accident results in death, permanent total disablement, permanent partial

disablement, temporary partial disablement,

e) Disablement exceeds a period of 3 days.

11.12 Doctrine of Notional extension

Usually the employment is not deemed to have commenced until the employee has reached
the place of employment and the injury caused during the journey was excluded.

The industrial jurisprudence, recognised the theory of “notional extension” of the premises of
employers so as to include an area which the workman passes and repasses in going to and
from the place of employment.

Bai Shakri v. New Manekchowk mills Co. Ltd . (1961) – The mills used to
manufacture cloth and the mill was working in a shift system. The employee’s shift
was at 3 PM. The employee came early and went to meet a friend in another
department and then he reported back to his own department at 3:20 PM. Here he
suffered a heart attack, he was shifted to a hospital. Later, he resigned from the
employment and later on he died. The claim was made on the employer stating that it
was arising out of and in course of employment. This case is very important since it
laid down a few guidelines. It was held that:
e) There must be a causal connection between the injury, the accident and
the work done in course of employment. It should not be a very remote
connection.
f) The onus is upon the applicant to show that it was the work and the resulting
strain which contributed to or aggravate the injury. The burden of proof shall
lie on the applicant.
g) The employee need not actually working when the injury occurs. He might
even be on holiday or might have resigned.
h) If there is evidence to show that the injury/death is as a consequence of the
employment and the stress and strain of employment results in aggravation of
injury or death, then if the reasonable prudent man is able to draw the
connection between the injury/death and employment, then the employer is
made liable.
The third principle in the Bai Shakri case is that ‘it is not necessary that the employee must be
actually working at the time of his death or that death must occur while he is working or had
just ceased to work’. In another case where an employee had a lot of work stress and after
returning home from the establishment, after 3 hours of relaxation, the employee had a
massive heart attack and died on the spot. Here, the employer was made liable.
The fourth principle in the Bai Shakri case is that ‘Where the evidence is balanced, if the
evidence shows a greater probability which satisfies a reasonable man that the work
contributed to the causing of the personal injury, it would be enough for the employee to
succeed’.
In the Bai Shakri case, the employer was NOT made liable since it was not arising out of and
in course of the employment.
The outcome of these 4 principles is that where the employee is performing his duties of the
employment, and the accident occurs at the place of work or while working outside
establishment or at home, or while travelling, the employer is held liable. Thus, the
connection is between the work done, the consequence of the work as resultant strain, the
accident and the injury as a result of the accident.
Notional Extension Theory (NET):
The accident must be arising out of and in course of ‘employment’. The question is where the
employment begins. The employment begins from the time the worker travels from his house
to the establishment, works in the establishment and then travels and returns home. The NET
concept is this extension of meaning of employment to the travel of the employee.
The reason is, the worker is travelling only because of employment and so the employer shall
be liable.
The NET extends the scope of employment even for travel.
Situation 1: However, the NET does not apply to a case where the worker deviates from
his path, or indulges in any personal engagement while coming back from employment,
and then meets an accident, then the NET does not apply.
Thus, the NET only applies where the worker strictly follows his path and does not
deviate, and it is only from and to the establishment.
In St. Helens Colliery Co. Ltd. v. Hewlston – Here, the employee travelling in a colliery was
injured. The employer had an agreement with the train company and had a special train
(colliery) for the employees to travel to and from their homes. It was a single trip for every
employee i.e., to and from home. The cost of this travel was deducted from their wages. The
employee’s train met with an accident. The HOL held that the employer was not liable to pay
compensation. The reason given was that the employee was not bound to travel by the train
and he could have travelled by some other means. The employee’s contract of service does
not say that he must travel by this train. Secondly, it was stated that the train was not the only
means of reaching to and from home. Had it been the only means of transportation, the
employer would be liable. However, since there were other means as well, the employee was
not obligated to use this mode. Thirdly, the HOL said that travel does not come in the scope
of ‘arising out of and in course of employment’ unless the contract of services says that the
travel must be by the means given by the employer.
After 1924, this concept changed and this decision was held inappropriate later. Thus, travel
is included in employment. The current situation is as follows:
Situation 2: the transportation is provided by the employer and the employee while in
this transport, gets injured due to an accident. The employer shall be liable.
 Situation 3: the employer does not provide any mode of transport, and the employee uses
his own mode of transport and gets injured due to an accident. The employer shall be
liable.
Situation 4: the employer provides transportation and the employee chooses not to use
this, uses his own mode of transport and gets injured due to an accident. The employer
shall be liable.
B.E.S.T Undertaking Bombay v. Agnes, 1963
The driver while returning after doing his job, by availing free bus service to go to his
residence at Santa Cruz, the bus collided with a stationary lorry and the said workman was
thrown out on the road and finally died. The Supreme Court held that there was notional
extension of the place of employment and the workman was entitled to compensation under
the Workmen’s Compensation Act
Therefore to be made liable under this doctrine
● There must be an obligation, express or implied, upon the employer to provide
transport to and from the work spot and a reciprocal obligation upon the employee to
avail that transport.
● The transport facility must not only be in the nature of concession or privilege which
the employees are free to avail or not.
● Where the means of transport provided by the employer, is not only the most
convenient means but also the only means to reach the place of work, there would
be deemed to be an implied obligation on the employer to provide that transport and a
reciprocal obligation on employee to avail it.
● In the case of an accident taking place on a public road, the employer would be
liable only if the employment of the employee required him to be there. The distance
of the place of accident from the place of work is immaterial in such cases

● The only situation where the employer shall not be liable is where the employer
deviates from the set route and engages in any personal tasks.
●
Defenses of Employer
6. Doctrine of assumed risk;
The employer can argue that the employee took the risk upon himself (Violenti non
fit injuria). The regular work of the employee was obviously dangerous. Where the
employee was asked to undertake a dangerous operation outside his ordinary duties
and he voluntarily accepted it, the employer had a good defence. The defence was
not tenable where the employer was being sued for the breach of a statutory duty

7. Doctrine of contributory negligence;

Under this line of defense, the employer could say that the injury was caused entirely
due to the workman’s fault. A defense of contributory negligence also arose if, in
addition to
 the employer’s negligence, the injured employee was himself negligent and the
injury was the result of both the causes
c) Eg: An employee is cut by a rusted iron piece and the employer gives basic first-aid.
Then, after coming back to work, the employee neglected the injury. The employee
then develops tetanus in the entire body and dies. Here, the death is due to the
contributory negligence of the employee and the employer cannot be held liable.
d) Here, where an employee fails to take reasonable care and neglects the safety
measures or procedures etc., the plea of contributory negligence may be raised by the
employer and the employer shall not be held liable in case of contributory negligence.

8. Doctrine of common employment and fellow servants’ responsibility;

The employer can contend that the workman knew at the time of employment that he
was exposed to the risk of injury because of the negligence on the part of his fellow-
workmen also; Employee was supposed to have contracted on the term that, as
between himself and his master, would run that risk; and The employer was not liable
to pay damages in respect of injuries arising from the carelessness of fellow workmen
9. Doctrine that Fatal Injury /“personal claim comes to an end with the help of
either party”;
The “Personal claim comes to an end with the death of either party”. This line of
defense pertained to fatal accidents. As the claim of a workman was based on the
personal negligence of his employer, the employer argued that “personal claim
comes to an end with the death of either party” (Actio personalis moritur cum
persona)

10. Doctrine of unknown person’s responsibility.

EMPLOYEE STATE INSURANCE ACT, 1948

Administration
● The administration of the ESI scheme is entrusted to an autonomous body called the
ESI corporation.
● The union minister for labor is the chairman and the secretary to Govt. of India
Ministry of Labor is the vice chairman of this corporation.
● It consists of members representing Central and State Govt. ,employers and
employees organizations, medical profession and Parliament.
● There is a standing committee, constituted from the members of the corporation,
which acts as an executive body for the administration of the scheme.
● The chief executive officer of the corporation is the director general who is assisted
by four principal officers:
● 1. Insurance commissioner 2. Medical commissioner 3. Financial commissioner 4.
Actuary
● There is a medical benefit council which is headed by the Director general of Health
Services, Govt. of India who is assisted by the medical commissioner in all matters
relating to medical relief.
● Besides the head office in New Delhi, the corporation has 23 regional offices and 26
sub regional offices at 2 divisional offices and 624 branch
Sec. 4- Composition:
a) It shall have members and office bearers. It shall have a Chairman and vice-Chairman
 appointed by central govt. It shall have 5 members from central govt. one person from
each State and each UT in India.
b) 10 persons representing the employers to be appointed by central govt from various
TUs of employers. 10 persons representing employees appointed by central govt from
various TUs of employees.
c) 2 persons from the medical profession appointed by central govt in consultation with
medical practitioners’ organizations.
d) 2 members of lok sabha and one member of rajya sabha. Director General of the corp.
shall be an ex-officio member of corp.
e) All these members are eligible for re-election or re-appointment to the Board, Standing
committee or medical council.

Sec. 5- Term of Corp.:

a) The chairman, vice-chairman, representatives of central govt, representatives of

state govts and UTs shall continue to hold office till pleasure of the President.
b) For representatives of TU, employers, medical professions, parliamentarians etc.
shall hold office for 4 years with a scope of re-election or re-appointment
Authentication of Orders: the director general shall be the proper authority to authenticate
the orders of the corp. if he is not available, any other officer may sign on his behalf.

Sec. 19-Corp. Power:

a) The basic objective of the ESI Corp. is to take decisions for improving health and
welfare of all insured persons.
 b) The wage limit is Rs. 21,000/-. Any person drawing wages above this is not within
ambit of the Act.
c) It shall provide for rehabilitation and reemployment of insured person, usually
disabled.
It shall incur expenses for such measures from its own funds.
d) It shall promote various other schemes for improvement of health and welfare of
insured person.
Inspectors- Duties- Powers
Duties –
1. Inquiring into the correctness in any return of
contribution 2. Ascertaining Provision of the Act has
been complied
3. Other authorized / specified duties by the
corporation. Powers –
1. To collect require and relevant information of employer / contractor or
both 2. To enter org / contractor premises at reasonable time and examined
relevant account books and relevant documents, payment of wages etc.
3. To examine employer, contractor, his agent / servant or IE in factory /
office 4. To make copies of extracts from any registrar, account books and
other books of maintenance of org
Sickness Benefits
(Sec. 46(1)(a), Sec. 49, Rule 55):

it has to be examined and certified by a registered medical practitioner. The sickness must
exceed a period of 2 days. For disablement benefits, it must exceed a period of 3 days.
a) Certificate must be provided by the registered medical practitioner. It shall state
the nature of sickness and the period of rest required.
b) The benefit is given at the rate at which it is prescribed by central govt and the
period so prescribed by govt.
c) The benefit is payment by employer to employee by rest.
d) For each benefit period, sickness benefit can be claimed for 78 days in one benefit
period.
The next 78 days can be claimed in the next benefit period.
e) Standard benefit rate (Sec. 2 (7A)) is the average daily wages by diving the total
wages paid for the contribution period by the no. of days for which the wages are
paid.
(1) Standard benefit rate = Average wages paid
(2) Average wages paid = (Total wage period for the particular contribution period)/
(The no. of days for which these wages were paid)
f) The sickness benefit is paid according to the standard benefit rate
only. g) This benefit is divided in two parts as follows:
(i) Extended Sickness Benefit: Insured persons suffering from long term ailment like
T.B., mental diseases etc. and experiencing great hardships on expiry of 91 days,
sickness benefit period can be converted into extended sickness benefit which is
normally 25 per cent more than the sickness benefit rate.
(ii) Enhanced Sickness Benefit: This benefit is given to insured men and insured
women for vasectomy and tubectomy. It is double the rate of sickness benefit i.e.
about the full average daily wages. Duration of enhanced benefit is up to 7 days in the
case of vasectomy up to 14 days in tubectomy from the date of operation. Any person
in receipt of sickness benefit is required to remain in under medical care and
treatment at dispensary/hospital or any other institution as recognized in the Act. Cash
benefit is paid by local office either personally to an employee or is remitted by post
Adjudicatory Board
Sec. 74 constitutes the Employees’ Insurance Court to adjudicate the disputes arising from
the insured person or the employer. The State Govt. shall prescribe by Gazette Notification
and constitute an ESI Court in a particular area specifying its jurisdiction.

Sec. 76 states that ESI proceedings commence similar to CPC, where a corporate, employer
or insured person makes a claim before ESI Court. The court first determines whether it has
jurisdiction or not, then proceeds with all provisions of the CPC like a civil suit. The case can
be transferred from one ESI Court to another ESI Court if the State Govt. permits. The court
to which the matter has been transferred shall continue with the proceedings in the second
court.

Sec. 77 states all proceedings before ESI Court shall be commenced by application only.

Sec. 78 provides same powers to ESI courts as to civil courts. It includes summoning and
enforcing the attendance of witnesses, compelling the discovery and production of
documents and material objects, administering oath and recording evidence.

Sec. 81 provides reference to the HC where a question of law arises and the ESI court sends
it to the HC and till the HC’s decision is received, the case shall not proceed.

Sec. 82 provides that no appeal from ESI Court’s decision lies in case of a question of fact
but in case of question of law, it lies before HC. Sec. 5 and 12 of Limitation Act applies.

Sec. 83 states that in case of appeal before HC, there is stay on payment of amount while
the appeal is pending.

Benefits under the Act

The section 46 of the Act envisages following six social security benefits :-

(a) Medical Benefit : Full medical care is provided to an Insured person and his family
members from the day he enters insurable employment. There is no ceiling on expenditure
on the treatment of an Insured Person or his family member. Medical care is also provided to
retired and permanently disabled insured persons and their spouses on payment of a token
annual premium of Rs.120/- .
1. System of Treatment
2. Scale of Medical Benefit
3. Benefits to Retired IPs
 4. Administration of Medical Benefit in a State
5. Domiciliary treatment
6. Specialist consultation
7. In-Patient treatment
8. Imaging Services
9. Artificial Limbs & Aids
10. Special Provisions
11. Reimbursement

(b) Sickness Benefit(SB) : Sickness Benefit in the form of cash compensation at the rate
of 70 percent of wages is payable to insured workers during the periods of certified
sickness for a maximum of 91 days in a year. In order to qualify for sickness benefit the
insured worker is required to contribute for 78 days in a contribution period of 6 months.
1. Extended Sickness Benefit(ESB) : SB extendable upto two years in the case
of 34 malignant and long-term diseases at an enhanced rate of 80 per cent of
wages.

2. Enhanced Sickness Benefit : Enhanced Sickness Benefit equal to full wage is

payable to insured persons undergoing sterilization for 7 days/14 days for male and
female workers respectively.
(c) Maternity Benefit (MB) : Maternity Benefit for confinement/pregnancy is payable for
Twenty Six (26) weeks, which is extendable by further one month on medical advice at the
rate of full wage subject to contribution for 70 days in the preceding Two Contribution
Periods.

(d) Disablement Benefit

1. Temporary disablement benefit (TDB) : From day one of entering insurable
employment & irrespective of having paid any contribution in case of employment
injury. Temporary Disablement Benefit at the rate of 90% of wage is payable so long
as disability continues.

2. Permanent disablement benefit (PDB) : The benefit is paid at the rate of 90% of
wage in the form of monthly payment depending upon the extent of loss of earning
capacity as certified by a Medical Board
(e) Dependants Benefit(DB) : DB paid at the rate of 90% of wage in the form of
monthly payment to the dependents of a deceased Insured person in cases where death
occurs due to employment injury or occupational hazards.

(f) Other Benefits :

Funeral Expenses : An amount of Rs.15,000/- is payable to the dependents or to the person
who performs last rites from day one of entering insurable employment.
Confinement Expenses : An Insured Women or an I.P.in respect of his wife in case
confinement occurs at a place where necessary medical facilities under ESI Scheme are not
available.

In addition, the scheme also provides some other need based benefits to insured workers.

Vocational Rehabilitation :To permanently disabled Insured Person for undergoing

VR Training at VRS.
Physical Rehabilitation : In case of physical disablement due to employment injury.
Old Age Medical Care :For Insured Person retiring on attaining the age of superannuation or
under VRS/ERS and person having to leave service due to permanent disability insured
person & spouse on payment of Rs. 120/- per annum.

Rajiv Gandhi Shramik Kalyan Yojana : This scheme of Unemployment allowance was
introduced w.e.f. 01-04-2005. An Insured Person who become unemployed after being
insured three or more years, due to closure of factory/establishment, retrenchment or
permanent invalidity are entitled to :-
● Unemployment Allowance equal to 50% of wage for a maximum period of upto
Two Years.
● Medical care for self and family from ESI Hospitals/Dispensaries during the
period IP receives unemployment allowance.
● Vocational Training provided for upgrading skills - Expenditure on
fee/travelling allowance borne by ESIC.

Atal Beemit Vyakti Kalyan Yojana (ABVKY) : This scheme is a welfare measure
for employees covered under Section 2(9) of ESI Act, 1948, in the form of relief
payment upto 90 days, once in a lifetime. The Scheme was introduced w.e.f. 01-07-
2018 on pilot basis for a period of two years initially. The scheme has now been
extended for another one year i.e. from 1st July, 2020 to 30th June, 2021. It has also
been decided to enhance the rate of unemployment relief under the scheme to 50% of
wages from earlier rate of 25% along with relaxation in eligibility conditions,
provided the Insured Person should have been in insurable employment for a
minimum period of two years immediately before her/his unemployment and should
have contributed for not less than 78 days in the contribution period immediately
preceding to unemployment and minimum 78 days in one of the remaining three
contribution periods in two years prior to unemployment. In a significant relaxation,
relief shall become due for payment after 30 days from date of unemployment and
claim can be submitted directly to the designated
Incentive to employers in the Private Sector for providing regular
employment to the persons with disability :
 ● Minimum wage limit for Physically Disabled Persons for availing ESIC
Benefits is 25,000/-.
● Employerss' contribution is paid by the Central Government for 3 years.

Benefits & Contributory Conditions :

An interesting feature of the ESI Scheme is that the contributions are related to the paying
capacity as a fixed percentage of the workers wages, whereas, they are provided social
security benefits according to individual needs without distinction.
Cash Benefits are disbursed by the Corporation through its Branch Offices (BOs) / Pay
Offices (POs), subject to certain contributory conditions.

Factories Act

Factory
1. Factory means any premises including its boundaries, where –
● Ten or more workers are employed or were working on any day during
the preceding twelve months and in any part of which, a manufacturing
process is carried out with the aid of power or is ordinarily so carried on.
● Twenty or more workers are employed or were working on any day during
the preceding twelve months and in any part of which, a manufacturing
process is carried out without the aid of power or is ordinarily so carried
on.
● It specifically excludes:
A mine subject to the operation of the Mines Act, 1952, or a mobile
unit belonging to the armed forces of the Union, a railway running
shed or a hotel, restaurant or eating place.
● Meaning of the words Premises and Precinct The word 'premises' means
open land or land with building or building alone.Therefore salt works where
process of converting seawater into salt is carried on in the open comes
within `premises' as defined in the Act. [Ardeshir H. Bhiwandiwala v. State
of Bombay, 1962]
● Precincts means a space enclosed by wall. [in K.V.V. Sharma v. Manager,
Gemini Studio, Madras,1953]
● Any `premises' to be categorised as factory two conditions must be fulfilled.
i) Ten or more persons are employed in the premises using
power or be employed not using power.
ii) Twenty or more workers must be employed not using power.

Essential Ingredients:
● There must be a manufacturing activity,
● Mere presence of a machine or an Electronic Data Processing Unit or a
Computer Unit installed in any premises or part thereof, shall not be
construed to form a factory.
● The Act empowers the State Governments to apply its provisions. In
computing the number of workers, all the workers in different groups and
shifts in a day are taken into consideration.
● Sec 2(m)

As decided in the case of “New Taj Mahal Cafe ltd Mangalore v. Inspector of
Factories, Mangalore,(1950) that, In order that any premises may be held as a factory ,
the following conditions must be fulfilled :-

(a) a manufacturing process must be carried on in any part of the premise of the
establishment and ,

(b) where a manufacturing process is carried on with the aid of power, ten or more workers
must be working and where manufacturing process is carried on without the aid of power,
twenty or
 more workers must be working in that establishment. But, the mere fact that the power is
used in the premises is not sufficient, but power must be used in the aid of manufacturing
process.

An important necessity for any premises to be regarded as a ‘factory’ is that a “manufacturing

process” should be conducted within the premises. In the factories Act,1948, according to
section 2(k) defines manufacturing process as:- “Manufacturing process” means process for –

(i) Making, altering, repairing, oiling, washing, cleaning, ornamenting, finishing,

packing, breaking up, or otherwise treating or adapting any article or substance
with a view to 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

(iv) Composing types for printing the letter press, lithography, photogravure, or
other similar process or book binding, or

(v) Constructing, re-constructing, repairing, refitting, or breaking up of ships or

vessels ; or

(vi) Preserving or storing any articles in cold storage;

In this regard it becomes necessary to discuss some special circumstances that came up in
some court cases :

(1) Preparation of food with the aid of various electrical appliances in the kitchen of a
hotel is a manufacturing process: As decided in the case of Poona Industrial Hotel v
I.C. Sarin , 1980.

(2) Selling of petrol or diesel by a petrol dealer or repairing of motor vehicle will not
come within the term “manufacturing process”, as noted in the case of : National
Service Centre and Petrol Pump v. E.S.I Corporation ,

(3) The work of mere packing cannot be called as a manufacturing process;

(4) The business of sale of diesel oil, motor spirit, lubricant, servicing of cars and
lorries, repairing vehicles and charging batteries with the aid of power, by employing
more than 20 workers / labourers amount to manufacturing process, as noted in the
case of “Baranagar Service Station v.E.S.I Corporation (1987).

(5) Decorticating groundnuts in electric mill is a manufacturing process.

(6) Breaking up of boulders is a manufacturing process – as decided in case of

Larsen & Toubro v. state of Orissa , 1992.
 (7) Transportation of goods on contract basis from one place to another by road with
the assistance of transport carriers is not a manufacturing process- as decided in the
case of regional Director E.S.I.C /vs/ Jaihind Roadways, Bangalore(2001),1 L.L.J
1187(Karnataka).

(8) Reading the definition of ‘Manufacturing process’ in the light of Supreme Court
in “Workmen”, Delhi Electricity Supply Undertaking /vs/ management”, (1974) 3
SCC 108, the word ‘or’ in section 2(k) (iii) must be read as ‘and’.

In other words, to satisfy the definition of “manufacturing process”, there should be a

process of generating, transmitting, and transforming of power. So a sub-station where only
transforming and transmitting of power is done is not covered. A contradictory judgement
was passed by Bombay High Court and it has laid down in the definition of “manufacturing
process’, that , in this definition , each of the words have got independent meaning which
itself constitutes the manufacturing process.

Therefore it can be concluded from these cases & definitions that if a manufacturing process
is not carried on within the premises it cannot be regarded as a factory, and to regard an
establishment or premises as a factory, it should fulfill certain conditions as mentioned above
and mainly manufacturing process should be carried on.

13.4 Occupiers Duties

● To provide and maintain plant and systems of work in the factory;
● To make the arrangements in the factory in connection with the use, handling, storage
and transport of articles and substances;
● To provide information, instruction, training and supervision on health and
safety measures;
● To offer such means of access to, and egress from such places free from risks;
● To provide, maintain or monitor working environment ;
● To prepare or revise periodically general policy of health and safety of the workers.
● A manufacturer is any person engaged in the designing, manufacturing, importing
or supplying any article for use in a factory. The term ‘article’ include plant and
machinery
● Cleanliness Disposal of wastes and effluents - Sec 12
● Ventilation and temperature dust and fume - Sec 13
● Overcrowding Artificial humidification Lighting – Sec. 14
● Drinking water Spittoons. - Sec. 18

Provisions Related to Health, Safety and Welfare

13.5 Chapter 3- Health:

1. Cleanliness-S.11
a) Every factory shall be kept clean and free from effluvia etc.
from: (1) Accumulation of dirt etc.
(2) Floor of washrooms shall be cleaned atleast
weekly (3) Wet floors must be drained effectively.
(4) All walls etc. be painted properly
(5) All doors and window frames etc. shall be painted or
varnished (6) The dates shall be written in register
If for any factory, these provisions cannot be complied with, the State govt may be
notification in Gazette exempt the factory or suggest alternative method.
2. Disposal of waste and effluents
S.12 3. Ventilation and
temperature S.13 4. Dust and fume
S.14
5. Artificial humidification S.15- required to be maintained as per prescribed guidelines
for regulating the temperature inside the premises.
6. Overcrowding S.16
7. Lighting S.17
8. Drinking water S.18
9. Latrines and Urinals
S.19 10. Spittoons S.20

13.6 Chapter 4- Safety:

1. Fencing of machinery S.21

2. Work on or near machinery in motion S.22
3. Employment of young persons on dangerous machines
S.23 4. Striking gear and devices for cutting powers S.24
5. Self-Acting Machines
S.25 6. Casing of new
machinery S.26
7. Provision of employment of women near cotton openers
S.27 8. Hoist and lifts S.28
9. Lifting machines, chains, ropes and lifting tackles
S.29 10. Revolving machinery S.30
11. Pressure plant S.31
12. Floors, stains and means of access
S.32 13. Pits, sumps openings in floor
etc. S.33 14. Excessive weights S.34.
15. protection of eyes S.35
16. precautions against dangerous fumes, gases, etc. S.36
17. precautions regarding the use of portable electric light
S.36a 18. Precautions in case of fire S.37
19. explosive or inflammable dust, gas, etc. S.38
20. Power to require specifications of defective parts or tests of stability
S.39 21. Safety of buildings and machinery. S.40.
22. Maintenance of buildings
S.40a 23. Safety officers S.40B.
Safety officers
● The State Government may direct the occupier of a factory to employ Safety Officers.
● Safety Officers may be employed:
● where 1,000 or more than 1,000 workers are employed.
● where the manufacturing process involves risk of bodily injury, poisoning or causing
any other hazard to the health of the person working in the premises of the factory.

13.7 Chapter 5- Welfare

1. Washing facilities for male and female workers

S.42 2. Facilities for storing and drying of clothes
S.43
3. Facilities for sitting, so that they don’t continuously stand and work
S.44 4. First aid appliances S.45
4. Canteens S.46
5. Shelters, rest rooms and lunch rooms S.47
6. Creches S.48, if there are more than 30 women employed. They are allowed to bring their
infants or children under 6 yrs of age. State govt. shall give notification of services and
facilities in these rooms. Facility for the mother to feed the child every few hours.
7. Welfare officer (S.49) is appointed for every 500 workers or more and state govt
prescribed his duties and frame rules.
8. Power to make rules to supplement
S.50 Role of Workers in Safety
Managment
● A Safety Committee that consists of equal number of representatives of workers and
management has to be set up unless the State Government directs not to form such a
committee,
● the composition, tenure of office of its members and their rights and duties shall be
prescribed,
● periodical review of all the safety measures must be taken up by the Committee,
● permit workers to exercise their right to notify any fear of accident or danger and
initiate immediate remedial action

Employees Provident Fund Act, 1952

14.1 Application
• Every industry employing 10 or more persons (180 industries are specified in Schedule 1 of
the Act)
•Every industry employing 10 or more persons which the Central Govt. may notify
• Any other establishment notified by the Central Government even if employing less
than 10 persons
(i) Educational, scientific research and training
institutions. (ii) Establishments known as hospitals.
(iii) Societies, clubs or associations which render services to their members without charging
any fee over and above the subscription fee or membership fee.
(iv) Establishments rendering expert services.
(v) Financial establishments (other than banks) engaged in the activities of borrowing,
lending, advancing of money and dealing with other monetary transactions with a view to
earn interest. (vi) Establishments engaged in poultry farming.
(vii) Establishments engaged in cattle feed industry.
(viii) Agricultural farms, fruits, orchards, botanical gardens and zoological gardens.

The Supreme Court has stated in Andhra University v. R.P.F.C. that in construing the
provisions of the Employees Provident Funds and Miscellaneous Provisions Act 1952, it has
to be borne in mind that it is a beneficent piece of social welfare legislation aimed at
promoting and securing the well-being of the employees and the court will not adopt a
narrow interpretation which will have the effect of defeating the very object and purpose the
Act.

Enfield India v RPFC 2000

It has been held that a person doing work of the principal employer, even though employed
by a contractor is also an employee covered by the definition.
The Supreme Court, in M.P. Shikshak Congress v RPFC (1999) decided that the EPF Act
was applicable to the teachers and employees of the aided school in Madhya Pradesh. Further
the inclusion of dearness allowance (D.A.) for computing salary was upheld in the case of
Gyan Bharti v RPFC (1996).
Sri Rama Vilas Service Ltd. V RPFC 2000-and Gandhi Vinita Ashram v PFC 1996
 It has been decided that trainees are not employees and are not covered by the EPF Act.
The court has held that stipend paid is not wages. It must be noted that trainees were recruited
under a particular Training Scheme and there was no guarantee of employment after
completion of the training period and that they were not entitled to other benefits, which were
available to other permanent employees.
The preamble to the Act also states that this is an Act to provide for the institution of:
(i) Provident Funds (ii) Pension Fund and (iii) Deposit Linked Insurance Fund for employees in
factories and other establishments. It is with this background that one must interpret the various
provisions of the Act and the Scheme related to it.

S.16. Act not to apply to certain establishments

(a) to any establishment registered under the Co-operative Societies Act, 1912, or under any
other law for the time being in force in any State relating to co-operative societies,
employing less than fifty persons and working without the aid of power, or

(b) to any other establishment belonging to or under the control of the Central Government or
a State Government and whose employees are entitled to the benefit of Contributory
provident fund or old age pension in accordance with any scheme or rule framed by the
Central Government or the State Government governing such benefits, or

(c) to any other establishment set up under any Central, Provincial or State Act and whose
employees are entitled to the benefits of contributory provident fund or old age pension in
accordance with any scheme or rule framed under that Act governing such benefits.

(2) If the Central Government is of opinion that having regard to the financial position of any
class of [establishments] or other circumstances of the case, it is necessary or expedient so to
do, it may, by notification in the Official Gazette, and subject to such conditions as may be
specified in the notification, exempt , whether prospectively or retrospectively,] that class of
[establishments] from the operation of this Act or such period as may be specified in the
notification.]
Contribution

Employer 12%

Employee 12% or 10%

The statutory rate of contribution to the provident fund by the employees and the
employers, as prescribed in the Act, is 10% of the pay of the employees. The term "wages"
includes basic wage, dearness allowance, including cash value of food concession and
retaining allowance, if any. The Act, however, provides that the Central Government may,
after making such enquiries as it deems fit, enhance the statutory rate of contribution to 120
k of wages in any industry or class of establishments.
The contributions received by the Provident Fund Organisation from unexempted
establishments as well as by the Board of Trustees from exempted establishments shall be
invested, after making payments on account of advances and final withdrawals, according to
the pattern laid down by the Government of India from time to time.
The exempted establishments are required to follow the same pattern of investments as is ,
prescribed for the unexempted establishments. The provident fund accumulations are
invested in government securities, negotiable securities or. bonds, 7-year national saving
certificates or post office time deposits schemes, if any. . EPF Interest Rate Under Para 60(1)
of the Employees' Provident Fund Scheme, the Central Government, on the recommendation
of the Central Board of Trustees, declares the rate of interest to be credited annually to the
accounts of provident fund subscribers

Formalities under EPF Act

1. Employer contribution of 12.61% of the salary of employees is to be paid as

under A. 3.67% to be remitted in Account No.1 (Employees Account)
B. 8.33% to be remitted in Account No.10 towards pension fund
C. In addition to 12% of the employer has to remit 1.61% paid as under
1. 1.10% Administrative charges in Account
No.2 2. 0.5% EDLI in Account No.21
3. 0.01% Inspection charges in Account No.22

2. The entire 12% of employees contribution goes into EPF account along with 3.67%
(out of 12%) from the employer, while the balance 8.33% from the employer’s side is
diverted to the EPS (Employee’s Pension Scheme) and the balance goes into the EPF
account.

Employee’s Contribution towards EPF

In general, the contribution rate for the employee is fixed at 12%. However, the rate is
fixed at 10% for the below-mentioned organizations:

● Organizations or firms employing a maximum of 19 workers.

● Industries declared as sick industries by the BIFR
● Organizations suffering an annual loss much more as compared to their net value.
● Coir, guar gum, beedi, brick and jute industries.
● Organizations operating under the wage limit of Rs. 6,500.

Employer’s Contribution towards EPF

The minimum amount of contribution to be made by the employer is set at a rate of 12% of
Rs. 15,000 (although they can voluntarily contribute more). This amount equals Rs. 1,800 per
month. It means that both the employer as well as the employee has to contribute Rs. 1,800
each per month towards this scheme. Initially, this amount was set at 12% of Rs. 6,500,
which would equal Rs. 780 to be contributed by both the employer and the employee.

● The contribution from both the parties is deposited into the EPFO (Employees
Provident Fund Organisation)

● This is a long-term investment fund for the contributors which helps them continue
an independent life after retirement
 Breakup of EPF Contribution
•12% of the employee’s salary goes towards the EPF.
•Whereas the employer’s contribution is divided as below:
–8.33% goes towards contribution for EPF
–3.66% goes towards contribution for EPS
–0.5% goes towards contribution for EDLI
–0.5% goes towards contribution for EPF administration charges
–01% goes towards contribution for EDLI administration charges
•Therefore, the employer contribution is 13.61%. The premium and management charges are
borne by the employer and the maximum limit is set at 0.5% of Rs.21, 000.

Schemes under/Various benefits EPF Act

•Three schemes under he Act are :
1. Employee Provident Fund Scheme (EPF)
a. The Employee's Provident Fund Scheme, 1952 (Sec. 5) provides
financial security to the employees in a covered establishment by
providing a system of compulsory saving. The scheme covers the
employees getting wages not exceeding 21,000 per month.

Key Points about EPF Contribution:

● 12% Employer’s contribution includes 3.67% EPF and 8.33% EPS

● 10% EPF share is valid for the organizations where there are 20 or
less than 20 employees /organizations with losses incurred more than
or equal to the net worth (at the end of financial year)
/organizations declared sick by the Board for Industrial and Financial
Reconstruction
● Total contribution made by the employer is distributed as 8.33%
towards Employees’ Pension Scheme and 3.67% towards
 Employees’ Provident Fund.
● The contribution made by the employee goes totally towards the
provident fund of the employee.
● Apart from the above-made contributions, an additional 0.5% towards
EDLI has to be paid by the employer.
● Certain administration costs towards EDLI and EPF standing at the
rate of 1.1% and 0.01% respectively also have to be incurred by the
employer. This means that the employer has to contribute a total of
13.61% of the salary towards this scheme.

2. Employee Deposit Linked Insurance Scheme and (EDLI)

Another important social security measure, Employees' Deposit Linked

Insurance Scheme (Sec. 6C) was introduced for members of the
Employees' Provident Fund
• No amount is recovered from employees for insurance fund.
Employer is required to pay a contribution of 0.5 per cent of the pay of
the employee in insurance fund. In addition to this, employer has to
pay 0.01 per cent as
 administrative charges and 0.005 per cent as inspection charges of
the employees' total pay in this scheme.
• This scheme is administered by Central Board of Trustees (CBT)

Salient Features of EDLI

● The insurance benefits can be availed by the family members,
legal heirs or nominees of the member.
● Members of EPFO are automatically enrolled for EDLI.
● An EPFO member is only covered by the EDLI scheme as
long as he/she is an active member of the EPF. His
family/heirs/nominees cannot claim it after he leaves service
with an EPF registered company.
● There is no minimum service period for availing EDLI benefits
● The employer has to make the contribution for EDLI and no
fee can be deducted from the employee’s salary
● The claim amount under ELDI is 35 times the average
monthly salary in the past 12 months subject to a maximum
of 7 lakh.
● The average monthly salary is calculated as the Basic +
Dearness Allowance of the employee
● A bonus of Rs. 1.75 Lakhs is also applicable under this scheme
● The employer can opt out of the scheme in case he takes a
higher paying life insurance scheme for employees under
Section 17 (2A)

3. Employee Pension Scheme (EPS):

The Employees Pension Scheme was introduced w.e.f. 16th November 1995.
Contributions: (i) The contribution envisaged under sec 6 is 8.33% of the
basic wages, dearness allowance and retaining allowance (if any) from the
employer’s contribution. {Sec.6A (2)(a)}.
Members of EPFO get pension benefits when they retire at the age of 58
years The minimum service period for availing benefits of EPS is 10 years
EPS contribution of 8.33% of the employee's basic + DA is made by the
employer Form 10D can be filled to apply for a monthly pension on retirement
at 58
Form 10C can be used to withdraw EPS amount or get EPS Scheme
Certificate In case of death of the member, the widow and children get a
monthly pension The member can withdraw the amount if he has not
completed 10 years of service at 58

BENEFITS UNDER EPS (Employees' Pension Scheme)

Orphan Pension to 2 orphans at a time till the age of 25 years on death of

member when there is no spouse or on death of spouse.
Window/Windower Pension on death of member of Pensioner
 Children Pension for 2 children at a time till the age of 25 years on death of
the member
Nominee pension paid for life to a duty nominated person by the member in
case there is no valid family.
Disabled children/ Orphan Pension for the entire life of the disabled child /
orphan.
Member pension upon Superannuation/ retirement
Disability Pension/ Member Pension on permanent and total disablement
during the service

Types of Pensions under Employees’ Pension Scheme

•There are different types of pensions under EPS such as pensions for widows,
children and orphans. These pensions provide an income to the family member of the
EPF subscriber.

Widow pension : it is applicable to the widow of the EPF member. The pension
amount will be payable until the death of the widow or her remarriage. In case of
more than one widow, the pension amount will be payable to the eldest widow.
Child Pension: In case of death of the member, monthly children pension is applicable
for the surviving children in the family in addition to the monthly widow pension. The
monthly pension will be paid till the child attains the age of 25 years. The amount
payable is 25% of the widow pension and can be paid to a maximum of two children.
Orphan Pension: In case the member dies and has no surviving widow, his children
will be entitled to get the monthly orphan pension of 75% of the value of monthly
widow pension. The benefit will be applicable for two surviving children from oldest
to youngest.
Reduced Pension: A member of the EPFO can withdraw an early pension if he has
completed 10 years of service and has reached the age of 50 years but is less than 58
years. In this case, the pension amount is slashed at a rate of 4% for every year the age
is less than 58 years.
 Social Security Legislations and its object:
The International Labour Organisation (ILO) defines Social Security as "the security that
society furnishes through appropriate organization against certain risks to which its members
are perennially exposed. These risks are essentially contingencies against which an individual
of small means cannot effectively provide by his own ability or foresight alone or even in
private combination with his fellows. The mechanics of social security therefore consists in
counteracting the blind injustice of nature and economic activities by rational planned justice
with a touch of benevolence to temper it.”

According to Friedlander "a programme of protection provided by society against the

contingencies of modern life- sickness, unemployment, old age, dependency, industrial
accidents and invalidism against which the individual cannot be expected to protect himself
and his family by his own ability or foresight."

"SOCIAL SECURITY is the security that furnishes, through appropriate organization,

against certain risk to which its members are exposed. The risks are essentially contingencies
against which the individual of small means cannot effectively provide by his own ability or
foresight alone or even in private combination with his fellows"

Modernization and urbanization have resulted in radical socio-economic changes and give
rise to new conflicts and tensions consequent upon the erosion of age old family and fraternal
security. The transition from agricultural economy to an industrial economy brought in
special accompanied problems that called for social security.

The Various Risks are:

● Sickness
● Invalidity
● Maternity
● Employment injury
● Unemployment
● Old age
● Death
● Emergency expenses

Objectives of Social Security:

The purpose of all social security measures in three fold:

I. Compensation provides for income security and is based upon the idea that during spells of
risks, the individual and his family should not be subjected to a double calamity involving
both destitution and loss of health, limb, life or work.

II. Restoration: implies cure of the sick and the invalid, re-employment and in habilitation.
III. Prevention designed to avoid the loss of productive capacity due to sickness,
unemployment or invalidity and to render the available resources which are used up by
avoidable disease and idleness and thus increase the material, intellectual and moral well
being of the community.

The Main Objectives:

1. To increase the productivity of industrial workers

2. To improve health and control sickness of industrial
workers 3. To prevent occupational diseases and take the
remedial measures
4. To remove mental and physical hazards to prevent industrial
accidents 5. To take care of old age and the other consequences
resulting there from
6. To ensure that various legislations are implemented properly to achieve the above
objectives

The Pillars of Social Security

1. SOCIAL INSURANCE

● These schemes are financed mainly through contributions of employers, workers

and other beneficiaries.
● Most are compulsorily established by the law.
● Benefits are linked to contributions of insured persons.

2. SOCIAL ASSISTANCE

● Provide benefits for meeting the minimum needs of the persons of small means.
● Financed by state funds.
● Benefits are changeable according to income and means of beneficiaries.

Evolution and Growth of Social Security in India:

● Evolution has been slow, sporadic and on a more or less selective basis.
● Only in case of fatal injuries was some relief provided under the Fatal Accidents Act,
1855.
● With coming up of ILO in 1919 emphasis was on protecting workers against hazards
of industrial lives.
● The ILO has been continuously contributing to the social security legislations and
conventions for the protection of workers’ welfare.
● The ILO passed a convention on maternity benefits in 1919. The women workers got
protection under this Act.
● Thereafter, it adopted a number of conventions including the Philadelphia
Declaration, 1944 for mandatory workers’ welfare. From 1964-1967 ILO passed a
number of conventions. In total, it passed 22 different conventions, social security
legislations receiving ratification from 520 nations.
 ● In these 22 conventions, Convention No. 18, 19, 42 and 118 deals with social security
legislations.
● Employee Compensation Act, 1923 is considered as first step towards social security
legislation. The Whitley Commission in 1931 made a statement that ESI is necessary
since a worker has a family to look after, has dependants. Thus, ESI must protect such
dependants. In 1940-42 there was Labour Ministers Conference and in 1943, Adarkar
was appointed as special officer to submit report on medical condition of workers. His
report provided social security benefits on contributory basis. This report was vetted
by Raghunath Rao and Morris Stack. This report was placed before the Indian Labour
Conference in 1944 October. The Standing committee took it up in 1945.
● The Bill providing for this was placed before Legislative Assembly in 1946 and
enacted in 1948.
● This provided for compensation, maternity benefits, medical and sickness benefits etc.
● Study group for social security with V K R Menon as chairman submitted report in
1958 and the ESI Scheme was revised on this report later.

Article 41 of the Indian Constitution

"The state shall, within the limits of its economic capacity and development, make effective
provision for securing the right to work, to education and the public assistance in cases of
unemployment, old age, sickness and disablement and in other cases of undeserved want."

Social Security Legislations:

1. Workmen's Compensation Act, 1923

2. Employee's State insurance Act,
1948 3. Employee's Provident Fund
and
4. Miscellaneous Provisions Act, 1952
5. Maternity Benefit Act, 1961
6. Payment of Gratuity Act, 1972